Cosmopolitan Trust Co. v. Mitchell

242 Mass. 95
CourtMassachusetts Supreme Judicial Court
DecidedJune 28, 1922
StatusPublished
Cited by50 cases

This text of 242 Mass. 95 (Cosmopolitan Trust Co. v. Mitchell) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cosmopolitan Trust Co. v. Mitchell, 242 Mass. 95 (Mass. 1922).

Opinion

Rugg, C.J.

This is a suit in equity brought in the name of the Cosmopolitan Trust Company by the commissioner of banks in possession of its property and business under G. L. c. 167, § 22, against thirteen persons as its directors for the purpose of holding them responsible for losses of the trust company. A demurrer has been filed by each defendant. It is alleged in the bill that the commissioner of banks took possession of the property and business of the trust company on September 25, 1920, and that on that date it was insolvent.

1. A most., important question is raised at the outset. The constitutionality of the statute under which the commissioner of banks is acting is assailed as infringing various provisions of the Constitution of this Commonwealth and of the Constitution of the United States. It is alleged in the bill that the Cosmopolitan Trust Company was duly organized under the law and carried on business “until September 25, 1920, when its doors were closed and its business and assets taken possession of by the commissioner of banks under authority of law given to him ... by chapter 399 of the Acts of 1910.” No specifications of reasons for closing its doors and taking possession of its business and assets are set forth. Therefore, if any one of the grounds for such act enumerated in the statute is unconstitutional, the defendants are entitled to the advantage of it, because no intendment can be made in favor of the pleader in such case. Old Dominion Co. v. Commonwealth, 237 Mass. 269, 274.

The business of banking vitally concerns the public interests. Long established usage has given its sanction to legislative supervision and regulation to a greater or less extent of the conduct of banks. The prevention and redress of the evil and damage to individuals and to the public, likely to arise from violation of their charters and of general laws and from insolvency of banks, have received the attention of the General Court at least since the enactment of St. 1838, c. 14. It is of vast importance to the commercial prosperity, the manufacturing activity, and [112]*112the industrial welfare of the community that banks be managed with integrity and sagacity and according to the rules of law prescribed for their administration. The savings of the poor, the earnings of the thrifty, and the resources of the wealthy, alike depend upon the prevention of delinquency on the part of those who control and direct the affairs of banks. Checks drawn against* deposits in banks have come to replace to so great an extent the use of currency and coin in the ordinary transactions of life that whatever rationally conserves their security is in the common interest. Reason and authority agree that the police power rightly may be exerted within rational limits to regulate and protect the safety of banking. Commonwealth v. Farmers & Mechanics Bank, 21 Pick. 542. Noble State Bank v. Haskell, 219 U. S. 104, 575.

The commissioner of banks is authorized to close the doors of the trust company and take possession of all its assets and business by § 2 of said c. 399 (see now G. L. 167, § 22) whenever it appears to him “[1] that any bank under his supervision has violated its charter or any law of the Commonwealth, or [23 is conducting its business in an unsafe or unauthorized manner, or [33 that its capital is impaired, or [43 if it shall refuse to submit its books, papers and concerns to the inspection of said commissioner or of his duly authorized agents, or [53 if any officer of such balnk shall refuse to be examined upon oath by the commissioner or his deputies touching its concerns, or [63 if it shall suspend payment of its obligations, or [73 if from an examination or from a report provided for by law the bank commissioner shall have reason to conclude that such bank is in an unsound or unsafe condition to transact the business for which it is organized, or that it is unsafe or inexpedient for it to continue business.” It has not been argued that the several statutory grounds thus specified do not justify a suspension of the right of the trust company to conduct a banking business. Therefore, it is not necessary to examine them in detail and delimit their scope. The contention is that the establishment of some or each one of these grounds involves the exercise of the judicial faculty, that confessedly the commissioner of banks is an executive or administrative officer and not an appointee of the courts nor clothed with any judicial functions, and hence that [113]*113the decision of these matters by the commissioner of banks violates art. 30 of the Declaration of Rights, which prohibits the executive, the legislative and the judicial departments of government each from exercising in any particular the powers of either or both of the others.

The validity of § 2 of c. 399, St. 1910, already quoted (see now G. L. c. 167, § 22), must be considered in connection with § 13 of said c. 399, G. L. c. 167, § 33. This later section provides for a full judicial review of the merits of the conduct of the commissioner of banks in taking possession of the business and assets of any banking corporation, to be had on application of such corporation filed in court within ten days after such taking possession, and empowers the court after finding the facts to dismiss the application or to enjoin the commissioner of banks from further proceedings and to direct him to surrender such business and property to the banking corporation. These two provisions of the statute are complementary one of the other.

The powers conferred upon the commissioner of banks are not judicial but purely administrative. His decision to take possession is not a judicial adjudication. It binds nobody. It is subject to immediate judicial inquiry. The act of the commissioner of banks is designed primarily to conserve the property of the bank for the benefit of its creditors and its stockholders. It rests upon an inquiry into facts, which may be imposed upon officers plainly possessing no judicial authority when intended to be the basis of administrative action only.

The provisions of statute here assailed were enacted before the organization of the trust company and bind it to the same extent as if inserted in a special act of incorporation, but go no further. Arlington Board of Survey v. Bay State Street Railway, 224 Mass. 463, 468. Interstate Consolidated Street Railway v. Massachusetts, 207 U. S. 79, 84. See Terral v. Burke Construction Co. 257 U. S. 529.

The power of inquiry into the condition of a bank with a view to determine the existence of contingencies, upon which the continuance in business of the bank is made to depend, may by law validly be reserved by the Legislature to itself or to administrative officers appointed under its authority. Such an inquiry into the affairs or defaults of a corporation with a view to con[114]*114tinue or to discontinue it is not a judicial act. Crease v. Babcock, 23 Pick. 334, 344.

There are numerous decisions of the Supreme Court of the United States to the effect that inquiry into facts may be devolved upon subordinate executive or administrative officers and that findings or decisions reached by such officers may be made conclusive without conferring judicial power or violating any guaranty secured by the Federal Constitution. See, for example,

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Bluebook (online)
242 Mass. 95, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cosmopolitan-trust-co-v-mitchell-mass-1922.