RECENT CASES. 221 Torts — Negligence — Liability for False Statements. — Defendants, di- rectors of a bank, negligently but not fraudulently made false statements as to the condition of the bank. Plaintiff, relying on these statements, purchased stock, which proved worthless. Held, that defendants are liable for the damage caused by their statements. Houston v. Thornton, 29 S. E. Rep. 827 (N. C). The English House of Lords decided, in Derry v. Peek, 14 App. Cas. 337, that similar facts would not support an action of deceit. That case has generally been regarded as settling in England that no action will lie for negligent misstatements, Angus V. Clifford, [1891] 2 Ch. D. 449. There was, however, no allegation of negli- gence in the declaration, so that the point is really a dictum. Massachusetts has fol- lowed the English doctrine. Nash v. Minn. Title and Trust Co., 163 Mass. 574. But in many .States the question is still open. The decision in the principal case seems sound. Granting that deceit will not lie, it seems that an action for negligence should. One who makes positive statements, intending them to be acted upon, should be bound to use ordinary care to see that they are warranted, at least when the statements are made to secure a result which will operate to the personal advantage of the one making them. Torts — Slander — Privilege. — Held,tsX to justify the speaking of slander- ous words on the ground of privilege it must appear, not only that the defendant believed he was speaking the truth, but that there were reasonable grounds for such belief. Toothakerv. Conant, 40 Atl. Rep. 331 (Me.). 'I'he question raised has been passed upon in only a few American jurisdictions, and the majority of the decisions are in accord with the principal case. Carpenter v. Bailey, 53 N. H. 590 ; Express Printing Co. v. Copeland, 64 Tex. 354 ; Briggs v. Garrett, III Pa. -St. 404. In England it is held that a defendant may avail himself of the de- fence of privilege if his motive is not wrongful and he has an honest belief in the truth of his statements. Clark v. Molyneux, 3 Q. B. D. 237. In accord with the English decisions is Bays v. Hunt, 60 Iowa, 251. It seems to be the better view, how- ever, that immunity is extended sufficiently if a defendant is allowed to escape liability for defamatory statements only when they are made upon a reasonable belief in their truth. This rule checks the spreading of false reports coming from sources on which many persons would rely, but which reasonable people generally would not credit. Trusts — Right to Follow Trust Funds. — A trustee placed trust funds in the hands of a firm which had knowledge of the trust relation. The firm used the funds in its business and, when dissolved by the death of a partner, was found to be insolvent. Held, that the cestui que trust is entitled to the amount of the converted trust funds in preference to the claims of the firm's creditors.. Evangelical Synod v. Schoeneich, 45 S. W. Rep. 647 (Mo.). The rule of equity which allows a cestui que trust, whose funds can be traced into the assets of a bankrupt estate, to take preference over the general creditors of the bankrupt, has met with much favor in the courts of this country. Nat. Bank v. Ins. Co., 104 U. S. 54. A failure, however, to appreciate the principle upon which the doctrine must rest has led some courts to extend its application further than a just regard for equity would warrant. McLeod . Evans, 66 Wis. 401. The present case seems to be open to this criticism. A departure from the principle that among cred- itors equality is equity can be justified only when necessary to prevent the general creditors from enriching themselves at the expense of a cestui que trust. When it does not appear that the trust funds form a part of the assets for distribution among the bankrupt's creditors, it is not a case of unjust enrichment of the creditors, and there can be no ground upon which to give the cestui que trust a preferred claim. This line of reasoning was used to defeat the claims of a cestui que trust in Covin v, Gleason, 105 N. Y. 256. See also Metropolitan Nat. Bank v. Campbell, 77 Fed. Rep. 705. It does not appear from an examination of the facts of the present case that the plaintiff could trace the trust funds into the insolvent firm's assets, and for that rea- son the decision appears to be unsound. Trusts — Special Deposit. — A debtor deposited in a New York bank the amount due from him to a creditor in Helena, Montana. The New York bank tele- graphed the Helena bank to pay the debt and charge the amount to its account. The Helena bank refused to pay the creditor except in New York exchange, which the creditor refused to accept. He also refused to allow the amount to be placed to his credit in the bank. The Helena bank failed before the creditor was paid. Held, that the Helena bank held the amount due the creditor as a special deposit, and he was entitled to it in preference to the general creditors. Moreland v. Brown, 86 Fed. Rep. 257 (C. C. A , Ninth Cir.). The decision must be regarded as unsound. The court quotes with approval the case of Farley v. Turner, 26 L. J. Ch. 710, in which a misconception as to the nature
