Germania Safety Vault & Trust Co. v. Driskell

• Decision Date: 06 February 1902
• Citation: 66 S.W. 610
• Parties: GERMANIA SAFETY VAULT & TRUST CO. v. DRISKELL et al. [1]
• Court: Kentucky Court of Appeals

66 S.W. 610

GERMANIA SAFETY VAULT & TRUST CO. v. DRISKELL et al. ^[1]

Court of Appeals of Kentucky.

February 6, 1902

Appeal from circuit court, Jefferson county, common pleas division.

"Not to be officially reported."

Action by John D. Driskell and another against the Germania Safety Vault & Trust Company to charge defendant for loss resulting from its negligence as administrator of the estate of William Driskell, deceased. Judgment for plaintiffs, and defendant appeals. Affirmed.

O'Neal & O'Neal and Kohn, Baird & Spindle, for appellant.

Simrall & Doolan, for appellees.

O'REAR J.

Appellant Germania Safety Vault & Trust Company, was a corporation whose charter authorized it to act as administrator of decedents' estates, in connection with its other business. One-half of its capital stock was by the act of incorporation set apart, and required to be, and was invested in such securities as by law were permitted to be invested in by trustees. This fund was by the act made liable exclusively first to the discharge of the corporation's trust or fiducial obligations. This company was appointed and qualified as the administrator of the estate of William Driskell, deceased. It deposited the cash belonging to this estate in the German National Bank, which was a banking corporation having its place of business in the same building as the trust company. During this time the same person was president of both companies, and each company had as many as three directors in common. The bank failed, having on hand money of the Driskell estate amounting to $3,867.27. Shortly after the failure of the bank, the trust company made a deed of assignment for the benefit of creditors generally. It was then removed as administrator of Driskell, and one Carmichael was appointed and qualified as administrator de bonis non. The trust company filed an ex parte settlement of its accounts as administrator of William Driskell in the Jefferson county court, which, without exception, was confirmed. The receiver of the German National Bank gave to the trust company, as administrator of Driskell, a certificate showing the amount of its deposit owing on that account. In the final settlement with the county court, above referred to, the trust company accounted for this certificate, and took credit for its amount. The administrator de bonis non received and receipted for it with other evidences of indebtedness belonging to the Driskell estate. On a final settlement of that estate, the balance owing on this certificate was set apart to appellees as distributees. The bank paid 60 cents to the dollar upon its liabilities, and appellees sued the trust company, the former administrator, to charge it, and especially to have recourse upon that part of its securities set apart by its charter as indemnity to its fiducial accounts, for the balance of this deposit, represented by the receiver's certificate mentioned. The circuit court granted the relief prayed for.

The record discloses that the president of the bank, who was also president of the trust company, knew that these funds were deposited in that bank, and knew that the bank was unsafe. He was actively and daily engaged in the management of the affairs of the two institutions. What actual knowledge of the bank's condition, its directors, who were also directors for the trust company, had, is not clearly shown.

Counsel for appellant present, and have interestingly discussed, several propositions, upon which we are invited to lay down the law applicable to this case. Disposing of them in the order presented, it is first asserted that it was the duty of the Germania Safety Vault & Trust Company, as administrator of Driskell, to deposit the funds of the estate in some bank, and that it was not negligence to deposit them in the German National. We agree that it was the duty of the administrator to deposit the money in some safe bank. It would have been culpable negligence not to have done so, considering the amounts passing through the administrator's hands,--more than $10,000. The administrator will be held to that degree of care, at least, that prudent and cautious business men ordinarily exercise in their own affairs. But this duty is not discharged by depositing the funds in any bank. Nor would it be by depositing it without inquiry or investigation as to the standing of the depositary. The administrator must have reasonable grounds to believe, and in good faith believe, the institution to be solvent, before he deposits the estate's funds with it. From this it follows that if the administrator knew the bank was in a doubtful condition, or if he had notice of such facts as reasonably should have caused him to first make further and more particular inquiry into the bank's solvency, yet he deposited the estate's funds there without satisfactory evidence of the bank's solvency, and the money is thereby lost, it is an act of negligence for which he will be liable. In the case at bar there were rumors generally astir in that community, and particularly within financial circles, affecting the integrity of the bank, before and during the time of these deposits. These rumors had come to officers of the trust company whose duty it was to look after deposits of trust accounts. They took no steps to verify or disprove them. Besides, the president of the trust company had actual knowledge of the faulty condition of the bank. This knowledge was acquired necessarily in the course of numerous dealings between the two institutions, and by reason of his own relation to them. Others of appellant's directors were also so situated that they should have known and could have known, and, in the absence of their testimony in the record, we must presume did know, of the bank's actual condition. Under these circumstances, the court is of the opinion that to deposit the estate's funds in such a bank was negligence on the part of the administrator. For a loss resulting from it, it should answer to the persons damaged.

2. Appellant's second proposition is that "J. M McKnight, as president of the German National Bank, was in an attitude hostile to the Germania Safety Vault & Trust Company, and his knowledge of the bank's condition was not imputable to the trust company, and was not its knowledge of the bank's condition." There are circumstances in which the proposition asserted would apply. Were this a controversy between the two corporations concerning a contract between them, and if it were more to the interest of the bank that the knowledge of its president in the transaction under consideration be concealed from the trust company, it might be so that in such state of case the...