Court Opinion

ID: 6312592
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:17:33.814115+00
Date Added: 2024-06-11T08:59:07.771842
License: Public Domain

The opinion of the Court was delivered by
Gibson, C. J.
Edwin Tyler’s account of the funds put into his hands for investment by the surviving trustee, was admissible evidence for a very sufficient reason—it was in prejudice of his interest. Had he purchased the stock with his own money, he would have owned it in perpetuity, instead of owning the produce of it during his lifetime. He declared that he had purchased it with the proceeds of the Farrandsville store for the benefit of the trust; and, at his death, his declaration became evidence of the fact as the confession of a man peculiarly, if not exclusively, cognizant of it, whose sacrifice, by the narration, is an equivalent for his oath. In Gressley’s Eq. Ev. 222, the confession of a trust is put as a familiar instance of hearsay evidence, in which such a sacrifice is held to be a sufficient guaranty of the narrator’s truth.
The declaration of Mr Walters, the cashier, was competent on another ground. The Act of Incorporation pledges a borrower’s stock for his discounts; and it was necessary to affect the bank with notice that these shares, standing as they did in the name of Edwin Tyler, were not his exclusive property when his note was discounted, in order to prevent the bank from acquiring an interest in. them beyond his beneficial ownership. The declaration of the cashier showed that this knowledge was in his possession ; but though it is the duty of that officer to disclose to the directors his knowledge of a security offered for a loan, and the presumption is that he did so in this instance, yet the difficulty is to determine whether his declaration that the stock belonged to the children, is to be taken for the aet of any one but himself. The relation which he bore in the transaction, was that of an agent, and depends for its extent on the constitution of the bank, and the course of its business. Thus, in Fleckner v. The Bank of the United States, (8 Wheat. 338), it is said the cashier is- the general executive officer in checking for money deposited; delivering up discounted notes and other property; receiving money, and taking care of the cash, notes, and bills; conducting the whole pecuniary operations in paying or receiving debts, and in discharging or transferring securities; and it may be added that he is, by necessary practice, the agent of the bank to manage its concerns in all things not peculiarly committed to the directors by the charter. In The Bank of Pennsylvania v. Reed, (1 Watts & Serg. 106), we held that a cashier has a general authority to-superintend the collection of notes under protest; to make agreements of compromise, when necessary; and, in short, to do anything which any other agent may do within the scope of his business. The extent of the cashier’s authority in this instance, therefore, is *377to be measured by the duties assigned to him ; and it is proved that he was allowed to discount notes—a function which involved a greater extent of power than is necessary to effect a transfer of dividends or stock. It was testified even that the discount from which the claim of the bank to these shares arises, was made by him instead of the board; and his knowledge at the time of the transaction, was therefore emphatically the knowledge of the board whose function he was authorized to perform. But on one of the two occasions mentioned by the witness, it is doubtful whether the declaration was made in the discharge of a duty. The surviving trustee testified that he was told at the bank, some time after Edwin’s death, that the shares were the property of the children. It may not have been the cashier’s business to converse on such topics; but the trustee testified that the cashier subsequently proposed to pay, on the security of his receipt, dividends admitted by him to be due to the children for these shares; and that the money was accordingly put to their stepmother’s credit for their use. As, then, these demands would have belonged to their father’s creditors, if the children had not had an interest paramount to his title, the Act itself was not only an admission of their right, but conclusive evidence that the bank had notice of it; and if the cashier supposed the stock to be their property at the time of the discount, there is no room to infer that the money was advanced on the credit of it as a security. The admission of the children’s ownership on another occasion, but to the same witness, neither added to, nor took from, the evidence of such a belief; and on the principle of those decisions by which the reception of incompetent evidence has been helped by conclusive proof of the fact, the case stood as fair for the bank on the whole evidence,"as if the questionable part had been struck out of it. The error, then, if there was one, was without prejudice.
