Mullen v. Durrie

MR. JUSTICE ANDERSON

delivered the opinion of the court.

Thomas Mullen died testate on January 21, 1931. His wife was named as executrix in the will. She declined to act- and requested the appointment of F. B. Durrie as administrator with the will annexed, and he was appointed and qualified as such administrator on February 23, 1932. The legatees and devisees named in the will, appellants here, are the surviving wife and the sons and daughters of the deceased, all of whom reside without the state of Montana.

On October 14, 1932, Durrie, as administrator, made and filed his final account of his administration of the estate. The appellants filed objections to the account, contesting the allowance of an item in the sum of $6,208.88, being a savings account in the United States National Bank at Deer Lodge, and to an item of $620 withdrawn from the same bank account and converted into a cashier’s cheek which was forwarded to Dr. E. S. Morrow, in Los Angeles, California, for medical services rendered to the deceased during his last illness, and to a like item of $200, withdrawn from the account in the same manner and for which a cashier’s cheek was forwarded to the widow in Los Angeles in payment of a family allowance.

The United States National Bank suspended business on October 22, 1932. Durrie, at the time of his appointment as administrator and until the bank closed, was its cashier and *149in full charge of the affairs of the bank under the control of the board of directors. He was a stockholder, but not a director, in the bank. Appellants contend that Dürrie was negligent in failing to withdraw the amount of the savings account in the bank. The court by a general order overruled the objections of the appellants and sustained the account of the administrator as filed. The appeal is from this order.

The funds in the savings account were on deposit in the bank in question for many years prior to the death of the deceased. Subsequent to the appointment of Durrie as administrator, the account was changed to his name as administrator of the estate of the deceased. No additional funds were credited to the account after his appointment, other than items of interest accruing thereon. The pass-book for the account, it appears, remained in the possession of the widow. She was present in Deer Lodge at the time of the appointment of the administrator. Other funds belonging to the estate were on deposit in other banks in Deer Lodge. The widow by letter requested the administrator to leave the funds in the several banks as they existed at the time of Mullen’s death. This request was followed by the administrator.

The only witnesses called by the objectors were the administrator, one of the members of the board of directors, and the receiver of the bank. There is no conflict in the testimony as between the several witnesses. Under this state of the record this court is called upon, as was the trial court, to say whether the undisputed testimony justifies the findings made. (Fleming v. Consolidated Motor Sales Co., 74 Mont. 245, 240 Pac. 376; Weiss v. Hamilton, 40 Mont. 99, 105 Pac. 74.)

This being a proceeding equitable in its nature, this court will, it being a proper case, review all questions of fact arising from the evidence presented by the record and determine the same, as well as questions of law. (In re Connolly’s Estate, 79 Mont. 445, 257 Pac. 418.) This necessitates an examination of the evidence.

*150The administrator, Durrie, as the managing officer of the bank, was thoroughly familiar with the affairs and condition of the bank at all times. It appears that in the fall of 1931 various directors of the bank were indebted to it. At the suggestion of Mr. Durrie these directors secured a loan on their individual notes from a banking institution in Helena in the sum of $48,000, which sum was paid into the bank and for which notes of like amounts were indorsed to them without recourse. Many of the notes so indorsed and delivered were those of the directors, although not all. The bank was in nowise obligated as a result of this transaction and thereby liquidated its notes in the amounts stated. The bank in the spring of 1932 obtained two loans from the Reconstruction Finance Corporation aggregating the sum of $88,000, and to secure the payment of the same pledged collateral of the face value in double the amount of the loans.

The bank, by notice printed on its pass-books, reserved the right to require a ninety-day notice of withdrawals of savings accounts. Such a notice appeared on the pass-book of the savings account in question. In the latter part of July or the first of August the bank for the first time exercised this reserved right as to the withdrawal of a particular savings account, and from that time on, until the bank closed in October, it exercised the right of notice as to withdrawals of large amounts. Durrie testified: “Any one who desired to make a withdrawal of anything of a normal amount for necessary purposes, they were paid right off, * * * even up to $500.” When inquired of as to the purpose of invoking the rule of notice, he stated: “I would say that the requiring of notice was a precautionary measure at the time it was first put into effect. We had funds to pay the withdrawal at the time we first started requiring notice. But we felt it was a matter of good business and we had been told by the Banking Department and other good banks that it was customary nowadays to require notices on large withdrawals.” He further testified: “The withdrawals came with no particular I will say rush, but there was a steady withdrawal, *151and when it was learned that we were requiring notice, other people who had not thought of withdrawing thought possibly then it was necessary and they started filing their notices as a means of being able to get their funds in ease they wanted them. It proved to be a bad move to take to require a notice because we got some very unfavorable advertising on account of it, but we did not anticipate it at the time.”

