Bank of Grand Rapids, Northern National Bank of Big Rapids, and First National Bank of Traverse City.

Champlin & Stone, for defendant City National Bank of Lansing.

Kingsley & Kleinhans, for defendant Detroit National Bank.

FitzGerald & Barry (Francis A. Stace, of counsel), for defendant T. Stewart White.

HOOKER, J. The W. Steele Packing & Provision Company, of Grand Rapids, was indebted as follows: To Fifth National Bank (complainant), $10,000; to Fourth National Bank, $7,500; to Northern National Bank, $5,000; to First National Bank of Traverse City, $3,000. It owed $21,000 to others not interested in this proceeding. Mr. Steele, its manager, was indebted as follows: To Fifth National Bank (complainant), $10,000; to Northern National Bank, $5,000; to Detroit National Bank, $5,000. All of this indebtedness, except that due the complainant, consisted of negotiable paper indorsed by Dunham, who was president and manager of the complainant bank.

On August 28, 1889, both Steele and the packing company were insolvent and the following instruments were executed to Dunham as trustee: The packing company gave: (1) A chattel mortgage on substantially all of its personal property, including "all personal chattels and effects, goods, provisions, books, and book accounts, and choses in action, * * located at its packing house in Wyoming township.' This may be designated the "Chattel Mortgage." (2) A real-estate mortgage upon the packing-house property in Wyoming township, which mortgage, after describing the real estate, included the following, viz.: "Also all the buildings, machinery, improvements, and chattels situate upon said premises." This mortgage will be designated the "Packing-House Mortgage." At the same time, Steele executed the following upon his individual property: (1) A real-estate mortgage upon property in Ionia, called the "Ionia Mortgage." (2) An

assignment of 70 shares of stock in the Fifth National Bank.

The packing company mortgages secured packing company paper, as follows: The chattel mortgage secured: Complainant, $10,000; Fourth National Bank, $2,500. This mortgage, on its face, purported to secure other claims; but complainant admits them to have been collateral to the $10,000 claim. The packing-house mortgage secured: Fourth National Bank of Grand Rapids, $5,000; Northern National Bank of Big Rapids, $5,000; First National Bank of Traverse City, $3,000. A second clause in this mortgage becomes immaterial, as the property did not produce a sufficient sum to pay the items having priority. The Steele mortgage and assignment secured his individual paper as follows: The Ionia mortgage secured: Complainant, $10,000; Northern National Bank of Big Rapids, $5,000; Detroit National Bank of Detroit, $5,000. The assignment of stock secured the Steele paper held by the Fifth National Bank, and it is contended that it covered the $5,000 note of Steele held by the Northern National Bank, which Steele testified that he supposed was held by complainant at that time; but we think that the weight of evidence is to the effect that it secured complainant only.

Had Dunham reduced all of the property to possession before disbursing it, no great difficulty should have been experienced in dividing it in conformity to the terms of the trust among those entitled to it; but he did not do this. On the contrary, he attempted to continue the business of the Steele Packing & Provision Company, opening an account in his own bank (i. e., the complainant), in his name as trustee, and drawing upon the fund for the expenses of the business, and to pay paper falling due, and discounts upon renewals. Such renewals were made or indorsed by him personally. The bank stock was converted into money, and, instead of being used to pay the complainant's notes against Steele, was, in part, at least, applied to other paper as it became due, or to discounts

upon renewals. No serious difficulty is found in tracing the funds. Ordinarily, in such cases, those receiving more than their legitimate proportions will be required to surrender the excess, upon a bill filed for an accounting; and the bill in this cause is filed for such purpose. Manifestly, the misconduct and mistakes of the trustee will not relieve a cestui que trust from his duty to account to his fellow beneficiaries; and in this case, if the defendants are to avoid contribution, it is because of facts which make it inequitable for the complainant to ask such relief.

Different reasons are assigned by the various defendants why they should be entitled to retain the sums that they have severally received from the trustee. First, it is contended that the course of the trustee had the full approval and assent of the Fifth National Bank, and that, as the payments were made over its own counter, upon checks signed by Dunham as trustee, it cannot now be permitted to recall such assent, and recover from the defendants, especially as the defendants relied upon such payments, and Dunham was released in consequence, when he would otherwise have been held as indorser.

