Case ID: wis_91/html/0098-01.html
Source: Caselaw Access Project
Author: {"author": "Cassoday, 0. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Dowie, Appellant, vs. Humphrey, Assignee, Respondent.
    
      September 11
    
    September 26, 1895.
    
    
      Equity: Following trust fund: Voluntary assignment: Banks and banking.
    
    Upon the settlement of an estate the administrator turned over to an attorney in fact for the heirs the money of the estate in the form of certificates of deposit, some of which had been issued by an unincorporated bank owned by said attorney in fact, which certificates were accepted by him as so much cash. About two months later, and before the money had been paid to the heirs, the bank of said attorney in fact closed its doors and he made an assignment for the benefit of his creditors. He had disposed of all of said certificates of deposit issued by other banks, except one. None of the proceeds thereof had been placed in his bank, and but a small part could be traced to deposits standing to its credit in other banks at the time of the assignment. It did not appear what precise disposition had been made of the moneys deposited in his bank by the administrator and evidenced by said certificates of deposit issued by it; but between the time of said deposits and the time when the bank closed its doors its payments in excess of its receipts had been greater than the amount of such deposits. Held, that the heirs were not entitled to payment of their claims, in preference to other creditors, out of the assets which came to the hands of the assignee, except as to the one certificate of deposit not disposed of by the assignor and so much of the proceeds of the others as could be traced to deposits in other banks.
    Appeal from a judgment of tbe circuit court for St. Croix county: E. B. BuNdy, Circuit Judge.
    
      Affirmed.
    
    On January 21, 1890, one Charles Dowie, a resident of St. Croix county, died intestate. On April 2,1890, one Silas Staples was appointed Ms administrator, and qualified as such. On October 1, 1890, A. J. Goss, of Hudson, was appointed attorney in fact for each and all of the twelve several heirs at law of said deceased, for the purpose of receiving from said administrator and settling with him for all moneys belonging to said estate upon final settlement. ' Said A. J. Goss was at the time the sole owner of the unincorporated bank known as the Hudson Savings Bank, and continued such owner down to June 15, 1893. As such banker said A. J. Goss received from said Staples on deposit: July 18, 1891, $1,562.36; .December 9, 1891, $1,500; September 29, 1892, $2,800; December 22, 1892, $610,— aggregating $6,472.36. At the time said Staples settled his accounts as administrator — April 14,1893 —■ he had on hand certificates of deposit in the aggregate amount of $11,722.24, of which sum $6,472.36 consisted of the four certificates issued by the Hudson Savings Bank, as aforesaid, and upon which there was then due $262.15 as accrued interest. He also had six several certificates issued by the Bank of New Eichmond, aggregating $2,623.21; and also six several certificates issued by the Manufacturers’ Bank of New Eichmond, aggregating $1,635; and also a certificate of deposit, issued by the First National Bank of Hudson, for $991.67. At the time of said settlement — -April 14, 1893— the said Staples, as such administrator, turned over all of said seventeen certificates of deposit to said A. J. Goss as such attorney in fact, who also allowed him, as interest on the four issued by his bank, the. $262.15 mentioned, and also allowed' him, as interest on the certificates issued by the other banks, $23.94. At the same time said A. J. Goss paid back to said Staples $2,320.71, with which said Staples paid all unpaid allowances and liabilities ■ against said estate, leaving the said A. J. Goss liable to the heirs of said estate to the amount of $9,687.62.
    On June 9, 1893, the said Hudson Savings Bank, belonging to the said A. J. Goss, closed its doors, and June 15, 1893, the said A. J. Goss made a voluntary assignment for the benefit of his creditors to the defendant Humphrey, who thereupon qualified as such. Among the assets so transferred to said Humphrey as assignee was the said certificate of 'deposit issued by the First National Bank of Hudson, of §991.67, with $19.82 accrued interest, amounting to $1,011.49, and also the four certificates of deposit issued by the Hudson Savings Bank, and accrued interest, aggregating $6,734.51. Between April 14, 1893, and June 10, 1893, the said A. J. Goss sold, transferred, and disposed of, or drew the money upon, all the other certificates of deposit mentioned, and used and disposed of the same and the proceeds thereof in his own banking business, and no trace of any of said certificates, or of any of the proceeds of any of said certificates, is found by the court, or can be made from the evidence, except that $369.51 thereof was still on deposit in the First National Bank of St. Paul, June 15, 1893, and the same passed to the said Humphrey as such assignee, and §67.20 thereof at that time was still on deposit in the Merchants’ National Bank of St. Paul, and the same passed to the said Humphrey as such assignee.
    . The trial court found, in effect, that neither the plaintiff nor any of the heirs of the said Dowie estate were entitled to any preference over other creditors of the said A. J. Goss, except that the proceeds of said certificates of deposits so on hand June 15, 1893, and so passed into the hands of said Humphrey as such assignee, aggregating $1,448.20, belonged to the estate of' the said Charles Dowie, deceased, and that the plaintiff, as one of the twelve heirs of said deceased, was entitled to one twelfth thereof, to wit, the sum of $120.68. From the judgment entered accordingly the plaintiff appeals.
    For the appellant there was a brief by Baher dk Helms, and oral argument by E. W. Helms.
    
