285 Mass. 22 | Mass. | 1933
The plaintiff is a Massachusetts trust company, in the possession of a conservator under §§ 83-89, added to G. L. (Ter. Ed.) c. 172 by St. 1933, c. 87, § 1. The trustees of the Worcester Investment Trust, hereinafter called the defendants, owning the Worcester Building in Worcester, gave a mortgage thereon in 1923 to the plaintiff as trustee for bondholders to secure an issue of bonds of $800,000. The mortgage indenture provided that twice a year the defendants should make specified payments into a sinking fund to be held by the plaintiff as trustee, to be used from time to time to retire bonds.
The conduct of the plaintiff as trustee of the sinking fund
The bill, the truth of which is admitted by the answers, shows that the plaintiff as trustee under the mortgage indenture received for the sinking fund various payments which it deposited in an account in its own commercial department, designated as “Worcester Bank & Trust Company, Trustee, Worcester Investment Trust, Sinking Fund.” The plaintiff allowed interest thereon at the current rate paid in the city of Worcester on similar deposits. The amount on deposit in that sinking fund account on March 4, 1933, was $29,055.92. During the entire period of the receipt by the plaintiff of sinking fund and other payments from the defendants, up to the time of the segregation of the amount in question hereinafter described, the cash available for the payment of deposits in the commercial department never fell below the
After the financial difficulties of the plaintiff had caused the appointment of a conservator, a plan of reorganization of the plaintiff was prepared and was declared effective by the commissioner of banks on June 9,1933. Under that plan the assets of the commercial department have, for the most part, been conveyed to a national bank, which has agreed to allow the depositors in the commercial department the right at present to draw checks up to a certain fractional part of their deposits, with a right to share in further liquidation later. But the plaintiff retained and segregated in the hands of its conservator the sum of $29,055.92, which was the amount of the sinking fund deposit, pending the determination of the question whether the defendants are entitled to payment of that sum in full, in priority to other depositors in the commercial department. This bill for instructions is brought to determine that question.
Apart from statute, in the distribution of the assets of an insolvent or deceased trustee, a claim based on the duty of the trustee or its breach is entitled to no priority because of its origin. Inherently a claim upon a grocery bill or a promissory note ranks as high. Attorney General v. Brigham, 142 Mass. 248. Little v. Chadwick, 151. Mass. 109. It is only where some of the assets can be shown to be a part of the trust estate, or the product of the conversion of specific funds or property of the trust estate into another form, that the trust estate can obtain an advantage over the creditors generally. That advantage is not a right to priority or preference, but rather a right to reclaim assets of the trust estate that can be traced and found. Bresnihan v. Sheehan, 125 Mass. 11. Lowe v. Jones, 192 Mass.
Essential to this fiction is the presumption that the trustee intends to do right and not wrong. In the present case there was no wrong in depositing the sinking fund in the commercial department, for that was authorized by the mortgage indenture, which permitted the plaintiff to deposit in “its own banking department.” Since the mortgage indenture dealt for the most part with duties imposed on the trust department, the reference to the “banking department” apparently was to some department other than the trust department. The requirement that the plaintiff “allow interest upon all deposits made ... in its own banking department,” indicates that the “banking department” intended was one receiving deposits and paying interest as a debtor for the use of the money deposited. Old Colony Trust Co. v. Puritan Motors Corp. 244 Mass. 259, 264. Compare Commonwealth v. Snow, 284 Mass. 426. In practice, trust departments of Massachusetts trust companies do not receive deposits of that sort, even if the statutes authorize them to do so. See G. L. (Ter. Ed.) c. 172, §§ 49-59. The words quoted cannot refer
True, the plaintiff is a single institution. It may be hard to discover a promisee other than the plaintiff itself who could bring an action at law to recover the amount of the deposit. But technical difficulties of that sort do not alter the decisive fact that the plaintiff, after rightfully depositing the sinking fund in its commercial department, rightfully used the money deposited. It became indistinguishable in fact from other assets of the commercial department. Since the whole foundation of the fiction fails because the transfer and use of the money were rightful, the sinking fund cannot be assumed to exist intact among the remaining assets of the commercial department. So far as the case of the defendants rests upon the theory of following trust funds, it must fail.
But the defendants claim statutory rights. In Morrison v. Lawrence Trust Co. 283 Mass. 236, the defendant trust company was guardian of a minor under G. L. (Ter. Ed.) c. 172, § 52, and was bound to keep separate the money and property received in that capacity. G. L. (Ter. Ed.) c. 172, §§ 53, 54. Instead, it deposited, in its name as guardian, money of the ward in its own commercial department, where the money naturally became mingled with its general assets. The right of the minor to full replacement out of the commercial department, thus diminishing the dividends to depositors in that department, was rested by
The plaintiff is instructed that the sinking fund deposit of $29,055.92 is not entitled to priority or preference over the claims of other depositors in the commercial department.
Ordered accordingly.