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the receiver, since his appointment as such, has received of the assets of the said bank "sufficient money and funds wherewith to pay and satisfy the said balance deposited and received as aforesaid.” A demurrer to the bill for want of equity was sustained by

” the circuit court, and from that ruling this appeal is taken.

It is contended on behalf of the appellant that the money deposited with the bank by the county treasurer was impressed with the character of a trust fund, and that the trust may be enforced against any assets of the bank in the hands of its receiver. It is not alleged in the bill that any of the money of the complainant, or any assets or property thereby procured, has come into the hands of the receiver. It is true it is averred that the bank still retains $11,355.68 of the complainant's money, but it is not said that any portion of that sum was in the possession of the bank when it closed its doors. We interpret the averments of the bill to mean, as in fact it was conceded upon the argument, that the money which the receiver holds is not that which was turned over to him as such when the bank was closed, but that it is the proceeds of collections by him made since that date. If it had been alleged in the bill that at the time of its failure the bank held a sum of money equal to or less than the amount here sued for, the court might lawfully presume that sum to be of the public funds of Spokane county, since it will be presumed that trust funds have not been wrongfully misappropriated or criminally used by the officers of the bank. But while that presumption would prevail as to money on hand, it would not be extended to other assets, for the officers of the bank had as little right to divert the public funds into investment in other property as they had to appropriate them to their own use. But it is said that the complainant has a lien upon the funds in the hands of the receiver upon the theory that the estate of the bank has received the benefit of the complainant's money, and its present assets are thereby increased. There are some decisions of the courts, particularly in cases of suit to recover public funds, that go to the extent of supporting this doctrine, and while the public benefit to be derived from the application of that rule to cases where school and county funds have been misappropriated by banks appeals strongly to the consideration of the court, we are unable to discover that the power to dispense such relief rests upon any of the established principles which govern the action of courts of equity.

There is no recognized ground upon which equity can pursue a fund and impose upon it the character of a trust, except upon the theory that the money is still the property of the plaintiff. If he is permitted to follow it and recover it, it is because it is his own, whether in the form in which he parted with its possession, or in a substituted form. Under the earlier rule, he was required to identify it as the very property which he had confided to another. The newer and more equitable doctrine permits him to recover it from any one not an innocent purchaser, and in any shape into which it may have been transmuted, provided he can establish the fact that it is his property or the proceeds of his property, or that his property has gone into it and remains in a mass from which it cannot be distin

guished. The earlier English doctrine, as declared in the opinion of Lord Ellenborough in Taylor v. Plumer, 3 Maule & S. 575, in which were reviewed the prior decisions of the English courts, was to the effect that the owner of property intrusted to another could follow and retake the same from the possession of the holder, whether he were agent, bailee, or trustee, or from others who were in privity with him, so long as they were not bona fide purchasers for value, and this irrespective of whether such property remained in its orig. inal form or had been changed into some other form, so long as it could be ascertained to be the same property or the proceeds of the same property, but that the right ceased when the means of ascertainment failed, and it was held that such means of ascertainment failed whenever the property was in the form of money, and had been then mixed and confused in a general mass of money of the same description. The more recent doctrine, however, follows the rule announced in Re Hallett's Estate (Knatchbull v. Hallett) 13 Ch. Div. 696, which is that, if money held by one in a fiduciary character has been paid by him to his account at his banker's, the person for whom he held the money can follow it, and has a charge on the balance in the banker's hands, and that if the depositor has commingled it with his own funds at the bank, and has afterwards drawn out sums upon checks in the ordinary manner, he must be held to have drawn out his own money in preference to the trust money, and that if he destroyed the trust fund "by dissipating it altogether, there remains nothing to be the subject of the trust, but so long as the trust property can be traced and followed into other property into which it has been converted, that remains subject to the trust.”

