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Timestamp: 2019-04-24 23:48:32+00:00

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DIRECTOR OF LIQUIDATIONS vs. MARY E. WOOD & others.
The executor of the will of one who had entered into an indenture of trust with a trust company under whose provisions he received the income during his life from the trust fund and others benefited from it after his death, was not liable as a shareholder of the company under G.L. (Ter. Ed.) c. 172, Section 24, as amended, where it appeared that among securities included in the trust were shares of stock of the company, transfer of title to which to the company as trustee he had made every effort to accomplish by delivery to it of the certificates with a duly executed assignment and power to transfer, although, without his knowledge, no formal transfer of the stock had been made on the books of the company.
The provisions of Section 39 of G.L. (Ter. Ed.) c. 172 do not make it unlawful for a trust company to receive shares of its own stock as trustee.
Upon determination in favor of the defendant of a suit by the liquidator of a trust company to enforce a stockholder's liability, the defendant was entitled to receive from the liquidator the amount of a dividend, declared upon the defendant's deposit in the savings department of the company and withheld by the liquidator pending determination of the defendant's liability, together with interest thereon at six per cent from the date of its declaration.
BILL IN EQUITY, filed in the Supreme Judicial Court for the county of Suffolk on September 27, 1935.
The case was reserved and reported by Dolan, J.
I. Cohen, (E. J. Flavin with him,) for the plaintiff.
Joseph P. Sullivan, for State Street Trust Company and another, executors.
COX, J. This is a suit in equity brought by the commissioner of banks in possession of the property and business of the Exchange Trust Company, hereinafter referred to as the trust company, against such trust company and certain alleged stockholders thereof, under G.L. (Ter. Ed.) c. 167, Section 24 (see St. 1933, c. 41, Section 4), to enforce against them the liability imposed on the stockholders. (G.L. [Ter. Ed. c. 172, Section 24. See St. 1934, c. 349, Section 14; St. 1937, c. 248.) The director of liquidations was substituted as plaintiff by amendment. See St. 1939, c. 515. We are not concerned with any of the defendants named in the bill except the State Street Trust Company and John E. Gilcreast, as they are coexecutors of the will of John F. Moore, deceased. The case is reported to this court by a single justice upon the bill, answer, the counterclaim of the defendants, and a statement of agreed facts which provides that any court shall be at liberty to draw from the agreed facts and documents in the case any inferences of fact that it would have authority to draw upon a case stated under G.L. (Ter. Ed.) c. 231, Section 126. See United States Fidelity & Guaranty Co. v. English Construction Co. 303 Mass. 105, 108-109. The acts of the commissioner of banks in taking possession of the trust company, or in determining the necessity of enforcing the individual liability of stockholders therein, are not questioned. Two issues only are presented: (1) are the defendants liable as of April 25, 1932, under the provisions of G.L. (Ter. Ed.) c. 172, Section 24, which provides, in substance, that the stockholders of such a corporation as the trust company shall be personally liable, equally and ratably, and not one for another, for all the contracts, debts and engagements of the corporation to the amount of their stock therein at par value thereof in addition to the amount invested in such shares; and (2) is the plaintiff liable on the defendants' counterclaim?
time the commissioner of banks took possession, on April 25, 1932, the trust company still held the certificates of stock in question and the instrument of assignment as part of the corpus of the trust under the indenture. Shortly thereafter the trust company resigned as trustee, and one of the defendants, the State Street Trust Company, was appointed succeeding trustee. Moore died on December 29, 1932. The account of the trust company, filed on January 23, 1934, lists the shares of stock in question as having been received from Moore and as having been delivered to the succeeding trustee. The inventory of the executors of Moore's will did not list said shares; the inventory of the State Street Trust Company, as trustee, did.
or holder of shares of its own capital stock, Commissioner of Banks v. Cosmopolitan Trust Co. 253 Mass. 205, 227, but we are of opinion that this did not prevent it from receiving as a part of the trust assets the shares of stock in question. See Harvey v. First National Bank of Boston, 270 Mass. 286, 291-292.
176 U.S. 521, 531. Earle v. Carson, 188 U.S. 42, 52-53. 45 Am. L. R. 137. 104 Am. L. R. 638, 643. As was said by Rugg, C.J., in Commissioner of Banks v. Cosmopolitan Trust Co. 253 Mass. 205, at page 227: "Delivery of a certificate to the officers of a bank for transfer, where the original holder has done all he can to divest himself of the indicia of title, and where the failure to issue the new certificate in the name of the new owner is wholly the fault of the bank or its officers, has been held to exonerate the original owner in case of a genuine sale." Commissioner of Banks v. Waltham Trust Co. 293 Mass. 62, 65. See Apsey v. Whittemore 199 Mass. 65, affirmed sub nomine Apsey v. Kimball, 221 U.S. 514. Compare Superintendent of Banks of New York v. Moors, 294 Mass. 518; Friede v. Mackey, 298 Mass. 193.
said that he should have insisted upon seeing with his own eyes that the transfer was actually made. The case is distinguishable from Commissioner of Banks v. Cosmopolitan Trust Co. 253 Mass. 205, where, at page 227, it is pointed out that the delivery by the defendant Berman of his certificate of stock was not to the bank or its officers for the purpose of transfer.
upon the unpaid balance of their dividend would not amount to equality of treatment. It must be assumed that the other creditors received their dividends in December, 1933, and have had the use of the money that was paid to them. It appears in the agreed facts that the fifty per cent dividend was declared. It is assumed that by this is meant that in accordance with the provisions of G.L. (Ter. Ed.) c. 167, Section 31, the commissioner of banks was authorized and directed by this court to declare such dividend, and that the defendants were among the persons to whom the commissioner of banks was directed to pay. There would be force in the contention, if it were made, that the case at bar is distinguishable from those in which the interest allowed is payable out of the pocket of one of the parties to the action. Here the interest payment must be borne by all creditors of the same class who have proved claims, provided there are funds of the trust company in the possession of the plaintiff out of which payment can be made. To state this proposition, however, is but to demonstrate the justice of allowing the defendants interest. The plaintiff (then the commissioner of banks), in seeking to hold the defendants liable as stockholders, was acting for the benefit of the creditors. In order to insure the collection of any sum that might be awarded to him, he withheld money otherwise due the defendants. If he had succeeded in his suit, he would have been entitled to interest and all to the advantage of the creditors. But he failed, and if there is any hardship to the creditors by reason of requiring the plaintiff to pay interest to the defendants, it does not meet the fact that the defendants, through no fault of their own, have been deprived of the use of the money that should have been paid to them, as it now appears, when the other creditors received their dividends. We are of opinion that the defendants are fairly and equitably entitled to interest, which a majority of the court think should be at the rate of six per cent. Armstrong v. American Exchange National Bank of Chicago, 133 U.S. 433, 470. Malcomson v. Wappoo Mills, 99 Fed. 633. Dunnagan v. Best, 59 Fed.(2d) 795, 796. Douglass v. Thurston County, 86 Fed.(2d) 899, 910.
Ticonic National Bank v. Sprague, 303 U.S. 406, 411. See Williams v. American Bank, 4 Met. 317, 320-322; Schaffer v. Hotel & Railroad News Co. 266 Mass. 276, 278, and cases cited; Ratner v. Hill, 270 Mass. 249, 253.
3. The result is that a decree is to be entered dismissing the bill and giving relief to the defendants upon their counterclaim by ordering payment to them of $3,000, together with interest thereon at the rate of six per cent per annum from December 26, 1933, with costs to the defendants.

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