Court Opinion

ID: 6617561
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:25:06.826336+00
Date Added: 2024-06-11T15:58:35.293214
License: Public Domain

Smith, P. J.
— The salient facts of this case as disclosed by the record, are that one Settle who was guardian of his¿ minor children, was removed by the probate court and the plaintiff was appointed in his stead.
While he was acting as guardian, and between the twentieth of May, 1889, and the thirteenth of August, 1890, he deposited to his credit in the defendant bank, a corporation, the sum of $1,868.05. That in September, 1889, he borrowed of defendant bank $200, for which he gave his note; that in August, 1890, the payment of the note being demanded, he agreed with the defendant bank that when the probate court at its regular August term, 1890, made him his annual allowance against the funds of his wards for their support, he would, out of the same, pay his note, and that the defendant bank might charge the amount off against his account; that the probate court afterwards did make Settle an allowance against the estate of his wards amounting to $250, and thereupon the defendant bank charged off said note amounting, principal and interest, to $217.95; that the balance of the money so deposited, amounting to $638.50, was, on the eighteenth of December, 1890, paid to the plaintiff by the defendant bank, on the check of Settle as guardian.
*263It further appears that after'giving the cheek just mentioned and making a payment of $2,005, Settle was still indebted to plaintiff, his successor, in the sum of $679.02; that he gave another check to his successor on the defendant bank for $217.95, the amount applied to the payment of his individual note by the defendant bank, the payment of which was refused.
This suit was brought by the plaintiff against the defendant bank to recover the amount of the check. The case was tried by the court sitting as a jury which resulted in judgment for plaintiff, to reverse which defendant bank has appealed.
It may be stated as a rule, deducible from many authorities, that a bank cannot use a deposit to pay the individual debt of the depositor due to it, when it has knowledge that the deposit is held by the depositor in a fudiciary capacity and does not belong to him personally. Meorse on Banking [2 Ed.], p. 37; Lessing v. Vertrees, 32 Mo. 431; Schouler on Executors and Adm’rs, sec. 352; Cowgill v. Linville, 20 Mo. App. 138; Payne v. The Bank, 43 Mo. App. 377; Union Stock Yards National Bank v. Gillespie, 137 U. S. 411; Greenwood v. Burnes, 50 Mo. 52; McDuffe v. McIntire, 32 Am. Rep. 500; Shaw v. Spencer, 100 Mass. 320; Smith v. Ayer, 101 U. S. 320; Colt v. Lasnier, 9 Cow. 320; McLeod v. Drummond, 17 Vesey, Jr., 153; Walker v. Bank, 25 Fed. Rep. 247. When the depositor seeks to pay his own debt to the banker by an appropriation of funds to his credit in a fiduciary capacity with the banker, then the banker is affected with knowledge of the unlawful character of the appropriation. Morse on Banking, section 317.
The duties of a guardian with respect to the estate of his ward are in many respects analogous to those of an executor or administrator. The statute defines the duties of a guardian, which every person who deals with *264him in that capacity is bound to know. In Kean v. Roberts, 4 Maddock 332, it was said by the vice chancellor, that every person who acquires personal assets by a breach of trust or devastavit in the executor, is l’esponsible to those who are entitled under the will, if he is a party to the breach of trust. * * * Generally speaking he does become a party to a breach of trust by buying or receiving in pledge any part of the personal assets, notfor money advanced at the time but in satisfaction of his private debt, because this sale or pledge is inconsistent with the duty of executor.” And any person receiving from an executor or administrator the assets of his testator or intestate knowing that such disposition of them is in violation of his duty, is to be adjudged as conniving with such representative and is responsible for the property received. And it has been held that when one had reasonable grounds for believing that the administrator or executor is, in the very transaction, converting such assets to his private use, such a person can take no advantage from the transaction, and the title to what he has acquired cannot be upheld. Schouler’s Ex’rs and Adm’rs, section 352, and cases cited.