    They contended that tbe transaction between Mr. Staples and Mr. Goss was equivalent to tbe payment by Mr. Staples to Mr. Goss of tbe sum of $9,699.62, in cash, and tbe deposit of such cash in tbe vaults of tbe Hudson Savings Bank by Mr. Goss. Tbe language used in tbe opinion in tbe case of Nonotuck Silk Go. v. Flanders, 87 Wis. 237, at tbe foot of p. 239, is exactly in point. Said sum so deposited was a trust fund, and under tbe “modern rule of equity” it will be presumed-that tbe $7,964.41 remaining in tbe Hudson Savings Bank and turned over by Mr. Goss to tbe assignee was a portion of the money so paid in by Mr. Staples. McLeod v. Fvans, 66 Wis. 401; Francis v. Evans, 69 id. 115; Bowers v. Fvans, 71 id. 133; Nonobuck Bilk Go. v. Flanders, 87 id. 237; In re Plankmton Bank, id. 378; In re Kdlletls Estate, 13 Ob. Div. 696; Sherwood v. Gent. Mich. Brn. Bcmk, 61 N. W. Eep. 352; In re Gamin v. Gleason, 105 N. T. 256. Tbe case at bar comes witbin both tbe logic and tbe letter of tbe Ilallett Gase. Tbe facts bring it precisely witbin tbe principle illustrated by Jessel, M. E., on p. 727. See, also, National Bcmk v. Ins. Go. 104 U. S. 54. Tbe balance of tbe trust fund, to tbe amount of $1,735.21, is traceable to, and was a part of, moneys deposited by Mr. Goss with banks other than tbe Hudson Savings Bank, and was transferred to tbe assignee by said assignment.
    Eor tbe respondent there was a brief by Spooner, Bmborn, Kerr <& Spooner, and oral argument by Ghas. P. Spooner, A. I. Sanborn, and J. B. Kerr.
    
    They cited, besides cases cited in tbe opinion, Philadelphia Nat. Bcmk v. Bowd, 38 Eed. Eep. 172.
   Cassoday, 0. J.

Tbe Dowie estate was fully settled April 14,1893, and tbe entire assets of that estate, after paying all allowances and liabilities, were on that day turned over to A. J. Goss, as tbe attorney in fact of tbe twelve Dowie beirs. By that transaction A. J. Goss became indebted directly to tbe several Dowie heirs for nearly $10,000. Two months afterwards A. J. Gross made a voluntary assignment for the benefit of his creditors to the defendant, Humphrey; and on investigation it turns out that his estate is overwhelmingly insolvent. Now, it is contended that Humphrey, as such assignee, should pay the Dowie heirs in full, in preference to the other creditors of A. J. Gross.

The trial court, in effect, held that so much of the Dowie estate and so much of the proceeds and avails thereof as had been traced into the hands of Humphrey, as such assignee, belonged to and should be treated as the property of the Dowie heirs; but as to the balance of their claims, respectively, they stood on the same footing as other creditors of A. J. Goss. We are constrained to hold that such'ruling is in harmony with the more recent adjudications of this court. Nonotuch Silk Co. v. Flanders, 87 Wis. 237; In re Plankinton Bank, 87 Wis. 378; Henry v. Martin, 88 Wis. 367; Burnham v. Barth, 89 Wis. 362; Thuemmler v. Barth, 89 Wis. 381.

In the first of these cases this court reviewed its former rulings, and sought to put itself in line with what we regarded as the best-considered cases in England and this country. In that case, and partly quoting from the opinions of other courts, it is, in effect, said that the guiding principle is that a trustee cannot assert a title of his own to trust property. If he destroys a trust fund by dissipating it altogether, there remains nothing to be subject to the trust. When trust money becomes so mixed up with the trustee’s individual funds that it is impossible to trace and identify it as entering into some specific property, the trust ceases. The court will go as far as it can in thus tracing and following trust money; but, when, as a matter of fact, it cannot be traced, the equitable right of the cestui que i/rust to follow it fails. The right to so follow and reclaim a trust fund is always based upon the right of property, and is never based upon tbe theory of preference by reason of an unlawful conversion. Nonotuck Silk Co. v. Flanders, 87 Wis. 241, 242.

