197 N.E. 204 | Ohio Ct. App. | 1934
This case comes into this court on appeal from the Court of Common Pleas of Allen county. Harry S. Day, treasurer of the state of Ohio, was not a party to the case in the lower court, but on his own motion was made a party defendant in this court, duly entered his appearance, and filed his answer herein.
This case was by stipulation of the parties submitted to this court upon the petition, the answers of the defendants and the amended reply of the plaintiff to the answer of defendant Ira J. Fulton, superintendent *270 of banks of the state of Ohio, in charge of the liquidation of The Lima First American Trust Company, and a transcript of the evidence in the form of a bill of exceptions taken in the lower court.
The object of the action is to have a certain claim of plaintiff — as successor trustee to The Lima First American Trust Company which was trustee under the will of Seth S. Wheeler, deceased, represented by and consisting of certain deposits of the funds of said trust estate made by said trust company, trustee, in its banking department — decreed to be alien on the assets of said trust company, including the funddeposited by said trust company with the Treasurer of State, pursuant to the provisions of Section 710-150, General Code, and the Superintendent of Banks ordered to take possession of said fund, and the Treasurer of State ordered to deliver said fund to the Superintendent of Banks for administration by him as a part of the assets of said trust company, and for incidental relief.
As shown by the transcript of the evidence it is stipulated by the attorney for the plaintiff and the attorney for the Superintendent of Banks that the averments in the petition as to matters of fact are correct except as developed in the trial from the testimony of witnesses; and it was stipulated by said attorneys that the averments in the amended reply as to matters of fact are correct except as to averments of malfeasance and misfeasance.
The facts, as shown by the pleadings and the evidence, are as follows:
The Lima Trust Company was duly appointed trustee under the last will and testament of Seth S. Wheeler, deceased, and duly accepted said trust and qualified as such trustee. Said trust company at the time of the creation of such trust relationship had been duly vested with trust powers upon its having made a deposit of one hundred thousand dollars, required *271 by the provisions of Section 710-150, General Code. The Lima First American Trust Company is the successor of said The Lima Trust Company, and became vested with trust powers upon its qualifying as a trust company by compliance with the provisions of said Section 710-150 of the General Code, and at all times mentioned in the pleadings in this case said The Lima First American Trust Company had and maintained with the Treasurer of State of Ohio said sum of one hundred thousand dollars in cash and securities, in compliance with the provisions of said Section 710-150. The securities representing said sum of one hundred thousand dollars, but of the present market value of less than one hundred thousand dollars, are still held intact by the Treasurer of State.
The Lima First American Trust Company was the duly appointed, qualified and acting trustee under the last will and testament of Seth S. Wheeler, deceased, up and until April 25, 1933, when, by consideration of the Probate Court of Allen county, plaintiff, The Huntington National Bank of Columbus, was appointed as successor trustee for the trust created under the will of Seth S. Wheeler, deceased, succeeding The Lima First American Trust Company, trustee, which had then resigned as such trustee. The plaintiff accepted said appointment, qualified as such trustee and is now acting in such capacity.
Upon the resignation of the former trustee, The Lima First American Trust Company, and the appointment of plaintiff as successor trustee, said former trustee was ordered to account for and turn over to plaintiff as such successor trustee all the assets and property belonging to said Seth S. Wheeler trust estate, and said trustee then filed its sixth and final account as trustee for said trust, as of May 22, 1933. This final account reveals that said former trustee, The Lima First American Trust Company, has failed to pay over and distribute to plaintiff as successor *272 trustee the sum of $2,580.24, constituting a part of the assets and property of said trust estate, which said sum is made up of three items, as follows: first, the sum of $249.27 on deposit in a "restricted balance" account of the trust department of said bank in the commercial department thereof, representing ninety-eight per cent of the amount of income cash account from all the trust funds undistributed at the close of business February 24, 1933; second, the sum of $1,925.24 on deposit in a "restricted balance" account of the trust department of said bank, in the commercial department thereof, and representing ninety-eight per cent of the uninvested principal of the trust fund of said estate at the close of business February 24, 1933; third, the sum of $405.73, which is ninety-eight per cent of the amount standing to the credit of said trust fund in savings account Number 33126 of said The Lima First American Trust Company.
