137 F.2d 603 | 2d Cir. | 1943
This litigation was initiated by the trustees in reorganization of Associated Gas and Electric Corporation, hereafter called the Corporation, to obtain a judicial determination of the question whether certain funds in their possession should be regarded as general assets or be held, for the benefit of a special class of creditors, namely, the owners of unclaimed interest which had accrued on the Corporation’s bonds before January 10, 1940, the date when its petition for reorganization was filed. The Corporation has outstanding three issues of unsecured bonds or debentures, issued during 1932 and 1933, which will be referred to collectively as bonds. Where discrimination between the issues is desired they will be called respectively the 8s of 1940, the income debentures and the convertible debentures. The bonds were issued both in bearer form with coupons representing interest and in registered form without interest coupons. Interest was payable semi-annually at the Corporation’s-office or agency in New York City. On January 10, 1940 matured but unclaimed' interest on the bonds aggregated $202,448.-05. Of this sum funds totalling $197,420.94 were on deposit with the corporation’spaying agent, Transfer and Paying Agency,
We think it entirely clear that the-funds deposited in the “Interest Account”' in Public National Bank remained subject to the Corporation’s control; hence the-district court correctly held them to constitute general assets. This account was. opened in September 1939 pursuant to a resolution of the Corporation’s directors authorizing the deposit in an “Interest Account” of funds to be disbursed in payment of interest due and payable on and
More can be said, but not enough, in support of the contention that the Trapa deposits were impressed with a trust. Prior to the designation in 1937 of Trapa as the Corporation’s paying agent, interest on the bonds had been paid through Transfer and Coupon Paying Agency,
The letters of November 8th were addressed to Traco. One letter referred to funds previously deposited with Traco for interest payments, and directed that “any amount of such deposits remaining with you are to be held in trust by you for the holders of such securities to whom the interest is payable, for a period of one year from the date hereof.” The other letter referred to checks transmitted therewith for payment of December 1934 interest, and stated: “These funds are deposited with you to be held in trust by you for the holders of our debentures to whom interest is payable and are to be held in such trust for the period of one year from December 1, 1934.” By endorsement on each letter Traco agreed to the trust instructions. After the writing of these letters the Corporation continued until January 1937 to transmit funds to Traco, in the same manner as before November 8, 1934, for payment of maturing instalments of interest; and after expiration of the one-
In reaching the conclusion that the Trapa deposits were impressed with a trust the district court applied the principle of “continuing intention” of a trust purpose, citing Sinclair Cuba Oil Co. v. Manati Sugar Co., D.C.S.D.N.Y., 2 F.Supp. 240 and Sherry v Union Gas Utilities, 20 Del.Ch. 60, 171 A. 188. In our opinion the application of this principle to the present case is precluded not only by the express limitation of one year for duration of the trusts created by the letters of November 8, 1934, but also by the fact that after that date the Corporation designated a new paying agent (Trapa) to which the funds now in litigation were transmitted without any intimation that they were to be held by it as trustee rather than as paying agent. It is, indeed, true that without the use of the words “trust” or “trustee” money can be placed in the hands of one person for payment to another under such circumstances as to create a trust enforceable by the latter; but the circumstances should “show beyond a reasonable doubt that a trust was intended to be created.” See Beaver v. Beaver, 117 N.Y. 421, 428, 22 N.E. 940, 941, 6 L.R.A. 403, 15 Am.St.Rep. 531; Sayer v. Wynkoop, 248 N.Y. 54, 59, 161 N.E. 417. That the Corporation intended to impress a trust upon the funds deposited with Trapa can be but an inference drawn from the proven facts. And it is one which need not necessarily be drawn, for the facts are at least equally consistent with an intention on the Corporation’s part to make Trapa merely its paying agent. The master’s finding of trust intention is therefore less compelling than it would be if based on conflicting evidence. See Kycoga Land Co. v. Kentucky River Coal Corp., 6 Cir., 110 F.2d 894, 896, certiorari denied 312 U.S. 688, 61 S.Ct. 615, 85 L.Ed. 1125. Moreover, if wc correctly read the district judge’s thorough and careful opinion, he would not have found a trust intention except for his application of the doctrine of “continuing intention.” As already stated, we think that doctrine is inapplicable. Accordingly we feel free to reverse the conclusion that the Trapa deposits involved in this appeal were held in trust for the owners of unclaimed interest.
The decree is to be modified in conformity with this opinion.
This was a business trust created by-certain individuals who executed in New Jersey in November 1932 a declaration of :rust under which they were constituted trustees to conduct business under the iame of H. C. Hopson & Company. By successive changes of name this trust became Transfer and Paying Agency. In 1937 the Corporation designated Trapa’s office in New York City as the office or agency where interest on the Corporation’s bonds should be payable.
The trustees’ appeal involves unclaimed interest of $126,684.68 on the income debentures and unclaimed interest of $65,865.97 on the convertible debentures. Unclaimed interest of $4,870.29 on the 8s of 1940, which makes up the balance of the Trapa deposits aggregating $197,420.9'', was also held to be trust funds, but th. appeal does not challenge the trust status of this item.
Empire Trust Company has succeeded the original trustee named in the indenture pursuant to which the Corporation’s convertible debentures were issued.
This was a business trust organized in New Jersey on January 2, 1982 by the same three persons who later organized the trust referred to as Trapa. See note 1, supra.
Similarly designated coupon accounts were kept by Traco in two other banks, but funds deposited in those accounts were not drawn upon except to transfer the deposits to the coupon account in Public National Bank, upon which Traco drew all cheeks issued in payment of coupons.
The fact of such transfer was stipulated.