Trust Company, In liquidation: limitation of action.
The commissioner of banks, in possession of the property and business of a trust company, brought in the name of the trust company an action against a depositor on a note originally given to the trust company in its commercial department and, without the knowledge of the depositor, transferred to the savings department, where it was when the commissioner took possession. Without first proving a claim with the commissioner, the depositor brought a cross action and sought a judgment on a deposit in the commercial department and that any in the action by the trust company be continued to await determination of the amount which could be applied thereon from dividends to be declared upon the account of the depositor in the commercial department. While the actions were pending, a decree was entered under G.L.c. 167, §§ 28, 36, setting a date two months after the decree as a time beyond which claimants could not present claims against the funds of the trust company. One year and four months after the time of limitation fixed in that decree, the actions were determined against the depositor. About three and one half months thereafter, he brought a bill in equity to enforce priority over other creditors as to his deposit in the commercial department on the ground that by fraud of the trust company's president he was induced to refrain from withdrawing his deposit one day before the commissioner took possession. Held, that (1) The decree of limitation was reasonable; (2) The decree of limitation was a bar to the suit.
RUGG, C.J.
The plaintiff corporation, a depositor in the Cosmopolitan Trust Company, seeks by this suit to establish a trust in its favor in a portion of the funds of the trust company in the hands of the commissioner of banks who on September 25, 1920, took possession of its business and property under the statute, and who has since been liquidating its affairs. It is not necessary to recite the allegations of the bill further than to say that the plaintiff corporation has been diligent in asserting its various contentions as appears from Cosmopolitan Trust Co. v. Suffolk Knitting Mills, 247 Mass. 530. The present bill was filed on June 7, 1924, which was after the termination of the prior litigation. The defendant filed a motion to dismiss on the ground that by decree of court entered on August 15, 1922, after due notice and hearing, the time beyond which claimants should not present claims against the funds of the trust company was fixed at October 16, 1922, and that no suit in equity or action at law for the purpose of establishing rights to any property of the trust company should be brought after October 16, 1922. A final decree was entered dismissing the bill on this ground. The plaintiff's appeal brings the case here.
The liquidation statute does not establish an express period of limitation within which claims must be proved or put in suit. It is provided in G.L.c. 167, § 28, that the commissioner in possession of a trust company for purposes of liquidation must give notices calling on all persons having claims to make proof of them before a specified time. The court is given power in equity to enforce the provisions of that and of other sections by G.L.c. 167, § 36. It is plain that as a practical matter some time must be fixed after which no proceedings at law can be instituted against the commissioner in possession of a trust company for the purpose of liquidating its business. The clear implication from G.L.c. 167, §§ 28, 29 and 31, is that the decree of the court in equity, after adequate notice fixing a time after which there can be no new suit instituted or action brought, is valid and binding. The nature of the liquidation requires that such power exist. Otherwise, the affairs of the trust company can never be wound up and its assets distributed among its creditors. The aim and end of the liquidation statute is to collect the assets of an insolvent trust company, to convert them into cash and to pay the proceeds in just proportion to its creditors, all as quickly as is consistent with sound judgment. This main object of the liquidation statute would be frustrated unless power was vested somewhere to fix a limitation of time after which new litigation must cease. That established in the case at bar was reasonable, being more than two years after the time when the commissioner took possession of the property and business of the trust company.
The suit in the case at bar manifestly was brought long after the expiration of the time limited in the decree of August 15, 1922. That decree is a complete bar to the prosecution of the present suit.
The rights of the other plaintiffs as set out in the bill are completely subordinate on this point to the rights of the corporate plaintiff. They cannot prevail if it fails. It is not necessary to discuss their position as revealed on the face of the bill.
Decree dismissing bill affirmed with costs of appeal.