Under the last will and testament of Seth S. Wheeler, deceased, creating said trust estate, in Item 4-a thereof, it is provided as follows:
"Said trustee shall keep said estate separate and apart from any other property or moneys owned or held by it."
The defendant Ira J. Fulton is the duly appointed, qualified and acting Superintendent of Banks of the state of Ohio, and the defendant Harry S. Day is the duly elected qualified and acting Treasurer of State for the state of Ohio. The Lima First American Trust Company was closed by action of its board of directors and was placed in the hands of a conservator appointed by the Superintendent of Banks, on April 10, 1933; and on September 10, 1933, said trust company was taken over for liquidation by said Superintendent of Banks and is now in process of liquidation.
The Lima First American Trust Company, as trustee of said estate, on or about February 16, 1933, sold bonds belonging to the estate in the principal amount *273 of $1,840, cash, and accrued interest of $25.50, the bonds being shipped February 16, 1933, to The Union Trust Company of Cleveland, with draft attached, which were cleared through The Cleveland Trust Company, and The Cleveland Trust Company paid for the bonds $1,840 and accrued interest of $25.50 to The Union Trust Company of Cleveland, said payment being made on February 21, 1933, and The Union Trust Company credited the same on its account against The Lima First American Trust Company, and said trust company immediately thereafter credited said trust estate with a deposit in its commercial department in the amount of the proceeds of said bonds, said deposit being Item 2 of the deposits hereinbefore referred to. From the 24th day of February, 1933, the day the trust company went on a restricted basis, up to and including September 9, 1933, at the close of business, the lowest amount of cash on hand in the bank appeared on April 8, 1933, the amount of cash on said date being $14,489.90, and there was no cash anywhere else in any other bank. There was also a bank debit to The Guaranty Trust Company of $.04, an account with The Union Trust Company of Cleveland which showed an overdraft, and also an account with The Bankers Trust Company showing an overdraft.
The total amount of funds of said estate deposited in The Lima First American Trust Company in various accounts was, on February 24, 1933, $1,866.50 as receipts from the sale of bonds, $254.36 from the income cash account, being the first item of deposits hereinbefore referred to, and $413.99 in the savings account, being the third item of deposits hereinbefore referred to, making a total amount of $2,534.85. After said trust company went on a restricted basis there was paid upon trust savings account Number 33126 the sum of $8.26, leaving a balance in said account of $405.73; and there was paid upon the income cash account *274 of $254.36 the sum of $5.09, leaving as a balance in said account the sum of $249.27.
Numerous claims for preference have been filed with the Superintendent of Banks against the property, assets, and funds of The Lima First American Trust Company and the time for filing claims by depositors has not elapsed.
The plaintiff has made demand for the payment or turning over of said funds to it by said Superintendent of Banks, which demand has been refused.
By this statement of facts, the pleadings, and the briefs, the following questions are presented:
First. Did the Common Pleas Court have jurisdiction and does this court on appeal have jurisdiction of the subject-matter of this action?
Second. Did the original banking corporation trustee have any authority to deposit any part of the funds of the trust estate in the commercial or savings departments of the bank conducted by it, where, in the will creating such trust, the testator directed that the trustee should keep said estate separate and apart from any property or moneys owned by it?
Third. If the deposits made by the banking corporation trustee in its commercial and savings departments were unauthorized, do such deposits constitute a misapplication of trust funds authorizing the engrafting of a trust for the payment thereof, or of any of such deposits, on any of the general assets of the bank in charge of the Superintendent of Banks for liquidation; and if a trust is engrafted, to which of said deposits and which assets will it apply?
Fourth. Is the Superintendent of Banks entitled to take possession of and administer the fund deposited by the trust company with the Treasurer of State, and now held by him as a part of the assets of said banking corporation; and how shall such fund be administered?
Fifth. If the deposits made by the banking corporation trustee of the funds of said trust estate in its *275 banking departments were unauthorized, does the making of such deposits constitute such a violation of duty and misfeasance on the part of the trustee as will entitle the plaintiff to a lien on such fund for the payment of such deposits, and, if so, will such lien be prior to or on a parity with the claims of other persons which may be allowed as liens against said fund, and if such fund is not sufficient to satisfy such claim and other similar claims, will the amount of the deficiency constitute a general claim against said banking corporation?
