Anderson v. Roberts

48 S.W. 847, 147 Mo. 486, 1898 Mo. LEXIS 159

• Court: Supreme Court of Missouri
• Decided: December 24, 1898
• Status: Published

Opinions

MARSHALL, J.

— In 1845, Anthony W. Rollins died, testate, devising to the then judges of the county court of Boone county the sum of ten thousand dollars, in trust, to loan the same upon good security, collect the interest, apply three-fourths of the interest to the education of such poor youths, male or female, of Booue county as desired to avail themselves of such aid and who should be selected by the president of the State university and the principal of the Columbia Eemale Academy; the remaining one-fourth of the interest and any unexpended balance of the three-fourths to be added to the principal.

The fund remained in the hands of James S. Eollins. from 1856 to September 8, 1867, when on motion of Eollins the county court ordered that the county treasurer receive of said Boffins, Union military bonds, at their par value, for the debt due by James S. Eollins to the county court, on account of the Eollins bequest, and pursuant to this order Eollins turned over the bonds to Moss Pruitt, the then county treasurer, who held the fund during his term, and turned over the same to his successor, E. B. Price, in January, 1868. Price held the fund during his term, and at the end thereof, in December, 1876, he turned it over to his successor, J. M. Samuels. He likewise held the fund until the end of his term in December, 1882, when he turned it over to his successor, Gr. "W". Trimble (one of the plaintiffs herein). Pursuing the course of business of his predecessors Trimble held the fund until the end of his term in January, 1887, when he turned it over to his successor, J. O. Gillespy. The fund at this time amounted to $37,844.70, of which $880.15 was in cash, and the balance in bonds and secured notes. Gillespy was re-elected county treasurer in 1891, and held office until January, 1895. Upon his final settlement Gillespy was found to be $4,758.44, short in respect to the fund, and also short in his accounts as county treasurer.

The various county treasurers kept separate statements as to this fund, but adopted different methods of keeping the securities and cash and paying out the money. The plaintiff Trimble while county treasurer kept the money of this fund mixed with the money of the county and made payments by checks signed by him as treasurer of Boone county and sometimes in cash. Prior to his election as county treasurer Gillespy had been twice elected sheriff and once collector of Boone county, his reputation for honesty was beyond question and he was generally regarded as a responsible man financially. At the end of the first term his bondsmen, who were directors and stockholders of the bank in which he kept his deposits, refused to go on his bond for his second term, but he gave a good bond signed by some of the best people in Boone county. The defendants, then judges of the county court, are not shown to have had any notice of this refusal of his former bondsmen.

The practice of the judges of the county court had always been to have reports from time to time of the condition of the fund. Substantially the whole fund was invested in notes secured by mortgages on real estate or in good bonds. No considerable sum was, at any time, kept in cash. The treasurer collected the interest and principal of the loans, as they fell due, secured new borrowers, and the judges examined and approved the securities offered.

The plaintiffs are the successors, as.county judges, of the defendants, and upon their induction into office refused to accept any of the trust funds from defendants (who were such judges during Gillespy’s two terms as treasurer) until a judicial determination was had as the proper amount. To determine this question, this action was begun. The petition alleges, as a specific breach of trust by defendants, that they loaned four thousand dollars and upwards of the trust funds, to Gillespy without any security, when he was insolvent, whereby that sum became lost to the trust fund, and then prays for a discovery and accounting. The result in the circuit court was that defendants were charged with Gillespy’s shortage of $4,758.44, allowed $2,000 as compensation for their services and those of Gillespy, interest was added to the difference, and .judgment entered for $3,639.68. Defendants appealed.

I. The plaintiffs assert.two propositions: 1st, that in intrusting the funds and securities to the custody and keeping of an agent at all, the defendants were guilty of a breach of trust; and, 2d, that even if defendants had a right, under the circumstances, to employ an agent they were guilty of a breach of trust in permitting the agent to have the custody of the fund and in failure to exercise due care in the selection of Gillespy as their agent .and in their supervision over his conduct.

The converse is the contention of defendants.

