Ryan v. Scovill

• Decision Date: 08 December 1934
• Docket Number: 31850.
• Parties: RYAN et al. v. SCOVILL et al.
• Court: Kansas Supreme Court

37 P.2d 1007

140 Kan. 588

RYAN et al. v. SCOVILL et al.

No. 31850.

Supreme Court of Kansas

December 8, 1934

Syllabus by the Court.

In beneficiary's action against bank to recover loss on loan made by trustee without court's permission, evidence held insufficient to sustain finding that bank knew that fund could not be disposed of without court's permission.

Bank held not chargeable with notice of facts coming to cashier's knowledge while acting in individual capacity or in private transaction.

Bank held not chargeable with notice that trustee could not without court's permission, loan funds which court in divorce action required to be placed in trust for minor children, merely because bank cashier acted as receiver in divorce action.

1. The defendant bank had a cashier who prepared a note for a customer who made a loan, which was signed by one of her friends. The fund from which the money loaned was derived was placed in the customer's hands as trustee. It had been placed there subject to the order of the court. The trustee made the loan without permission of the court, and there was a loss on the loan. The beneficiary of the trust fund brought an action against the bank to recover the loss. Held, on examination of the evidence, that the bank had no knowledge that the fund could not be disposed of without the permission of the court, and did not know the trustee was bound by that limitation, and was not liable.

2. The bank was not chargeable with notice of facts which came to the knowledge of the cashier while acting in the capacity of an individual or in a private transaction which was beyond the range of his official duties.

Appeal from District Court, Harper County; George L. Hay, Judge.

Action by Dora Scovill Ryan and others against Addie Scovill Freeport State Bank, and others. From an adverse judgment the Freeport State Bank appeals.

Adverse findings and verdict set aside, with directions to enter judgment for the Freeport State Bank.

Donald Muir, of Anthony, for appellants.

Harry B. Davis, of Anthony, for appellees.

JOHNSTON Chief Justice.

Addie Scovill and Fred Scovill were husband and wife until January 19, 1933, and at that time a divorce was granted to Mrs Scovill, who was also awarded the custody of the children and a division of the property owned by them was made.

Among other things the decree contained this provision: "That the property rights of said persons be disposed of as follows: That the receiver herein collect the assets of said estate in money, that are not already collected, except the liberty bonds and war savings stamps; that said liberty bonds of the value of Fifteen Hundred Dollars and said war savings stamps of the par value of One Hundred Dollars are ordered to be placed in the hands of said plaintiff as trustee for said minor children, which trustee shall hold the same subject to the further order of this court and said trustee shall execute a bond in the sum of Sixteen Hundred Dollars conditioned that she will faithfully perform said trust and hold said bonds subject to the further order of said court, in trust for said children."

It will be observed that she was appointed trustee for the minor children and given control of the $1,500 Liberty bonds, together with $100 of war savings stamps, which she agreed to hold for the minor children subject to the further order of the court. The bond was conditioned that she would faithfully perform the trust and hold the bonds subject to the further order of the court in trust for the children. A. J. Hilliard had been acting as receiver in the divorce action and he was also the cashier of the Freeport State Bank.

It was alleged that the only interest Addie Scovill had in and to the fund was as trustee for the plaintiffs herein. It is alleged that the Freeport State Bank, through its cashier, Hilliard, had good reason to know that the Liberty bonds and stamps were converted into cash by the defendant Freeport State Bank, through its cashier, and the proceeds derived therefrom were converted to the use and benefit of the defendants, the Burtons. All this was done without first obtaining from the district court of Harper county an order therefor, or even making a request or application for such an order, and it was a breach of the trust undertaken by Mrs. Scovill. That the plaintiffs did not know or learn of the fraud perpetrated upon them or either of them by the act of the defendant, the Burtons, and the bank, as aforesaid, until the first day of April, 1933, wherefore they demanded judgment against the defendants. A verdict returned by the jury was for Martha Scovill and against the defendants Addie Scovill and the Freeport State Bank, for $1,353.60. An appeal was taken by the Freeport State Bank, and it is insisted that said bank is under no liability for the wrongful loss of the money and is not accountable for it.

The bond for the trustee was signed by Grant Burton who was a brother-in-law of the trustee, Mrs. Addie Scovill. She left the Liberty bonds and savings stamps in the Freeport State Bank, of which Hilliard was in charge, and who had been the receiver in the divorce action. Orvill Burton came to see her and sought to borrow the money in the trust fund. He also applied for $1,500 of her own money. The loan was made to her sister's son, and she had asked Hilliard about the loan, and he said 0rvill was honest and recommended the loan. She obtained the advice of a lawyer, E. C. Wilcox, who stated that he thought Orvill was all right.

The loan was made by the trustee to her sister's son, and it was probable that she was easily satisfied with the recommendations of the borrower and may not have known that she was required to ask the court for...