TRUST FUNDS.

[Franklin Circuit Court,

January Term, 1888.]

Stewart, Shauck and Shearer, JJ.

#### *ODD FELLOWS’ BENEFICIAL ASS’N v. FERSON AND GREENLEAF’S EX’R.

Loss OR by Bank Failure.

Where a trustee, acting: in good faith, without negligence, and in the usual course of business, deposits trust funds in a reputable banking house to his credit as such trustee, and not mingled with his own funds, he is not liable if they are lost by a failure of the bank.

Error to the Court of Common Pleas of Franklin county.

*49The plaintiff in error sued William Ferson, John Greenleaf and one Gere, in the court of common pleas, alleging that on January 10, 1877, Ferson accepted the office of treasurer, and upon that day, with the other defendants as his^ sureties, executed a bond for the'faithful performance of his duties, the condition of the bond being that until the election and qualification of his successor, Ferson should “faithfully perform the duties of said office, and faithfully collect, pay over and account for all moneys that should come into his hands agreeably to the requirements of law and instruction of said association.”

The petition alleges that after the execution of said' bond, moneys of the association amounting at a settlement had January 10, 1878, to $7,289.59, came into Ferson’s hands, of which $4,800 remains unpaid; and for that amount recovery is sought against Person and his sureties.

John Greenleaf in his answer alleges that, as plaintiff knew, he executed the bond as surety, for Ferson; that on the 18th of January, 1888, a settlement was had between the plaintiff and Ferson, of all matters covered by said bond, when there was found to be in the hands of Ferson as such treasurer, the sum of $7,289.59; that without the surety’s knowledge or consent, fhe plaintiff, Ferson, and Moodie, Hubbard & Co., who were bankers in the city of Columbus, agreed that Ferson as such treasurer should draw his three drafts of that date on Moodie, Hubbard & Co., with whom, as plaintiff knew, said moneys were deposited to the credit of Ferson as such treasurer for the payment of said sum; said Moodie, Hubbard & Co. to accept said drafts and pay them according to their terms; that pursuant to said agreement three drafts aggregating said sum of $7,289.59 were, on the 18th of January, drawn by Ferson ás such treasurer on Moodie, Hubbard & Co. to the order of Joseph Dowdall, secretary, one payable January 21, one January 22, and one January 23, and all of them were accepted and certified by Moodie, Hubbard & Co.; that said drafts for the full amount thereof were drawn on funds then on.deposit with Moodie, Hubbard & Co. to the credit of Ferson as such treasurer; that the drafts so drawn and certified were accepted by the plaintiff in payment of the-moneys so found to be in Ferson’s possession, and to extend the time for the payment thereof as aforesaid; that such of said drafts as were not paid by Moodie, Hubbard & Co. are still retained by the plaintiff, and that notice of their non-payment was not given to Ferson within a reasonable time. Greenleaf further alleges that for a number of years prior to January 18, 1878, Ferson had been the plaintiff’s treasurer; that during all that time, with its knowledge and without any objection from it, he had usually kept the plaintiff’s money on deposit to his credit as such treasurer with said bankers, Moodie, Flubbard & Co., and with Bartlett & Smith, who were their predecessors in business; and that in making such deposits he acted in good faith, believing that said moneys would be repaid by the depositaries.

Replying, the plaintiff denies the avei-ments of the answer that by agreement said drafts were accepted in payment of the amount found due it from Fer-son; that it had knowledge that said funds were deposited with Moodie, Hubbard & Co.; that it agreed that said bankers should accept and pay said drafts according to their tenor and effect; that they were drawn on funds to the credit of Ferson as such treasurer; that it extended the time for the payment of the sum due it from Ferson, and it avers that said drafts were received with Green-leaf’s assent as additional security for the payment of said sum. It admits the payment of one of the three drafts, and that it holds the other two as additional security according to said agreement, and avers that Ferson had immediate notice of their non-payment.

Upon the trial of these issues, a jury being waived, the cause was submitted to the court for determination. Counsel requested the court to state its finding’s of fact and conclusions of law separately.