The American courts, while uniformly approving the doctrine of that decision, have exhibited a diversity of holding as to its meaning. Some, as we have shown, have interpreted it to mean that, in a suit brought to pursue trust property and affix upon it the character of a trust, it is only necessary to show that the defendant's estate, although insolvent and in the hands of an assignee or receiver for distribution, has actually received the benefit of the trust fund, and that it makes no difference that the plaintiff is unable to show that his fund, or property which represents it, is then in the estate in any form, or has actually come into the hands of the assignee or receiver. Harrison v. Smith, 83 Mo. 216; Jones v. Kilbreth (Ohio) 31 N. E. 346; Independent Dist. v. King, 80 Iowa, 497, 45 N. W. 908; Peak v. Ellicott, 30 Kan. 156, 1 Pac. 499; McLeod v. Evans, 66 Wis. 401, 28 N. W. 173, 214; Plow Co. v. Lamp, 80 Iowa 722, 45 N. W. 1049; Myers v. Board of Ed., 51 Kan. 87, 32 Pac. 658; San Diego Co. v. California Nat. Bank, 52 Fed. 59. Decision in these cases would seem in the main to have been influenced by the consideration that the estate of the insolvent, and thereby the general creditors thereof, must have received the benefit of all trust funds unlawfully used by the insolvent in the course of business or the payment of debts. Said the court in Peak v. Ellicott:

“As the estate was augmented by the conversion of the trust fund, no reason is seen under the equitable principle which has been mentioned why they should not become a charge upon the entire estate."

In Plow Co. v. Lamp, 80 Iowa, 722, 45 N. W. 1049, the court said: “The creditors, if permitted to enforce their claims as against the trust, would secure the payment of their claims out of trust moneys.'

In Harrison v. Smith, the court said, while it would "be impossible to make it a charge upon the estate or assets to the increase or benefit of which it has been appropriated, the general assets of the bank having received the benefit, there is nothing inequitable in charging them with the amount of the converted fund.”

We are unable to assent to the proposition that, because a trust fund has been used by the insolvent in the course of his business, the general creditors of the estate are by that amount benefited, and that therefore equitable considerations require that the owner of the trust fund be paid out of the estate to their postponement or exclusion. If the trust fund has been dissipated in the transaction of the business before insolvency, it will be impossible to demonstrate that the estate has been thereby increased or better prepared to meet the demands of creditors, and even if it is proven that the trust fund has been but recently disbursed, and has been used to pay debts that otherwise would be claims against the estate, there would be manifest inequity in requiring that the money so paid out should be refunded out of the assets, for in so doing the general creditors whose demands remain unpaid are in effect contributing to the payment of the creditors whose demands have been extinguished by the trust fund. Both the settled principles of equity and the weight of authority sustain the view that the plaintiff's right to establish his trust and recover his fund must depend upon his ability to prove that his property is in its original or a substituted form in the hands of the defendant. Little v. Chadwick, 151 Mass. 109, 23 N. E. 1005; Cavin v. Gleason, 105 N. Y. 256, 11 N. E. 504; Association v. Austin (Ala.) 13 South. 908; Shields v. Thomas (Miss.) 14 South. 85; Silk Co. v. Flanders (Wis.) 58 N. W. 383; Slater v. Oriental Mills (R. I.) 27 Atl. 443; Bank v. Armstrong, 39 Fed. 684; Multnomah Co. v. Bank, 61 Fed. 912; Massey v. Fisher, 62 Fed. 958.

The decree is therefore affirmed, with costs to the appellees.

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(Circuit Court of Appeals, Ninth Circuit. June 24, 1895.)

No. 210.

Where trust funds have been wrongfully invested by the trustee in se
curities which remain in his hands, the owner of such funds is entitled to
follow the same, in the form into which they have been converted, and
impress a trust thereon for his benefit. Spokane County v. First Nat.
Bank, 68 Fed. 979, followed.
Appeal from the Circuit Court of the United States for the East-
ern Division of the District of Washington.

This was a suit by the city of Spokane against the First National Bank of Spokane and F. Lewis Clark, its receiver, to impress a trust upon assets of the bank in the receiver's hands. The circuit court sustained a demurrer to the bill for want of equity. Complainant appeals. Reversed.

James Dawson, for appellant.
C. S. Voorhees, for appellees.

Before MCKENNA and GILBERT, Circuit Judges, and KNOWLES, District Judge.

GILBERT, Circuit Judge. This case is similar to the foregoing suit of Spokane County v. Same Defendant, 68 Fed. 979. The bill of complaint differs, however, from the bill in that case in one important particular. It contains the averment that the city treasurer has deposited with the First National Bank of Spokane public moneys of the city, known by the officers of the bank to be such, and that said officers failed to keep said money separate and distinct from other funds, but wrongfully mixed and commingled the same with the money of the bank, and that it has used the same in paying its employés, patrons, clients, and depositors, “and in the purchase by said defendant First National Bank of the property, notes, bills, and securities now constituting and forming the assets of said defendant First National Bank, in the possession of the receiver, hereinafter mentioned.” Thereafter follows the allegation that the receiver has, since his appointment, collected of the assets of said bank a sum equal to the amount still due the city.