These questions will be considered in the order presented:
1. There is no averment in the pleadings that the subject-matter of this action is res judicata, or that the Common Pleas Court or this court does not have jurisdiction of the subject-matter, and no question as to jurisdiction was raised on the trial of the cause in the Common Pleas Court. The jurisdiction of the Common Pleas Court and of this court over the subject-matter is now objected to for the first time, in the brief of defendant, upon the sole ground that, as the Probate Court had jurisdiction of the settlement of decedent's estate and of the accounting between the trustees, such jurisdiction is exclusive, and that the Common Pleas Court did not have original jurisdiction of the subject-matter of this action, and that consequently this court, on appeal, had no jurisdiction of the subject-matter, and this ground will be the only ground considered; and except for this ground of objection the parties will be considered as having waived any objection to, and as having acquiesced in, the jurisdiction of this court on appeal over the subject-matter of the action.
The final account filed by The Lima First American Trust Company, as trustee, as set forth in the averments of the petition, which, no evidence having been developed to the contrary, is by stipulation of the *276 parties admitted to be true, shows that it failed and refused to pay over and distribute to the plaintiff, as successor trustee, the sum of $2,580.94, constituting a part of the assets and property of the trust estate, and also shows the specific items of deposit in the banking department of the trustee making up said amount. The order of the Probate Court directed said trustee to account for and turn over to plaintiff, as such successor trustee, all the assets and property belonging to said trust estate. This order and the identification in the account filed by the original trustee, of the specific items of assets to be turned over, had, upon the successor trustee accepting the appointment and qualifying as trustee, the effect of vesting in the successor trustee the title and right of possession to the specific items, and the successor trustee having the title and right of possession is entitled to enforce all legal and equitable rights as owner with reference to such items without any further adjudication by the Probate Court with reference thereto.
It was not within the jurisdiction of the Probate Court to engraft or enforce trusts or liens on the funds of the trust company, as the Probate Court is not vested with general equitable jurisdiction authorizing it to engraft or enforce such trusts or liens, and the Probate Court did not have and could not acquire jurisdiction over the Treasurer of State, the custodian of one of the funds upon which a lien is sought to be engrafted; nor was it within the jurisdiction of the Probate Court to allow such claim as a preferred claim against the assets of the trust company in the possession of the Superintendent of Banks for the purpose of liquidation, as the allowance of claims against a bank in the process of liquidation is governed exclusively by the provisions of Section 710-1 et seq., of the General Code, which vest such jurisdiction in the Superintendent of Banks and the Common Pleas Court of the county where the bank in process of liquidation *277 is situated. The Common Pleas Court has jurisdiction not only in the matter of the allowance of claims against banks in process of liquidation, but has general equitable jurisdiction as well, and is the only court in which the relief sought in this action could be granted, so the Common Pleas Court had jurisdiction of the subject-matter, and this court, on appeal from the Common Pleas Court, has jurisdiction of the subject matter.
2. It is contended by the defendant Superintendent of Banks that, by reason of the provisions of Section 710-165, General Code, "moneys * * * pending distribution or investment may be treated as a deposit in the trust department or may be deposited in any other department of the bank, subject in other respects to the provisions of law relating to deposit of trust funds by trustees and others", the various deposits made by the trustee of the trust funds in the commercial and savings departments of the trust company were made under authority of law. The defendant apparently overlooks the provisions of Section 710-164, General Code, which read as follows:
"In the management of money and property held by it as trustee, such trust company may invest such money and property in a general trust fund of the trust company. But it shall be competent for the authority making the appointment to direct whether such money and property shall be held separately or any part thereof invested in a general trust fund of the trust company. The trust company always shall follow and be entirely governed by the directions contained in any will or instrument under which it acts."
It will be noted that this section expressly provides that it shall be competent for the authority making the appointment of a trustee to direct whether such property and money shall be held separately, or any part thereof invested in the general trust funds of the trust company, and that the trust company always *278 shall follow and be entirely governed by the directions contained in any will or instrument under which it acts. Under the provisions of this section, Seth S. Wheeler, in his last will and testament under which he appointed said trustee, had full authority to direct, as he did direct, that said trustee should keep said estate separate and apart from any other property or moneys owned or held by it, and the trust company, under the provisions of this section, was required to follow and be entirely governed by the directions contained in the will. As the trust company in the will was prohibited from making such deposits, such deposits were wholly unauthorized.
