I cannot agree with the result about to be announced in this case. As Judge LEHMAN points out, the fact that the order of the court limited the City Chamberlain to an investment in a "guaranteed mortgage or guaranteed mortgage certificate or other similar securities" did not relieve him from liability for "any dereliction of duty imposed by law in making such choice." In any ordinary case, to comply with the duty imposed on him by law,the least that he could have done was to exercise such "care and prudence which a reasonably prudent man would exercise in the management of his own affairs" under the same or similar circumstances. It is hard to conceive of a reasonably prudent man in the management of his own affairs blindly accepting the representation of a seller of securities as to their character and quality without inquiry or investigation of any kind. Much less could a man so act where he is responsible for the investment of other people's money and expect to be relieved from liability for loss in the event that the statement relied upon should prove to be false.
In this case, I think the measure of care required was higher than has been stated. The circumstance was present that the money invested was that of an infant, *Page 326 the protection of whose interests has always been the subject of special care and solicitude. The court order as to the kind of investment to be made did not compel the Chamberlain to make the particular investment at all hazards. It was only permissive and could be used as a shield against attack for loss only in the event that the Chamberlain should be satisfied that the permissive investment was proper after he had exercised the care required of him. Concededly, he made no investigation whatever of the character and quality of the investment. Inquiry or investigation might have indicated to one exercising ordinary prudence that securities other than a "guaranteed mortgage certificate" but of a similar character would have indicated greater safety. Inquiry or investigation might have indicated that some other kind of investment would be preferable, and to the end that an investment offering greater safety might be made the court order would doubtless have been modified to meet the Chamberlain's recommendations. The Chamberlain may not have been required to make an independent search or appraisal of the underlying security. He could at least have required the seller to exhibit whatever evidences of title and value he had. Furthermore, the intention of the Legislature "to hold officials and the municipality to strict responsibility for funds, intrusted to their custody, of infants and other wards of the court" is clear. (Banks v. Jacoby Sons, Inc., 246 App. Div. 841. ) It has established the rule of strict responsibility (Laws of 1927, ch. 185), and so have the courts. (See opinion below,250 App. Div. 440, for collection of authorities.)
I know of no rule heretofore established in any jurisdiction which absolves a fiduciary from liability for loss where, as in this case, he makes an investment of funds intrusted to his care without personally exercising the slightest diligence to determine its character, quality and safety. *Page 327
I think the decision of the lower courts was correct and that the order appealed from should be affirmed, with costs.
CRANE, Ch. J., O'BRIEN, HUBBS, LOUGHRAN and FINCH, JJ., concur with LEHMAN, J.; RIPPEY, J., dissents in opinion.
Orders reversed, etc.