We construe these averments of the bill to distinctly allege that the assets that came into the hands of the receiver were purchased by the bank with the city's money.

In the light of the authorities cited in the foregoing decision, and of the conclusions there reached, we are of the opinion that the demurrer to this bill should have been overruled. It is our judg. ment, therefore, that the decree be reversed at the cost of the appellees, and that the cause be remanded to the circuit court for further proceedings not inconsistent with this opinion.

DUGAN et al. v. O'DONNELL,

(Circuit Court, N. D. California. July 2, 1895.) 1. LIMITATIONS-DISAVOWAL OF TRUST.

Though mere lapse of time will not ordinarily bar the enforcement of a clearly-established trust, time will begin to run as soon as the trustee disavows the trust and claims adversely; and unless the cestui que trust was ignorant of the claim and of his own rights, lapse of time is a complete


The doctrine of laches for delay in the enforcement of rights is not so strictly applied where the parties are relatives as in the case of strangers, but close relationship will not prevent its application if the delay is so great

as to affect the memory of witnesses and destroy evidence. 8. SAME-NONRESIDENCE.

The nonresidence of the complainants, in a bill to declare respondent a trustee for them of an interest in an estate alleged to have been procured from them by fraud, will not, of itself, excuse a want of diligence in ascertaining and enforcing their rights.

4. SAME.

Where complainants, after actual notice that respondent, in possession of an estate in which they claimed an interest, was holding and claiming adversely to them, delayed 17 years in bringing suit, they are barred by their laches, though they were without full knowledge of all the facts, on the ground that equity will regard possession of the means of knowledge

as equivalent to actual knowledge. 8. SAME.

In a suit to declare respondent a trustee for complainants of an interest in an estate and to set aside a probate decree of distribution confirming such estate in respondent, it appeared that respondent was a nephew of complainants' intestates, who were residents of a foreign country, and that he had possession of an estate in which all parties had an interest. By exaggerating the difficulty of preserving it, he induced his aunts to deed their interests therein to him, representing it to be for their interest, and, on presenting the deeds to the probate court, procured the decree giving him title. Thereafter he expressly informed them that he claimed all such interests as his own. It was alleged that they trusted him implicitly, but the evidence showed that they had agents secretly looking out for their interests, and accepted the consideration for the deeds on the advice of such agents. Suit was not brought until 20 years after the execution of the deeds, 17 years after notification of the adverse claim, and 11 years after the entry of the probate decree. Held, that after such lapse of time, and the death of some of the original parties and many of the witnesses, positive proof of the good faith of the transaction could not reasonably be required, and that in the absence of clear proof of fraud good faith will be presumed.

In Equity. Suit by Mary Dugan and others against Roger O'Donnell to declare respondent a trustee for complainants of an interest in the estate of Hugh O'Donnell, deceased, to set aside a probate decree for distribution of the estate, and for an accounting.

John J. Coffey, for complainants.
Galpin & Zeigler, for respondent.

HAWLEY, District Judge. This is a suit in equity to obtain a decree that the respondent holds in trust for the use and benefit of complainants certain property and interests in the estate of Hugh O'Donnell, deceased; that the judgment of distribution of the probate court of the city and county of San Francisco in said estate be set aside and vacated, on the ground of fraud upon the rights of complainants; that an accounting be had of all the dealings and transactions of respondent with said estate; and for such other and further equity as complainants may be entitled to.

Hugh O'Donnell died intestate February 6, 1868, at San Francisco, Cal., leaving one brother, Jeremiah O'Donnell, and three sisters, Catherine O'Donnell, Mary Gallagher, and Margaret McGonigle, residents of the county of Donegal, Ireland. All of them are now dead. The complainants are, respectively, the minor child and heir of Mary Gallagher, deceased, and the administratrix with the will annexed of the estate of Catherine O'Donnell, and guardian of the heirs. It is averred and claimed that complainant Mary Dugan is entitled to a one-fourth interest in the estate of Hugh O'Donnell, deceased, as the only child and heir of Mary Gallagher, and that the other complainants are entitled to one-fourth of the estate, as legatees of Catherine O'Donnell, deceased.

It appears

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