And so where an administrator had assigned promissory notes of the estate in his hands for goods for his own use, it was held a waste of the estate, and if the assignee had knowledge that the administrator was acting in violation of his trust, the right of property in the notes was not divested. Thomasson v. Brown, 43 Ind. 203. And so, too, it has been held that when an administrator holding title to personal assets, he holds them in trust to pay debts of deceased and discharge legacies; and property thus held, acquired from him by third parties with knowledge of his trust and in disregard of its obligations, can be recovered. 'WIloever takes it for an object other than the general pur*265pose of the trust, must lookto the authority of the trustee or he will act at his peril. Smith v. Ayer, supra; Colt v. Lasnier, supra. The rule was laid down in dhe house of lords that, *“when an executor parts with’ ■any portion of the assets of the testator. under such circumstances as the purchaser must know that they were sold not for the benefit of the estate, but for the ■executor’s own benefit, the result is as if he were himself, in respect to those assets, the executor. Walker v. Taylor, 4 Law Times (N. S.) 845.
But, as we understand it, the rules announced in the authorities just referred to, are really not disputed by the ■defendant bank, but its contention is, that the agreement with ¡Settle takes the case out of the operation of these rules. If Settle was indebted to his wards in a much larger sum than that which he had on deposit in ■defendant’s bank, as appears was the case, would the fact that he had obtained an allowance in his favor •against the estate of his wards confer'upon him authority (to apply any part of this deposit as guardian in defendant’s bank to the payment of his individual debt to the bank? If, after deducting his allowance from the amount he was indebted to his wards he was still in their debt, from whence was derived the power to use the money of his wards in defendant’s bank to pay his ■own debt? Unless the guardian himself could hold this money against his wards, certainly the bank could not. ‘The bank could have no greater right to the money than Settle had. The deposit was to his credit as .guardian, so the pertinent question is, when did it cease bo be due him in his representative quality and become ■due him individually. Surely the allowance did not ipso facto accomplish that result. It is not pretended “that the order of allowance authorized the application •of any part of the deposit to its payment. It is quite ■difficult to understand how the mere promise of Settle *266to pay the note of the bank ont of the deposit, in case-he obtained an allowance by the probate court, could, in that event, have the effect to change his relation to-any part of the deposit.
. If this deposit was all of the money in his hands due-his wards, then it would have been proper to have paid the allowance out of it, or, which is the same thing, given parol direction to the defendant bank to apply an amount of it equal to the allowance, or less, to the payment of the note which it held against him. In order to sustain the action of the defendant bank in making the application of the deposit, it must show that Settle had become the individual owner of' the part of it so applied. The act was prima fade unauthorized $,nd unlawful. The defendant knew the-money deposited belonged not to Settle, but to his wards. It knew that the application of a part of the deposit to pay his individual note was in general disregard of the obligations of his trust. Cowgill v. Linnville, 20 Mo. App. 138. If the state of the account of Settle with his wards, at the time of the application of so much of his bank deposit as paid his note to the-bank, was such as to show that he had faithfully discharged his trust according to law and that he has not at that time or • at the time of the allowance in his favor, indebted to, or behind with, the estate of' his-wards, then it is plain enough that he could apply a. part of the bank deposit to the payment of his allowance,, but the burden of showing this rested upon the defendant bank, who, in the absence of such showing, must beheld to have knowingly applied the money of the-ward’s estate on deposit with it, to the payment of the-individual debt of Settle under an agreement that did not confer on it the semblance of an authority to do so.
In view of the dim light which the few meager-facts disclosed in the record throw upon the transac*267tion between the defendant bank and Settle, we-' must conclude that the agreement under which the wards’ funds were misapplied to the payment of Settle’s individual debt, was no more than an artful scheme by which it was intended by defendant bank to collect a. loan imprudently made. Its effect was to facilitate-the waste of the wards’ estate by the guardian. No-such an agreement can have the sanction of the law. It was without the power of the guardian.
The prima facie liability of the defendant bank is. conceded. We are unable to find anything in the defendant’s case which rebuts such liability. The-agreement pleaded and admitted does not relieve the-act of Settle, in misapplying the money of his wards to, the payment of his individual debt, of the taint of illegality. Nor can the defendant dispute its liability to the plaintiff, who is the representative of the wards, since it knowingly participated in the misapplication of the deposit. There is nothing in the agreement pleaded which takes the case out of the ordinary rule which we stated at the outset.
No error is perceived in the action of the court in respect to the giving or refusing of declarations of law. The theory of law upon which the issues were determined is in harmony with the views herein expressed,, and with which no fault has been found."
It results that the judgment is affirmed.
Gill, Jo. concurs. Ellison, J. dissents.