Covey v. Pierce

• Decision Date: 13 May 1935
• Docket Number: No. 17865.,17865.
• Citation: Covey v. Pierce, 82 S.W.2d 592, 229 Mo.App. 424 (Mo. App. 1935)
• Parties: COVEY v. PIERCE et al.
• Court: Missouri Court of Appeals

82 S.W.2d 592

COVEY v. PIERCE et al.

No. 17865.

Kansas City Court of Appeals. Missouri.

May 13, 1935.

Appeal from Circuit Court, Nodaway County; D. D. Reeves, Judge.

Action by Alice Dell Covey, by next friend, against W. C. Pierce and another. From a judgment for defendants, plaintiff appeals.

Reversed and remanded with directions.

Randolph & Randolph and Nile L. Vermillion, all of St. Joseph, for appellant.

Wright & Ford, of Maryville, for respondents.

REYNOLDS, Commissioner.

Plaintiff, by next friend, prosecutes this action against defendants as trustees under the will of Sarah J. Richardson, deceased, for an accounting by them as such of a certain trust estate provided in said will and for their removal as such trustees and the appointment of another trustee as their successor and for the payment by them to such successor when appointed of a sum of money sufficient to restore such estate and for judgment against them, upon an accounting, for such sum as may be found due and owing the trust estate by them with interest and for any and all other equitable relief that might and should be required in the premises.

It appears from the record that the will of Sarah J. Richardson, creating the trust estate, was admitted to probate in the probate court of Nodaway county, Mo., on February 13, 1928. It is necessary to consider only the following provisions thereof in the determination of the questions involved herein:

"III. All the rest, residue and remainder of my property of whatever kind and nature and wheresoever situate, I give, devise and bequeath to W. C. Pierce and A. K. Frank or the survivor of them as trustee upon the following trust:

"(a) Said trustees shall keep the money loaned at the best rate of interest obtainable, collect the interest thereon and annually pay to my great niece, Alice Dell Covey (daughter of Anna May Covey) the net income therefrom.

"(b) Said trust shall continue until my great niece, Alice Dell Covey arrives at the age of twenty-one years and the proceeds as above set out shall be paid to her annually during all that time.

"(c) This trust shall continue until the said Alice Dell Covey reaches the age of twenty-one years when the whole of said undisbursed principal and interest shall be paid, and I give, devise and bequeath the same to her.

"IV. I nominate and appoint W. C. Pierce, executor of this my last will and testament but in case of his death, refusal to act or disability in any wise, then I nominate and appoint A. K. Frank."

The defendant W. C. Pierce qualified as executor of the will upon the death of the testatrix and made final settlement of his accounts as such executor in the probate court, upon which settlement he was directed to pay to himself and A. K. Frank, as trustees, a balance in his hands of $2,972.56, comprising the trust estate under said will, and to file their receipt therefor.

From the evidence in the record, it appears that this balance consisted of cash in the sum of $972.56 and a note for $2,000 inventoried among the assets of the estate, which was on hand at the death of the testatrix against one Charles A. Jensen, of date December 18, 1925, due January 1, 1931, with accrued interest unpaid thereon to date of such inventory of $15, amounting at such time to $2,015.

On April 29, 1929, a few days prior to the final settlement made by defendant Pierce as executor, the defendants, as trustees under the will, by their joint receipt in writing, acknowledged receipt from the defendant Pierce as executor of the trust estate mentioned in the sum of $2,972.56, which receipt being delivered to the said Pierce was by him filed in the probate court; and his discharge as executor was procured to be entered thereupon.

At the time of such final settlement with the probate court, it was ordered that the defendants Pierce and Frank, as trustees, make settlement of their accounts in the probate court each year during the existence of the trust estate. Thereafter, defendant Pierce, as trustee, on September 2, 1930, September 8, 1931, and September 5, 1932, filed settlements in said estate in the probate court, purporting to be annual settlements showing the condition of the trust estate at such times.

