In re Stafford

Harris, J. When a bank receives from its customer his money, and passes the same to his credit, it is called a deposit, . but, in legal effect, it is a loan. The bank credits the amount to the depositor, as a debt which it owes him. Nothing short of payment will absolve the bank from the obligation it assumes. (Commercial Bank of Albany v. Hughes, 117 Wend. 94.) Robinson, therefore, must be regarded as having loaned the money in question to the bank. If He had made the deposit to the credit of the estate, then probably, the loss sustained through the insolvency of the bank, would have fallen upon the estate, and not upon him. But, by depositing the funds of the estate with his own individual funds, to his own credit individually, I think he became the debtor of the estate, and the creditor of the bank, to the amount so deposited. It was, in effect, a loan, not as receiver, but on his own individual account. Had he owed the bank, it might have insisted upon an offset of the debt against the deposit, nor would it have availed the receiver to show that the funds deposited were really not his own, but those of the estate. (Utica Ins. Co. v. Lynch, 11 Paige, 520.) The question, in this case, is to be determined upon the same principles as other cases of trust. The receiver was, in fact, a trustee, and is entitled to the same protection, and subject to the same liabilities as other trustees. I understand it to be a general rule, applicable to all persons standing in that relation, whether they be receivers, guardians, executors or administrators, or trustees of any other description, that so long as they keep themselves strictly within the line of duty, and exercise reasonable care and diligence, they can not be made responsible for any loss or depreciation of the fund intrusted to them; but if they do not strictly pursue that line, and a loss ensue, they [355] are liable to make that loss good, although such loss may have been wholly unexpected, and little likely to have happened from the course pursued, and although the conduct of the trustee had been entirely free from any improper motive. If this rule be applicable to the case in hand, and I am unable to see why it is not, it is clear the receiver must himself bear the loss which he seeks to charge upon the estate. Instead of depositing the funds to the credit of the estate, separately, he mingled them with his own, and involved them in a general account of debtor and creditor between himself and the bank. It may be assumed that he was actuated by no improper motive. He did not suppose it possible that any one could be injured by thus disposing of the funds. The same would have been equally true, had he loaned them temporarily to a friend, in whose honesty and responsibility he had confidence. Yet it would not be pretended that, in such a case, he could escape liability for any loss which might occur, though equally unexpected, as in this case. He would have been liable in that case, as he is in this, upon the ground that in the management of the funds he had allowed himself to pass beyond the line of his duty. I regret to find myself brought to this conclusion. There can be no doubt that Mr. Robinson has acted in entire good faith; nor is there any reason to believe that the estate has really suffered by the course he has pursued. It seems severe, under such circumstances, to charge him with the loss. But, though it operate severely in this particular instance, is it not better, than that a well settled and salutary principle should be violated 1 Courts of equity have laid down certain rules as the result of long experience, by which those having the management of trust funds are to be guided, if they would protect themselves from personal responsibility. Prominent among them is the principle that such funds are to be kept separate from the private funds of the trustee, and, if mingled with his own, he may be charged with such funds, as being himself the borrower. This exception to the report must, therefore, be allowed, and there must be added to the amount reported by the referee to be due from Mr. Robinson, the sum of $265,73, being the net [356] amount of the credit allowed to him by the referee on account of the Canal Bank deposit. [Albany Special Term, July 7, 1851. Harris, Justice.] In respect to the item of $57, there are no facts before me from which I am able to determine whether that amount was or was not properly allowed by the master. That exception must, therefore, be disallowed. The report, amended as above, must be confirmed.