State ex rel. Lien v. House, 29929.

• Court: United States State Supreme Court of Ohio
• Writing for the Court: HART
• Citation: 144 Ohio St. 238,58 N.E.2d 675
• Parties: STATE ex rel. LIEN, Superintendent of Banks, v. HOUSE et al.
• Docket Number: No. 29929.,29929.
• Decision Date: 13 December 1944

144 Ohio St. 238
58 N.E.2d 675

STATE ex rel. LIEN, Superintendent of Banks,
v.
HOUSE et al.

No. 29929.

Supreme Court of Ohio.

Dec. 13, 1944.

[58 N.E.2d 675]

Syllabus by the Court.

1. The period of limitation within which an action must be commenced is determined from the nature of the demand and the ground of the action as set out in the pleadings.

2. An action against trustees of an express trust for loss of funds arising from a breach of trust involving tortious conduct such as bad faith, negligence and doubledealing is one at law, the cause of action accrues, in the absence of undiscovered fraud, when the trusteeship as to such trustees is terminated, and the action is barred in four years by virtue of the provisions of Section 11224, General Code.

Appeal from Court of Appeals, Cuyahoga County.

Action by the State, on the relation of Rodney Lien, Superintendent of Banks, against J. Arthur House and others for damages, for breach of trust. A demurrer to the amended petition was sustained, 10 Ohio Supp. 29, the judgment was affirmed by the Court of Appeals, and the case was transferred to the Supreme Court on allowance of a motion to certify the record.-[Editorial Statement.]

Affirmed.

A demurrer to the amended petition of the Superintendent of Banks, hereinafter called the superintendent, was sustained on the ground that the action was barred by the statute of limitations, and, the superintendent not desiring to plead further, final judgment was entered in favor of the defendants.

That judgment was affirmed by the Court of Appeals.

The case is here for review, a motion to certify the record having been allowed.

The amended petition discloses that in 1913, the Guardian Trust Company, formerly the Guardian Savings & Trust Company, instituted a pension fund, later called the retirement fund, for the benefit of its employees; that the management and control

[58 N.E.2d 676]

of the retirement fund were placed in a board of trustees consisting of seven members-four selected by the Guardian Trust Company, two by the contributing employees, and the other member the president of the bank; that contributions to the fund were made by each subscribing employee while contributions in a like amount were made by the bank; that the defendants in this action, J. Arthur House, W. A. Daley, I. C. Bolton, A. W. Dean and A. S. Taylor, were continuously trustees of the retirement fund from January 21, 1930, until May 11, 1933, and were, during the same period, directors of the Guardian Trust Company; that prior to 1931 the money in the retirement fund was invested in mortgage securities purchased from the Guardian Trust Company; and that the trustees in May, 1930, began to sell the mortgage securities and with the proceeds purchased capital stock of the Guardian Trust Company and continued to do so until March, 1933, when they had purchased 1,565 shares. The amended petition further alleges that these shares were so acquired and retained as to amount to a breach of trust, which resulted in a great loss to the trust fund in question.

On May 11, 1933, other persons were selected as trustees, successors to the defendants herein, and succeeded to the management and control of this trust. The amended petition further alleges that ‘prior to 1937, certain claims against the Superintendent of Banks in said capacity were duly filed by the then existing trustees of the retirement fund of said The Guardian Trust Company, and certain claims for stockholder's liability were filed against said trustees, said existing trustees being successor trustees to the defendants herein; that said mutual claims were settled and as a result of said settlement said The Guardian Trust Company liquidation received approximately $80,000 on a claim which was originally for $156,500, and in addition thereto said Superintendent of Banks had assigned to him all the right, title and interest of said retirement fund, its successor trustees and beneficiaries, to any rights, claims or demands which said parties had against the defendants herein as a result of the operation and management of said retirement fund; that said agreement containing said assignment was duly approved by the Court of Common Pleas of Cuyahoga county upon due application thereto in the year 1937.’

On November 10, 1941, this action was instituted by the superintendent as assignee against the defendants individually to collect the sum of $80,000 paid out of the trust fund, in settlement of the superadded stock liability on the shares held by the trust, and to recover the loss to the trust fund, basing his right of recovery on the assignment of the rights of the successor trustees to any claim which they had against such former trustees growing out of the latter's alleged breach of trust in the illegal purchase of bank stock as an investment for the trust.

The superintendent, in order to establish his cause of action against such former trustees as individuals, alleged in his amended petition that the purchase and retention of the shares of the capital stock of the Guardian Trust Company by the defendants involved a duality of interest in view of the defendants' official positions with the trust company; that the purchase and retention of such shares were made by them to prevent the stock from being placed upon the open market and thus depress the price of similar securities held by themselves and also by the bank as trustee; that the defendants changed investments of the trust fund from sound investments to unsound ones; that they failed to use the requisite care and skill required of trustees under such circumstances; that they acquired and retained as investments bank stock which had imposed upon it by law an additional liability in the event of failure of the bank, when better and sounder investments were available; that they acquired a portion of such shares at a price higher than the market price; that they acquired and retained such stock when they knew or should have known that the financial condition of the Guardian Trust Company was unsound and unstable and knew or should have known of the probability of the assessment of double liability on the shares; and that the acquisition and retention of the shares were an abuse of discretion on the part of the defendants as such trustees.

The prayer of the original petition is for an accounting and for a ‘judgment against said defendants for the amount expended by...