Muhlenberg v. Northwest Loan & Trust Co.

Opinion by Mr. Chief Justice Bean. [143] This case having been submitted in April last on the theory that it involved substantially the same question as Ferchen v. Arndt, 26 Or. 121, 37 Pac. 161, and Sharpe v. Hartman, (in which no opinion was written, 26 Or. 131,) submitted about the same time, the opinion in the Ferchen case was supposed to be decisive of the ease now under consideration. But appellant’s counsel seek, by a petition for rehearing, to escape the effect of that decision by claiming now, for the first time, that the pleadings in this case show that the money for which plaintiff claims a lien, or its proceeds, was in the possession of the trustee bank at the time of its suspension, and constitutes a part of the assets in the receiver’s hands. This is a highly technical construction of the pleadings, at variance with the whole theory upon which the case was tried, and is manifestly contrary to the facts as disclosed by the testimony. The money for which plaintiff seeks to enforce a lien was received by the bank prior to the nineteenth day of June, eighteen hundred and ninety-three, and was commingled with and used as a part of its general funds in the usual course of its business from that time until its suspension on the twenty-ninth of the following July; and there is no evidence to show that any part of it or its proceeds were in the possession of the bank at the time of its suspension, or have since come into the hands of the receiver. It is clear, therefore, that upon the facts plaintiff is not entitled to a lien upon any of the assets of the bank in the hands of the receiver, for, as said by Chief Justice Lord in the Ferchen case, “Before one claiming to be a trust creditor can be entitled to a lien or preference over other creditors, he must make it appear that the fund or property of the debtor which he seeks to affect with such a lien or preference includes the trust property or proceeds thereof.” The answer alleges that the moneys mentioned in the complaint were deposited with the bank to be paid to a debtor [144] of the plaintiff and his assignor on the order of Markle; that after its receipt the bank notified Markle of the same and he thereupon offered to pay it to such debtor but that he refused to receive it and ‘ ‘ that said Markle therefore permitted said-moneys to remain on deposit with said trust company where the same were at the time it was forced by financial embarrassment to suspend its business.” It is contended that the portion of the answer quoted is an allegation or admission that the moneys of plaintiff were in the bank either in specie or in some changed form at the time of its suspension, but when construed in connection with the subject matter of the allegation of which it forms a part it was evidently not so intended, but only to aver that the money remained on deposit with the bank in the sense that it stood on the books of the concern to the credit of the plaintiff and his assignors. This seems to us manifest when it is remembered that the complaint alleges, and the answer admits, that the bank placed the moneys of plaintiff “in its treasury for use in connection with its banking business, and that having been so placed in the treasury aforesaid, they were paid out in the course of its business affairs as a banking institution. That thereupon the defendant wholly destroyed the identity of plaintiff’s said remittance and the identity of the moneys of the other parties paid over to it in trust as aforesaid.” And “that by reason of the wrongful mingling of the moneys of plaintiff and the other parties aforesaid it is impossible to follow the moneys so paid to the defendant company and that the same are wholly incapable of identification. ” The complaint seems to have been drawn and the case was tried on the theory that plaintiff could not trace his money or the proceeds thereof into the hands of the receiver. This position is, in our opinion, fully warranted by the record. No allusion is made by appellant in his brief to the alleged admissions of the answer, nor was his [145] contention in this court that he was entitled to a lien because his money or the proceeds thereof were actually in the possession of the receiver, but on the doctrine that (quoting from the brief) “where funds come into the hands of a trustee impressed with a trust in favor of the principal and are wrongfully mingled by the trustee with his own funds so as to be incapable of identification, the cestui que trust has an equitable lien on all the assets of the defaulting trustee to the amount of the fund so misappropriated.” In our opinion, therefore, there is nothing in the record in this case to exempt it from the rule announced in Ferchen v. Arndt and applied in the Sharp case, the facts of which appellant states in his brief are “substantially identical ” with those in the case under consideration. Rehearing denied. Footnotes [1] Note.—There is an interesting essay on the right of a beneficiary to follow trust funds, with special reference to the new doctrine that, though a trust fund cannot be traced into any particular asset of the insolvent estate of the trustee, yet it is sufficient to charge the estate in behalf of the beneficiary, in preference to the general creditors, to show that it had gone into and been used for the benefit of his estate, with numerous citations, by Jos. H. Taulane in 48 Alb. Law Jour. 38á. The same question is considered in Little v. Chadwick, 151 Mass. 109, 7 L. R. A. 570, with note; and in First National Bank v. Hummel, 8 L. R. A. 788, with note, 20 Am. St. Rep. 257, 14 Colo. 259. See. also the note to Ferchen v. Arndt, 26 Or. 121.—Eeporter.