Instead of examining the exceptions to the charge in detail, it is preferable to dispose of them by inquiring whether the trust fund might be traced through the store at Farrandsville specifically to this stock; and whether there was in fact evidence that the identical money had been invested in it.
In regard to the first, it is well settled that a trust will be enforced not only against those who are rightfully possessed of the fund as trustees, but also against all others who have obtained it without consideration or with notice of the trust. (Story’s Eq. Juris, ch. 9, § 533). In Taylor v. Plumer, (3 M. & S. 570), Lord Ellenborough held, that the interest of the cestui que trust shall not suffer by a change in the form of the fund, whether it were made in performance of the trustee’s duty or in violation of it, because an abuse of the trust can neither give nor take away a right; and those who claim-by it as volunteers or Vith notice, stand on a level with the delinquent trustee. Thus in Burdett v. *378Willet, (2 Vern. 638), a debt created by a factor who had sold his principal’s goods and died before the expiration of the credit, was decreed to be paid to the principal, and not to the factor’s specialty creditors; because, though a factor has the right at law, he is in equity but a trustee.
That case assumes that trust money may be followed whenever it can be identified, notwithstanding the obsolete remark of Lord King in Deg v. Deg, (2 P. Wms. 414), that it has no earmark. It is true that coin, or currency of which possession is the index of ownership, cannot be followed into the hands of a bona fide receiver of it for value; not, however, because it has no earmark, but because the convenience of trade does not allow such transactions to be unravelled. But equity looks to the manner in which a trustee has disposed of the fund, and pursues it into the hands of any one who has received it maid fide—in other words, with notice of the trust. A long list of cases might be given for this; but I particularize Chedworth v. Edwards, (8 Vez. 46), because the subject of it was a stock transaction, and the steward who had invested his master’s money in his own name was restrained from transferring the shares. Cases of land purchased with trust money are still more numerous, and I refer to Lench v. Lench, (10 Vez, 517), in which Sir William Grant said, that whatever doubt may have formerly been entertained, it is now settled that trust money may be followed into land, and the claim established by parol evidence.
Was there, then, evidence to be left to the jury, that the trust fund had been vested specifically in this stock ? The land in Connecticut was sold under a power in the deed, and the price of it invested as capital in a store at Farrandsville, which was managed for the trust by Edwin Tyler, but sold by the surviving trustee after a year of successful business. The profits were given to Edwin for his own use, but the capital was put into his hands with instructions to invest it in the stock of this bank for the benefit of the trust; and that he did so, is in evidence by his own declaration, while it is shown by the cashier’s declaration that the bank was aware of the extent of his interest. The evidence therefore was properly left to the jury, with a direction to find for the plaintiff, if it proved that the money with which the stock was bought, was the identical price of the store. The process of perpetual transmutation to which the fund was subjected while it was employed in trade, was immaterial: the price of the store was taken to be the property of the trust by all the parties in interest, and no one else had a right to object. Whether the bank was aware of the interest of the children at the point of time when it discounted the draft, was not made a question at the trial, though there was conflicting evidence on the subject of it; and if there was error in respect to it, the court is not responsible for it. It is unimportant that there may not have been evidence to raise *379the question submitted by the court, whether the shares were purchased with the proceeds of notes given for the Farrandsville store and discounted at the bank. Such a transaction would point out the fund; yet the question was not whether the price of the store had come into the capital of the bank through a particular channel, but whether it had come into it at all. It is not clear, however, that the question was put without evidence; for it was in proof that Edwin Tyler had discounted a note drawn by Ogden E. Edwards, the purchaser of the store.. Neither was the liability of the stock to execution creditors, the test of its liability to the bank. In regard to them, not being purchasers, the question of notice would be an irrelevant one, though it would be otherwise in regard to a purchaser at their sale; and had the bank been put on the footing of an execution creditor, it would not have had' a leg to stand on. We cannot perceive a ground, then, on which the assignment of errors can be sustained.
Judgment affirmed.