Anderson v. Roberts

• Decision Date: 13 December 1898
• Citation: 48 S.W. 847,147 Mo. 486
• Court: Missouri Supreme Court
• Parties: ANDERSON et al. v. ROBERTS et al.

48 S.W. 847

147 Mo. 486

ANDERSON et al. v. ROBERTS et al.

Supreme Court of Missouri.

December 13, 1898.

COUNTY JUDGES — LIABILITY FOR PRIVATE TRUST FUND — DEFAULT OF COUNTY TREASURER.

A certain fund was directed by a testator to be paid to the judges of the county court "to be vested in said court as a permanent fund" for a certain charitable purpose. The county court ordered that the fund be received by the county treasurer. For over 25 years the county treasurers held possession of the fund, treating it like county funds, and made periodical reports of its condition to the county court. Held, that the county judges were not liable for a loss of the fund through the default of a county treasurer who gave a sufficient bond, and whose reputation for integrity and financial responsibility during his continuance in office was supposed by said judges not to have been questioned.

Burgess, J., concurring on the ground that, the county court being the real trustee, the judges would be liable only for malfeasance in office.

Gantt and Robinson, JJ., dissenting.

In banc. Appeal from circuit court, Boone county; John A. Hockaday, Judge.

Action by Ben M. Anderson and others against W. F. Roberts and others to determine the extent of defendants' liability for funds held in trust by them as public officers. From the judgment rendered, defendants appeal. Reversed.

In 1845, Anthony W. Rollins died, testate, devising to the then judges of the county court of Boone county the sum of $10,000, in trust to loan the same upon good security, collect the interest, apply three-fourths of the interest to the education of such poor youths, male or female, of Boone county, as desired to avail themselves of such aid, and who should be selected by the president of the State University and the principal of the Columbia Female Academy; the remaining one-fourth of the interest and any unexpended balance of the three-fourths to be added to the principal. The fund remained in the hands of James S. Rollins from 1856 to September 8, 1861, when, on motion of Rollins, the county court ordered that the county treasurer receive of said Rollins Union military bonds, at their par value, for the debt due by James S. Rollins to the county court on account of the Rollins bequest, and pursuant to this order Rollins turned over the bonds to Moss Pruitt, the then county treasurer, who held the fund during his term, and turned over the same to his successor, R. B. Price, in January, 1868. Price held the fund during his term, and at the end thereof, in December, 1876, he turned it over to his successor, J. M. Samuels. He likewise held the fund until the end of his term, in December, 1882, when he turned it over to his successor, G. W. Trimble (one of the plaintiffs herein). Pursuing the course of business of his predecessors, Trimble held the fund until the end of his term, in January, 1887, when he turned it over to his successor, J. C. Gillespy. The fund at this time amounted to $37,844.70, of which $880.15 was in cash and the balance in bonds and secured notes. Gillespy was reelected county treasurer in 1891, and held office until January, 1895. Upon his final settlement Gillespy was found to be $4,758.44 short in respect to the fund, and also short in his accounts as county treasurer. The various county treasurers kept separate statements as to this fund, but adopted different methods of keeping the securities and cash and paying out the money. The plaintiff Trimble, while county treasurer, kept the money of this fund mixed with the money of the county, and made payments by checks signed by him as treasurer of Boone county, and sometimes in cash. Prior to his election as county treasurer, Gillespy had been twice elected sheriff and once collector of Boone county. His reputation for honesty was beyond question, and he was generally regarded as a responsible man financially. At the end of his first term, his bondsmen, who were directors and stockholders of the bank in which he kept his deposits, refused to go on his bond for his second term, but he gave a good bond, signed by some of the best people in Boone county. The defendants, then judges of the county court, are not shown to have had any notice of this refusal of his former bondsmen. The practice of the judges of the county court had always been to have reports from time to time of the condition of the fund. Substantially the whole fund was invested in notes secured by mortgages on real estate or in good bonds. No considerable sum was, at any time, kept in cash. The treasurer collected the interest and principal of the loans as they fell due, secured new borrowers, and the judges examined and approved the securities offered. The plaintiffs are the successors, as county judges, of the defendants, and upon their induction into office refused to accept any of the trust funds from defendants (who were such judges during Gillespy's two terms as treasurer) until a judicial determination was had as to the proper amount. To determine this question this action was begun. The petition alleges, as a specific breach of trust by defendants, that they loaned $4,000 and upwards of the trust funds to Gillespy without any security, when he was insolvent, whereby that sum became lost to the trust fund, and then prays for a discovery and accounting. The result in the circuit court was that defendants were charged with Gillespy's shortage of $4,758.44 allowed $2,000 as compensation for their services and those of Gillespy, interest was added to the difference, and judgment entered for $3,639.68. Defendants appealed.

