Court Opinion

ID: 8184931
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:07:17.151249+00
Date Added: 2024-06-11T16:40:22.867732
License: Public Domain

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 di*102rectly 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 *103is 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 *104was 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 *105and 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.