242 Mass. 78 | Mass. | 1922
This is a petition by the commissioner of banks against the Prudential Trust Company, hereafter called the Company, and its stockholders. The commissioner of banks has taken and retains possession of the property and business of the Company under St. 1910, c. 399, as amended (see now G. L. c. 167). No question is made of its inability to meet its obligations. The object of this suit is to collect from the stockholders of the Company their statutory liability for its debts. It is alleged in the bill that a creditor obtained judgment against the Company, that execution issued thereon, that demand for
The single point in issue is whether on these facts the suit can be maintained on the determination of the commissioner of banks alone that an assessment of one hundred per cent on the shares of stock is necessary to pay the creditors of the Company, or whether the stockholders are entitled to a hearing with full examination of the assets and liabilities of the Company and a determination by the court of the necessity and amount of the assessment. The decision of this point depends upon the construction of the governing statutes. These are certain sections of G. L. c. 167 and c. 172. The pertinent provisions as to the power of the commissioner of banks first were enacted in St. 1910, c. 399. The General Court then adopted in many respects a new policy concerning the supervision and the liquidation of trust and certain other banking companies organized under the laws of this Commonwealth. The powers of the State officials were greatly enlarged. The commissioner of banks was authorized on his own judgment and responsibility, without the intervention of the court, when enumerated facts were made to appear to him, to take possession forthwith of the business and property of a banking corporation and to retain possession until it should resume business or until its affairs should be liquidated finally. Large powers as to such liquidation are conferred upon him.
It already has been decided that the commissioner of banks in the liquidation of trust companies is an executive or administrative and not a judicial officer. When pursuant to the statute he takes and retains possession of the property and business of a trust company for purposes of liquidation according to law,
Stockholders’ liability of the kind here in suit has existed under the law for many years. See St. 1888, c. 413, § 14. The method for its enforcement by judgment creditors and by receivers, now set out in G. L. c. 172, § 24, also has long been a part of our law. When the power of the commissioner of banks was enlarged by St. 1910, c. 399, it was provided in § 4 that "he may, if necessary to pay the debts of any such trust company, enforce the individual liability of the stockholders.” These words are found without material change in G. L. c. 167, § 24.
It is manifest that this as well as some other provisions of our banking law were taken without substantial change and in almost the same words from the national bank act. It is provided in U. S. Rev. Sts. § 5234, among other matters, that the appointee of the comptroller of the currency and under his direction “may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders.” The liability sought to be enforced in the present proceeding is that established by G. L. c. 172, § 24, whereby shareholders are made “personally liable, equally and ratably and not one for another, for all contracts, debts and engagements of the corporation, to the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares.” This form of] liability goes back at least to St. 1888, c. 413, § 14. The liability of stockholders in national banks, as phrased in U. S. Rev. Sts. § 5151, is this: "The shareholders . . . shall be held individually responsible, equally and ratably, and not for one another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares,” with exceptions not here significant. The sections of our own statute and of the national banking law from which these provisions have been quoted cover in other essential particulars important aspects of the liquidation of banking institu
The Supreme Court of the United States in 1869 interpreted the force and effect of the National Bank Act in respect of the power of comptroller of the currency and his appointee (called in that act "receiver” although not appointed by a court) to enforce the liability of shareholders of national banks of whose assets he had taken possession. It was held in Kennedy v. Gibson, 8 Wall. 498, 505, 506, that "The receiver is the instrument of the comptroller. ... It is for the comptroller to decide when it is necessary to institute proceedings against the stockholders to enforce their personal liability, and whether the whole or a part, and if only a part, how much, shall be collected. These questions are referred to his judgment and discretion, and his determination is conclusive. The stockholders cannot controvert it. It is not to be questioned in the litigation that may ensue. He may make it at such time as he may deem proper, and upon such data as shall be satisfactory to him. This action on his part is indispensable, whenever the personal liability of
