240 Mass. 394 | Mass. | 1922
These are suits in equity whereby the several plaintiffs seek to recover from the defendant as commissioner of banks in possession of the property of the Prudential Trust Company the amounts of deposits made by them in the trust company' while it was insolvent, on the ground that the trust company was known by its managers to be insolvent at the time of the receipt of the deposits, and that hence the bank became a trustee ex maleficio of the moneys thus deposited. The facts as to the financial condition of the trust company and the knowledge and intention of the executive officers concerning its future were briefly these: The bank was organized and opened for business in June, 1915. During the months of July, August and September, 1916, it had less than the required legal reserve every day (with three or four exceptions) by amounts ranging from $4,000 to $56,000. From October, 1916, through July, 1917, it had the required reserve
Doubtless the trust company was insolvent at all the times when deposits were made here sought to be recovered. A trader or a bank commonly is insolvent when not in condition to pay its debts in the ordinary course, as persons carrying on trade or banking usually do. Thompson v. Thompson, 4 Cush. 127. Lee v. Kilburn, 3 Gray, 594, 600. Vennard v. McConnell, 11 Allen, 555, 561. Peabody v. Knapp, 153 Mass. 242. Holbrook v. International Trust Co., 220 Mass. 150, 155.
Acceptance of deposits by a bank is a representation of solvency. A bank hopelessly insolvent receiving deposits from those who confide in its good reputation or in its representations, is held to knowledge that it cannot meet its obligations. Taking deposits under such circumstances is the equivalent of a preconceived purpose not to pay and is a fraudulent act. The contract of deposit may be rescinded by the depositor and the deposit, or its proceeds, if traced, may be recovered in like manner as other trust funds. On the other hand, simple insolvency, even of a bank, does not warrant the rescission of deposits if there are genuine and reasonable hope, expectation and intention on the part of the officers of the bank to carry on its business and to recover sound financial standing. To warrant such rescission there must be the further fact that it is reasonably apparent to its officers that the concern will presently be unable to meet its obligations as they are likely to mature and will be obliged to suspend its ordinary operation. The facts must establish the conclusion that the trust company accepted the deposit knowing through its officers that it would not and could not pay the money when demanded by the depositor. Watson v. Silsby, 166 Mass. 57, 59. St. Louis & San Francisco Railway v. Johnston, 133 U. S. 566, 576-578. Williams v. Van Norden Trust Co. 104 App. Div. (N. Y.) 251. Roberts v. Hill, 24 Fed. Rep. 571, 573. It was said in Brennan v. Tillinghast, 120 C. C. A. 37, (201 Fed. Rep. 609) “the mere fact that the bank is known to be insolvent at the time the deposit is received is not in our opinion sufficient of itself, without more,
In the case at bar it appears that the trust company, while not complying with the requirements of the statute as to reserves, and while not keeping the assets in its savings department separate and distinct from its general .assets, was yet continuing to meet its obligations as and when they arose. The exact state of its affairs or the precise extent of its insolvency is not disclosed on this record. It had been apparently in a somewhat shaky condition for several years and yet had been able to continue its business. The commissioner took possession of its assets and property under G. L. c. 167, § 22. There is nothing to indicate that such action was anticipated by the officers or that they had any reason to expect that the institution might not continue for the next three or four years as it had during the past like period. Its deposits had been previously at a lower ebb than when closed by the commissioner, and had recovered. These suits in effect are claims against all the other creditors. This record discloses no equity in favor of these depositors against other depositors during this period of insolvency. In substance and effect the present plaintiffs are seeking a preference over other creditors which is not clearly established. A ratable distribution appears to be more likely to work out justice. The bill may be dismissed in each case with one bill of costs to the defendant.
So ordered.