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ceived differs with that which precedes it, in the fact of ability to trace the money.

A New Hampshire case,10 is such a useful one on the subject that I cannot forbear quoting from it at some length. It related to collections made by a trust company and the suit was against its assignee in insolvency. It was said: "If it were found that the relation was that of trustee and cestui que trust, or was of a fiduciary character, it would not follow that the claimants would be entitled to the relief they now seek. In Cavin v. Gleason, 105 N. Y. 256, 262, it is said: 'It is clear, we think, that 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 solvedness 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 there is property in the possession of the assignee that was held in trust by the defendants, the cestuis que trustent are entitled to their interest in it notwithstanding the assignment."

But: "Proving that there was a trust at one time in particular property does not prove that the trust is impressed upon other property at a later time, without

10.

Atl. 113.

Bank Comm'rs. v. Security Trust Co. (1901), 70 N. H. 536, 49

showing that the latter is the proceeds or substitute of the former. In this case, proof by the claimants that the defendants acting in a fiduciary capacity, collected money for them a year or six months, or a longer or a shorter time before the appointment of the assignee, does not prove that the money or property into which it may have been converted was on hand at the time the assignee took possession, nor that the estate as a whole, was then larger or more valuable than it would have been otherwise."

It would seem unnecessary to further pursue the branch of our subject under this section. The rule seems firmly established, that a trust will not be impressed upon other property according to the mere probabilities in a business disaster. Misusing trust funds may contribute to, rather than arrest, such result, but be that as it may, the rule requires a tracing of trust funds by the claimant thereof and this by proof of a rational, definite character. Thus a Massachusetts case," is quoted as saying that: "If the trustee has become bankrupt, the court cannot say that the trust money is to be found somewhere in the general estate of the trustee that still remains." The New Hampshire case cites and discusses a great abundance of authority, both English and American, and says: "The difference in the authorities after all mainly relates to the application of the rule, rather than to the rule itself.'

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§ 154. Acts of Officers Creating Trust Fund Though No Money Passes to Trust Company. Before leaving the subject of trust fund that may be followed in equity, it is interesting and perhaps important to con

11. Little v. Chadwick (1890), 151 Mass. 109, 110, 23 N. E. 1005, 7 L. R. A. 570.

12. See also Empire State Surety Co. v. Carroll County (1912), 194 Fed. 593, C. C. A.

sider the grounds of dissent of two of the five judges in Madison Trust Co. v. Carnegie Trust Co. supra. This minority agreed with the majority that there was no preferential lien under the New York statute. They contended, however, that no debt was shown against the trust company and, of course, no trust even of an equitable nature. The facts in this case are special, but they are argued in a way that suggests want of apparent power in a general officer acting alone to commit a trust company to responsibility.

The company was sued upon an agreement by the vice-president for the trust company, signing for it, to buy certain stocks and hold them as trustee. A check was given by plaintiff and it was indorsed by the company to another of its officers who appropriated its proceeds. The dissent by Scott, J. says: "The evidence is very clear that (the vice-president) was never in fact authorized to make the agreement in behalf of the Carnegie Trust Company. If the stocks had actually been bought, it would, I think, be well within the corporate power of the Carnegie Trust Company to hold them as trustee for the Van Norden Trust Company, and an agreement to do so, signed in the name of the company by any general officer, would doubtless be within the apparent scope of his authority. It is not that portion. of the agreement, however, which the company is charged with breaching, for it never came into possession of the stock. The breach with which it is charged is that it did not buy the stocks at all and this part of the agreement was not, in my opinion, within the apparent scope of (the vice-president's) authority, *** and there is nothing in the case which would justify a presumption of authority in the vice-president to so agree, in face of the established want of actual authority."

Whether this reasoning would hold or not in the face of the fact, that turning over a check for the amount was the same as paying over the trust company's counter the amount thereof, it is unnecessary to inquire. It seems to me that this would obviate the difficulty of ultra vires But the question suggested remains and a Court of Appeals case is cited in its support.

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This case, speaking of an agreement by a trust company to become the guarantor of a note secured by collateral in the way of certain bonds and stocks, said this was in effect an attempt to guaranty the future value of said stocks and bonds. The opinion, as distinguishing between a trust company and a bank, said: "Where a corporation is organized for business or trading purposes, and the only person interested therein, other than its business creditors, are its stockholders, and their only interest therein is to secure dividends upon their investment, the question of ultra vires is of comparatively small importance, except in behalf of the State in their public capacity, and the courts treat the question as it relates to such a corporation very differently than they do in the case of a banking corporation." It goes on to speak then of banking institutions occupying a fiduciary position and especially of trust companies saying: "Their primary work is of a trust capacity, and to a large extent they take the place of individual administrators, executors, guardians, committees, receivers and trustees." This contract was held to create no liability.

Where the vice-president of a trust company, trustee under a mortgage, made representations to prospective purchasers of the value of bonds secured thereby, it was

13. Gause v. Commonwealth Trust Co. (1909), 196 N. Y. 134, 89 N. E. 476, 24 L. R. A. (N. S.) 967.

held there was no presumption of law that he had authority to make such representations.'

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I think the dissenting opinion in the Carnegie Trust Company case is wrong, because the delivery to it of the check payable to its order was the same as paying to it the money it called for and a vice-president at least had power to indorse the check, unless the maker of the check knew or had reason to know he would indorse it in furtherance of an unlawful agreement.

§ 155. Statutory Preferences Against Insolvent Trust Company. In respect to the lamentable wreck of the Carnegie Trust Company and as a seeming reflection on administration of its assets in insolvency it was said by Mr. Justice Shearn in Le Baudy v. Carnegie Trust Co. supra that: "(Plaintiffs') case is a hard one, but it is no harder than that of thousands of other depositors of this wrecked institution. It is not to be wondered at that the plaintiff sought a preference, however, in view of the fact that preferential claims to the amount of several hundred thousand dollars have been allowed and paid out to a small group of creditors without any contest in court. In my opinion, all preferences in the cases of insolvent banking institutions should be resisted by the public authorities, except where they are statutory, and should, when in the courts, be disposed of wherever possible upon the principle that equality is equity."

If the learned judge takes this principle as explained in the New Hampshire case supra, this is all right, but, if he means that there should be substituted a measure like the Chancellor's boot to cover hard cases, then he greatly errs.

14. Davidge v. Guardian Trust Co. (1911), 203 N. Y. 331, 96 N. E.

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