Worcester County Nat. Bank v. Commissioner of Banks

• Decision Date: 11 April 1960
• Citation: 166 N.E.2d 551,340 Mass. 695
• Parties: , Blue Sky L. Rep. P 70,472 WORCESTER COUNTY NATIONAL BANK v. COMMISSIONER OF BANKS.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 551

166 N.E.2d 551

340 Mass. 695, Blue Sky L. Rep. P 70,472

WORCESTER COUNTY NATIONAL BANK v. COMMISSIONER OF BANKS.

Supreme Judicial Court of Massachusetts, Worcester.

Argued March 11, 1960.

Decided April 11, 1960.

John Cancian, Boston, for plaintiff.

Leo Sontag, Asst. Atty. Gen. (Pasquale J. Piscitelli and John W. Gorman, Boston, with him), for defendant.

Before WILKINS, C. J., and SPALDING, WILLIAMS, WHITTEMORE and CUTTER, JJ.

WILKINS, Chief Justice.

For many years prior to January 12, 1959, the capital stock of Worcester County Trust Company, a Massachusetts trust company, was a legal investment for Massachusetts savings banks under G.L. c. 168, § 54, as amended, now § 47 as appearing in St.1955, c. 432, § 1. On that date Worcester County Trust Company converted into a national banking association under the name of Worcester County National Bank, which is the plaintiff. G.L. c. 172, § 44, as amended. U.S.Rev.Stat. (1875) § 5154, 12 U.S.C. (1958) § 35 [12 U.S.C.A. § 35]. Thereafter the defendant Commissioner of Banks has taken the position that 'the stock of the plaintiff has lost its status as a qualified legal investment for Massachusetts savings banks because of and solely by virtue of the aforesaid conversion.' This bill in equity in the Superior Court seeks (1) a binding declaration of 'the status and legality of the stock of the plaintiff as a legal investment for Massachusetts savings banks under the pertinent provisions of c. 168 of the General Laws'; and (2) that the 'court order the defendant to place the stock of the plaintiff on the legal list of investments for Massachusetts savings banks under § 51 OF C. 168¹ of the General Laws.'

A demurrer to the bill was overruled. Later the case was reported without decision, upon the pleadings, the defendant's appeal from the interlocutory decree overruling the demurrer, and a statement of agreed facts. G.L. c. 231, § 111.

One ground of demurrer is that the Superior Court lacks jurisdiction of the subject matter. If the declaratory relief sought is a case arising under G.L. c. 168 this ground must be upheld.

Declaratory judgment procedure, G.L. c. 231A, was inserted in our statutes by St.1945, c. 582, § 1. Section 1 of c. 231 A provides, 'The supreme judicial court, the superior court, the land court and the probate courts, within their respective jurisdictions, may on appropriate proceedings make binding declarations of right, duty, status and other legal relations * * *.' Chapter 231A relates to procedure and does not deal with jurisdiction. Twentieth Report of the Judicial Council, Pub.Doc.No. 144, p. 16; 29 Mass.L.Q. No. 4. Chief Justice Hughes in Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617. See Wellesley College v. Attorney General, 313 Mass. 722, 731, 49 N.E.2d 220; Meenes v. Goldberg, 331 Mass. 688, 691-692, 122 N.E.2d 356.

For the jurisdiction of the Superior Court, we must turn to G.L. c. 213, § 1A (as amended through St.1941, c. 28), which reads: 'The superior court shall have original jurisdiction, concurrently with the supreme judicial court, * * * of all cases and matters of equity of which the supreme judicial court has had exclusive original jurisdiction under section two of chapter two hundred and fourteen or otherwise, other than cases arising * * * under chapters one hundred and sixty-seven, one hundred and sixty-eight and one hundred and seventy-two, relating to banks and banking * * *.' The provision of G.L. c. 214, § 2 (as amended through St.1954, c. 439, § 2), is: 'The supreme judicial court shall have original and exclusive jurisdiction in equity of all cases and matters of equity cognizable under any statute * * * and the superior court shall have like original and exclusive, or like original and concurrent, jurisdiction only if the statute so provides.'