The rule of the United States Supreme Court has been followed in other States where the substance of the national bank law has been enacted with reference to State banks. Davis v. Moore, 130 Ark. 128. Aber v. Maxwell, 140 Ark. 203. Collier v. Smith, 169 S. W. Rep. 1108. Stringfellow v. Patterson, 192 S. W. Rep. 555. Hanson v. Soderborg, 105 Wash. 255. Van Tuyl v. Scharmann, 208 N. Y. 53, 62, 63. Harris v. Briggs, 264 Fed. Rep. 726 (C. C. A.). It does not seem to us that Ueland v. Haugan, 70 Minn. 349, Sargent v. Waterbury, 83 Ore. 159, Pate v. Bank of Newton, 116 Miss. 666, or Lynch v. Jacobsen, 55 Utah, 129, are opposed to this rule, for the reason that the statutes construed in those
Other reasons confirm this construction of our statute. It is provided that receivers can enforce the liability of shareholders in insolvent trust companies only with the approval of the Supreme Judicial Court. G. L. c. 172, § 24. Coyle v. Taunton Safe Deposit & Trust Co. 216 Mass. 156, 162. Requirement for such approval by the court when the commissioner of banks enforces the liability of stockholders is omitted from G. L. c. 167, § 24. This omission is significant of a legislative purpose that such approval was not an essential prerequisite although appropriately it was secured by the plaintiff in the case at bar before instituting this proceeding. Judgment creditors of business corporations may enforce the narrow stockholders’ liability created by G. L. c. 158, § 45, by direct suit without approval of the court. Priest v. Essex Hat Manuf. Co. 115 Mass. 380. Clarke v. Warwick Cycle Manuf. Co. 174 Mass. 434. The liability of stockholders of a State bank for the redemption of its circulating notes could be enforced by receiver only after approval by the Supreme Judicial Court. R. L. c. 115', § 81. Commonwealth v. Cochituate Bank, 3 Allen, 42, 46. The amount to be recovered often of necessity has been settled by decree of the court. Crease v. Babcock, 10 Met. 525, 555-568. Other provisions of statutes permit direct suit against officers liable without approval of the court. Thacher v. King, 156 Mass. 490. E. S. Parks Shellac Co. v. Harris, 237 Mass. 312. The analogy between these other provisions of our statutes and G. L. c. 167, § 24, is not very close but they tend to show that it was not the intent of the Legislature in enacting the latter section to hamper the powers of the commissioner of banks.
The present suit is not grounded on G. L. c. 172, § 25. That relates to a different matter from that here involved.
The provisions of St. 1910, c. 399 (see now G. L. c. 167), were
The principle and the reasoning of Kennedy v. Gibson, 8 Wall. 498, and the decisions of the United States Supreme Court which follow it, are adopted as matter of statutory interpretation as the law of this Commonwealth upon this point.
The federal cases already cited are sufficient authority to the effect that our statute thus interpreted violates no provision of the Fourteenth Amendment to the Constitution of the United States.
It is equally clear that no provision of the Constitution of this Commonwealth is infringed by the statute.
The liability of a stockholder to be responsible for debts of the corporation is a part of the contract by which the corporatian assents to come into existence, and each person when he assumes the relation of a shareholder, whether at the organization or later, consents to this condition and becomes a party to its terms. The obligation, even though created by statute, is contractual in its nature. Whoever undertakes the relation of shareholder voluntarily enters into an implied contract to bear such deficiency as may rest upon him under the statute. Any rational method of determining the extent of the liability of the shareholder prescribed by the statute is a part of the contract. No discussion is required to show that this statute does not violate fundamental rights, as would a provision, for example, not to resort to federal courts in case of diversity of citizenship. The validity of statutes imposing upon stockholders liability to a greater or less extent for the debts of a corporation has been
The business of banking is of such general public interest as to be under the control of the Legislature within rational limits. The Commonwealth may act as the creator and controller of corporations for the benefit of depositors and other creditors. Noble State Bank v. Haskell, 219 U. S. 104, 575. Lorando v. Gethro, 228 Mass. 181, 187. Title Guaranty & Surety Co. v. Allen, 240 U. S. 136.
The determination by the commissioner of banks to collect an assessment of one hundred per cent from the shareholders is not the exercise of a judicial function. It is a practical business question to decide whether in the economical and expeditious settlement of an insolvent bank the entire amount collectible shall be demanded at once and the balance, if any, after paying the debts, be returned, or whether, in the general interest of all concerned a less amount be assessed. The court itself might proceed on that principle for in kindred cases it has acted upon estimated necessities rather than upon an absolute ascertainment. Commonwealth v. Cochituate Bank, 3 Allen, 42, 46.
It follows that there is in this statute no infraction of the rights secured by arts. 10, 11, 12 or 30 of the Massachusetts Declaration of Rights.
In accordance with the terms of the report, a decree may be
So ordered.