- 47 -
successor. Under the escrow arrangement there was accordingly a
separation of legal and beneficial ownership with respect to
specific property that was inconsistent with a mere bailment.
See Bogert, supra sec. 11, at 122-123. The Escrow Trustees
exercised some discretion over the investment of the reserves and
the release of unconsumed reserves; through their audit
authority, they also supervised the Dealerships' compliance with
the terms of the VSC program. Neither the Dealerships nor the
contract holders had access to the reserves or the right to
control the actions of the Escrow Trustees. The escrow
arrangement was therefore not an agency relationship. See
generally 1 Restatement, supra sec. 8; Bogert, supra sec. 15, at
163, 168-169, 172-176. Cf. McCrory v. Commissioner, 69 F.2d 688,
689 (5th Cir. 1934), affg. 25 B.T.A. 994 (1932). We are
satisfied that the PLRF accounts would qualify as trusts under
general principles of law as well as the law of the particular
States governing the operative agreements. Cf. Merchants Natl.
Bank v. Frazier, 67 N.E.2d 611 (Ill. App. Ct. 1946) (escrow
treated as express trust); Newton v. Wimsatt, supra; Southern
Cross Lumber & Millwork Co. v. Becker, 761 S.W.2d 269 (Mo. App.
Ct. 1988) (same). The PLRF accounts are also properly regarded
as trusts for Federal income tax purposes.
It does not follow that funds deposited into the PLRF
accounts by the Dealerships were collected from the individual
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