Reicheldifer's Appeal

The opinion of the court in this case goes beyond the recent decisions of the Supreme Court (Cameron v. Carnegie Trust Co.,292 Pa. 114; Mehler's App., 310 Pa. 25), on which it purports to rely as authority, and runs counter to the rule that has been in force in this State for many years, viz., that a trust creditor, in order to secure a preference over general creditors — and still more, over creditors preferred by statute, such as depositors of a bank — must trace the fund claimed into some specific property, fund, security or account of the insolvent bank, which has passed into the hands of the receiver and the proceeds of which are being distributed. And by ``account' in that connection, is not meant a mere bookkeeping entry on its own books, but a separate and distinct asset, which is not commingled with the general assets of the insolvent bank; such as an account in another bank, or in the hands of a third person; or if an account on its own books, that specific assets or property have been set aside for its payment or protection.

In Cameron v. Carnegie Trust Co., supra, the Ottumwa National Bank sent to the Carnegie Trust Company a note for collection and remittance only. The Carnegie Trust Company collected the note, received the money, and drew a draft on the Colonial Trust Company — where it had sufficient funds on deposit — and sent it to the Ottumwa National Bank. The Carnegie Trust Company failed before the draft was presented to the Colonial Trust Company. The Supreme Court held that the Ottumwa Bank was entitled to be paid in preference to the depositors of the trust company the money which the latter had received as agent for thebank, and for which it had given its draft, drawn on another banking institution. By giving its draft on the Colonial Trust Company, for the money which it had received as agent for the bank and mingled with its other funds, it designated an ``account', which came into the hands of the receiver, separate from its general assets, out of which the trust fund was to be paid.

In Mehler's Appeal, supra, the treasurer of the Dollar Title and Trust Company of Sharon caused the stock of the Mehlers, which had been pledged as collateral security for a loan, to be sold for the account of the Trust Company and the proceeds of the stock were deposited in the Mellon National Bank to the credit of the trust company. The treasurer then embezzled out of the general funds of the trust company the equivalent of the stock so sold. On the insolvency of the trust company the Mehlers were held to be entitled to be paid the proceeds of the sale of their stock which had been fraudulently sold by the treasurer and deposited to the credit of the trust company in the Mellon National Bank, or so much thereof as was represented by the"lowest balance" to the credit of the trust company in the Mellon Bank "after the proceeds of the conversion had been deposited therein." There, again, we have a specific fund or account, separate and distinct from the general assets of the insolvent trust company, into which the trust fund was traced.

