Court Opinion

ID: 5239627
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:22:37.953985+00
Date Added: 2024-06-11T08:27:47.120347
License: Public Domain

Laughlin, J. (dissenting):
I am in accord with the views of the majority of the court to the effect that the plaintiff was not precluded by the former appeal herein from asserting the claim which he now presents; but I am of opinion that his claim is well founded, and that he was entitled to have it established for $140,000, the entire amount of the trust fund which the Carnegie Trust Company held in trust for the Nineteenth Ward Bank, as security for the payment of the notes which that bank transferred to the plaintiff, who thereby succeeded to the rights of the Nineteenth Ward Bank with respect to the security of the trust fund. While any part of the notes remained unpaid, the cause of action, therefore, for this trust fund vested in the plaintiff, and if he should recover any surplus over and above the amount due to. him on the notes, of course he would hold it as trustee for the makers of the notes. I know of no precedent for the decision about to be made, which, as I view it, in effect holds that collateral security is released to the extent of any payment on the indebtedness for which it is held as security and that the cause of action for the collateral thus released thereby becomes vested in the pledgor, for, manifestly, it is no concern of the Carnegie Trust Company that a payment of $16,000 was made on the notes by the makers. It is conceded that the equitable cause of action which the Nineteenth Ward Bank, as cestui que trust, had against the Carnegie Trust Company as trustee became vested in the plaintiff as security for the notes transferred to him. The majority opinion, as I understand it, proceeds upon- the theory that in so far as the makers have made payments on the notes, the cause of action against the trustee has passed to them.
Manifestly, if the makers had received the proceeds of the discount of the notes, and had delivered to the Nineteenth Ward Bank securities as collateral, the bank would be entitled to hold those securities until the last cent owing on the notes was paid. If, instead of delivering collateral to the bank, it had been delivered to a third party as trustee for the benefit of the bank as holder of the notes, the rule would be the same, and the cause of action against the trustee to reduce the collateral to possession would vest in the bank on default in payment of the
*148notes. That is, in legal effect, this case, the only difference being that here, instead of other collateral being delivered to the trustee, the entire proceeds of the discount of the notes was delivered to the trustee, and it is manifest, I think, that the trustee held the entire amount for the benefit of the holder of the notes until the payment of the entire indebtedness thereon. The payment of part of the indebtedness by the makers merely reduces their liability, but the security, namely, the original proceeds of the notes, and the cause of action against the .trustee therefor, stand as security for the payment of the notes in full, and the makers can recover no part thereof either from the Carnegie Trust Company or the plaintiff as the holder of the notes until the entire indebtedness is paid.
I, therefore, vote for reversal and for the modification of the judgment in accordance with these views.
Judgment affirmed, with costs.