On April 29, 1929, defendants, as such trustees, deposited in the Farmers' Trust Company at Maryville, Mo., the sum of $972.56 in cash out of said trust fund, which was entered upon the books of said trust company as follows: "Farmers' Trust Company. Alice Dell Covey. April 29, 1929, Maryville, Missouri. $972.56. From Richardson." Later, on January 9, 1930, the defendants, as trustees, deposited the further sum of $2,120 out of said trust estate, being the proceeds (including interest thereon to the date of its collection) of the Jensen note above referred to, which note at that time was collected by the defendants as trustees. Said latter mentioned deposit was entered upon the books of said trust company as follows: "Farmers' Trust Company, deposited by W. C. P. and A. K. F. Tr. Alice Dell Covey. January 9, 1930. $2,120.00," underneath which was noted in pencil as follows: "Jensen."

At the time that each of said deposits was thus made in the Farmers' Trust Company, such company was a regularly incorporated banking institution and trust company at Maryville, Mo., of which defendants were the active managing officers. Of its 2,000 shares of stock, the defendant Pierce owned 900. The defendant Pierce was the president and, in addition to being a large stockholder, was also a director. The defendant Frank was the cashier and an active officer and was otherwise interested as a stockholder. From certain exhibits in the record, it appears that it had a capital stock of $200,000 and carried a surplus of $40,000. Its individual deposits were ordinarily around $950,000, its time certificates of deposit ordinarily around $108,000, and its savings deposits ordinarily around $134,000. Its total liabilities were ordinarily listed around $1,735,000, and its total assets and resources at the same figure.

After having been deposited in said trust company, the trust funds as aforesaid were permitted by the defendants to remain upon deposit therein until said company, on April 7, 1930, was closed for business and placed under the control of the state finance department for liquidation and were on deposit in said trust company at the time it closed and passed with the other assets of the company under the control of the finance department.

During all of the time between the date of the first deposit and the closing of the trust company, the defendants continued in their relations with said company as the active managing officers thereof and as stockholders and directors. The trust company passed under the control of the finance department, as an insolvent institution, upon the order of its board of directors, for the purposes of liquidation, and was, at the time of the trial in the court below, in the process of liquidation. For some weeks prior to the closing of the trust company, between March 3, 1930, and April 7, it met with heavy and unexpected withdrawals of its individual deposits, approximately $110,000, resulting in the reduction of its cash and cash items on hand and in items due from other banks to such an extent that the cash reserve required by law to be carried by it was reduced below the required limits, by reason of which it was compelled to close and cease business.

The grounds on which the plaintiff seeks relief are that defendants have, by the manner in which they have handled the trust fund under their care, failed properly to manage and protect the same and have neglected and violated their trust with respect thereto.

The matters relied upon as constituting such neglect and violation of trust are set out in the petition as follows:

"Plaintiff further states that instead of lending said sum of money at the best rate of interest obtainable, the defendants on the 30th day of April, 1929, did deposit the sum of Nine Hundred Two Dollars and Fifty-Six Cents ($902.56) of said money in the Farmers' Trust Company, a banking and trust company located in the town of Maryville, Missouri, of which said bank and trust company the defendant, W. C. Pierce, was president and officer and director thereof, and the defendant A. K. Frank, was assistant cashier thereof, and said defendants had full and complete charge of said bank and trust company, and full and complete knowledge of the condition and affairs of said bank and trust company.

"That on the 10th day of January, 1930, said defendants did deposit a further sum of Twenty-One Hundred Twenty Dollars ($2,120.00) out of said fund in said Farmers' Trust Company; that the defendants failed and neglected to lend said money and at the time of depositing the funds from said trust estate in said bank, said bank and trust company was in an imperiled condition, the assets of said bank were frozen and impaired, all of which condition the defendants had knowledge thereof, or by the exercise of ordinary care should have had knowledge thereof, and that said defendants continued to allow the funds of said trust estate to remain on deposit in said bank and said trust funds did remain on deposit in said bank until the failure of said bank in April, 1930, and after the failure of said bank and during the liquidation thereof by the banking department of the State of Missouri, defendants failed and neglected to make application to the court having jurisdiction of the liquidation of said bank, for the purpose of having the funds of said estate on deposit in said bank at the time of the failure thereof, declared a trust fund and paid out and allowed as a preferred claim in the liquidation of the assets of said bank.

"And that the acts of the defendants in depositing the funds from said trust estate in the said bank in which they were personally interested as officers, directors and stockholders was done for the purpose of...