It is a general rule that trustees must retain the custody of trust funds, and execute the trust themselves and not through the instrumentality of an agent, or as it is sometimes said they can not delegate their powers. [Turner v. Corney, 5 Beav. 515; Bostock v. Floyer, L. R. 1 Eq. 26; Ghost v. Waller, 9 Beav. 497; Clough v. Bond, 3 Mylne & Craig, 490; Deaderick v. Cantrell, 10 Yerg. 263.] But there are exceptions to the rule, arising from necessity, or from the copimon custom of mankind, in which the trustee is entitled to employ an agent and will not be liable for losses occurring from the act of the agent, if the selection was a proper one. [2 Story Eq. Jur. (13 Ed.), sec. 1269, and cases cited in note; 1 Beach, Modern Equity Jur., sec. 252, and cases cited; Hill on Trustees, marg. p. 573.] Perry on Trusts (4 Ed.), sec. 404, states the rule to be: “But there are circumstances where the trustees must employ agents. Lord Hardwicke said: ‘There are two sorts of necessity, legal necessity and moral necessity. As to the first a distinction prevails. AYhere two executors join in giving a discharge for money, and only one of them receives it, they are both answerable for it; because there is no necessity for both to join in the discharge, the receipt of either being sufficient; but if trustees join in giving a discharge and one receives, the other is not answerable, because his joining in the discharge was necessary. Moral necessity is from the usage of mankind, if the trustee acts prudently for the trust, as lie would have done for bimself, ‘and according to tbe usage of business;’ as if a trustee appoint rents to be paid to a banker at that, time in, credit, but wbo afterwards breaks, tbe trustee is not answerable. So in tbe employment of stewards and agents; for none of these cases are on account of necessity, but because tbe persons acted in the usual method of business.’ ” Many illustrations could be added, e. g. where tbe trust consists of a large number of bouses, where tbe rents are small and payable monthly; tbe trustee could attend to tbe business bimself; but it is not usual for owners to do so themselves and trustees are not expected to. Or if tbe trust consists of a cattle ranch, the trustees could feed and herd tbe cattle themselves, but it would be unreasonable to expect it. Or where tbe trust consists of notes due from persons living in different states; tbe trustees could go to each State and collect them, but it is not according to tbe usual course of business.

These illustrations demonstrate that tbe general rule is subject to more exceptions than those arising purely from necessity. They apply to the case at bar in principle, though not in similitude. In State ex rel. Townshend, Adm’r, v. Meagher, 44 Mo. loc. cit. 363, Currier, L, speaking of tbe care which trustees must exercise over trust property said: “Tbe care must be graduated according to tbe character of the property, its value, and tbe convenience of its being made secure, the facility for its being stolen, and tbe temptations thereto.” Other cases bold to tbe doctrine that- a trustee can only employ an agent in cases of actual necessity, but tbe rule laid down by Lord Hardwicke is based upon better reason and tbe common custom of mankind.

In this case the defendants might have kept tbe securities and cash in a strong box in a bank or safe deposit, with triplicate keys, one held by each, and all necessary to open tbe box. But this is not tbe common cuátom of mankind. They might have made all the loans and collections themselves, going in solemn form, in single file or in solid phalanx after the delinquent debtors, and returning, laden with spoils, have proceeded in a body to lay the treasures away in the triply guarded depository, but this is not the custom of trustees. In short they might have constituted themselves a constant guard of honor over the fund, like the dragon guarding the Golden Eleece at Colchis, to prevent some Jason from running away with it, but their eccentricity in so doing would have excited wonderment in our practical day and generation. But they were not obliged to do any of these ostentatious acts. They were judges, not mere private trustees selected on account of special confidence of the creator of the trust. Judges of only a county court it is true, but nevertheless judges, elected by the people to attend to the business of the people of the county. They were trustees because they were judges not judges because they were trustees and not because they were selected with special confidence in their fitness to administer this trust. They had a right to employ an agent, and what agent could be found more suitable than the person who had been twice elected sheriff, once collector and twice treasurer of the county? He, too, a man of unquestionable integrity and, so far as defendant’s are shown to have known, of personal financial responsibility. When the funds were turned over to him by Mr. Trimble there was only $880.15, in cash, the balance of the $37,844.70, being in notes and bonds. There was then, apparently, small “facility for its being stolen,” and the cash item afforded little “temptation thereto,” especially to one who had been so honored by his fellow citizens and who had built up a good name in the community. But he turned out $4,758.44 short, and for this reason it is argued the defendants had no right to employ an agent or if they had they were guilty of want of care, for which they are liable, in employing Gillespy.

If the disastrous results are to be accepted as the true measure of care required of mankind, and to have relation to the inception of the employment, then it would only be necessary to prove a loss, and want of care would follow as conclusively as a mathematical deduction. This is not even the rule of the harshest cases to which our attention has. been directed.

The true facts in regard to this matter put a different phase on the liability of the defendants from that attaching to mere private trustees.-

The will of Mr. Rollins bequeathed ten thousand dollars “for the education of such poor and indigent youths of Boone county, both male and female, as are unable to educate themselves.” The executors were directed to pay over that sum to the then justices of the county court of Boone comity or their successors in office, and the will provided that “said fund shall remain with, and be vested in, said court as a permanent fund for the promotion of the object specified in the 7th item of this will above.” It further directed the judges of the county court to loan “the funds thus vested in them,” and concluded by directing the “county court of Boone county” to make an annual report to the board of curators of the State University as to the amount and condition of the fund. Mr. Rollins died in 1845. On September 15, 1856, Mr. James S. Rollins appeared before the county court, gave a bond for $10,600, with security, which, when paid, was to be taken in full discharge of the Rollins bequest. On December 1, 1862, Ur. Rollins was allowed to retain the fund for twelve months without interest. On September 8, 1867, Mr. James S. Rollins appeared before the county court and on his motion it was ordered by the court that the treasurer of Boone county be authorized to receive of said Rollins, Union military bonds at their par value for the whole or any part of the debt duo by him to the county court of Boone county, on account of tlie Eollins bequest. Accordingly tlie fund was turned over to Moss Pruitt, tbe then treasurer of that county, Pruitt turned over the fund to bis successor Price, who in turn, turned it over to bis successor Samuels, and be to Trimble, and Trimble to Gillespy. During all these years from 1867 to 1895 tbe county treasurers held possession of tbe fund, mixed it with and treated it like county funds, paid it out on checks signed by them as such treasurers, and made reports to tbe county court, which made orders of record in tbe county court records in reference thereto.

