REAL-ESTATE TRUST CO. OF PHILADELPHIA v. NEW ENGLAND LOAN & TRUST CO.

REAL-ESTATE TRUST CO. OF PHILADELPHIA v. NEW ENGLAND LOAN & TRUST CO. (Circuit Court, S. D. New York. March 6, 1899) Insolvent Corporations — Receivers—Proceeds op Pledged Securities. The proceeds o-f mortgages owned by an insolvent loan and trust company, but which had been pledged by it to trustees to secure its debentures, both principal and interest, constitute a trust fund in the hands of its receiver, which cannot be used by him for the ordinary purposes of the receivership, notwithstanding any rights therein the company might have had under its contracts while a going concern. Application of receiver for instructions as to interest on mortgages assigned by defendant to trustees for debenture series. Thomas M. Day, Jr., for the motion. Frederick Goeller, opposed. [MAJORITY — LACOMDE, Circuit Judge.] LACOMDE, Circuit Judge. The written contracts contain no provisions regulating what is to be done when the loan company becomes bankrupt. From the day it went into the hands of the receiver it has been powerless to discharge any of the functions contracted for. It happens that the receiver, the officer of the court, finds in his hands some money paid by mortgage debtors on their mortgages. To what extent the loan company might have used this, if it had continued as a going concern, and as the agent of the trustees to collect such interest, is wholly immaterial. The mortgages were all transferred to the trustees, and expressly pledged as security for the debentures. The pledge of each mortgage carried with it, not only the principal, but also all interest which might accrue thereon. Interest and principal alike- should be treated as trust funds. The general creditors have no interest in either. Instructions accordingly.