Walsh v. Lowell Trust Co.

• Decision Date: 29 May 1923
• Citation: 139 N.E. 789,245 Mass. 455
• Parties: WALSH v. LOWELL TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

245 Mass. 455

139 N.E. 789

WALSH

v.LOWELL TRUST CO.

Supreme Judicial Court of Massachusetts, Middlesex.

May 29, 1923.

Appeal from Superior Court, Middlesex County; Franklin T. Hammond, Judge.

Suit in equity by Richard B. Walsh, as trustee in bankruptcy of Guy F. Cochran, against the Lowell Trust Company, to require the defendant to pay to plaintiff a sum received by defendant from the bankrupt, which plaintiff claimed amounted to a preference, void under the Bankruptcy Act. Decree for plaintiff, and defendant appeals. Affirmed.Samuel P. Sears and Hugh D. McLellan, both of Boston, for appellant.

Frederic A. Fisher and Richard B. Walsh, both of Lowell, for appellee.

BRALEY, J.

The answer admits that the plaintiff is the duly appointed trustee in bankruptcy of the estate of Guy F. Cochran, who on March 25, 1920, paid within four months prior to the date of adjudication a debt he owned to the company amounting to $1,224, which it had acquired by assignment from one Mendlik, the bankrupt's original debtor, who owed the company a much larger amount. It is found that at the date of the payment the bankrupt was insolvent, and, if the payment was a preference, the defendant will obtain a greater percentage of its debt than other creditors of the same class. The plaintiff was not required to prove that the bankrupt intended to give a preference, and the main contention is whether the defendant on March 25, 1920, had reasonable cause to believe that Cochran was insolvent. Rogers v. American Halibut Co., 216 Mass. 227, 229, 103 N. E. 689, and cases and statutes there cited.

[2] The bankrupt, who had been a depositor for almost three years before the payment in controversy, was indebted to the company for a loan of $180, secured by collateral, which had been thrice renewed, the last renewal being March 6, 1920. While the officers of the company designated in the report were in the performance of their respective duties chargeable with knowledge of its transactions with the bankrupt, shown by the books (Allen v. Puritan Trust Co., 211 Mass. 409, 420, 97 N. E. 916, L. R. A. 1915C, 518, to which we shall hereafter refer), the defendant is also chargeable with information obtained by its officers as to the bankrupt's insolvency, when acting within the scope of their authority (Batchelder v. Home National Bank, 218 Mass. 420, 105 N. E. 1052). The company never elected a treasurer, but the duties of such officer devolved on the president and in his absence on the actuary. The master, after recitals of the powers of the president George M. Harrigan, and his interviews with the bankrupt concerning the transaction here in question, states:

‘I am unable to find that Harrigan either personally or as representative of the Lowell Trust Company of which he was president had reasonable cause to believe on March 25, 1920, when Cochran paid the $1224 to said company in liquidation of the balance then due on the Mendlik account he was insolvent and unable to pay his debts.’ And this finding is not contested byd the plaintiff.

[3] The by-laws of the company, however, provide that:

‘The board of directors shall elect by ballot an actuary, who shall be ex officio secretary of the board, * * * and who shall be subject to removal at the pleasure of the board, * * * and that all conveyances of real estate ordered by said directors shall be signed by the president or actruary,’ with certain exceptions which are immaterial.

By article 9 of the by-laws:

‘The actuary shall have charge of the corporate seal. He shall be ex officio secretary of the board of directors, attend its meetings, and keep its records. In the absence of the president he shall call such meetings to order for the purpose of organization. He shall have special charge, under the direction of the president and finance committee, of the deposit and trust departments of the company. He shall have the custody of all bonds, stocks, moneys, and other assets and property and all papers and documents owned by the company, or under its charge. He shall pay its current, expenses, and disburse its moneys, under the direction of the president, finance committee and board of directors. He shall cause to be kept accurate books of account of the business of the company, which shall at all times be open to the inspection of the directors, and in common with the president he may sign all certificates of stock, and all deeds of the company, except as the directors may otherwise provide, he may sign, countersign, or indorse checks, drafts, orders for money, and receipts, and the bonds or other securities which shall be issued through the company as trustee. He shall render to the stockholders annual reports in writing of the business and condition of the company, and to the directors similar reports, monthly or oftener, if required, and shall perform such other duties as shall from time to time be assigned to him.’

The actuary also serves as secretary of the finance committee, but--

‘Has no vote, and takes no part in their deliberations except to furnish on request such information as to the standing of customers or prospective customers as may have come to...