That is not the situation here. Abbie P. Alexander had two accounts in the Manayunk Trust Company — one a savings account, the other a checking account. They represented no specific items of property, but, by statute, created her a preferred creditor as against the money, checks in course of collection, notes, loans and discounts, bonds, mortgages, real estate and other property constituting the general assets of the trust company. She bought a mortgage from the appellant, Elizabeth T. Reicheldifer for $1,524.50, giving the latter's agent, the Manayunk Trust Company, a transfer of $1,000 from the savings account and a check for $524.50 on her checking account in said trust company. The trust company charged Mrs. Alexander's savings account with $1,000 and her checking account with $524.50 and credited an account which it carried on its own books as "Miscellaneous Account" with $1,524.50, drew on a check on itself against that account for $1,524.50 and sent it by mail to Mrs. Reicheldifer. She presented it to the trust company for payment, but in the meantime the Secretary of Banking had taken charge of its affairs and the check was not paid. No money, checks, securities or property of any kind were segregated and kept apart in the ``Miscellaneous Account" from the general assets of the trust company, consisting of cash, checks in course of collection, notes, loans and discounts, bonds, mortgages, real estate and other property of the trust company. It was only a bookkeeping transaction on the books of the trust company — a "mere book entry" as referred to by Mr. Justice MITCHELL in Iron City Nat. Bank v. Fort Pitt Nat. Bank, 159 Pa. 46, 51, and commented on approvingly in Union Nat. Bank v. Franklin National Bank, 249 Pa. 375, 385. By a bookkeeping entry, $1,524.50, which was "mixed with a general mass or fund of the same description," (Com. v. Tradesmen's Trust Co., 250 Pa. 372, 95 A. 574) was transferred on the books from Abbie P. Alexander's accounts to ``miscellaneous account,' but no property was actually segregated and identified as belonging to either Mrs. Alexander or ``miscellaneous account.' There was not a penny of cash, or any specific item of property of the trust company that could be separated from the general assets of the latter and truly be said to constitute the ``miscellaneous account.' In this respect, the present case is wholly different from the two Supreme Court cases above cited and relied on by the majority of this court. It brings our case squarely within the decision of the Supreme Court in Freiberg v. Stoddard, 161 Pa. 259. There the plaintiff drew certain drafts on a debtor and indorsed them to the order of a bank for collection. The drawee was a depositor in the bank. The drafts were accepted and the account of the drawee charged therewith. The bank, which was insolvent, drew a draft on a bank in another city and sent it to the plaintiff. Before it was presented the bank made an assignment. The opinion of the lower court, which was approved by the Supreme Court, was written by Judge RICE, afterwards President Judge of this court, and in it he said, "But in this case no money was added to the assets of the bank, and no part of the money in bank was separated or set apart or in any way appropriated to the payment of the drafts, and, so far as appears, the assignor did nothing to indicate an intention on his part to treat any portion of the funds in bank as different from the remaining deposits. . . . . . A trust creditor is not entitled to preference over general creditors of the insolvent merely on the ground of the nature of the claim. . . . . . But if we hold to the rule that, to entitle one claiming to be a trust creditor to preference, he must trace the trust money into some specific property, or into some particular fund or account of the assignor with which the latter has mingled it, we think the plaintiffs have failed, because they have not shown that the assignor received any money as the proceeds of the drafts which he added to and mingled with the general mass of deposits in bank, or that any part of the money in bank was ever set apart, or in any manner appropriated to the payment of the drafts." In Cameron v. Carnegie Trust Co., supra, Mr. Justice SIMPSON recognized that the foregoing was still the law, saying "In Freiberg v. Stoddard, 161 Pa. 259, there was no money received by the bank, to whom the drafts were sent for collection, but onlya charging of the amount thereof against the deposit account of the drawer; [italics ours] and it may fairly be assumed, from the opinion of Judge RICE, which was adopted by this court, that if the bank had actually received money for the drafts, and this had been mingled with its other funds, the drawer would have been entitled to a preference." In Lebanon Trust Safe Deposit Bank's Assigned Est., 166 Pa. 622, it was held that "where money received by a bank as trustee is not kept distinct nor invested in any specific way, but is mingled with the general mass of money on deposit and used in the general banking business, and there is no means of tracing or ascertaining its identity in any form or species of property, the cestui que trust is not entitled to a preference over general creditors in a distribution of the assigned estate of the bank." This rule is recognized in the very late case of Pittsburgh's Appeal, 316 Pa. 125, where it was held that "trust relationship, alone, does not give priority; that depends on identification of the property: Lifter v. Earle Co.,72 Pa. Super. 173, 176; Mehler's App., 310 Pa. 25, 29,164 A. 619." See also Thompson's App., 22 Pa. 16, 17; Com. v. Union Surety Guaranty Co., 37 Pa. Super. 179, 183; Groff v. City S.F. T. Co., 46 Pa. Super. 423.

It is unfortunate that at the time this transaction occurred the law did not put the appellant on an equality with the depositors. That has been rectified by the Department of Banking Code of 1933, sec. 1011, 3d par. (Act of May 15, 1933, P.L. 565, 614); but under the law then existing she had no priority over general creditors, — and certainly none over depositors — because the transfers from the savings and checking accounts of Mrs. Alexander to the ``miscellaneous ac-count' were merely book entries, and passed to the latter no specific money or property which was separate or distinct from the other assets of the trust company, but only an interest in property, which was ``mixed with a general mass or fund of the same description,' and was incapable of identification. It will not do to speculate what would have been the result if Mrs. Alexander had drawn out $1,524.50 in cash and paid it to the trust company. She did not do it, and we must treat the facts as they are.

Judge LAMBERTON, of the court below, in what I think is a very clear and convincing opinion, has discussed a number of other decisions, which it is not necessary for me to refer to. I think they justify the action of the court below and admit of no other ruling, if the decisions of our Supreme Court are to be followed.

I would affirm the decree.