Opinion of the Court by
Judge Barker —
Reversing.
The learned trial judge in his opinion in this case makes the following statement of facts, upon which the legal issues turn, which we adopt as our own: “The defendant, S. S. Weakley, as trustee of Mary Ann Robertson, in 1901 invested $1,300 of trust funds in his hands in 26 shares of the stock of the Bank of Waddy, which began business in January, 1900. In his settlement in the county court he was credited by this investment. The cestui que trust having died, this action in equity is brought by parties interested in the estate to surcharge his settlement, and make him liable for the bank stock investment, it having become worthless. Upon this record there can be no doubt that the trustee made the investment in perfect [296]*296good faith, and that it was such as a prudent business man would make in his own affairs, and to secure a certain support for himself and family. The evidence shows conclusively that when the trustee invested the money, the stock was generally regarded as worth as much or more than he gave for it. The directors were regarded as good business men, and men of means and fine business standing were interested in the bank as officers and stockholders. It was then a good dividend-paying stock, and continued to be until July, 1905. The'trustee owned stock in the bank, individually; in fact, purchased some for himself after the trust investment was made, and not long before the bank made an assignment. Other trustees besides the defendant invested trust funds in the stock of the bank, which was finally wrecked by the cunning dishonesty of its cashier.” The question arising for adjudication upon the foregoing statement of fact is whether or not the appellee was liable for, the loss of the trust fund in his hands, caused by the investment in the stock of the wrecked Bank of Waddy.
It is clear that the trustee, under the rule prevailing in this State prior to the enactment of the statute which we shall hereafter discuss, would be liable for the loss sustained. In the case of Smith v. Smith, 7 J. J. Marsh, 238, the guardian was held liable for the depreciation of 16 shares of stock in the Bank of Kern tucky, which he had purchased with his ward’s money; and in Clark et ux v. Anderson, 13 Bush 111, it was held that the investment by the trustee of the funds of his cestui que trust in second mortgage bonds of the Louisville, Cincinnati & Lexington R. R. Company was unauthorized, and the loss cast upon the trustee. In that case, Chief Justice Lindsay, speaking for the court, said: “In this State trust funds may be [297]*297loaned on personal security when it is ample and sufficient (Higgins v. McClure, 7 Bush 381; Clay v. Clay, 3 Metc. 548), and may be invested in certain public securities (Myer’s Supp. 264; Gen. Stats. 508), with the sanction of a court of equity; but no judicial precedent or statutory regulation will justify their investment in the stock or bonds of private corporations, and bonds secured by a second mortgage on the roadbed and other property of a railway company are peculiarly objectionable.” The opinion in Durrett’s Guardian v. Commonwealth, 90 Ky. 312, 14 S. W. 189, 12 Ky. Law Rep. 207, does not justify the investment by the guardian of his ward’s money in the stock of a bank as an original proposition. It is there held that, inasmuch as the funds were originally invested by the ancestor in bank stock, and in this shape came to the guardian’s hands, he was justified in selling the bank stock which had begun to depreciate, and in in-' vesting the proceeds in other bank stock which appeared a safer investment. In speaking of the duty of a trustee, in the opinion under consideration, it is said: “Mere good faith, while requisite and commendable, is not all that is required of such a fiduciary. He must be competent also. While it is his duty to make the ward’s estate as productive as a prudent use will admit, yet he must do so' in conformity to law. He must possess such legal knowledge as is needful to the proper execution of the trust.” Again: “It is the duty of the guardian to make the estate productive, and he may therefore, in a prudent manner, loan out the money of the ward, taking solvent personal security. In such a case he will not be held liable if a loss results without neglect upon his part in preventing it.” The case turned upon the right of the guardian to change the security, and there is noth[298]*298ing said by the court which would authorize the assumption that the trustee, as an original proposition, had the right, as the law then stood, to invest the trust fund in the stock of a private banking corporation,. Prom the foregoing authority it is clear that, unless the trustee is authorized by the statute now in force in this State bearing upon the question in hand, he can not escape liability in the instance before us. The statute relied upon to justify the investment is contained in section 4706 of the Kentucky Statutes of 1903, which is as follows: “That it shall be lawful for persons or corporations holding funds in a fiduciary capacity for loan or investment, to invest the same in real estate, mortgage notes or bonds, or in such other interest-hearing or dividend-paying securities as are regarded by prudent business men as safe investments, and to make loans with such securities as collateral; but such funds shall not be invested in the bonds or securities of any railroad, or other corporation, unless such railroad, or other corporation ( has been in operation more than ten years, and, during that time, has not defaulted in the payment of principal or interest on its bonded debt, or be invested in the bonds of a county, district, town or city that, within ten years, has defaulted in the payment of the interest or principal of its bonded debt; and a fiduciary shall account for all interest or profit received.”
