TRUSTS - CONSTRUCTIVE TRUSTS - PREFERENTIAL CLAIM AGAINST BANK'S ASSETS FOR DEPOSITS MADE AFTER HOPELESS INSOLVENCY

On proclamation by the governor of the so-called bank holiday, the Union Guardian Trust Company was closed as of February 11, 1933. The evidence showed that within nine months of closing the company had made provision for obtaining $2,500,000 by pledging assets, had received loans amounting to $12,000,000 from the Reconstruction Finance Corporation, and was conferring frequently with the officers of· that agency to negotiate an additional $44,000,000 loan. Under the authority of emergency legislation passed after the bank holiday, a conservator was appointed. By the plan of reorganization all the assets of the company were set aside in a fund designated as a depositors' and creditors' trust fund for liquidation by a trustee for the benefit of creditors.

Plaintiffs seek to establish a preferential claim against the assets on the theory that the trust company's acceptance of their deposits while insolvent created a trust ex male-ficio in favor of the plaintiffs. The lower court gave judgment for plaintiffs. On appeal, held, reversed. The trust company was not hopelessly or irretrievably insolvent when it accepted the deposits.

Union Guardian Trust Co. v. Emery, 292 Mich. 394, 290 N. W. 841 (1940).