Stockholders of the Cochituate Bank v. Colt , 67 Mass. 382 ( 1854 )

Shaw, C. J.

The question in the present case, having arisen in a case before one judge, where a great number of persons were interested, and where a considerable amount of money was lying in the hands of receivers, to which creditors would be entitled, as soon as the question should be disposed of, the court were desired by all- parties interested to take it into consideration, as soon as the course of the court and other engagements would permit. This they have done, and it devolves on me to state the opinion of the court.

It is a little remarkable, that in the several cases which have arisen under the present act, and an act previous thereto, which had been repealed, and substantially reenacted, this question has not been directly settled. But in looking at the several cases, there seems to be no one directly in point.

As between the bank, as a debtor, on the one side, and the holders of bills and other creditors, on the other, the bank owes to each the whole amount. The difficulty arises when it turns out that the bank is insolvent, and is unable to pay the whole, when it becomes a question solely among different classes of creditors. In the absence of positive law, of some well established rule of policy founded on general convenience, all creditors have a right to share in the fund in proportion to the amount of their respective debts. The considerations for their respective debts have equally gone into the hands of the common debtor, and contributed proportionably to form the fund of which the assets in the hands of the receivers now form the only residuum. Why should they not share it in the same proportion? Or, to state the same point in another view, as there must from necessity be a loss, for which no creditor is responsible, all must bear that loss propertionably. Such is the general rule in regard to similar cases of common loss, as of bankrupts, living and deceased insolvents. In these, there are some limited and well defined exceptions founded on considerations of policy, and in general declared by positive law. As for instance, in cases of deceased insolvents, expenses of last sickness are preferred, in deference to the dictates of enlightened humanity, to secure a sick but poor person from suffering in extremis. So taxes due to the government are in some cases preferred, to secure the public revenue, pursuant to the maxim sains república suprema lex est.

This plain principle of equity is supported by authorities, too numerous and uniform to require particular citation. The rule of distribution is, “ equality is equity.” This is the general rule; preference is the special exception; and it is incumbent on those who claim such preference to establish it.

It" is stated, in the argument, that there is a general impression in the community, that the law has given this priority to creditors who have given credit to banks by receiving their bills as money, and that it was intended to give greater security to bank notes, because they pass as money, and in effect constitute the currency of the state. This impression may have arisen from the fact that the general law has made some provision, and that a somewhat extraordinary one, for the better credit and security of bank notes, by providing that, when other means have failed, the stockholders, in their individual capacity, to an amount equal to that of their stock, shall be held liable to such holders of bills. Rev. Sts. c. 36, § 31. St. 1849, c. 32. But it has been held that such holders of bills must first present their claims, and receive a dividend from the general assets of the bank, and that individual stockholders are liable only for the deficiency of such dividend received. Grew v. Breed, 10 Met. 569.

As all the duties and liabilities of banks, and those connected with them and responsible for them, are regulated by statute law, including the revised statutes, and several acts since the revised statutes, if there were any other special provision in favor of holders of bills, it would not be difficult to find it; but there appears to be none. On the contrary, by Rev. Sts. c. 44, § 10, being the statute regulating corporations, and to which chapter banks are made liable, (Rev. Sts. c. 36, §§ 1, 2,) the general rule of distribution is declared. Receivers are to distribute the funds of insolvent corporations ratably among all the creditors. It is true that this applies to insolvent corporations generally, and it may not be presumed that the legislature had banks and bank notes specially in view; still, as the two statutes are connected, and form one system, and as a general rule is thus declared, if a general exception of bank bills had been intended, it would have been expressed in one or the other of these chapters. Upon the most careful examination, no such exception or qualification of the general rule is found.

On the whole, the court are all of opinion that the holders of bank bills, proving their claims against an insolvent bank, in proceedings against it, under an order for the appointment of receivers, are not entitled to a preference over depositors and other creditors, in the distribution of its assets, and that the petition praying for the allowance of such preference must be dismissed. Petition dismissed.