Norwich bulletin., 1914-04-30

SlncG pd1u ttle4I ldCe Nd1ue WHICH amounts have never been repaid it. The bank claims that these items so collected constitute a trust fund flor it and as to them 1t Is a preferred cred- ] itor and entitled to immediate pay ment
 1 An adjudication of these questions Is i asked, and also as to whether the 1 Thames Go. can set off. the $294.30 due ! it on general account against the sum due the bank, if this be found to be a trust fund.
 The endorsement of these items for ! collection and remittance was a re- 1 strictive endorsement. | FIresnen's Bank v National Tube 1 Works, f51 Mass, 413. AIS. l It created between the sending ana 1 receiving bank the relation of princi- l pal and agent.
 So long as the items remained un- | collected the principal could control | their disposition. The agent had re- ceived the items for a specific pur- pose and stood toward its principal as | a trustee charged with an active duty 1 towards the purpose of the agency I which was the subject of the trust. Dale " Gear, 3S Conn, 15. IS. | After the collections were made the | agent or trustee might have continued | the trust relation. or by its conduct l toward the collections have changed 1 the relation of that of debtor and cred 1 itor.
 l For example, the agent would change | the relation to that of debtor and cred | itor were 1t to mingle the funds col l lected with it's own funds. credit the 1 collections to the sending bank under | its arrangement with it to make remit tances at specified times. If, on the other hand, 1t held the funds collected. 1 intending under it's agreement to make immediate remittance and for very brief period for business convenience keeping the fund set apart or on spe- l PiQ1 6annGif for ifS nr1nClDal. there would be no change in the relation, the trust would continue, and on failure Of the agent pending transmission of the fund, the principal would be entitled to them.
 Commercial Bank V. Armstrong, 14S U. S., 50. 56.
 Some of the courts hold the test is found in the ability to trace the fund, if this can be done the trust contin- ues; if it cannot, the trust ceases and the principal must share with other crSdftors of the insolvent. While other courts hold the test to be whether the relation of principal and agent has ceased and that of debtor and creditor begun.
 We agree with the supreme court of the United States (Conl. Bank " Arm strong) that the latter test furnishes the more satisfactory reason traced is, as it seems to us, evidence of the existence or existence of this relation.
 But whatever the ground of recov- cry adopted the claimant to the fund must assume the burden of proving the existence of this trust relation.
 Bank Com. ". Trust Co. 70 N. H.. $50.
 The insolvency of the Thames Go. terminated its authority to collect The receiver of the company could not inventory uncollected items for they never became part of the assets of the company.
 If the company collected in spite of the termination of it's agency to col lect it held the proceeds as an agent for the sending bank and they became impressed with a trust from which they cannot be diSas ssociated.
 Freeman's Bank V. National Tube Works (supra).
 Manufacturers Bank V. Continental Bank, 14S Mass, 559; Cyc., 512.
 The item of s647.S4 was collected af- ter the order of court of April 16th.
 Restrained from Dividends.
 This order restrained the Thames Co. from paying out any of it's funds or declaring or paying dividends on its deposits or capital stock.
 The order did not in terms purport to prevent the company from making collections of items in its hands.
 But when the power of the company to remit the proceeds of it's collections was taken from it, it's power to fulfill the purposes of the agency committed to it by the Reserve bank was taken away.
 The bank would not have authorized the collection had it known that the proceeds could not be remitted to it. It would not have converted a practi- cally cash asset into a general claim against the company.
 When The company lost its power to oo orrU on of "a agency ceased.
 The claim collected after the order of court of April 18th is in the same position as the claim collected after an adjudication in insolvency. The pro- ceeds are impressed with a trust, the relation of principal and agent has never been transformed to that of debtor and creditor
 As to the two items collected before the order was passed, the facts stipu- lated do not indicate that the bank in- tended that the sums collected on these items should be a trust fund, or be forthwith remitted to it. The letter of April 14th, forwarded with the two largest items did state that the enclos- ure was flor collection and remit tance." There is nothing in the facts presented, and no legan inference to be drawn from the use of these words which compel the conclusion that inn mediate remittance was intended.
 T credit until paid" This undoubtedly had reference to the custom between banks holding business relations to credit items unless otherwise direct ed. And it implied that credit might be made upon collection.
 We think the custom of tine banking business is so universal that we may take judicial notice of it, that items collected for another bank are in fact credited whether the provision for collection and remittance" be among the printed directions of the letter of the forwarding bank to it's correspond eat or not.
 We must presume that by a we'll known custom among banks moneys of it's correspondents when collected are mingled with the funds of the collecting bank
 Freeman's Bank V. National Tube Works (sUpra).
 When this is done the forwarding bank will get a like sum of money but not the specific fund collected
 If the payment of a fee for the col lection indicates, as the Reserve bank asserts, a custom that immediate re- mlttance of the items collected should be made. we could not so hold without 8 finding of the custom.
 Until the case is presented of such custom, 1t will not be necessary to consider the effect of the violation of its contract by the agent by crediting the collections made.
 We should have preferred that the record should show more fully all of the facts surrounding this transac- ton; the relation and course of busi- ness between the Reserve bank and IL ~ +I,-