Arnall v. Commercial Bank of Wellsville

• Decision Date: 02 February 1932
• Docket Number: No. 21880.,21880.
• Citation: 45 S.W.2d 909
• Parties: ARNALL et al. v. COMMERCIAL BANK OF WELLSVILLE et al.
• Court: Missouri Court of Appeals

45 S.W.2d 909

ARNALL et al. v. COMMERCIAL BANK OF WELLSVILLE et al.

No. 21880.

St. Louis Court of Appeals. Missouri.

February 2, 1932.

Appeal from Circuit Court, Montgomery County; W. C. Hughes, Judge.

"Not to be officially published."

Proceeding whereby Grover L. Arnall, in his own right and as curator of the estate of his mother, Permelia C. Arnall, a person of unsound mind, seeks a preferred claim against the funds and assets of the defunct Commercial Bank of Wellsville, the property and affairs of which C. E. French, Commissioner of Finance of the State of Missouri, has charge of. From the judgment, defendant bank appeals.

Affirmed.

Glover E. Dowell, of Montgomery City, for appellant.

Fry & Hollingsworth and Marion S. Francis, all of Mexico, Mo., for respondents.

BENNICK, C.

This is a proceeding whereby Grover L. Arnall, in his own right, and also as curator of the estate of his mother, Permelia C. Arnall, a person of unsound mind, has sought to have a preferred claim adjudged against the funds and assets of the defunct Commercial Bank of Wellsville.

The said Permelia C. Arnall was duly adjudged to be a person of unsound mind by the probate court of Montgomery county on August 1, 1921, and her son, Grover L. Arnall, was appointed her guardian and curator. It is significant, however, that he accepted the appointment with a large measure of reluctance, and only after he had consulted with T. K. Shelby, who was the president and in active charge of the Commercial Bank of Wellsville, and E. S. Oliver, one of its directors, and had been assured by them that Shelby would keep his records and prepare his settlements for him, and would invest the assets of the estate through the bank so as to realize a return thereon of 6 per cent. or better. This agreement is highly important to remember, for it forms the basis of Arnall's contention that his claim is entitled to be preferred.

Arnall thereupon, at Shelby's suggestion, opened up an account with the bank in the name of himself as curator of his mother's estate, and turned over to Shelby certain assets of the estate, consisting of cash and notes, with accrued interest thereon, of the aggregate face value of $5,194.51, as is to be computed from Arnall's testimony. At the same time, or shortly thereafter, Arnall rented a safe deposit box from the bank in which to keep the papers belonging to the estate. Though Arnall and Shelby each carried a key to the box, it appears that it was never opened by Arnall until after the failure of the bank, and Shelby's mismanagement of its affairs had become known.

From the time when the above arrangement was entered into down to the closing of the bank, Shelby prepared all of the annual settlements which were filed in the probate court, and generally forwarded them by mail to the judge thereof, accompanied by a letter in many instances which purported to give the court more detailed information concerning the status of the estate than was shown on the face of the settlement. He would also notify Arnall at the same time that settlement was being made, and Arnall would then appear before the court, and go through the formality of signing and verifying the papers, as to the accuracy of which he knew but very little.

Now while Shelby's settlements appeared to be entirely regular on their face, as a matter of fact, after the bank was closed and Arnall for the first time took the opportunity to go through the contents of the safe deposit box, he found penciled notations therein in Shelby's own handwriting, showing an altogether different set of figures from those contained in the settlements which had been filed from time to time, and disclosing how the funds had actually been handled by the bank. For instance, while practically all of the settlements had shown an item of interest collected each year which would have been a return of substantially 6 per cent. on the funds intrusted to the bank, the fact was that save for two loans to one A. P. Merritt, the first for $1,000, on January 28, 1926, and the other for $333.18, on November 3, 1926, no part of the funds had ever been loaned out by the bank, but on the contrary had been kept on general deposit to the credit of the curator's account. It thus appears that the entries of interest were largely, if not entirely, fictitious, and were a part of Shelby's scheme to conceal the fact that the funds were not being loaned out as he had originally promised.

While Arnall, generally speaking, was led to believe that the bank was keeping the money loaned in accordance with the agreement entered into with him at the time he turned the funds of the estate over to it, there is nevertheless no doubt that several of the settlements prepared by Shelby showed substantial sums on general deposit in the bank, of which Arnall necessarily had notice. However, Shelby, when accosted about the matter, represented in each instance that loans were then pending, and that the money was simply being held on deposit for the period following the payment of one loan and the making of another, as the result of all of which Arnall was lulled into a false sense of security, and was precluded from any further questioning into Shelby's management of the estate.

The bank closed its doors on May 10, 1930, on which date the records showed that there was the sum of $1,743.58 on general deposit to the credit of Arnall as curator. Arnall testified that he was unaware that any such sum was held to his credit, but that he believed that at least $4,000 was loaned out at interest.

It was admitted that the department of finance, upon taking charge of the bank, received assets in excess of the amount involved in this proceeding, and that suit to have the claim established was begun within the period of limitations provided by statute.

The petition was in the usual form for a proceeding of this character, and prayed that the judgment be declared a prior lien against the assets of the bank over and above the claims of general creditors. The...