Counsel for appellant contend that the trial court committed reversible error in refusing to accord to appellant's claim a preference over general creditors, and rely upon Continental Nat. Bank v. Weems,69 Tex. 489, 6 S.W. 802, 5 Am. St. Rep. 85, in support of that contention. Counsel for appellees controverts that proposition and presents the contention that Bank v. Weems supports the action of the trial court in this case in refusing to allow the preference contended for. In that case our Supreme Court dealt with a case in which a bank had received from another bank certain claims for collection and return, and had collected a portion of them, and had indorsed and discounted the remainder and used the money received by such discount in the payment of its own debts; and, from the time it collected a portion of the claims until the receiver was appointed, it had on hand more money than the amount so collected,
Upon that state of facts, the Supreme Court held that the bank which sent the claims for collection was entitled to a preference over general creditors to the extent *Page 991 of the amount of money which the other bank had collected upon those claims, but was not entitled to a preference as to the claims not collected and used by the other bank in the payment of its debts; and, in discussing the question as to the right of preference for the money collected, the court said: "We think, therefore, that, when the City Bank collected these last notes, it acted in a fiduciary capacity, and received the proceeds in trust for the Continental National Bank, and that it was its duty to remit them to the latter. This brings us to the further question whether, under the circumstances of this case, they were divested of their character of trust funds when they were placed by the collecting bank in its vaults and there mingled with other moneys. It is a principle of equity, long recognized and applied, that, when one who is intrusted with the money of another invests it in property, the cestui que trust may follow the funds, and, fixing upon the property the character of the original trust, may claim it as his own. Ryall v. Rolle, 1 Atk. 172; Scott v. Inman, 4 Wells, 400; Burdett v. Willett, 2 Vernon, 638. But in an early case it was said: `If the factor have money it shall be looked upon as the factor's estate and must first answer the debt of a superior creditor, * * * for, in regard that money has no earmark, equity cannot follow that in behalf of him that employed the factor.' Whitcombe v. Jacob, 1 Sack, 160. The idea thus suggested seems long to have prevailed in the courts of England. But at a later day a different doctrine has been established in these courts (Taylor v. Plumer, 3 Mau. S. 562; Pennell v. Diffil, 4 M., D. D. 372; Knatchbull v. Hallett, L. R. 13 Ch.Div. 696), and has generally been applied in the courts of last resort in this country in the more recent cases. Nat. Bank v. Insurance Co., 104 U.S. 54, 26 L. Ed. 693; Brocchus v. Morgan (Tenn.) 5 Cent. Law J. 53; People v. Rochester Bank, 96 N.Y. 32; Harrison v. Smith, 83 Mo. 210, 53 Am.Rep. 571; Stoller v. Coates,88 Mo. 514; Peak v. Ellicott, 30 Kan. 156, 1 P. 499, 46 Am.Rep. 90. The rule thus followed in the cases last cited we think is founded upon the better reason. Where the trustee kept the fund separate, and the original money was capable of being identified, there never was any question. The dictum above quoted is not understood as having been applied to such a case. It is where the trustee has mingled the trust money with the mass of his other funds that the difficulty arises. It may be that, when the entire mass is once paid away, the right to claim a trust in any money or property is forever lost. But if, as in the present case, throughout all the trustee's dealings with the funds so mingled together, he keeps on hand a sufficient sum to cover the amount of the trust money, we think it capable of demonstration that the trust should attach to the balance that is found to remain in his hands. Let us take the case before us for an illustration. It is shown by the evidence that after the bank received the money, amounting to about $5,000, its cash assets were never reduced below the sum of $6,000 until they went into the receiver's hands. Even admitting that, in course of its transactions, this identical money was paid out by the bank to its uttermost farthing, yet we know that every dollar so expended left its representative and exact equivalent in the vault from which it was taken, and that, when again the money so left was expended, it left in turn its equivalent behind it. We see, therefore, that, whatever changes may have taken place in the funds from the receipts and expenditures of the bank, the balance left at the date of its failure was the result of the proceeds of the notes to the extent to which such balance was thereby increased, and that the case which went into the hands of the receiver should be deemed the representative of those proceeds and impressed with the trust character which pertained to them. The equity would have been no stronger if the City Bank had used appellant's money in the purchase of bonds or other securities, which were found in its vaults and identified, and if appellant were now seeking to recover the securities so bought. For the reasons given, we are clearly of the opinion that appellant was entitled to priority of payment for the proceeds of the notes collected by the City Bank."
The court then took up the other branch of the case, and, in discussing it, used language which, dissociated from the first question, might tend to sustain the contention urged on behalf of appellees in this case.
We think it appears with reasonable certainty from the agreed facts in the case at bar that, from the time the Union Trust Company collected appellant's claim until the receiver was appointed and took possession, the collecting bank had in its possession more money than the amount collected upon appellant's claim, and therefore, under the doctrine announced and applied in the Weems Case, appellant's claim is entitled to preference.
Counsel for appellee undertakes to distinguish this from the Weems Case for the reason that the collecting bank in that case had but one place of business, and, when the collection there involved was made, the money was placed in the vault with other funds, while in the case at bar the collecting bank operated banks and transacted business at several different places in the state widely distant from each other; and the facts show that, when the receiver took possession, most of the money was at other places and there was not enough in the possession of the Union Trust Company at the place where this claim was collected to pay the entire claim. In other words, it seems to be contended either that these several places of business must be considered as if they *Page 992 belonged to separate and distinct owners or that the right to treat money found in possession of an insolvent collector as a substitute or equivalent for money collected and held in trust is dependent upon the fact that the money so collected was placed in the same vault with the money found on hand and taken possession of by the receiver. Neither of these propositions is regarded as sound. It is true that in the Weems Case the money collected was placed in the same vault with other funds belonging to the collecting bank; and it could not well have been otherwise, as that bank had only one place of business. But we do not understand or believe that it was the intention of the court to make the right of preference depend upon the fact that the money collected was actually and physically mingled with or placed in juxtaposition to other money belonging to the collecting bank. The true logic and doctrine of the Weems Case is that such collections as that involved in this case constitute a trust fund, and that, as long as the collecting bank keeps on hand as much or more than the amount of money so collected, the trust will attach to the funds so held by the collecting bank, although the identical money collected may have been paid out. And from this it follows that we hold that appellant's lien attached to all the money which went into the hands of the receiver, and that this would be true even if none of it had been found in the Union Trust Company's bank and place of business where appellant's claim was collected. Appellees' illustration of money deposited by one bank in another is not in point, because, when a general deposit is made, the money ceases to belong to the depositor and the transaction creates the relation of debtor and creditor.
For the reasons stated, that portion of the judgment of the trial court refusing a preference to appellant's claim is reversed and here rendered for appellant, requiring the receiver to pay said claim in full.
Reversed and rendered.