Indiana Trust Co. v. Griffith
| Decision Date | 30 June 1911 |
| Docket Number | 21,408 |
| Parties | Indiana Trust Company, Guardian, v. Griffith, by Next Friend |
| Court | Indiana Supreme Court |
Rehearing Denied December 15, 1911.
From Probate Court of Marion County; Merle N. A. Walker, Judge.
Action by Humphrey C. Griffith, as next friend, against the Indiana Trust Company. From a judgment for plaintiff, defendant appeals.
Affirmed.
Ayres Jones & Hollett and Kealing & Hugg, for appellant.
William Bosson, for appellee.
Cox, J Myers, J., did not participate in the decision of this cause.
This action was brought by appellee, as next friend of Pleasant H. Griffith, a person of unsound mind, by petition in the court below, which has jurisdiction of such guardianship, in which petition he seeks to compel appellant, as the guardian of such ward, to take out of the estate of the latter certain bonds and stocks, naming them, of the value of $ 98,297.52, which the current report of appellant filed in 1908 shows had been purchased with the funds of the trust, and which it is alleged had depreciated; and the petition prays that appellant guardian be required to account to the estate for the moneys so invested, together with interest thereon.
Appellant's demurrer to the petition was overruled, and thereupon it filed an answer in two paragraphs. The substance of appellant's answer is that it had invested the trust funds in stocks and bonds, as alleged in the petition, of certain named public-service, railroad and other private corporations in and outside the State of Indiana, and in nontaxable bonds of Indiana municipal corporations, except that item one, set out therein, of $ 1,300, stock of the Indiana National Bank, belonged to and was owned by said Pleasant H. Griffith before said Indiana Trust Company was appointed his guardian, and that it had received that stock from its predecessor in the trust as a part of the assets of the estate of the ward; and except that the second item of stock mentioned in the petition--being the Atlas Engine Works, six per cent preferred stock, of the par value of $ 9,500, had been sold by this guardian for its full value, and at and for the full price paid by it for such stock, and that the Brown-Ketcham Iron Works, six per cent preferred stock, of the par value of $ 3,000, being the third item of stock set out in the petition, was purchased by this guardian on April 28, 1903, under the special order and direction of the court; that it admitted that in its reports prior to 1906 appellant did not itemize the bonds in question by their names and specific value and cost, but reported them all together as "bonds, stocks," etc., of a certain aggregate sum for which it claimed credit, but that in its sixth report to the court in 1906 it did report such bonds specifically by name, character and cost, and claimed credit for the aggregate sum which then amounted, for said bonds, to $ 56,033.50, and that such report was approved by the court; that since such report it has purchased additional bonds of the same character to the amount of $ 38,279.02, and has in its seventh report in 1908 specified them, and claimed credit for that additional sum; that the depreciation of such bonds at the market value is not more than $ 5,000.
It is further alleged that "the bonds were valid, genuine and regular, * * * and that it invested said moneys in said bonds for that reason, and it in good faith believed them to be safe, sound, desirable and profitable investments of the money of its said trust, * * * and that the matter of the investment of said moneys in said bonds was submitted to the board of directors of said Indiana Trust Company, guardian, aforesaid, and that said board fully and duly investigated and examined said bonds and stocks, and their values and securities, and after such investigation and examination directed and ordered said moneys invested in said bonds at and for the amounts paid for them by this guardian, and for the amounts at which they were reported to the court, and that said investments were made in good faith."
Appellee demurred to this answer for want of facts to constitute a defense to the petition. This demurrer was sustained, and appellant elected to stand upon its answer, and refused to plead further, whereupon the court decreed that appellant should take out of its account with the estate the bonds, designating them, and that it should charge itself with the amount invested by it in the purchase of them, to wit: $ 93,997.32, together with interest at the rate of six per cent from the date of the decree, and rendered judgment against appellant for costs. From this judgment this appeal is taken, and the errors assigned are based on the rulings of the court in overruling appellant's demurrer to the petition and in sustaining appellee's demurrers to the two paragraphs of answer.
The central and vital question is, did the provisions of the act of 1893, and the amendments thereof, authorizing the incorporation of loan, trust and safe deposit companies (Acts 1893 p. 344, Acts 1899 p. 503, Acts 1907 p. 109, §§ 4942-4959 Burns 1908), grant to such companies a discretion so broad and plenary in the investment of the funds of a ward or other cestui que trust that, when exercised without submitting the question to the court in which supervision of the trust rests and acting on its order, they are absolved from liability for loss in the subsequent depreciation of the investment?
It is from the authority granted by said act that appellant received its appointment as guardian of the estate of Griffith at the hands of the lower court, and it is contended by its counsel that the sixth subdivision of § 10 of said act (§ 4953, supra) grants it the wide and exonerative discretion in investing the estate of its ward, heretofore indicated. That part of the act from which it is insisted such discretion is derived, reads as follows:
It is contended that under the discretionary power vested in appellant under the first part of this provision, it is given a wide latitude in selecting the securities for investment, that it is required to exercise only good faith and due care in selecting the securities it may choose to buy, that liability is not continued after the time such investments are made for the value of such securities, and that to absolve it from liability it is not necessary to procure an order from the court authorizing such investment.
It is necessary for a guardian to get an order from the court before investing the funds of the ward, only when the statute so provides. When it is not so provided, the guardian is vested with a discretion. 21 Cyc. 87, 88; 17 Am. and Eng. Ency. Law (2d ed.) 432; note to Schmidt v. Shaver (1902), 89 Am. St. 250, 292; Gary v. Cannon (1843), 38 N.C. 64; Mather v. Knox (1882), 34 La. Ann. 410; Durrett's Guardian v. Commonwealth (1890), 90 Ky. 312, 14 S.W. 189; Sherry v. Sansberry (1852), 3 Ind. 320.
But while such investments may be made, yet, if made without an order from the court, the risk is with the guardian. In re Cardwell (1880), 55 Cal. 137; Nagle v. Robins (1900), 9 Wyo. 211, 62 P. 154; Coffin v. Bramlitt (1868), 42 Miss. 194, 97 Am. Dec. 449; Clark v. Anderson (1877), 76 Ky. 111; Robertson v. Robertson's Trustee (1908), 130 Ky. 293, 113 S.W. 138, 132 Am. St. 368 and note; Sherry v. Sansberry, supra; Tucker v. State, ex rel. (1880), 72 Ind. 242; Woerner, Guardianship p. 211; 21 Cyc. 88. See, also, Brown v. Wright (1869), 39 Ga. 96, 101; McIntyre v. People, ex rel. (1882), 103 Ill. 142; Hughes v. People, ex rel. (1881), 10 Ill.App. 148; Carlysle v. Carlysle (1857), 10 Md. 440; Forrester v. State, ex rel. (1876), 46 Md. 1540.
There is little authority to show that a trustee may excuse himself by showing that he has conducted the business of investing his trust funds in the same manner that an ordinarily prudent man of business might do with his own property. The trustee must conduct himself faithfully, and exercise a sound discretion. He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of the capital invested. A business man of more than average caution may and often does, assume intentional risks in the investment of his own property. For the sake of obtaining a greater than an...
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