Court Opinion

ID: 5179994
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:40:48.417853+00
Date Added: 2024-06-11T08:26:32.134818
License: Public Domain

O’Brien, J.
(dissenting):
Appeal from order directing payment of claim.
In 1884 Charles H. Moore was the receiver of the estate of Roswell S. Burrows, deceased. . He has since died, and the petitioner here succeeded him as such receiver. In that year Mr. Moore commenced an action against the American Loan and Trust Company to recover certificates of the capital stock of the Niagara Falls International Bridge Company, then held by the said American Loan and Trust Company in pledge. The latter defended the action, and thus an issue arose between the receiver and the trust company as to who was legally entitled to the possession of the certificates. Judgment was rendered in that suit in favor of the trust company. Pending appeal to the Court of Appeals, Moore, the receiver, thereafter obtained an order of court allowing, him to enter into a stipulation which was. made between the parties on October 21, 1887, as follows : “ The said receiver shall exchange with said trust company cash to the amount of the claim of said defendant as established by the judgment herein, with interest and all the costs awarded at Special or General Term for the certificates of bridge stock, and the power of sale and transfer accompanying the same, now held by the said trust company. Said cash to be held by the said trust company subject to the same lien, if any, that it may be ultimately. decided in this suit that the trust company has on the said stock, and that in case judgment herein is affirmed by the Court of Appeals, that the said trust company may apply’such money to the payment of its said claim and costs to the discharge of said loan. And that if the plaintiff shall succeed in this suit and obtain the judgment of this court, determining that he is entitled to said stock, then that the said trust company, upon the entry of such judgment and upon demand, will return said cash without interest to the receiver, and at the same time and under the same circumstances, shall deliver to the receiver the note and other papers ’relating to the loan for which the said defendant now holds said stock as collateral.”
On the same day the trust company delivered to Moore the certificates of stock, and the latter deposited the money in question with the trust company and took a receipt therefor. Thereafter the trust company became insolvent and Simmons was, appointed its receiver,, and on or about the 21st of July, 1892, Moore served upon Sim*201mans a notice of the deposit of this money and of his claim that it was held as a pledge and that neither the trust company nor its receiver had any “ right to mingle the said money so deposited in pledge with the general assets of said trust company.” Subsequently Moore died and Lorenzo Burrows was appointed receiver in his stead. Afterwards a judgment was recovered in the action of Burrows, as receiver, against the American Loan and Trust Company, wherein it was adjudged that the plaintiff, as receiver of the estate of Roswell S. Burrows, deceased, was entitled to the certificates of stock and to the said sum deposited in lieu thereof.
The trust company was incorporated by special act of the Legislature of this State (Chap. 868 of the Laws of .1872, as amended by chap. 260 of the Laws of 1884), and section 8 of said act provides : “In case of the dissolution of the said company * * * the debts due from the company as trustee, guardian, receiver or depositary of moneys in court or of savings bank funds shall have a preference.” The trust company carried on a general banking business from October, 1887, when said deposit was made; until Mr. Simmons was appointed as receiver on March 7, 1891. When the deposit in question was made, the money was not kept separate, but was mingled with the funds of the company generally. At the time when Mr. Simmons, as receiver, took possession of the assets of the company there was on hand the sum of §31,793.89 in cash. There was then no special sum of money set apart to meet the claims asserted in the action of said Moore. The amount of the indebtedness of the company, to which by the terms of the charter preference was expressly given, was $704,840.10. In addition, there are claims to the amount of $400,000. The principal of the preferred claims has been paid in full, but the receiver has not now in his hands a sufficient amount of money to pay the interest, and nothing whatever has-been paid upon the unpreferred ^claims.
The receiver of the estate of Burrows petitioned this court for an order that his claim be “ paid in full and in preference to the claims of any general creditor upon the funds or assets in the hands of the said Simmons as receiver as aforesaid.” The receiver of the trust company opposed this motion upon the ground that the petitioner was not entitled to such preference, either by reason of the character of the transaction out of which the claim arose or of the provisions *202of the charter of the trust company. An order was, however, made directing such payment absolutely, and from that order Mr. Simmons, as receiver, has appealed to this court.
The certificates of stock for which the money was substituted were not deposited with the trust company by Burrows or by his receiver, Moore, but were held by that company as security for a debt. Moore, claiming the stock as the property of the estate of Burrows, brought his action for the pfirpose of procuring a determination to that effect, but judgment went against him and he appealed. If at that time the trust company, as it then had the legal right to do, had sold the certificates of stock and applied the proceeds to the payment of its debt, using the money realized in its business, would the receiver of Burrows’ estate, upon subsequently obtaining a reversal and a judgment in his favor, have been entitled, as against the receiver of the trust company, to a preference over all other creditors ? Such a judgment would eventually entitle the receiver of Burrows to a return of the stock or, in case it was sold, to its Value. In such a transaction it could not be held that there was any trust relation, or that the trust company acted as bailee, for Burrows, but, as we have seen, it was claiming in hostility with respect to securities which it held in pledge for a debt due it,'and the judgment when rendered, and before it was reversed, decreed that it was entitled to sell the stock and apply the proceeds to 'the payment of its debt. I think that, in such a transaction, the certificates having been sold and the money applied in discharge of the debt due the trust company, and the money realized mixed with its general funds and used in its ordinary business,' where, as shown, there was no fiduciary relation, and no relation as between the Burrows estate and the trust company of bailor and bailee, the remedy of Burrows receiver upon obtaining the judgment ‘ in liis favor would be a right to have a return of the stock dr its value if sold. And the claim thus arising would place the receiver of Burrows in the category of a general creditor, and would hot create any such fiduciary relation as would entitle him to a preference over all other general creditors. ' ■
If this view of the original relation between the parties is right, I do not see how it is in any way changed by the' stipulation, which merely substituted the money for the stock. The stipulation, pro*203vides that the cash shall ¡he held by the trust company subject to-the same lien, if any, that it may be ultimately decided in the suit that the trust company has in the .stock, and that if the plaintiff shall obtain a judgment determining that he is entitled to the stock, then the trust company shall return the cash. There is no agreement that the money shall be retained in specie, but simply that, after recovery of a judgment by plaintiff, the money shall be returned upon demand. No force can be attached to the provision that the money shall be sub ject to the same lien as the stock, because this provision was in the interest of the trust company, and was inserted, not for the protection of the receiver of Burrows, but as-recognizing the lien which the trust company claimed, and it was proper that it should provide that the money deposited in lieu of the stock should be subject to the same rights as the trust company had to the stock. I fail to' see hów a deposit thus made is any stronger than that of the ordinary. depositor in a trust company,, because in the latter casé the trust company agrees to pay back the-money on demand, without any preliminary process of litigation, whereas, under the stipulation, the money deposited by Moore was to be repaid only if he could succeéd in establishing his right thereto by litigation.
But even if we should regard the stipulation as constituting -the petitioner a trust creditor, this would not entitle him to a"preference. •As said in Matter of Cavin v. Gleason (105 N. Y. 262): “ Upon an accounting in bankruptcy or insolvency a trust creditor is not entitled' to a preference over general creditors of the insolvent, merely on the ground of the nature of his claim, that is, that he is a trust creditor as distinguished from a general creditor. * * * The equitable doctrine that, as between creditors,, equality is equity, admits, so far as we know, of no exception founded on the greater supposed .sacredness of one debt, or that it arose out of a violation of duty, or that its loss involves greater apparent hardship in one case than another, unless- it" appears in addition that there is some specific recognized equity founded on some agreement, or the relation of the debt to the assigned property, which entitles the claimant, according to equitable principles, to preferential payment. If it appears that trust property specifically belonging to the trust is included in the assets, the court, doubtless, may order it to be *204restored to the trust.” In that case also we find an answer to the suggestion made, that this amount should be preferred before other claims because the funds and assets which came to the possession of Simmons were increased by the amount of the moneys in controversy, .and that by reason of them he received that amount more than he ■otherwise would. As therein said: “In a very general sense all ■creditors of an insolvent may be supposed to have contributed to the assets which constitute the residuum of his estate.” I think the principle of that case sustains the appellant’s view, that upon -whatever terms the stock or the money might have been received, ■even if it were the fact that the trust company had wholly concerted or misapplied the same ; still, that alone would not give the ■debt so arising a preference over other indebtedness of the trust' company. In order to secure a preference it would be necessary to .show in addition' that some part of the proceeds arising from such action was in the hands of the trust Company when Mr. Simmons was appointed receiver, and then the preference would not extend beyond the amount of such proceeds actually coming into the receiver’s possession.
I do not think that the petitioner’s right to relief can be predicated upon the second ground, namely, the. terms of the charter of the trust company, that “ debts due from the company as trustee, .guardian, receiver or depositary, of moneys in court, * * * .shall have a preference.” Regarding the manner in which the -deposit was made, we do not think it constituted the company “a •depositary of moneys in court.” That provision covers cases in which the company is intrusted as an officer of the court, acting in ■a fiduciary capacity, with the property of others, and can have no .reference to a case where, acting in its own behalf, it accepts security for a debt which it claims to be due to it.
I am of opinion, therefore, that the order directing a preference ■was erroneous and should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.
Order affirmed, with ten dollars costs and disbursements.