C. B. Sebastian and W. M. Williams, for appellants. Turner & Hinton and Wellington Gordon, for respondents.

MARSHALL, J. (after stating the facts).

The plaintiffs assert two propositions: First, that in intrusting the funds and securities to the custody and keeping of an agent at all, the defendants were guilty of a breach of trust; and, second, that, even if defendants had a right, under the circumstances, to employ an agent, they were guilty of a breach of trust in permitting the agent to have the custody of the fund, and in failure to exercise due care in the selection of Gillespy as their agent, and in their supervision over his conduct. The converse is the contention of defendants. It is a general rule that trustees must retain the custody of trust funds, and execute the trust themselves, and not through the instrumentality of an agent; or, as it is sometimes said, they cannot delegate their powers. Turner v. Corney, 5 Beav. 515; Bostock v. Floyer, L. R. 1 Eq. 26; Ghost v. Waller, 9 Beav. 497; Clough v. Bond, 3 Mylne & C. 490; Deaderick v. Cantrell, 10 Yerg. 263. But there are exceptions to the rule, arising from necessity, or from the common custom of mankind, in which the trustee is entitled to employ an agent, and will not be liable for losses occurring from the act of the agent, if the selection was a proper one. 2 Story, Eq. Jur. (13th Ed.) § 1269, and cases cited in note; 1 Beach, Mod. Eq. Jur. § 252, and cases cited; Hill, Trustees, marg. p. 573. Perry, Trusts (4th Ed.) § 404, states the rule to be: "But there are circumstances where the trustees must employ agents. Lord Hardwicke said: `There are two sorts of necessity, — legal necessity and moral necessity. As to the first a distinction prevails. Where two executors join in giving a discharge for money, and only one of them receives it, they are both answerable for it, because there is no necessity for both to join in the discharge, the receipt of either being sufficient; but if trustees join in giving a discharge, and one receives, the other is not answerable, because his joining in the discharge was necessary. Moral necessity is from the usage of mankind. If the trustee acts prudently for the trust, as he would have done for himself, "and according to the usage of business," — as, if a trustee appoint rents to be paid to a banker at that time in credit, but who afterwards breaks, — the trustee is not answerable. So in the employment of stewards and agents, for none of these cases are on account of necessity, but because the persons acted in the usual method of business.'" Many illustrations could be added, e. g.: Where the trust consists of a large number of houses, where the rents are small and payable monthly, the trustee could attend to the business himself; but it is not usual for owners to do so themselves, and trustees are not expected to. Or, if the trust consists of a cattle ranch, the trustees could feed and herd the cattle themselves, but it would be unreasonable to expect it. Or, where the trust consists of notes due from persons living in different states, the trustees could go to each state, and collect them, but it is not according to the usual course of business. These illustrations demonstrate that the general rule is subject to more exceptions than those arising purely from necessity. They apply to the case at bar in principle, though not in similitude. In State v. Meagher, 44 Mo., loc. cit. 363, Currier, J., speaking of the care which trustees must exercise over trust property, said: "The care must be graduated according to the character of the property, its value, and the convenience of its being made secure, the facility for its being stolen, and the temptations thereto." Other cases hold to the doctrine that a trustee can only employ an agent in cases of actual necessity, but the rule laid down by Lord Hardwicke is based upon better reason, and the common custom of mankind. In this case the defendants might have kept the securities and cash in a strong box in a bank or safe deposit, with triplicate keys, one held by each, and all necessary to open the box. But this is not the common custom of mankind. They might have made all the loans and collections themselves, going in solemn form, in single file, or in solid phalanx, after the delinquent debtors, and returning, laden with spoils, have proceeded in a...