It is confidently urged that the foregoing statute authorizes the investment by the trustee of the trust fund in the stock of the Bank of Waddy; it being said that this is permitted, in the following general language succeeding the specific enumeration of the property authorized by name, to-wit: “* * * Or in such other interest-bearing or dividend-paying securities [299]*299as are regarded by prudent business men as safe investment, and to make loans with such securities as collateral.” It is contended that bank stock is-a dividend-paying security, and is included in the general language following the specific enumeration. But^. the appellant insists that, even admitting this part of appellee’s contention to be sound, the investment in question is included in the prohibition of the investment of trust funds in the bonds or securities of any railroad, or other corporation, unless such railroad, or other corporation, has been in operation more than 10 years, and during that time has not defaulted in the payment of principal or interest on its bonded debt. We are inclined to believe that the contention of the appellant is sound, and that, in order that a trustee may be justified in the investment of trust funds in bank stock, the corporation must have been in operation-more than 10 years. We can not give our assent to the proposition that the investment of trust funds in bank stock is permitted under the general words “or dividend-paying securities,” and yet not included in the inhibition of investing in the securities of other corporations, unless such corporations have been in operation more than 10 years.
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Opinion of the Court by
Judge Barker —
Reversing.
The learned trial judge in his opinion in this case makes the following statement of facts, upon which the legal issues turn, which we adopt as our own: “The defendant, S. S. Weakley, as trustee of Mary Ann Robertson, in 1901 invested $1,300 of trust funds in his hands in 26 shares of the stock of the Bank of Waddy, which began business in January, 1900. In his settlement in the county court he was credited by this investment. The cestui que trust having died, this action in equity is brought by parties interested in the estate to surcharge his settlement, and make him liable for the bank stock investment, it having become worthless. Upon this record there can be no doubt that the trustee made the investment in perfect [296]*296good faith, and that it was such as a prudent business man would make in his own affairs, and to secure a certain support for himself and family. The evidence shows conclusively that when the trustee invested the money, the stock was generally regarded as worth as much or more than he gave for it. The directors were regarded as good business men, and men of means and fine business standing were interested in the bank as officers and stockholders. It was then a good dividend-paying stock, and continued to be until July, 1905. The'trustee owned stock in the bank, individually; in fact, purchased some for himself after the trust investment was made, and not long before the bank made an assignment. Other trustees besides the defendant invested trust funds in the stock of the bank, which was finally wrecked by the cunning dishonesty of its cashier.” The question arising for adjudication upon the foregoing statement of fact is whether or not the appellee was liable for, the loss of the trust fund in his hands, caused by the investment in the stock of the wrecked Bank of Waddy.
It is clear that the trustee, under the rule prevailing in this State prior to the enactment of the statute which we shall hereafter discuss, would be liable for the loss sustained. In the case of Smith v. Smith, 7 J. J. Marsh, 238, the guardian was held liable for the depreciation of 16 shares of stock in the Bank of Kern tucky, which he had purchased with his ward’s money; and in Clark et ux v. Anderson, 13 Bush 111, it was held that the investment by the trustee of the funds of his cestui que trust in second mortgage bonds of the Louisville, Cincinnati & Lexington R. R. Company was unauthorized, and the loss cast upon the trustee. In that case, Chief Justice Lindsay, speaking for the court, said: “In this State trust funds may be [297]*297loaned on personal security when it is ample and sufficient (Higgins v. McClure, 7 Bush 381; Clay v. Clay, 3 Metc. 548), and may be invested in certain public securities (Myer’s Supp. 264; Gen. Stats. 508), with the sanction of a court of equity; but no judicial precedent or statutory regulation will justify their investment in the stock or bonds of private corporations, and bonds secured by a second mortgage on the roadbed and other property of a railway company are peculiarly objectionable.” The opinion in Durrett’s Guardian v. Commonwealth, 90 Ky. 312, 14 S. W. 189, 12 Ky. Law Rep. 207, does not justify the investment by the guardian of his ward’s money in the stock of a bank as an original proposition. It is there held that, inasmuch as the funds were originally invested by the ancestor in bank stock, and in this shape came to the guardian’s hands, he was justified in selling the bank stock which had begun to depreciate, and in in-' vesting the proceeds in other bank stock which appeared a safer investment. In speaking of the duty of a trustee, in the opinion under consideration, it is said: “Mere good faith, while requisite and commendable, is not all that is required of such a fiduciary. He must be competent also. While it is his duty to make the ward’s estate as productive as a prudent use will admit, yet he must do so' in conformity to law. He must possess such legal