Shute v. Hinman

Mr. Justice Bean delivered the opinion. This is a proceeding to require the assignee of the estate of Anton Pfanner, insolvent, to pay the administrator of Martin Manning, deceased, $879.84 out of the moneys coming into his hands as assignee, on the ground that it is a trust fund. The facts are that on February 3, 1896, Pfanner was appointed and qualified as administrator of the estate of Martin Manning, deceased, and acted as such until June, 1897, when he was removed by the county court, and the present petitioner appointed in his stead. Soon after his appointment as administrator, Pfanner purchased and assumed control of a banking house at Forest Grove; and all funds received by him belonging to the estate were deposited in the bank to his credit, and commingled with and used as a part of the general funds of the bank in the usual course of business. On June 10, 1897, the bank failed, and Pfanner made a general assignment for the benefit of his creditors. He had in the bank vault at the time the sum of $1,755.69 in cash, and was indebted to the Manning estate in the sum of $879.84 for [580] moneys collected by Mm as administrator. The present administrator sets out these facts in his petition, and prays an order directing the assignee to pay over such sum to him out of the funds on hand at the time of the assignment. The petition was granted, and the assignee appeals, claiming that the evidence is insufficient to establish the right of the Manning estate to a preference over the other creditors of Pfanner. 1. The rule in this state is that one claiming a preference over other creditors, on account of trust property, must either identify the specific property, or the proceeds thereof, or show that the property of the debtor which he seeks to affect with such lien or preference includes the trust property. The rule formerly prevailed that the claimant must identify the particular property or the proceeds thereof; but this has been, so modified that, although its identity has been completely lost, equity will afford relief if it is shown to have been mingled into a common mass, and forms a part thereof. “This equitable doctrine is put upon the ground,” says Mr. Chief Justice Lord, “that the real owner has the right to retake and reclaim his property, through all its transformations and forms” so long as it may be traced, whether its identity is preserved, or is merged into a mass of which it forms a part. To accomplish this end, when such trust property has been mingled into a mass of which it forms a part, but its identity is lost, equity affords relief by creating a charge or lien upon such mass for its ascertainable value. The right to such relief has its basis in the right of property, and ‘simply asserts,’ as Andrews, J., says, ‘the right of the true owner to his own property:’ Cavin v. Gleason, 105 N. Y. 262 (11 N. E. 504). But whether such owner seeks to recover specific property, or to create a lien upon a mass or fund, he must trace such property, and show [581] that it belongs to him, or that it has gone into, and. then remains in, the mass which he seeks to impress with a lien or charge. In such cases the question to be determined always is whether the trust property or fund, or the proceeds thereof, is traceable into any specific property or fund. Before, therefore, 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 lien or preference includes the trust property, or the proceeds thereof:” Ferchen v. Arndt, 26 Or. 121 (29 L. R. A. 664, 46 Am. St. Rep. 603, 37 Pac. 161, 163). 2. By applying this rule to the facts in the case before us, its solution presents no difficulty. The evidence shows that the money for which the plaintiff claims a preference was indiscriminately mixed and mingled with the bank’s other money, and its identity wholly lost. None of it has been traced or followed into the mass sought to be charged with the lien. It was used by the bank in the ordinary course of its business to pay its debts and obligations, the same as any other money; and, so far as this record shows, none of it was in the possession of the bank at the time of its suspension, or has since come'into the hands of the assignee. This is not a case where the trustee has mingled the trust fund with his own, and a balance remains sufficient to satisfy the trust, as in Knatchbull v. Hallett, 13 Ch. Div. 696 ; but here the trust fund was commingled with the other funds of the bank, the same as that of other depositors, and was paid out and disbursed in the same manner. It is manifest, therefore, that the petitioner has no preference over other creditors. The decree must therefore be reversed, and the petition dismissed ; and it is so ordered. Reversed.