State v. Northern Trust Co. ( 1897 )

CANTY, J.

I concur. An order was made in the assignment proceedings of the insolvent bank, declaring the state to be a preferred creditor, and ordering the trust company, as assignee of the bank, to pay the claim. If this order amounted to a final judgment or decree in favor of the state, and against the trust company, so that it was a legal obligation on which the state could sue the trust company in an independent action or proceeding, then the state would in law be a creditor of the trust company, and therefore, under G. S. 1894, §§ 4234, 4251, a preferred creditor. But it was not such an order. Except as hereinafter stated, it was enforceable only in the assignment proceedings, and the money of the bank in the hands of the trust company as assignee did not, by virtue of that order, become in law the money of the state until paid over to the state. But equity regards that as done which should be done, and if this money in the hands of the trust company as assignee (which should have been paid over to the state) could be traced into the hands of the receiver of the trust company, and there identified, the state would, in my opinion, be a preferred creditor, not by virtue of said sections 4234 and 4251, or section 5898 (see State v. Bell, 64 Minn. 400, 67 N. W. 212), but by virtue of the rules of equity applicable to such cases.

There are two successive steps to be taken in arriving at this conclusion: First, that equity regards that as done which should be done, and therefore the state has an equitable claim against the trust company; second, that, by reason of the equitable doctrine of following trust funds, the state may, if it can, follow the fund into the hands of the receiver of the trust company. This last step, the state was not able to take. Therefore it is not in equity a preferred creditor, but its equitable claim still remains, which, in my opinion, it may enforce as an equitable claim in the receivership proceedings against the insolvent trust company. But, as the state has no standing as a creditor of the trust company except with the assistance of a court of equity, that court will not declare it to be a preferred creditor as long as it cannot trace the trust fund into the hands of the receiver.