Tbe opinions of tbis court in tbe subsequent cases cited are equally explicit. Thus in Burnham v. Barth, 89•’Wis. 367-370, Mr. Justice Piukey said: “"When tbe trust fund cannot be identified or traced into some specific estate or substituted property, and tbe means of ascertainment fail, tbe trust wholly fails, and tbe party can only prove as a general creditor. ... As tbe right to trace bis trust fund is founded on tbe right of property, and not on tbe ground of compensation for its loss, be must be able to point out tbe particular property into which tbe fund has been converted. "When be is unable to do tbis, tbe trust fails and bis claim becomes one for compensation only, for tbe loss of tbe fund, and stands on tbe same basis as tbe claims of general creditors. Tbe rule in tbe administration of insolvent estates is that equality is equity, and the burden of joroof is on tbe claimant to show tbe facts which entitle him to claim as owner and not merely as a creditor. . . . Tbe court will go as far as it can in tracing and following trust money, but when, as a matter of fact, it cannot be traced, tbe trust and equitable right of tbe beneficiary to follow it fails. . . . "Where tbe trust fund cannot be traced, and tbe substituted property into which it has entered specifically identified, tbe trust fund must be regarded as dissipated, within tbe meaning of tbe authorities,— scattered, dispersed, and, as such, destroyed.”

Under these adjudications, can we say that any more than tbe $1,448.20 of tbe Dowie estate, as allowed by tbe trial court, actually passed into tbe bands of Humphrey as such assignee ? It will be remembered that A. J. Goss bad borrowed from tbe administrator of that estate, in tbe years 1891-92, $6,472.36, and that bis indebtedness therefor was evidenced by four certificates of deposit, upon which there was due as unpaid interest, April 14, 1893, $262.15. The several deposits for which said certificates were given were, respectively, made from six to twenty-three months before. True, in settling with the administrator, A. J. Goss accepted these' evidences of his own indebtedness as so much cash; but his available cash in the bank was not thereby increased a particle. It does not appear, and probably it could not have been made to appear by evidence, what precise disposition was made of any of such deposits in 1891-92. It does appear that from January 3, 1893, to June 10, 1893, there was paid out of the Hudson Savings Bank by A. J. Goss to persons lawfully entitled thereto, over and above the amount of moneys received by him or said bank from all sources, $26,668.92; and in addition to this there was, during the same period, a large reduction in the net amount of the credits of the Hudson Savings Bank in the various banks with which it carried on business in New York, Chicago', St. Paul, and New Richmond. As shown in Nonotuck Silk Co. v. Flanders, 87 Wis. 243, the use of trust funds by an insolvent debtor in payment of his own debts does not enrich his estate nor diminish his indebtedness, but merely creates one debt to pay another and hence furnishes no ground for preference. The views expressed are in full accord with two very recent cases in courts of very high standing on these much mooted questions. In re Hallett & Co., Ex parte Blane [1894], 2 Q. B. 237; Freiberg v. Stoddard, 161 Pa. St. 259. It appears from the record that the cash balance of the Hudson Savings Bank, April 14, 1893, was only $17.50 larger than the day before, and on the next day it was $43 smaller, and June 8, 1893, it was $7,568.49 less. Erom the evidence in this case it is impossible to say that the avails of any of the thirteen certificates of deposit received by A. J. Goss from Staples, April 14, 1893, on other banks were ever placed in the Hudson Savings Bank. The dealings between the Hudson Savings Bank and A. J. Goss and the First National Bank of St. Paul between April 14, 1893, and June. 9, 1893, appear to have been upwards of $50,000. During that time nine of said certificates appear to have been disposed of to that bank. It is manifest, however, that only $369.51 of the avails of those certificates remained' in that bank- at the time of the assignment. The trial court, by giving the appellant the benefit of the presumptions against such insolvent depositor, sanctioned in In re Hallett's Estate, 13 Ch. Div. 696, and Nonotuck Silk Co. v. Flanders, 87 Wis. 243, held that that amount belonged to the Dowie estate. Upon the same principle the trial court allowed the Dowie estate the $67.20 which remained in the Merchants’ National Bank as the avails of certain of those certificates at the time of said assignment. The court also allowed said estate the unappropriated certificate of $991.67, • issued by the First National Bank of Hudson, which, with the accrued interest, amounted to $1,011.49.

We perceive no error in the record.

By the Court.— The judgment of the circuit court is affirmed.