Windstanley v. The Second National Bank of Louisville
| Citation | 41 N.E. 956,13 Ind.App. 544 |
| Decision Date | 08 November 1895 |
| Docket Number | 1,741 |
| Parties | WINDSTANLEY ET AL. v. THE SECOND NATIONAL BANK OF LOUISVILLE, KENTUCKY |
| Court | Court of Appeals of Indiana |
From the Lawrence Circuit Court.
Judgment reversed, with instructions to sustain appellants' motion for a new trial, and for further proceedings in accordance with this opinion.
N Crooke and F. A. Crooke, for appellants.
W. H Martin, for appellee.
The facts essential to the determination of this appeal appear in the special findings made by the court and are in substance as follows:
The plaintiff below, and appellee here, is a banking corporation organized under the laws of the United States, and does a general banking business in the city of Louisville, Kentucky. The appellants, the Windstanleys and Breyfogle, were a co-partnership, doing a general banking business at Bedford, Indiana, under the name of the "Bedford Bank." The Louisville bank sent to the Bedford bank for collection various claims aggregating $ 1,179.89. Prior to June the 2, 1893, the Bedford bank collected all of these claims, and on June second, third and fifth it remitted all of the collections so made, less the exchange, by three drafts drawn on the Chicago National Bank. At the time the Bedford bank drew the drafts in its favor on the Chicago bank, it had no funds whatever in the Chicago bank subject to draft. The drafts so drawn were not paid, nor has any part of the moneys collected ever been paid. On the 6th day of June, 1893, the Bedford bank made an assignment for the benefit of its creditors under the insolvent laws of this State, and Daniel W. Parker, one of the appellants, was appointed assignee. There was found to be due the Louisville bank of principal and interest the sum of $ 1,259.57. Upon these facts the court stated conclusions of law to the effect that the Louisville bank was entitled to recover the sum above named as against Parker, assignee, and that said claim was a preferred one against the funds in the assignee's hands. A judgment was rendered accordingly and the assignee ordered to pay the claim out of any funds in his hands as a preferred claim.
An assignment of error calls in question the trial court's conclusions of law.
The relation shown to exist between the Louisville bank and the Bedford bank is a fiduciary one, that of principal and agent. The question here presented for decision is, we believe, a new one in this State, and the authorities elsewhere bearing upon it are not in harmony. Under these circumstances we feel it to be our duty to adopt that rule which leads to the most equitable and just results.
It is an ancient rule of the common law that the owner of a chattel who has been wrongfully deprived of its possession, may follow it and recover it, no matter what changes and transmutations it may have undergone and however much it may be increased in value by the expenditure of labor upon it; provided only that the product is still a chattel and composed of the original materials. Thus, if logs be sawed into lumber and the lumber be made into an article of furniture, the owner of the logs may recover the article of furniture. Sunnyside Coal & Coke Co. v. Reitz, 39 N.E. 541; Ellis v. Wire, 33 Ind. 127.
A court of law, as a general rule, deals only with the legal title, and when the legal identity of a chattel is destroyed, or cannot be specifically traced into another thing, such court is unable to give relief except by action for damages, against the wrongdoer or person, who converted it. But courts of equity, having greater powers, endeavor to afford a more complete remedy. Thus any property, either real or personal, held by a fiduciary or trustee and denominated a trust, may be reached after it has changed its character and lost its original from.
The equity rule is that trust property may be followed by the beneficiary so long as its identity can be ascertained. If a trustee or other fiduciary wrongfully dispose of his principal's property, equity imposes a constructive trust upon the new forms or species into which it is converted, so long as it can be traced or followed and its identity ascertained. 2 Pom. Eq. Juris., sections 1050, 1058; 2 Story Eq. Juris., sections 1258, 1259; The principle upon which this rule rests is a very plain and just one. It is founded upon the right of property. The trust property rightfully belongs to the cestuis que trust and a change in its form does not change its ownership. So long as either the original or substituted property can be traced or followed, equity will always attribute the ownership to the beneficiary and will not allow the right to be defeated by the wrongful act of the fiduciary, no matter what form it may assume.
The true owner of property has the right to have his property restored to him, not as a debt due and owing, but because it is his property wrongfully withheld. As between the cestuis que trust and the trustee and all parties claiming under the trustee, except purchasers for value and without notice, all the property belonging to the trust, however much it may have been changed in its form or its nature or character, and all the fruits of such property, whether in its original or altered state, continue to be subject to and affected by the trust. Pennell v. Deffell, 4 De G. M. & G. (Eng. Ch.) *372.
It was formerly held that these rules came to an end the moment the means of ascertaining the identity of the trust property failed. Taylor v. Plummer, 3 Maul. and S (King's Bench) 562. In the case of trust moneys commingled by the trustee with his own moneys, it was held that money has no ear-marks, and when so commingled the whole became an...
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Winstandley v. Second Nat. Bank of Louisville
......8, 1895. Appeal from circuit court, Lawrence county; R. W. Miers, Judge. Action by the Second National Bank of Louisville, Ky., against William C. Winstandley and others. There was a judgment for plaintiff, and defendants appeal. ......