3. The deposits made by the banking corporation, trustee of the trust funds, in the commercial and savings departments of the bank conducted by it being wholly unauthorized, such acts on its part constitute a violation of its duty and a misapplication of funds, and the plaintiff, as successor trustee, upon tracing said deposit funds, either in their original form or into specific property which passed to the Superintendent of Banks, may have a trust engrafted thereon. Terre Haute Trust Co. v. Scott, Recr.,
It must be noted, however, that the mere misapplication of a trust fund does not create a general lien on the tort-feasor's estate, but to entitle the owner to recover such fund from a receiver or a trustee it must be traced either in its original form or into specific property which passed to the receiver.Smith et al., Trustees, v. Fuller et al., Assignees,
The case of Jones v. Killbreth,
The blending of the trust money with the money of the trustee was suffered at one time to defeat the owner's title and compel him to stand as a mere unsecured creditor. This was upon the idea that money was not earmarked, and, therefore, could not be recovered in specie. But the later cases have met this difficulty in the case of blended moneys in a bank account, from which there have been drawings from time to time, by the fiction that the sums thus drawn out were from the moneys which the tort-feasor had a right to expend in his own business, and that the balance which remained included the trust fund which he had no right to use. Smith v. Fuller, supra; Knatchbull v. Hallett, In reHallett's Estate, 13 Ch. Div., 696; National Bank v. InsuranceCo.,
But as this is a mere presumption it will not stand against evidence. It is, therefore, a part of the rule applicable to following misappropriated moneys into a bank account that if at any time during currency of the mingled account the drawings out had left a balance less than the trust money, the trust money must be regarded as dissipated except as to this balance, the sums subsequently added to the account from other sources not being attributable to the trust fund. Smith v. Fuller, supra. And if it be shown that at all times from the making of the deposit to the time of the assignment by the bank there was in its vaults money of the amount and value equal to the amount so deposited, a court of equity may engraft a trust upon such money, and the trustee will become a preferred creditor to the amount of such deposit.
It will further be noted under the rule adopted in the cases above cited, and particularly in the case of Commissioners v.Strawn, supra, that in order to engraft a trust, for trust funds so deposited, the deposit must be made in money, and the money coming into the hands of the person in charge of the liquidation of such insolvent bank must include in its mass the money so deposited, commingled with other moneys of said bank; and, as only property of the same kind can be commingled or blended, money can only be commingled with money, and where such deposit is made by way of credit on the books of the bank, rather than by actual deposit of money, such deposit will not entitle the holder thereof to engraft any trust upon any part of the moneys coming into the hands of the liquidating officer of such bank. It will also be noted that under the decisions mentioned the deposits, in order to engraft a trust, must augment the assets of the bank coming into the hands of the liquidating officer. *281
In considering the application of the rules mentioned to the facts in the case at bar, the second of the items of deposit hereinbefore mentioned will be first considered. This item is an item of deposit credit for the proceeds of certain bonds belonging to the trust estate, sold by the trustee. The evidence shows that the proceeds of these bonds never entered the vaults of the trust company, as immediately following the sale of the same The Union Trust Company applied the proceeds as a credit on the indebtedness of The Lima First American Trust Company to it, and The Lima First American Trust Company, immediately following, acquiesced in said application and gave a deposit credit on the books of its banking department to the trust estate for the amount thereof. The evidence fails to show whether the proceeds of the bonds were by way of cash or bank credit, but whether by way of bank credit or cash the evidence affirmatively shows that the actual proceeds were neither commingled nor blended with the moneys in the vaults of the bank; neither was there any augmentation of the assets of the bank, as the proceeds were used to decrease the liabilities of the bank rather than to increase its assets; and neither were such proceeds included in the moneys in the vaults of said bank coming into the possession of the liquidating officer, as, at the time the liquidating officer took possession of said assets, the only thing representing the proceeds of the sale of the bonds was the debt shown by way of deposit credited to the trustee on the books of said bank for the proceeds thereof; and there was no corpus or res at the time the liquidating officer took possession of said bank for the purpose of liquidation upon which a trust or lien for the payment of said deposit could operate. Fulton, Supt. of Banks, v. Gardiner,
With reference to the item of deposit hereinbefore referred to as the first item of deposit, amounting to the sum of $249.27, on deposit in a "restricted balance" account of the trust department of said bank, in the commercial department thereof, the evidence shows that said deposit was made from the income cash account of said estate. And with reference to the third item the evidence shows it was made from uninvested funds of the estate. In neither case is there any evidence tending to show that the deposits consisted of money, that is, coin or paper money, in contradistinction to checks, drafts, interest coupons or other credits. As a trust can be impressed on money in the vaults of an insolvent bank coming into the possession of the liquidating officer only where money deposited is commingled with the money of the bank in the vaults of the bank, the burden is on the plaintiff to establish that the funds deposited were money and not credits, and as there is no evidence tending to prove that the deposits consisted of money, the plaintiff is not entitled to impress a lien on any of the money in the vaults of the bank coming into the possession of the liquidating officer. There can be no tracing without a starting point, and unless the original deposit is identified as money there can be no starting point.
