Liddell v. Strong

• Decision Date: 14 November 1938
• Docket Number: 33384
• Citation: 183 Miss. 805,184 So. 432
• Court: Mississippi Supreme Court
• Parties: LIDDELL v. STRONG

184 So. 432

183 Miss. 805

LIDDELL v. STRONG

No. 33384

Supreme Court of Mississippi, Division A

November 14, 1938

Suggestion Of Error Overruled January 9, 1939.

(Division A.)

1. GUARDIAN AND WARD.

A guardian can have no divided interest, but the wards in a guardianship come first.

2. GUARDIAN AND WARD.

Whenever a guardian finds himself so situated that, because of an adverse interest, either personally or as trustee or agent for others, he cannot in vital particulars give undivided allegiance to his wards, his proper course is to forthwith resign his guardianship, turning over to his successor all the ward's estate and furnishing all the material information which he has which bears on the safety and preservation of the estate, and, failing to take such course he is liable for all foreseeable proximate consequences.

3. GUARDIAN AND WARD.

A guardian of minor wards who had obtained authority to deposit guardianship funds in bank of which he was cashier was liable to estate for loss resulting from failure to withdraw funds from bank prior to failure of bank when he had knowledge of danger to deposits, as against contention that failure to withdraw guardianship funds was excused because withdrawal would have constituted breach of duty to other depositors of bank as cashier.

HON. T P. GUYTON, Chancellor.

APPEAL from the chancery court of Winston county, HON. T. P. GUYTON Chancellor.

Action by W. A. Strong, Jr., guardian, against Howard Liddell for loss of guardianship funds resulting from bank failure. Judgment for plaintiff, and defendant appeals. Affirmed.

Affirmed.

E. M. Livingston and Hathorn & Davis, all of Louisville, for appellant.

The guardian was not directed to invest the funds at his discretion using sound business judgment, but was directed by the Chancellor in vacation to invest the funds by lending them to the Louisville Home Bank, or by placing them in the Louisville Home Bank on savings account to draw interest at the rate of 4% per annum. This order of the court gave the guardian no discretion, but was mandatory on him and he had nothing left to do except follow the order of the Chancellor and so invest the funds and the loan was so made in strict compliance with the order of the court.

Section 1885, Code of 1930.

There is no testimony in this record to show that the bank was insolvent in May of 1930, and no evidence in the record to show that Mr. Liddell had any reason to believe the bank was insolvent until the day it closed. The reserve of the bank had gotten low it is true, and this is admitted by Mr. Liddell, but this was due solely to the fact of the unprecedented depression in the country and the inability of the bank to realize money on its assets. The court, we are sure, will take judicial knowledge of the fact that during the years of 1930 to 1933 this country went through the worst depression in history. Banks were failing throughout the United States and some of the best banks in Mississippi were forced to close their doors due to the financial condition of the country and due to the fact that these banks were unable to realize money on their securities and assets. The Louisville Home Bank was no exception, but a bank that survived this depression and withstood its ravages it is the exception and was extremely fortunate. The bankers throughout Mississippi were at that time putting forth every human effort to keep their institutions open, to serve the public and prevent a disaster to their institutions and depositors. Mr. Liddell and the other directors of the Louisville Home Bank were doing the same thing that bankers throughout the nation were doing at this time.

The chancellor took the position that in the face of these conditions Mr. Liddell should have filed a petition in the court reporting to the court the condition and asking that he be permitted to withdraw the funds from the bank and make some other investment. Can it be said that such a duty rests on the cashier of a bank? Had he filed such a report to the chancellor at any time from the date the funds were invested to the date the bank closed its doors he would have been unfaithful to the trust the depositors of his bank had placed in him, and had such report been made and filed with the records in this case it would have been only a few hours thereafter until it would have been generally known through Winston county that the cashier of the Louisville Home Bank was not willing to risk the bank of which he was cashier to handle funds in his custody. This would have wrecked the bank within a few hours and would have branded Mr. Liddell as a man unworthy of confidence and as a traitor to the directors of the bank and the depositors of the bank. It would have also subjected him to severe, penalties under the law for being instrumental in closing his bank.

It is a general rule applicable to all persons standing in the relation of trustee whether they be receivers, guardians, executors or administrators or trustees of any description that so long as they keep themselves strictly within the line of duty and exercise reasonable care and diligence they cannot be made responsible for any loss or depreciation in the fund intrusted to them; but if they do not strictly pursue that line and a loss ensue they are liable to make that loss good although such loss may have been wholly unexpected.

Coffin v. Bramlett, 42 Miss. 194, 97 Am. Dec. 449.

We submit that Liddell acted in this case strictly within the line of duty.

28 C. J. 1145, sec. 244; Cohn v. Winslow, 76 So. 264.

It is our contention and our understanding of the law in this state that negligence is never presumed in cases of this nature and must be alleged and proved in order that the negligence may be actionable.

In re Guardianship of Horne, 173 So. 660; 65 C. J. 795, par. 672.

The case In Re Adams Guardianship, 152 So. 836, is in favor of appellant rather than being a authority adjudicating a theory of law which condemns him. In the Adams case the deposit in the bank was made prior to receiving or applying for any order of the court directing the investment to so deposit the funds. In the Adams case, also, the certificate of deposit was long past due and any disposition could have been lawfully made therewith at its maturity; and the deposit made in the Adams case was made while the Bank Depositor's Guaranty Law had been suspended prior to making the deposit and the court designated the bank after such law had been suspended; the deposit had not yet matured at the time the bank failed, and could not have been withdrawn without sixty (60) days notice as required by order of the Banking Department.

There is not one line of testimony to support the Chancellor's finding that it was manifestly contemplated, both by the guardian and by the court that these funds could be withdrawn in whole or in part at any time. If this had been true, what was the necessity of having the Chancellor's order designating the deposit under Section 1885 of the Code of 1930.?

Can this appellant now be condemned and held liable for some $ 3500.00 because he exercised his best judgment? The law only requires a guardian to use his best judgment in investment of funds, and the law only requires bank officers and directors to use their best judgment in the handling of a bank and in lending its funds. This is what Mr. Liddell did, as shown by the testimony, and no man could have done more.

W. A. Strong, Jr., of Louisville, for appellee.

We submit that Mr. Liddell as cashier and director of the Louisville Home Bank is charged with the knowledge of its affairs and of the general reputation of its debtors as to solvency or insolvency.

McCraine v. State, 130 So. 295; Ellis v. H. P. Gates Co., 60 So. 649; Boyd v. Appelwhite, 84 So. 16; Early v. U.S. F. & G., 176 So. 720.

Of course, if Mr. Liddell knew at the time he placed the money in the bank, that the bank was in a dangerous condition, the order of the court to place it in the bank would not be of any benefit to him, for the reason that it would be an order procured through fraud and therefore void.

Union Chevrolet Co. v. Arrington, 138 So. 593; Pan-American Life Ins. Co. v. Crymes, 153 So. 803; Reily v. Crymes, 168 So. 267.

With reference to the duty of the guardian to take some steps to protect his wards' money after realizing that said bank was in a failing condition, we would respectfully direct the court's attention to the rule of law announced in "Perry on Trusts, " sec. 443, wherein it is stated that it is the duty of a trustee to withdraw the money...