252 Mass. 358 | Mass. | 1925
This is a suit in equity whereby the plaintiff seeks to establish a constructive trust respecting deposits
Among findings made by the master are the following:— “ In connection with its business in 1917, the Cosmopolitan Trust Company had a Christmas Club, the funds of which were payable on December 15,1917. In that year, the bank had great difficulty in meeting its clearings. Deposits were being withdrawn in a very rapid manner, and these withdrawals continued during the latter part of December and, in January, 1918, settlements for the day’s work, we find, [were] delayed until certain sums of money were sent over to the clearing bank to enable the trust company,- day by day, to meet its clearings. A similar situation occurred in December, 1918, at which time the bank had still more difficulty in meeting its clearings, which was only accomplished by means of a check on the Irving National Bank, which would take three days to clear. In December, 1918, in order to clear its checks, the entire gold reserve of the bank, amounting to $40,000, was forwarded to the First National Bank before the latter would agree to clear checks for the trust company. The withdrawals greatly exceeded the deposits, and this continued late in January of 1919. In 1919 and 1920, deposits increased, and the foreign department of the trust company showed large profits, but during that year the Cosmopolitan Trust Company had difficulty in meeting
The master also found that the deposits of the plaintiff or the proceeds thereof could not be traced further than that they went into the commercial department of the trust company.
It may be doubtful whether these findings amount to a decision that the officers of the trust company, although knowing of its insolvent condition, were without genuine and reasonable hope, expectation and intention to carry on its business and to recover sound financial standing. See Steele v. Commissioner of Banks in re Prudential Trust Co. 240 Mass. 394, 397. It is not necessary to pass upon that point because, for another reason, the plaintiff cannot recover.
It was said in Little v. Chadwick, 151 Mass. 109, 110, “When trust money becomes so mixed up with the trustee’s individual funds that it is impossible to trace and identify it as entering into some specific .property, the trust ceases.
It seems fairly inferable from all the facts set out in the master’s report that, from one angle of approach, every deposit received by the trust company during a long period of time before the commissioner took possession of its property and business, was accepted fraudulently because it was in truth insolvent and not in a condition to pay the depositors in ordinary course. The devices adopted by it to secure the clearing of the checks of its depositors show the straits to which it was put. Its entire gold reserve was used at one time to tide it along. In view of the exigencies constantly confronting the trust company in the last months of its doing business, it cannot be thought, that any particular sum of money was kept in any special fund. It is a fiction established by equity in order to work out justice to assume that in the fluctuations of a fund made up partly of money obtained by fraud and partly of money belonging to a wrongdoer, the latter’s purpose is to draw out his own rather than the other’s money, and that therefore the person defrauded can assert a lien on what remains. It would be pressing that fiction to an absurd extent to follow it in the circumstances disclosed on this record. Every equity in favor of this plaintiff would probably be found to exist in favor of every other ordinary depositor in the trust company during the period covered by the master’s investigations. The present
It was said in Central Trust Co. of Illinois v. Hanover Trust Co. 242 Mass. 265, 268, 269: “It should be added that the right to preferential payments should not be implied or extended in cases arising under this statute, one purpose of which is to ensure prompt liquidation in favor of the numerous depositors in the savings and commercial departments of trust companies. G. L. c. 167, §§ 22-36.” Several cases illustrate that principle where the court has found inapplicable the theory of tracing trust funds followed in Hewitt v. Hayes, 205 Mass. 356. Commissioner of Banks v. Cosmopolitan Trust Co. 240 Mass. 254, 259. Commissioner of Banks, petitioner, in re Prudential Trust Co. 240 Mass. 478, 484. Hecker-Jones-Jewell Milling Co. v. Cosmopolitan Trust Co. 242 Mass. 181, 188. The trust company is hopelessly insolvent. Its assets are not sufficient to pay in full its depositors either in the savings department or in the commercial department. In substance and effect this is an attempt by one depositor to secure a preference over other creditors, and to get payment in full at the expense of other creditors. There is no equity which warrants such a preference in all the circumstances.
The finding of the master is categorical to the effect that he cannot trace the deposits of the plaintiff into any particular fund. That finding is supported by the inferences from
The case at bar may be distinguishable from Allen v. United States, 285 Fed. Rep. 678, in that the trust company was not authorized by law to receive the deposit there in question. However, whether all decisions can be distinguished or whether there is some conflict in the authorities, we are clear as to the result tó be reached on the facts of the present record.
It follows that the plaintiff cannot recover. The decree is reversed and a decree is to be entered dismissing the bill.
So ordered.