Of the voluminous findings of fact made in the trial court the following relate to the issues:

*50The checks were drawn upon a fund actually deposited with Moodie, Hubbard & Co. to the credit of Ferson as treasurer of the plaintiff. Tihe bankers, being notified by Ferson of his intention to draw a cheek upon them for the full amount of the balance, notified him that they were short of funds and requested him to arrange with the plaintiff so that it should accept three checks payable respectively in three, four and five days from said 18th day of January. This proposition the plaintiff refused to accept unless the bankers would certify the checks, and thereupon.the checks were drawn by Ferson, certified by the bankers and accepted by the plaintiff on the day-of their date. The check first maturing was paid,' but on the 23d of January the bank suspended and the remaining checks have not been paid. The evidence does not show whether the unpaid checks were presented for payment or not, but Ferson was not notified of their non-payment until two or three days after the 23d when the last draft was payable. On' the 18th of January, Greenleaf had no knowledge of any of the transactions of that day. Ferson had been treasurer of the plaintiff for ten years prior to the execution of these drafts, and during that time had kept its funds on deposit to his credit as such treasurer at the same banking house where business had been conducted by Bartlett & Smith until about the 1st of July, 1877, when they were succeeded by Moodie, Hubbard & Co., but there is no evidence showing that such' deposit was kept with them with the plaintiff’s knowledge. Moodie, Hubbard & Co. were engaged in a regular banking business, and in depositing with them, Ferson acted in good faith and without negligence, believing and having cause to believe that -his checks drawn against said fund would be paid when presented.

Upon these facts the trial court rendered judgment against Ferson for the balance, but in favor of the administrator of Greenleaf, the surety.

*

 This case was settled and dismissed by the parties November 19, 1889.

Shauck, J.

The judgment against Ferson is not complained of; but the association seeks a reversal of the judgment in favor of his surety, because, first, the special finding of facts made in the court of common pleas is not sustained by the evidence, and second, the facts found do not warrant the judgment in favor of Greenleaf.

It seems clear to us that the trial court erred in finding from the evidence that the drafts or time checks were taken in payment of the amount and without the knowledge or assent of Greenleaf. True, Greenleaf so testified in the case. But Horn’s testimony to the contrary shows a much more probable course of proceeding, and is more consistent — indeed entirely consistent- — with the conceded and established facts.

All the witnesses agree that when the settlement was made in the office of the bank, Ferson communicated to Horn and Dowdall, who represented the plaintiff, the proposition of the bankers that checks payable in three, four and five days, should be received, and that this proposition was distinctly rejected, they saying-that they would notify Greenleaf, and leaving the bank as if for that purpose. Dowdall died before the trial, but Horn testifies that they went to Greenleaf’s store, reported to him the precise situation, and the proposition of the bank; and that -he requested them to take the checks, saying that if anything was made of them it would be so much better for him. This was in accordance with the interest of all the parties. It is what both would have done, acting intelligently in view of the situation. The conclusion of the trial court requires the assumption that Horn and Dowdall having refused the checks changed their minds without reason, and that they deliberately released a responsible surety, accepting in lieu of his liability, the check of an insolvent drawer upon a bank that was confessedly without funds.

The finding in this respect ought to have been that all that done on the 18th of January was done with Greenleaf’s express assent.

*51J. T. Holmes, for plaintiff.

Lorenzo English, contra.

The trial court further found that in selecting the bank of Moodie, Hubbard & Co. as the depository of the fund, Ferson acted in good faith and without negligence. The evidence upon this point is meager. Ferson testifies that he understood the bank to be solvent, that it was doing a regular banking business, and that he expected checks drawn upon this fund to be paid when presenter Others testify that it was doing a regular banking business. There is no evidence to show that it was not of good repute in business circles. It does appear that Ferson had close business relations with one of the firm, and that his office was in the same building with the bank.- Upon this state of the evidence we', cannot say that the finding in this respect was wrong.

Although it found this fact, the trial court must have regarded it as of no significance, else it would not have rendered judgment against Ferson. Did the exercise by Ferson of good faith and reasonable care in the selection of a deposi-, tory of the fund constitute a performance of his duty under the bond which was to “faithfully discharge all and singular the duties of his office as treasurer, and* faithfully collect, pay over and account for all moneys,” etc. Upon both principle and authority this question must be answered in the affirmative. The obligation of the trustee is to exercise such care and intelligence in the keeping of trust funds as men ordinarily exercise in their own affairs.

Where a trustee, acting in good faith and without negligence, deposits trust funds in a reputable banking house to his credit as trustee, and not mingled with his own funds, he is not liable if they are lost by a failure of the bank. Perry on Trusts, sec. 443; Pomeroy’s Equity Jurisprudence, sec. 1067, *et seq.;*McLaw’s Adm’r v. McGregor’s Adm’rs, 1 C. S. C. R., 327.

Judgment affirmed.