4. Before considering the question whether the plaintiff is entitled to a lien for the payment of said deposits upon the fund deposited by the trust company with the Treasurer of State it is necessary to determine whether the Superintendent of Banks is entitled to take possession of and administer the fund deposited by the trust company with the Treasurer of State pursuant to the provisions of Section 710-150, General Code, as a part of the assets of said banking *283 corporation, and as to the law governing the administration of the same.
The provisions of the statutes with reference to the deposit by a trust company of the fund with the Treasurer of State are contained in Section 710-150 of the General Code, which reads as follows:
"No trust company, or corporation, either foreign or domestic, doing a trust business shall accept trusts which may be vested in, transferred or committed to it by a person, firm, association, corporation, court or other authority, of property within this state, until its paid-in capital is at least one hundred thousand dollars, and until such corporation has deposited with the treasurer of state in cash the sum of one hundred thousand dollars, except that the full amount of such deposit by such corporation may be in bonds, or other interest-bearing obligations of the United States or those for the payment of principal and interest of which the faith of the United States is pledged, including bonds of the District of Columbia; farm loan bonds, issued under the provisions of the act of Congress known as the federal farm loan act, approved July 17, 1916, and amendments thereto; * * * bonds of this state or any municipality or county therein, * * * or in the first mortgage bonds of any railroad corporation that for five years last past has earned at least five per cent net on its issued and outstanding capital stock, which securities and the sufficiency thereof shall be approved by the superintendent of banks. From time to time said treasurer shall, with the approval of the superintendent of banks, permit withdrawals of such securities or cash, or part thereof, upon deposit with him and approval of the superintendent of banks, of cash or other securities of the kind heretofore named, so as to maintain the value of such deposits as herein provided, and so long as it continues solvent he shall permit it to collect the interest on its securities so deposited." *284
The purpose of such deposit is set forth in Section 710-161, General Code, which reads:
"The capital stock of such trust company, with the liabilities of the stockholders existing thereunder, and the fund deposited with the treasurer of state as provided by law shall be held as security for the faithful discharge of the duties undertaken by such trust company in respect to any trust * * *."
The only specific provisions of the General Code with reference to the administration of such fund are contained in Section 710-155, which provides that when such deposit of securities belongs to a foreign trust company the Common Pleas Court of the county in which the principal place of business of such trust company within the state is located, upon certain proceedings had, may order the withdrawal of such funds, and the Treasurer of State is bound to recognize and comply with a certified copy of such order and turn over the securities. There are no provisions of the General Code defining the duties of the Treasurer of State with reference to said fund, upon the liquidation of a bank, and there are no provisions authorizing the Treasurer of State to administer said fund in the event of liquidation. On the other hand, under the provisions of Section 710-90, General Code, the Superintendent of Banks is required upon taking possession of the business and property of any bank for liquidation to forthwith post a notice on the doors of each office of the bank, which notice shall state the date and the time of such posting and that all the business and property of such bank are in his hands; and to forthwith, by written notice, serve personally, or by registered mail or telegraph notify all correspondents and reserve banks and all other individuals, partnerships, corporations and associations known to him to be holding or in possession of any assets of such bank.
Section 710-91, among other things, provides:
"Immediately upon the posting of notice on the door *285 or doors of a bank by the superintendent of banks, as provided in section 710-90 of the General Code, the possession of all assets and property of such bank of every kind and nature, wheresoever situated, shall be deemed to be transferred from such bank to, and assumed by the superintendent of banks; and such posting shall of itself, and without the execution or delivery of any instruments of conveyance, assignment, transfer, or endorsement, vest the title to all such assets and property in the superintendent of banks." (Italics ours.)
Section 710-92, General Code, provides that if the superintendent doubts the justice or validity of any claim he may reject the same in whole or in part, or reject any claim of security preference or priority, or offset, and that section further provides that a person, partnership, corporation or association who shall deem himself or itself aggrieved by the rejection of his or its claim in whole or in part, or the rejection of any claim of security preference or priority, or set-off, by the superintendent, shall bring an action against the Superintendent of Banks and such bank, within three months after such rejection or refusal of allowance, or be forever barred from asserting the same.
Section 710-93 provides for the filing by the superintendent of an inventory of the assets of the bank, lists of claims, permanent records of liquidation, and records of final distribution.
Section 710-95 prescribes certain powers and duties of the Superintendent of Banks upon taking possession of a bank for liquidation, and for the securing of instructions from the Common Pleas Court of the county as to the manner in which he should exercise his power and discretion.
Section 710-97 provides for the payment of expenses of liquidation.
Section 710-98 prescribes the method and manner of paying dividends. *286
Section 710-98a makes certain provisions with reference to allowance of preferred claims.
Section 710-99 provides for objections to claims, and for hearing by court thereon.
Above sections with other cognate sections provide means, formula and machinery convenient and adequate for the administration of, and the determination of, the validity and priority of any claim against any asset of the bank.
It will be noted that under the provisions of Section 710-150 and Section 710-161 the Treasurer of State is merely a custodian of the fund deposited by the trust company with him, and that neither of these sections, nor any other provision of the code, confers on him any power or duty with reference to the administration of such fund in the event of liquidation of the bank making such deposit, while under the other sections mentioned the power and duty are conferred on the superintendent to take possession of and administer all the assets of the bank when he has taken charge of the same for the purpose of liquidation; and the method and manner of allowance and rejection of claims against the bank are prescribed, together with the limit of time in which such action can be brought to secure the allowance of claims, the method of bringing such action, and the court having jurisdiction thereof; and that the power of the superintendent to administer all of the assets is not limited in any way by any statutory authority conferred on the Treasurer of State, or otherwise.
Reading these sections together, and taking into consideration the fact that the fund deposited with the Treasurer of State is unquestionably an asset of the bank, it is clear that it was the legislative intent that upon the liquidation of a bank the superintendent should take possession of and administer the fund deposited by such bank with the Treasurer of State and that the mode and manner of administration thereof *287 should be exclusively governed by the provisions of the code relating to the administration of the assets of banks in process of liquidation by the Superintendent of Banks. And upon taking possession of a banking corporation with trust powers for the purpose of liquidation it is the duty of the Superintendent of Banks, in order to facilitate the liquidation of such banking corporation, to forthwith cause such banking corporation to resign as fiduciary of the trusts of which it is trustee, and to file final accounts of such trusts so that its liability as such trustee may be determined and claims may be filed therefor by its successor trustee or the beneficiaries of such trust.
As the plaintiff has asserted a claim on said fund, and as the unsecured creditors of said bank will be entitled to the proceeds thereof remaining after the payment of claims entitled to preferential payment out of said fund, it will be ordered that the Treasurer of State forthwith pay over and deliver said fund to the Superintendent of Banks and that the superintendent take possession thereof for administration by him as a part of the assets of said bank.
5. Under the provisions of Section 710-161, General Code, above referred to, "the capital stock of such trust company, with the liabilities of the stockholders existing thereunder, and the fund deposited with the Treasurer of State as provided by law shall be held as security for the faithful discharge of the duties undertaken by such trust company in respect to any trust * * *." It will be noted that this section, in addition to providing that the fund deposited with the Treasurer of State shall be held as security for the faithful discharge of the duties undertaken by such trust company, provides that the capital stock of such trust company, with the liabilities of stockholders existing thereunder, shall be held as security.