Section 1A of c. 213, when first inserted in our statutes by St.1939, c. 257, § 1, referred only to the general banking statute c. 167. Chapters 168 and 172, relating to savings banks and trust companies, respectively, were added by amendment in St.1941, c. 28, ² because of a recommendation by the Commissioner of Banks in his annual report of 1940. See 1941 House Doc. No. 4, pp. 3-4, where the commissioner stated: '* * * In the legislative committee hearings upon the recommendations and petitions which resulted in the enactment of said chapter 257, it was pointed out that proceedings and matters relating to banks and banking could be more effectively and expeditiously treated by the Supreme Judicial Court. * * * Because the wording of said chapter 257 expressly referred only to said chapter 167, some question has arisen as to whether said chapter 257 clearly excludes from its operation certain sections of other banking statutes, more particularly section 40 of chapter 168, relating to the transfer of special trust funds; section 44 of chapter 168, relating to the reduction of deposits in savings banks; section 18 of chapter 172, relating to the cancellation or other disposition of capital stock of certain trust companies; section 25 of chapter 172, relating to the enforcement of the liability of certain stockholders in trust companies; and section 90 of chapter 172, relating to the enforcement of the statutory provisions governing conservatorship of certain trust companies. While it is expected that only on rare occasions will matters contemplated by the foregoing sections be brought before the Supreme Judicial Court, nevertheless, because of the centralization of records and the great public interest which might be involved in such cases, it is believed that the best interests of all parties concerned and the public will be served by retaining exclusive jurisdiction of such matters in the Supreme Judicial Court. Accordingly, I recommend that chapter 257 of the Acts of 1939 be amended so as clearly to exclude the foregoing matters from its operation.'

The declaratory relief presently sought relates to the interpretation of G.L. c. 168, § 47 (as appearing in St.1955, c. 432, § 1 ³), and an order is asked as to the commissioner's duties under c. 168, § 51 (as so appearing). The substantive issue is whether a national banking association organized by a conversion from a State trust company pursuant to U.S.Rev.Stat. (1875) § 5154, 12 U.S.C. (1958) § 35 [12 U.S.C.A. § 35], and G.L. c. 172, § 44, as amended, retains its former corporate identity to the extent that the dividend record of the trust company may be considered that of the national bank for the purpose of qualifying the stock of the national bank as a legal investment for Massachusetts savings banks under c. 168, § 47 (as so appearing).

We think that this does not become a case arising under c. 168 merely because the questions raised have their origin in that chapter. See Republic Pictures Corp. v. Security-First Nat. Bank, 9 Cir., 197 F.2d 767, 769-770. The key to the solution appears in the five sections mentioned by the Commissioner of Banks in each of which a definite procedure in the Supreme Judicial Court is prescribed. G.L. c. 168, §§ 40, 44 (see now c. 168, § 25(4), § 32, both as appearing in St.1955, c. 432, § 1). G.L. c. 172, § 18, as amended through St.1935, c. 18. G.L. c. 172, § 25, as amended through St.1934, c. 349, § 15. G.L. c. 172, § 90, inserted by St.1933, c. 273. Before the enactment of St.1941, c. 28, there were numerous provisions in the general banking statute for similar definite procedures in the Supreme Judicial Court. G.L. c. 167, §§ 5 (as appearing in St.1933, c. 337), 7, 24 (as amended through St.1933, c. 41, § 4), 26, 27, 29, 30, 31A (as appearing in St.1937, c. 170), 32-34, 35A (inserted by St.1933, c. 302), 36 (as amended through St.1939, c. 451, § 58), 40. G.L.(Ter.Ed.) c. 167, §§ 13, 31, 35.

These sections providing definite procedures in the Supreme Judicial Court are what is meant in c. 213, § 1A, by cases arising under cc. 167, 168, and 172. There was jurisdiction in the Superior Court.

Turning to the merits, we note that if this were the reverse situation of a national banking association converting into a State trust company, a question similar to the present could not arise. By c. 172, § 44 (as appearing in St.1955, c. 275, § 1), 'the continuing trust company * * * into which a national banking association shall have been converted under this section shall be considered the same business and corporate entity as that of the * * * converting institution, although the rights, powers and duties of the continuing trust company shall be those established by its charter.' For the parallel Federal provision, see 12 U.S.C. (1958) § 214b [12 U.S.C.A § 214b]. All that § 44 contains respecting the persent problem is, 'Nothing in this section nor in the General Laws shall restrict the right of a trust company * * * to * * * convert into a national banking association in accordance with the laws of the United States and without approval of any authority of the commonwealth.'

The plaintiff contends, and the defendant denies, that the mere fact of conversion, as matter of law, has no effect upon the qualification of the plaintiff's common stock as a legal investment for savings banks.

The defendant's position on the merits seems to us to be based upon oversimplification. The argument, shortly stated, is that the charter of the Worcester County Trust Company became void on January 12, 1959, and that the plaintiff came into corporate existence on the same date. Ergo, it could not have paid dividends for a five year period. Reference is made to the last sentence of c. 172, § 44, which reads, 'The charter of any trust company or banking company which shall have been consolidated or merged into or the business and substantially all of the property and assets of which shall have been purchased or absorbed by a trust company or national banking association, or the affairs of which shall have been liquidated, shall be void...