Chancellor v. Chancellor

• Decision Date: 01 February 1912
• Citation: 177 Ala. 44,58 So. 423
• Parties: CHANCELLOR v. CHANCELLOR.
• Court: Alabama Supreme Court

58 So. 423

177 Ala. 44

CHANCELLOR v. CHANCELLOR.

Supreme Court of Alabama

February 1, 1912

Rehearing Denied May 1, 1912.

Appeal from Probate Court, Talladega County; W. C. McMillan, Special Judge.

Petition of P. L. Chancellor, as administrator, for final settlement of the estate of his intestate. From a decree for petitioner the contestant, I. S. Chancellor, one of the heirs of intestate, appeals. Reversed and remanded.

The administrator sought to have himself credited with an item of $1,223.45, and commissions thereon, which he had deposited in the Union Bank & Trust Company; he claiming to have deposited it as trust funds, and the contestant setting up that it was deposited by him in his individual capacity. The evidence was in conflict as to this matter, but the preponderance seems to be that the deposit was made in his individual capacity. The bank failed, and the administrator sought to excuse himself on this ground.

J. B Sanford, of Sylacauga, and D. H. Riddle, of Goodwater, for appellant.

Knox Acker, Dixon & Sims, of Talladega, for appellee.

ANDERSON J.

"A trustee may deposit money temporarily in some responsible bank or banking house; and if he acted in good faith and with discretion, and deposited the money to a trust account, he will not be liable for its loss, * * * but he will be liable for the money in case of a failure of the bank, or for its depreciation, if he deposits it to his own credit, and not to the separate account of the trust estate." Perry on Trusts, § 443. Again, this writer says, in section 463: "So if the trustee pays the money into a bank in his own name, and not in the name of the trust, he will be responsible for the money in case of the failure of the bank." This general rule is not only recognized by our own court, but by all well-considered cases. Ditmar v. Bogle, 53 Ala. 169; Booth v. Dexter Co., 118 Ala. 369, 24 So. 405. Where an administrator or trustee, with trust funds in his hands, deposits them in his own name in a bank or other institution which fails, the loss should fall on him. And his liability will not depend upon the good faith, prudence, or judgment with which apparently he may have acted, nor upon the fact that he may have disposed of his own funds in the same way. In re Arguello, 97 Cal. 196, 31 P. 937; Commonwealth v. McAlister, 28 Pa. 480; Williams v. Williams, 55 Wis. 300, 12 N.W. 465, 42 Am. Rep. 708; Naltner v. Dolan, 108 Ind. 500, 8 N.E. 289, 58 Am. Rep. 61; Corya v. Corya, 119 Ind. 593, 22 N.E. 3.

If the administrator deposits trust funds in a bank and takes therefor a certificate of deposit in his own name individually, the deposit is at his own risk, and the loss will fall on him in the event of a failure of the bank. Nor will the fact that he informed the bank at the time of deposit that the funds belonged to an estate of which he was administrator alter the liability. In re Hornor's Estate, 66 Mo.App. 531. We are much impressed with the soundness of the well-considered case of Naltner v Dolan, 108 Ind. 500 [8 N.E. 289, 58 Am. Rep. 61], and from which we quote: "The authorities, however, distinguish between cases in which the deposit was made in such a manner as to preserve its trust character on the books of the bank in which the fund was deposited, and those in which the owner of the fund might be put to the trouble of proving by extraneous evidence that the fund was not the individual money of his trustee. Whenever a trustee, unless properly authorized to do so, puts the fund in such shape as to invest himself with a legal title to it, the cestui que trust has his election, either to treat the fund, according to the appearance of things, as the property of the trustee, and regard the latter as his debtor, or he may demand that the title be transferred to him. If a deposit is made in such manner as, on the face of the books of the bank in which the deposit is made, to authorize the trustee, his assignee, or legal representative, to claim it as the fund of the depositor, the cestui que trust has the option to do likewise. Merket v. Smith, 33 Kan. 66 ; McAllister v. Commonwealth, 30 Pa. 536; Morris v. Wallace, 3 Pa. 319 [; Jackson v. Bank, etc., 10 Pa. 61; School District, etc., v. First Nat. Bank, 102 Mass. 174; Utica Ins. Co. v. Lynch, 11 Paige [N. Y.] 520; Bartlett v. Hamilton, 46 Me. 435; 2 Pomeroy, Eq. Jur. §§ 1067-1076; Perry, Trusts, §§ 443, 444; Story, Agency, § 208. In case it becomes the duty of an agent or trustee to deposit money belonging to his principal, he can escape the risk only by making the deposit in his principal's name, or by so distinguishing it on the books of the bank as to indicate in some way that it is the principal's money. If he deposited in his own name, he will not, in case of loss, be permitted to throw such loss on his principal. Williams v. Williams, 55 Wis. 300 , 42 Am. Rep. 708; Norris v. Hero, 22 La. Ann. 605; Mason v. Whitthorne, 2 Cold. (Tenn.) 242; Jenkins v. Walter, 8 Gill & J. [ Md.] 218 ; Robinson v. Ward, 2 C. & P. 60; McDonnell v. Harding, 7 Sim. 178; State ex rel. v. Greensdale [106 Ind. 364, 6 N.E. 926, 55 Am. Rep. 753], supra. In such a case, the good faith or intention of the trustee is in no way involved. Having for his personal convenience, or from whatever motive, deposited the money in his own name, thereby vesting himself with a legal title, it follows as a necessary consequence, when a loss occurs, he will not be permitted to say, as against his cestui que trust, that the fact is not as he voluntarily made it appear. What the legal or equitable rights of the real owner of the fund would be in such a case, as against the bank, or as against attaching creditors of the depositor, has been the subject of much discussion, and of some diversity of opinion. Pennell v. Deffell, 4 DeG. M. & G. 372; School District, etc., v. First Nat. Bank, 102 Mass. 174; Jackson v. Bank, supra; Bundy v. Town of Monticello, 84 Ind. 119, 131, and cases cited; McLain v. Wallace, 103 Ind. 562 ; McComas v. Long, 85 Ind. 549; Ellicott v. Barnes, 31 Kan. 170, 173 ; Morse, Banks and Banking, 300-302. Whatever diversity of opinion may be found in respect to the rights of the bank, or other creditors of the depositor, the authorities agree that a trustee who either invests or deposits trust money in his...