knowledge as is needful to the proper execution of the trust.” Again: “It is the duty of the guardian to make the estate productive, and he may therefore, in a prudent manner, loan out the money of the ward, taking solvent personal security. In such a case he will not be held liable if a loss results without neglect upon his part in preventing it.” The case turned upon the right of the guardian to change the security, and there is noth[298]*298ing said by the court which would authorize the assumption that the trustee, as an original proposition, had the right, as the law then stood, to invest the trust fund in the stock of a private banking corporation,. Prom the foregoing authority it is clear that, unless the trustee is authorized by the statute now in force in this State bearing upon the question in hand, he can not escape liability in the instance before us. The statute relied upon to justify the investment is contained in section 4706 of the Kentucky Statutes of 1903, which is as follows: “That it shall be lawful for persons or corporations holding funds in a fiduciary capacity for loan or investment, to invest the same in real estate, mortgage notes or bonds, or in such other interest-hearing or dividend-paying securities as are regarded by prudent business men as safe investments, and to make loans with such securities as collateral; but such funds shall not be invested in the bonds or securities of any railroad, or other corporation, unless such railroad, or other corporation ( has been in operation more than ten years, and, during that time, has not defaulted in the payment of principal or interest on its bonded debt, or be invested in the bonds of a county, district, town or city that, within ten years, has defaulted in the payment of the interest or principal of its bonded debt; and a fiduciary shall account for all interest or profit received.”
It is confidently urged that the foregoing statute authorizes the investment by the trustee of the trust fund in the stock of the Bank of Waddy; it being said that this is permitted, in the following general language succeeding the specific enumeration of the property authorized by name, to-wit: “* * * Or in such other interest-bearing or dividend-paying securities [299]*299as are regarded by prudent business men as safe investment, and to make loans with such securities as collateral.” It is contended that bank stock is-a dividend-paying security, and is included in the general language following the specific enumeration. But^. the appellant insists that, even admitting this part of appellee’s contention to be sound, the investment in question is included in the prohibition of the investment of trust funds in the bonds or securities of any railroad, or other corporation, unless such railroad, or other corporation, has been in operation more than 10 years, and during that time has not defaulted in the payment of principal or interest on its bonded debt. We are inclined to believe that the contention of the appellant is sound, and that, in order that a trustee may be justified in the investment of trust funds in bank stock, the corporation must have been in operation-more than 10 years. We can not give our assent to the proposition that the investment of trust funds in bank stock is permitted under the general words “or dividend-paying securities,” and yet not included in the inhibition of investing in the securities of other corporations, unless such corporations have been in operation more than 10 years. The object of the statute is to render the investment of trust funds as secure as possible on the one hand, and at the same time to widen the field of investment as far as is reasonably consistent with safety. One of the best securities for the integrity of the fund is the fact that the corporation has stood the test of time. This time test is fixed by the Legislature at 10 years, and this was considered necessary to prove the safety and solvency of the corporation in question. There is every reason for fearing for the safety of funds invested in a newly embarked banking venture; but, [300]*300after time has demonstrated the capacity of the officials to manage the corporation, their honesty and integrity, and also that the business can be made profitable at a given place for a long-period' of time, then it is that the law considers that trust funds may, with reasonable safety, be invested therein.
We are not willing, on the one hand, to widen by interpretation the field for the investment of trust ■ funds, without also by .interpretation holding fast to the safeguards which the Legislature has thrown around such investments. We see no more reason for permitting the investment in bank stock under the general language in the first part of the statute than there is for including it also in the inhibition of the general language following the specific enumeration in the latter part. The doctrine of ejusdem generis applies equally to the two instances. It seems to us that, assuming for the purposes of this case that bank stock is legitimate property for the investment of trust funds under the permissive part of the statute, it is also included in the inhibitory part, and that, before a trustee is permitted to invest the funds of hisr cestui que trust in stock of private business corporations, these must have fulfilled the requirements of the statute as to the time of their existence. This, it is admitted, the Bank of Waddy had not done; and therefore it follows that the investment was not .justified.
For these reasons the judgment of the trial court is reversed, for further proceedings consistent with this opinion.
Petition for rehearing by appellee overruled.