162 A. 296 | Pa. | 1932
Argued May 26, 1932. The Commercial Trust Company deposited $6,429.50 with the Union Trust Company, the account being styled "Commercial Trust Company Trust Funds." The Union Trust Company had $6,808.45 on deposit with the Commercial Trust Company, this account being styled "Union Trust Company Trust Funds." It is conceded that both deposits represented trust funds of the respective institutions, and, as such, were the property of various cestuis que trust or beneficiaries of each bank.
Union Trust Company was and still is a solvent going concern. Commercial passed into the hands of the secretary of banking because of impairment of capital. The secretary drew on Union for the trust funds of Commercial which it held. Payment of his draft was refused since Union claimed a set-off against it because of the trust fund deposit it had in Commercial. The court below refused to permit the set-off for the reason that it did not appear that there was mutuality of demand both as regards the quality of the right and the identity of the parties.
The statutes* and orders of the banking department have resulted in a general practice among trust companies of depositing trust funds exactly as was done in this case. The beneficial owners of Commercial's trust account are A, B, and C; their money is in the Union bank. The beneficial owners of Union's trust account are X, Y, and Z, and their money is in the Commercial bank. Strike the trust companies out of the picture, as they are only trustees holding legal title, and the matter *496
is reduced to its simplest form. What is then asked in the set-off is that the money of A, B, and C, be used in part to pay the debts to X, Y, and Z. This we held in Hunter v. Henning,
The question here then is one of ownership, not one of determining the status of a deposit between the bank and the depositor. The underlying equitable principle set forth in Trestrail v. Johnson, supra, controls. The names in which suit could be brought and defended furnish an indication, but are not the only criterion, of the right of set-off. To whom do the funds really belong? Mutuality of right in a set-off is not circumscribed by the "right to bring an action," but the broader question may be and generally is of importance. Whose money or claim is proposed to be used as a set-off? This is the true equitable principle which governs such questions. Where there is a contest over trust funds in the hands of trust companies that are governed by the same acts, the status of such trust funds, because of their shifting character, must receive a more liberal treatment than trust funds in the hands of other fiduciaries. This results from the acts of assembly and orders of the secretary of banking under these acts, authorizing and requiring the use and deposit of such funds in a prescribed manner. The designation of the beneficiaries and their interest in the fund is also controlled to a large extent by these acts and orders, as *497
well as the actions of the trust company covering these matters. Because of these circumstances, while certain liberties exist in the case of such trust companies with respect to the manner of drawing and honoring checks on such accounts, and perhaps with respect to other banking matters in connection therewith and in suits therefore, when the security of the fund itself is attacked, the trust company claiming it, or the secretary of banking for it, may, for the benefit of the real owners or beneficiaries, defend or assert their claim or title to the fund, either in their right or through the trust company. In this respect the case differs from the instances of set-offs or claims as noted in First National Bank of Lock Haven v. Mason,
The court below did not err in entering judgment for the secretary of banking for the amount which the Commercial Trust Company had on deposit with the Union Trust Company.
Judgment affirmed.