Cook v. Holland

575 S.W.2d 468, 1978 Ky. App. LEXIS 648
CourtCourt of Appeals of Kentucky
DecidedJune 30, 1978
StatusPublished
Cited by5 cases

This text of 575 S.W.2d 468 (Cook v. Holland) is published on Counsel Stack Legal Research, covering Court of Appeals of Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cook v. Holland, 575 S.W.2d 468, 1978 Ky. App. LEXIS 648 (Ky. Ct. App. 1978).

Opinion

PARK, Judge.

These consolidated appeals are from a judgment entered by the Graves Circuit Court in an action for personal injuries suffered by the plaintiffs (appellees and cross-appellants), Betty Ann Holland and Judy Bowen. Their personal injury claims arise out of a collision on October 23, 1971, between a truck operated by the defendant (appellee and cross-appellant), Joseph Leland Baucum, and an automobile driven by the defendant (appellee), Clemontine Dab-ney. Holland and Bowen were both passengers in the Dabney automobile. After the trial court directed a verdict against Bau-cum, the jury returned a verdict in favor of Holland for $156,062.84 and in favor of Bowen for $30,000.00. The jury also returned a verdict for Dabney for $1,758.00 on her cross-claim against Baucum.

For many years, Baucum had been employed as farm manager of the Foster Four Star Farm owned by W. F. Foster prior to his death in 1967. L. G. Cook qualified as executor and trustee under the will of W. F. Foster. Cook continued to employ Bau-cum as farm manager. Cook was a defendant in circuit court both individually and in his fiduciary capacity as executor and trustee. In this court, Cook is an appellee and cross-appellant in both capacities. The beneficiaries under the will were Foster’s son and widow, the defendants (appellees) Charles S. Foster and Katie Foster Long.

Numerous issues are raised on appeal, but they may be conveniently grouped in three categories: (1) the extent to which other persons associated with the Foster estate are liable for the negligence of Baucum; (2) whether the claim against Cook individually is barred by the statute of limitations; (3) whether a new trial should be granted.

I

The Judgment

The circuit court held that Cook was personally liable to Holland and Bowen for the negligence of Baucum. The judgment was rendered jointly and severally against Bau-cum and Cook. However, the judgment also granted Cook indemnity from Baucum and the Foster estate for all sums paid by him or on his behalf on the judgment recovered by Holland and Bowen. In effect, Cook was authorized to satisfy his liability under the judgment out of the assets of the trust estate. Nevertheless, the circuit court held that Holland and Bowen could not maintain an action against Cook in his fiduciary capacity. The plaintiffs’ complaint against the beneficiaries of the trust was also dismissed.

On appeal, Cook contends that he has no personal liability for Baucum’s negligence. Foster’s son, who is the principal beneficiary of the trust, and Cook, in his fiduciary capacity, both assert that the assets of the trust estate cannot be used to satisfy Cook’s *472 personal liability under the judgment. Holland and Bowen claim that the circuit court erred in dismissing their complaint against Cook in his fiduciary capacity and against the trust beneficiaries.

Individual Liability of Cook

Under the orthodox common law rule, a trustee is personally liable to third persons for torts committed by him in the administration of the trust. Louisville Trust Co. v. Morgan, 180 Ky. 609, 203 S.W. 555 at 557, 7 A.L.R. 396 (1918); Pirtle’s Adm’x v. Hargis Bank and Trust Co., 241 Ky. 455, 44 S.W.2d 541 at 545 (1931); Restatement (Second) of Trusts § 264 (1959); G. Bogert, Trust and Trustees § 731 (2d ed. 1960); A. Scott, The Law of Trusts § 264 (3d ed. 1967). Cook concedes that a trustee is personally liable for his own negligence or other fault. However, Cook contends that a trustee should have no personal liability in the absence of personal fault. In this case, the collision between the Baucum truck and the Dabney automobile was not the result of any personal fault on the part of Cook.

Cook’s contention is not supported by the orthodox common law rule. A trustee is personally liable for torts committed by an agent or employee in the course of the administration of the trust. The principle of respondeat superior is applied to the trustee just as though he were the owner of the trust property free of the trust. His liability is the same as it would be if he were not a trustee. It is immaterial that the trustee receives no benefit from the trust. Restatement (Second) of Trusts § 264, Comment b; Bogert, op. cit., § 731 at 534-35; H. Stone, “A Theory of Liability of Trusts Estates for the Contracts and Torts of the Trustee,” 22 Colum.L.Rev. 527, 540-41 (1922); Annot., 7 A.L.R. 408 at 411 (1920), supplemented in 123 A.L.R. 458 at 462 (1939).

Professor Scott has given the following explanation for the rule imposing personal liability on the trustee under the doctrine of respondeat superior:

It may seem to impose a hardship upon the trustee that he should be held personally liable, and it is arguable that where he is not at fault he should be liable only to the extent to which he can obtain indemnity out of the trust estate. On the other hand, there is no reason why the victim of the tort should be denied relief merely because the trust estate is insufficient to indemnify the trustee. The risk of personal liability in tort is a risk which the trustee runs in undertaking the administration of the trust. Ordinarily he can protect himself by taking out liability insurance and paying the premiums out of the trust estate.

Scott, op. cit., § 264 at p. 2243. Holland and Bowen had no control over the amount of liability insurance covering the operations of the Foster farm. Cook did. Because the circuit court also held that Cook was entitled to indemnity from the trust estate, the practical consequence of the circuit court’s judgment is to place the risk of insolvency of the trust estate on the trustee rather than on the tort victims. We conclude that the trial court was correct when it adjudged Cook liable for Baucum’s negligence. 1

Cook’s Right of Indemnity

Even though a trustee may be personally liable for a tort committed by his agent or employee in the administration of the trust, it does not follow that the loss must ultimately be borne by the trustee. If the liability is vicarious and the trustee has violated no fiduciary duty, the trustee is entitled to indemnity out of the trust estate. Not only is the trustee entitled to indemnity, but the trustee may properly use trust property to discharge his personal liability. Restatement (Second) of Trusts § 247, Comments a and b; Bogert, op. cit., § 734; Scott, op. cit., § 247; Annot., 44 *473 A.L.R. 637 at 676 (1926), supplemented in 127 A.L.R. 687 at 693 (1940). As a reason for imposing personal liability on a trustee, courts have stated that a trustee should not be allowed to impair the trust estate by his own tort or negligence. E. g., Louisville Trust Co. v. Morgan, supra, 203 S.W. at 557. However, if the trustee is without personal fault and his personal liability is vicarious, there is no sound reason for denying him a right of indemnity.

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Bluebook (online)
575 S.W.2d 468, 1978 Ky. App. LEXIS 648, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cook-v-holland-kyctapp-1978.