Mutual Accident Ass'n of the Northwest v. Jacobs

Mr. Justice Craig delivered the opinion of the Court: The $6000 was not passed over to S. A. Kean in currency nr other money, but, as appears from the evidence, the officers -of the Accident Association drew a check, payable to the order of S. A. Kean & Co., for $6000, on the Union National Bank, and delivered the check to Kean & Co., and the money was drawn on the check and used by Kean in his banking business. It is also plain, from the evidence, that the Accident Association knew that the check was paid, and that the money passed into the bank, and was used by the bank in the same manner as other funds which were received by the bank in the usual course of business. Under such circumstances, can it be held that the bank received the money as a special deposit,—that the money became a trust fund, and was of such a character that the court was authorized to take it out of the hands of the general creditors and turn it over to petitioner. If the evidence established the fact that the $6000 had "been placed in the hands of Kean & Co. as a special deposit, we think the petitioner was entitled to be protected. But was this a special deposit. As we understand the question, there is a wide difference between a special and a general deposit, as those terms are understood, not only by bankers, but by the public, who are transacting business daily with banks. Where money of any description is deposited in a bank, and the identical gold or silver or bank bills which were deposited are to be returned to the depositor, and not the equivalent, the deposit will be special, while, on the other hand, a general deposit is “a deposit which is to be returned to the depositor in kind.” Anderson’s Law Dic. 344; 1 Morse on Banking, sec. 190; 2 Am. and Eng. Ency. of Law, 92; Keen v. Colyer, 1 Metc. 417. Where gold or silver coin, or a package of bills or currency, is received in a bank as a special deposit, the identical money to be returned, the bank has no authority to use the money in its business,—its duty is to safely keep and return the identical money; but where there is a general deposit, the understanding being that a like sum of lawful money should be returned, the bank is permitted to use the money in its general business, and the relation of debtor and creditor is created by the transaction. There is nothing in the certificate of deposit which was issued by Kean & Co. which indicates that a package amounting to $6000 had been deposited, there to remain for a time and be returned. That was not the transaction, but, as is clearly shown from the evidence, the petitioner gave Kean & Co. a check on another bank, which went through the clearing house and was paid, and Kean & Co., with the knowledge of the petitioner, mingled the money with the general funds in the bank. This $6000 was commingled with the general funds of the bank in the same manner as-money deposited by other depositors. The money thus became the- funds of the bank, and, as such, upon the failure of Kean & Co. could not be followed by the petitioner. If the $6000 had been placed in a separate package, and thus deposited in the bank, and had never been mingled with the-general funds of the bank, the position of the petitioner might, be sustained; but such was not the case. Otis v. Gross, 96 Ill. 613, is a ease where the same principle was involved as here. There moneys had been deposited under an order of court, but had not been kept separate from the general funds of the bank, and it was held that the deposit was not a special one, or a mere bailment, but the. money deposited became that of the bank. Trustees v. Kirwin, 25 Ill. 73, is a case where the same principle is involved; and in Union Nat. Bank v. Goetz, 138 Ill. 127, after referring to the Kirwin case and various other authorities, it is said: “Many other cases might be cited, but enough has been shown to clearly indicate the line of decisions; holding the doctrine that trust funds can only be pursued when they can be clearly distinguished from other property held by the trustee or by those representing him, and this court is; fully committed to this rule.” Wetherell v. O’Brien, 140 Ill. 146, is also a case in point. There a deposit had been made with a banker, the intention of the depositor being, that the deposit should be invested in a loan on real estate to be procured by the banker, and it was insisted that the money was deposited for a special purpose, and hence a trust for that purpose arose. In the decision of the case it is said: “Where the money which is delivered to a bank; even though it be for some specified purpose, as, for instance, investment in a mortgage security, has been mingled with the funds of the bank, as was done here, there is no rea-son why the depositor should be preferred above any other creditor. Where a trustee changes the form of the trust property, the right of the beneficial owner to reach it and compel its transfer may still exist if the property can be identified as .a distinct fund, and is not so mixed up with other moneys or property that it can no longer be specifically separated. ‘If “the trust property has been transferred to a bona fide purchaser for value without notice, or has lost its identity the beneficial owner must and under other circumstances he may, resort to the personal liability of the wrong-doing trustee.’ (2 Pomeroy’s Eq. Jur. sec. 1058.) Where a trustee has concerted a trust fund into money, and mingled it with his other moneys, so that it can not be separated from the latter, the beneficial owner occupies the position of a general creditor of the estate, and can not follow the fund into the hands of an assignee for the benefit of creditors. (Ill. Tr. and Sav. Bank of Chicago v. Smith, 21 Blatchf. 275, and cases there cited.) Its identification is a prerequisite to the exercise of the right to follow it. (2 Story’s Eq. Jur. sec. 1259.) While it may not be necessary to point to the particular pieces of money or the particular bank bills that were deposited with the trustee, if the trust property be money, yet there must be a preservation of the distinctness of the trust fund.” Here the money passed into the bank as a general deposit. It was mingled with other funds deposited in the bank, so that "there is no means of separating it from other moneys received by the bank in its usual course of business, and the petitioner occupies the position of a general creditor. The judgment of the Appellate Court will be affirmed. Judgment affirmed.