Dunham took possession of the property at once upon receiving the papers creating the trust. It will be remembered that each instrument was unlike the others, and no two secured identical obligations. A proper administration of the trust would have required the several funds received from the property covered by the respective instruments to be kept separate, and applied according to the terms of the various instruments. Dunham did not do this. He opened one account as trustee, and deposited moneys from the various sources therein. He paid notes and discounts upon renewals, as they became due, by drawing checks upon this fund. He carried on the business of the Steele Packing & Provision Company, including a retail meat market, paying the expenses, and, there is reason to believe, 'large losses, from this account, and, apparently, he used the Wyoming township real estate for the purposes of this business. About the

first thing done by him was in relation to the note of $2,500, held by the Fourth National Bank, upon which he was indorser. It fell due the day following the creation of the trust. He telephoned the holder to send it through the clearing house to the Fifth National Bank, and it would be paid. It was so sent, and it was paid, by its application in the adjustment of that day's business between these banks. It appeared upon the hearing that the Fifth National Bank carried this as a cash item for a time at Dunham's direction, and that he subsequently paid it from the trust fund. Complainant now claims that, in the accounting, the Fourth National Bank should be charged with the amount of such note as though it had received payment from the trust fund, and that, as the fund proved inadequate to full payment of the debts, it should account for the excess with interest.

We may, perhaps, profitably dispose of this question at this point. We think that the Fifth National Bank was under an obligation to treat that note as sent to it for payment. It saw fit to receive it and settle for it upon an understanding with Dunham, which it was not authorized to do on behalf of the holder. If not paid, it should have protested it, and returned it without delay. There is nothing to indicate that the Fourth National Bank expected it to be paid from the trust fund. It had been informed by Dunham that it would be paid if sent to the bank. Was it Dunham as trustee, or indorser, or president of the bank, who made this promise? Inasmuch as there was nothing to indicate that, as trustee, he had money to pay it, but, on the contrary, it quite clearly appears that he had not, it will not be unfair to assume that the direction was given as indorser, and that he arranged with his bank to pay the note and carry it for him. It cannot now shelter itself behind the claim that it relied on his promise as trustee, and carried the note as a cash item against the trustee. So far as this note is concerned, we think complainant estopped; and, for the

purpose of any accounting with the trustee, it is to be treated as though it purchased that note, and became entitled to its proportion of the fund obtained from the chattel-mortgaged property.

The Fourth National Bank had another claim. This was a packing company note of $5,000, with Dunham's indorsement. It was apparently a renewal of the note secured by the packing-house real-estate mortgage, and was sold for full consideration to the City National Bank of Lansing. Previous to its sale, the Fourth National Bank had received, as discounts, upon successive renewals of this paper, the sum of $449.99. It is contended that this sum should be considered in the accounting. We pass the question, to be considered later, with others of like character, and follow the history of the note itself. On October 8, 1890, it was sent by the City National Bank to the Fourth National Bank for collection, but was not paid. A renewal was returned, with the sum of $103.33 interest, which was paid by a trustee check, signed by Dunham, payable to the Fourth National Bank. We do not discover that further interest was paid on this note, and on March 10, 1891, Dunham filed his bill in the Kent circuit court, in chancery, to foreclose the packinghouse real-estate mortgage. J. Edward Earle, who was a stockholder and an officer of the Fifth National Bank, was his solicitor, and the case was commenced upon the request of the City National Bank. It will be remembered that there was a second clause in this mortgage, which secured other creditors, among them the complainant. The debts to be first paid were this $5,000 note, owned by the City National Bank, a $5,000 note given to the Northern National Bank, which found its way to White (as will appear hereafter), and a $3,000 note owned by the First National Bank of Traverse City. A number of these beneficiaries asked leave to answer and file crossbills, and this was permitted, nearly all doing so. The Fifth National Bank filed an answer and cross-bill, praying for an accounting, as follows: