Court Opinion

ID: 6234167
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:28:39.753989+00
Date Added: 2024-06-11T08:57:59.406127
License: Public Domain

The opinion of the court was delivered,
by Sharswood, J.
The exception by Robert A. Evans to the report of the auditors, charging him with interest, was rightly dismissed. He had mixed the trust-moneys of the assigned estate in his hands with his own, depositing them in his own name with the banking-house of Evans, McEvoy & Co., of which he was a member, and upon this deposit he admitted that he received interest, though at what rate he declined to say. All the authorities agree that in such a case the trustee is chargeable with interest: Verner’s Estate, 6 Watts 251; Dyott’s Appeal, 2 W. & S. 565; Robinett’s Appeal, 12 Casey 174; Wistar’s Appeal, 4 P. F. Smith 60.
The case of George K. Reed, the other assignee, is different. He did not mix the trust funds with his own. He deposited them in a separate account in his name as assignee. He received no interest upon them. Upon his own private account with the same bankers he received no interest. The presumption, at least in the absence of evidence to the contrary, is so, for deposits for safe keeping do not bear interest without a special agreement. Nor was he bound in an estate of this character — when he had a year to settle — and where the estate was in his hands for distribution merely, to invest the proceeds. Had this deposit been made in a banking-house in established credit in which he was not himself interested, it is not pretended that he would have been properly chargeable with interest which he had not received.
It is contended, however, and this contention prevailed with the auditors and the learned court below, that because George K. Reed was a member of the banking-house of Reed, McGrann & Co., with whom these deposits were made, that fact is sufficient to fix upon him this liability. This is pushing the doctrine, as it appears to us, to a very extravagent length, not sustained by any of the authorities which were cited and relied on by the learned auditors nor in the argument at the bar. It may be admitted that banks do employ a certain portion of their deposits in the discount of negotiable paper. They do that upon a calculation that such a proportion will not be called for. This proportion must vary from time to time, depending very much upon the state of credit and confidence in the community. When the deposits are large and are left for any certain period, they often agree to pay interest to their depositors, at rates varying according to the circumstances *459of each particular case. It is admitted that the agreement is generally special with each depositor. The saving fund institutions, which do not bank, but invest the money of .their depositors in bonds, mortgages and other permanent securities, generally, I believe, stipulate that a certain notice shall be given before the money can be drawn out, or if it is liable to draft at any time the rate of interest is small. Certainly the custom of banks to pay interest to their depositors is of recent introduction. ■ Now the principle maintained, and upon which alone the decree as to George K. Reed can be supported, is that no matter what his interest in the firm was — no matter -what proportion of their deposits they kept on hand to meet the checks of their depositors — or what the actual profit made — the trustee must be answerable for interest at six per cent. The rule indeed is one of policy — to enforce the great principle that a trustee shall not be permitted to derive any benefit, direct or indirect, from the trust estate. But we ought not to carry this principle to an extent which will produce inconvenience and injustice. If the ground here taken be true it will preclude a trustee from making his deposits as trustee in an incorporated bank of which he is a stockholder. It surely should be competent for the trustee, in every case in which he is charged with interest on this ground, to show what profit he actually did make. The proportion of such profits coming to him as the stockholder of an incorporated bank or the member of a private banking-house, would perhaps be inappreciably small, unless indeed the amount of the deposits was extraordinarily large. Every case of this character must necessarily depend upon its own peculiar circumstances. We do not say that there may not be cases in which the charge of interest at some rate would not be eminently proper. The only hesitation we have had in this instance is in considering the question whether George K. Reed ought not to be charged with some rate less than six per cent. Yet without knowing what was the extent of his interest in the firm of Reed, McGrann & Co., or what the rate of profits they divided, or what was the proportion of those profits derived from that part of their deposits which they used in their business, how can this be determined ? It may be that upon such a calculation it would be found that the proportion of the $831.86 lawful interest charged against Mr. Reed actually coming to him from the profits of his banking-house derived from them would be a very small sum. It will be observed that Mr. Reed’s receipts were not so large as to require the application of so rigid a rule. His cash receipts up to April 5th 1869 were $2513.83; up to April 17th 1869 $4350.25; 14th May 1869 $6240.61; July 2d 1869 $8068.66 ; Oct. 18th 1869 $9035.33; May 13th 1870 $9557.07. The assignment was dated February 27th 1869, and the account of the assignees was filed May 17th 187 0, not quite fifteen months after the assignment. Taking all *460these circumstances into consideration, we think that it would be unjust to Mr. Reed to allow this surcharge of interest against him to stand, and that no rule of equity or consideration of policy requires it.
Decree affirmed as to Robert A. Evans, and reversed as to George- K. Reed — the costs of the appeals to be paid by the appellants, in the proportion of two-thirds by Evans and one-third by Reed.