140 A. 768 | Pa. | 1928
Argued January 3, 1928. The Ottumwa National Bank, appellant, sent to the Carnegie Trust Company a note for collection and remittance only. The bank was not a depositor of the trust company, and the latter institution was then insolvent, a fact which did not become known to the bank until after the secretary of banking had taken possession of the trust company's assets, as hereinafter set forth. Despite the fact of its insolvency, the trust company accepted the note, received its amount in cash, mingled the sum so received with its other funds, and sent to the bank a draft on the Colonial Trust Company, for the amount of the collection. In due course, the *117 draft was presented for payment, but this was refused, because, on that day, the secretary of banking, in accordance with the banking laws of the State, had declared the Carnegie Trust Company to be insolvent, and had taken possession of its assets, preparatory to closing up its affairs, as required by those laws. Subsequently the Colonial Trust Company paid to the secretary the balance due by it to the Carnegie Trust Company, which sum, at the time the draft in favor of the bank was drawn and at all times thereafter, was far in excess of the amount of the draft. The bank requested the secretary to pay it that amount, but he refused to do so. It thereupon presented its petition to the Court of Common Pleas of Allegheny County, which had jurisdiction of the accounts of the secretary, setting forth the facts, and asking that he be required to make the payment; he filed an answer; the court made the order prayed for, the Superior Court reversed, and we allowed the present appeal.
At bar, counsel for the respective parties asked us to decide the case on its merits, irrespective of the procedural points which had been suggested by them, viz.: (1) Whether or not the only time to raise the issue was on the settlement of the accounts of the secretary, and (2) whether or not, since he was but a stakeholder, he had any standing to appeal from the order of the court of common pleas. Though we are thus excused from deciding these points, it may be well to state that the proper procedure on questions affecting a distribution of the funds collected by the secretary, is to present a claim when his account has been filed and is before the court, at which time all the distributees can be heard, and from the decree which follows they alone have the right to appeal: Cameron v. City Bank of York,
Turning then to the substantial question involved, we find that, despite dicta to the contrary, nearly all of the applicable principles of law are well settled. The relation between the bank and the trust company was not the ordinary one of debtor and creditor, but that of principal and agent (Webb v. Newhall,
Counsel for appellee strenuously urge, however, that, though it is conceded the trust company was insolvent throughout the entire transaction, it is not admitted or shown the officers knew this, and that the rule above stated will not apply unless they did. We are not interested in determining whether or not such a distinction exists, for, if it does, it would be inapplicable here. The petition avers not only the insolvency, but the knowledge of the bank officials; the answer admits the former, and as to the latter simply says that "respondent *119
is without knowledge" on the subject. This is an insufficient denial. Appellee asserts that he did not know of the fact of insolvency until after he took possession of the trust company's assets, and hence he must have obtained that knowledge either from an examination of the company's books or from those acquainted with its affairs. It is a little difficult to understand why that examination or information did not likewise show whether or not the bank officials had knowledge of the insolvency; but, whether it did or did not, this being an equitable proceeding, a pleading of ignorance on the subject was not sufficient to put upon appellant the burden of proving that otherwise undisputed fact: Fisher v. King,
It may be, as also contended by appellee, that it is the custom of banks, when a check, note or draft is sent for collection, to mingle the amount received thereon with the general funds of the bank and to send to the remitter a check for the amount collected. The present record is silent regarding any such alleged custom, and no authority has been shown us which so asserts, where, as here, the collecting agency was insolvent when the *120
check, note or draft was received and collected. If such a custom exists, it is, as respects the present status, a bad one, and the courts will not enforce it (Holmes v. Johnson,
It is further contended that, even if the foregoing conclusions are correct, appellant cannot succeed, because unable to trace the proceeds of the note into any account which was existing at the time the trust company failed. The legal effect of this situation has long been a vexed question, but the modern doctrine sustains appellant's right. It would unduly prolong this opinion to attempt to review the numerous and conflicting cases on the subject; many of them will be found cited in 3 Pomeroy's Equity Jurisprudence (4th ed.), section 1048 (e), beginning on page 2384, from which we quote (page 2387): "If the beneficiary can show that the trustee's estate, as it came into the hands of his assignee, trustee in bankruptcy, receiver, executor of administrator, wasactually increased by the whole or a definite portion of the misappropriated trust fund, justice demands that he, and not the other creditors, should have the benefit of this increase. The creditors have no right to make a profit by their debtor's breach of trust." And again (page 2388): "It is now the well settled rule, that where withdrawals from the mixed fund, with or without subsequent replenishing from the trustee's individual money, have not at any time reduced the balance to a sum less than the trust fund deposited, the cestui que trust, as against the trustee's creditors, is entitled to repayment in full; his money is sufficiently identified as having always been contained within the blended fund."
In the present case, admittedly, the money belonging to appellant was wrongfully included in the trust company's general assets, which were at all times sufficiently large to make good the amount due, and the effect of refusing relief would be to give to other distributees *121
a larger sum than they would have received but for the fraud practised on appellant. In view of this, to rule in appellee's favor would be to make the fraud successful, whereas to refuse so to do could not possibly result in legal harm to anyone. Hence, we again state, what is and always should be fundamental, that no one, however innocent he may be, will be permitted to benefit by the wrongdoing of another, if the result will be to make effective the injury to the person wronged, and it is equitably possible to prevent such a result: Stirk's Est.,
A study of our decisions will show that they do not antagonize the conclusion here reached. In Freiberg v. Stoddard,
The judgment of the Superior Court is reversed and that of the Court of Common Pleas of Allegheny County is reinstated and affirmed.