Court Opinion

ID: 8831790
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:05:47.605847+00
Date Added: 2024-06-11T17:04:56.724370
License: Public Domain

LEARNED HAND, District Judge
(after stating the facts as above). I cannot conceive any legal distinction between a fund deposited in a bank to meet a declared dividend, and called a “Dividend Account,” and a similar fund deposited to meet coupons and called a “Coupon Account.” A declared dividend is universally regarded as a debt, and a coupon is, of course, no more than a secured debt. How it can be thought, ceteris paribus, that one account should be a trust fund, and another not, passes the limit of my discrimination. But this case concerns coupons, and however the law be written I must try to spell it out.
*923The fact that the fund remains subject only to the obligor’s order has usually been deemed enough to rebut the inference of a trust. There must be some intention to give the beneficiary irrevocable rights in the res, and that scarcely comports- with the obligor’s sole right to draw. That was the case in Re Interborough Consol. Co. (Ex parte Gustave Porges) 288 Fed. 334 (C. C. A. 2, January 16, 1923), and it is authoritative on me even if I did not agree with it, which (though that makes no difference) I do.
In the case at bar the funds when deposited were plainly enough earmarked for their purpose and the bank disbursed them directly upon presentation of the coupons. That method of paying the debts might, I should think, be interpreted either way. I do not mean that it is of any moment that the bank was also the trustee under the mortgage. What seems to me of consequence is that each remittance was sent on with the understanding that the obligor should nqt have anything more to do with it, and that the bank should distribute it to those who were entitled. That, I should think, might well have been treated as an irrevocable release of control, and so a valid declaration of trust. At least, in such a case, where the whole thing turns on how you will interpret papers whose meaning is entirely indeterminate, I should incline to think that the obligor showed by its practice that it was permanently done with the funds. Of course, that does not mean that the debt was paid. Adams v. Hackensack Improvement Commission, 44 N. J. Law, 638, 43 Am. Rep. 406.
But the whole thing is very tenebrous at best, and it is more important that the law should be certain than that ideal justice should be done, whatever that may mean. In Noyes v. First National Bank, 180 App. Div. 162, 167 N. Y. Supp. 288, the bank paid the coupons out of the fund-by its own checks, and still no trust arose. The Court of Appeals accepted Mr. Justice Scott’s opinion as its own (224 N. Y. 542, 120 N. E. 870), and that settles tíre law there against my supposed test. Of course, this is a matter of general commercial law, and federal judges are free to follow their own notions; but it is undesirable to do so, unless one’s convictions are firmer than my own. Anyway this case, along with Staten Island Cricket & Baseball Club v. Farmers’ L. & T. Co., 41 App. Div. 321, 58 N. Y. Supp. 460, on which it stood, was approved in Re Interborough Consol. Co. (Ex parte Gustave Porges) supra, and indeed appears to have been the basis of that decision. The distinction which I have veñtured to suggest as possibly critical was ignored, and I have no doubt that it would be overruled, if now made a point of departure. There is no distinction between the state law and the case at bar.
Petition granted.