It is plain therefore that Mr. James S. Eolllins, every county treasurer and every county judge of tbe county court, regarded and treated tbe fund as if tbe county court and not tbe individuals composing tbe court was tbe trustee. It is also certain that tbe donor, Mr. Anthony TY Eollins bad tbe same idea in bis mind when be made bis will, for be speaks of it being “vested in said county court as a permanent fund,” and directs “tbe county court of Boone county” to make annual reports to tbe board of curators of tbe State University.

Mr. Eollins evidently thought that there was some doubt about a county court having the power to act as trustee, and therefore by item 8 of bis will spoke of tbe fund being vested in tbe county court, while in item 9 be spoke of it being vested in tbe judges of tbe county court. But tbe prevailing idea was that while be directed tbe fund to be paid over to tbe then judges and their successors, the court was to manage it. He intended it as a public charity for tbe poor youths of Boone county, and evidently selected tbe county court to manage tbe fund because that court bad to deal officially with financial matters and with poor persons. Tbe case of Chambers v. St. Louis, 29 Mo. 543, bolding that a municipal corporation might be a trustee of a charitable trust, had not then been decided, and it may have been for this reason or because Mr. Rollins saw a distinction between a municipal corporation, with its dual capacity, and a county court, with only a governmental capacity, that he expressed himself with such confusion in the will as to where the fund was to be vested. At any rate every one had for nearly a quarter of a century treated it as the business of the county court. The usual course of business acted upon, acquiesced in and sanctioned by all parties and by the community, had been for the court to treat it as a trust fund of the court, to be held by the county treasurer like other funds, and secured by his official bond, and these defendants only treated it as it had always been, treated, and we think properly so.

In Tatum v. Holliday, 59 Mo. 422, Wagner, J., held that where a sheriff was, by order of court, substituted as trustee in a deed of trust, he acted officially in making a sale, and his bondsmen were liable for a conversion of the proceeds, and that it was only in case some other person was substituted for the trustee that a bond is required. This was followed by Norton, J., in State ex rel. v. Griffith, 63 Mo. 545, and by Bakewell, J., in State to use v. Taylor, 6 Mo. App. 277, and by Sherwood, J., in State ex rel. Chase v. Davis, 88 Mo. 585. The principle underlying this doctrine is that a public officer’s bond is liable for all money that comes into his hands in his official capacity. The obligation of a sheriff’s bond is, “for the faithful discharge of his duties” [R. S. 1889, sec. 8175], and his duties as prescribed by section 8185 do not expressly include acting as trustee under deeds of trust. The condition of a county treasurer’s bond is, “for the faithful performance of the duties of his office” [R. S. 1889, sec. 3162], and by section 3165, he is required to “receivé all moneys payable into the treasury thereof, and disburse the same on warrants drawn by order of the county court.”

It not unfrequently happens that trust estates and funds get into courts, and in every such instance it is directed by the court to be turned over to the clerk of the court. The obligation of a clerk’s bond is conditioned, “that he will faithfully perform the duties of his office, and pay over all moneys which may come to his hand by virtue of his office,” etc. [R. S. 1889, sec. 1966.]

If a sheriff, substituted as trustee under sections 8683 and 8684, E. S. 1889, is not required to give a bond because he acts officially and his sureties are liable for his acts, and if a clerk of a court of record, who receives trust funds placed in his hands by order of the court, is liable on his bond therefor, it follows that a county treasurer who receives trust funds that are under the management of the county court, by order of that court, is likewise liable on his bond therefor.

When, therefore, the county court, in 1869, directed the Eollins bequest to be received by the county treasurer, it placed the trust funds in the only proper repository for funds that the county court had the management of, and in the hands of a public officer whose bond was responsible for the safe keeping of the fund and such treasurer acted officially in reference thereto. And when each retiring treasurer turned over the trust fund to the incoming treasurer, the latter took it officially and impressed with the original order of the court, and each treasurer’s bond became security therefor.

The judges of the county court therefore performed their full duty when they placed the fund in the hands of the county treasurer, and they are-not liable for a loss or misappropriation of the trust fund by the treasurer, any more than they would be for ordinary county funds. The remedy of plaintiffs in this case was complete against the sureties on the treasurer’s bond.

It follows that the judgment of the circuit court must be reversed. It is so ordered.

Sherwood and Brace, JJ\, concur. Burgess, J., concurs, but places it on the ground that the county court is the real trustee, and that the judges as a court could only be held liable for malfeasance in office. Williams, J., having been of counsel did not sit and took no part herein.