In view of the provisions of Section 3 of Article XIII of the Constitution, that the "stockholders of *288 corporations authorized to receive money on deposit shall be held individually responsible, equally and ratably, * * * for all contracts, debts and engagements of such corporations, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares" (italics ours), it appears that this statutory provision was not intended to and could not give claims against a banking corporation carrying on a trust business, arising out of the violation of its duties as fiduciary, preference over the claims of other creditors of the corporation, insofar as the capital stock of such trust company, with the liabilities of stockholders existing thereunder, is concerned, but was only intended to provide that claims against the trust company for violation of its duties as a fiduciary were not to be limited in recovery to said one hundred thousand dollar fund deposited as security, but upon the exhaustion of such fund, were entitled, as payment of claims for such violations, to participate on an equality with unsecured claims against such corporation arising upon other grounds. The fund of one hundred thousand dollars being established, and being held as security for the faithful discharge of the duties undertaken by such trust company in respect to any trust, it is clear that either the trustee or the beneficiaries of a trust estate which has sustained a loss by reason of the failure of the trust company to faithfully discharge such duties have the right to resort to such fund for indemnification against such loss.
"It might be supposed that the term `breach of trust' was confined to willful and fraudulent acts which have a quasi criminal character, even if they have not been made actual crimes by statute. The term has, however, a broader and more technical meaning. It is well settled that every violation by a trustee of a duty which equity lays upon him, whether willful and fraudulent, or done through negligence, or *289 arising through mere oversight or forgetfulness, is a breach of trust. The term therefore includes every omission or commission which violates in any manner either of the three great obligations * * * of carrying out the trust according to its terms, of care and diligence in protecting and investing the trust property, and of using perfect good faith. This broad conception of breach of trust, and the liabilities created thereby, are not confined to trustees regularly and legally appointed; they extend to all persons who are acting trustees, or who intermeddle with trust property. * * *
"In addition to this claim of the beneficiary upon the trust estate as long as it exists, the trustee incurs a personal liability for a breach of trust by way of compensation or indemnification, which the beneficiary may enforce at his election, and which becomes his only remedy whenever the trust property has been lost or put beyond his reach by the trustee's wrongful act." 3 Pomeroy's Equity Jurisprudence (4th Ed.), 2479, Sections 1079 and 1080.
The admissions by the parties hereinbefore referred to, that the order of the Probate Court directed said banking corporation trustee to account for and pay over to the plaintiff as successor trustee all the assets and property belonging to said trust estate, and that the final account filed by the trustee pursuant to said order showed its refusal to pay over and distribute to plaintiff as trustee the sum of $2,580.94, constituting a part of such assets and consisting of the items of deposit hereinbefore referred to, are sufficient, without resort to other evidence in the case, to establish misfeasance and violation of fiduciary duty on the part of the trustee, as it is a primary duty of a trustee, on order of a court having jurisdiction of the trust estate, to account to and pay over to its successor trustee *290 the assets and property of said trust estate, and such misfeasance and violation of such duty on the part of the trustee entitled the plaintiff as successor trustee to resort to the fund deposited with the Treasurer of State for compensation and indemnification for the amount due it on such accounting, which the accounting trustee has failed to pay. Furthermore, the evidence shows that the deposits of such trust funds in the instant case were made contrary to the provisions of the will directing that such deposits should not be made, and such actions on the part of the trust company constituted misfeasance and violation of fiduciary duty on its part which entitled plaintiff to resort to such fund for indemnification for the amount thereof. A lien will therefore be impressed on such security fund for the total amount of such deposits, as shown by the evidence, to wit, the sum of $2,521.50.
As this fund of one hundred thousand dollars constructively came into the possession of the Superintendent of Banks at the time he took possession of said bank for the purpose of liquidation, and the order of the Probate Court and the accounting were not made until after the superintendent took possession, this lien, for the reasons mentioned in Fulton, Supt.of Banks, v. B.R. Baker-Toledo Co.,
Decree will therefore be entered for the plaintiff and against defendants, in accordance with the conclusions hereinbefore set forth.
Decree for plaintiff.
CROW, P.J., and KLINGER, J., concur.