It appears that at the time the bank closed it had failed to secure a further loan from the Eeconstruction Finance Corporation. Mr. Durrie testified as to the cause of the closing, as follows: “We closed that time because we had failed to get certain relief measures that we felt we were going to get without any question, and we felt that the interests of depositors would be jeopardized by remaining open, and that we would be preferring creditors to pay some depositors and not able to pay others.” He further testified that in the forepart of October he informed the board of directors that, if they failed to get certain assistance which they had every reason to expect, the bank might be put in a dangerous position, and that he only had actual knowledge that the bank would close on the day preceding its failing to open for business.

John Mclnerney, who was the vice-president of the bank and somewhat active in its affairs, testified that the bank did become short of cash on account of the depression, and because they could not collect their loans in the latter part of September or early in October.

J. H. Morrow, the receiver, testified that the liabilities of the bank amounted to $550,000; that the face value of the assets, excluding the stockholders’ liability, was $780,000, and that the stockholders’ liability was $100,000 additional, of which he estimated $30,000 would be ultimately collected; and he gave as an approximation that the bank would ultimately pay its creditors 50 cents on the dollar.

The bank did not close as the result of the failure of any other banking institution in which the bank in question had funds on deposit.

*152No attempt was made on the trial of this case to show what the condition of the bank was at any time, between the appointment of the administrator and its closing, other than the testimony already noted disclosed.

In the ease of In re Connolly’s Estate, 79 Mont. 445, 257 Pac. 418, 423, this court said: “The executor is chargeable with the whole of the estate of the decedent which may come into his possession, at the value of the appraisement contained in the inventory (sec. 10282, Rev. Codes 1921) ; and while he is prohibited from making profit from its increase, yet he is not required to ‘suffer loss by the decrease or destruction, without his fault, of any part of the estate’ (Id. 10283). The universal rule seems to be that — ‘Executors and administrators are not insurers, nor will they be chargeable with the loss or depreciation of the assets where they have acted in good faith and with due prudence and diligence in the care and management of the estate, but they are liable for losses which are the consequence of bad faith or the want of due prudence and diligence.’ (24 C. J., p. 123.) An executor fulfills his trust obligation to the estate when he deposits estate funds temporarily with a responsible bank; and, where he acts in good faith in the exercise of his best judgment, he is not liable for loss occasioned by the failure of such bank. (Pethybridge v. First State Bank of Livingston, 75 Mont. 173, 243 Pac. 569; State v. Kearns, 79 Mont. 299, 257 Pac. 1002; Woerner on Administration, 2d ed., p. 710; 11 Cal. Jur., p. 1023).”

Therefore, in order for the administrator lo be chargeable with the loss of the funds in the closed bank, it must appear from the evidence that he was negligent in not removing the funds belonging to the estate. Negligence, as applied to acts of omission, is thé failure to do what a reasonable and prudent person would ordinarily have done in the circumstances of the situation. (Zanos v. Great Northern Ry. Co., 60 Mont. 17, 198 Pac. 138.)

The question is fairly presented: Would a reasonably prudent person, having knowledge of such facts as this record discloses was in the possession of the administral or Durrie, have *153withdrawn the estate funds or given notice in ample time so that they might have been withdrawn before the closing of the bank?

The appellants insist that the foregoing question should be answered in the affirmative, and that by reason of Durrie’s negligence the funds deposited in the bank were lost to the estate, and that he is therefore chargeable with their loss. They rely upon a number of decisions from other courts where a result in accord with their contentions was sustained on appeal. An examination of these decisions, and particularly of the facts Before the court in these various cases, renders them distinguishable from the facts here present, as we will demonstrate. In the case of In re Enfield’s Estate, (Iowa) 251 N. W. 637, the cashier of the Bank was likewise the administrator of the estate. Prior to his appointment a voluntary assessment of approximately one hundred per cent, on the stockholders had been paid. The deceased was a depositor in the bank in question. The administrator withdrew funds from another bank and deposited them in his bank. Following his appointment there was a gradual shrinking in the bills payable and individual deposits in the bank. There were but few days during the entire period following his appointment on which the balance of cash available in the bank was sufficient to pay the amount of the estate’s deposit. An examination of the condition of the bank by the banking authorities some four or five months before its closing disclosed that nearly fifty per cent, of the bank’s bills payable were classified as objectionable. The foregoing facts were disclosed by the evidence, and, although the administrator testified that he believed the bank to be solvent and at no time believed the funds in his hands were in danger of being lost, the trial court found otherwise, basing its opinion upon the evidence before it as to the condition of the bank from time to time during the period of the deposit. This conclusion was affirmed on appeal.

The Oklahoma ease of In re Horseman’s Estate, (Okl. Sup.) 29 Pac. (2d) 589, was one where the administrator was also the cashier of a bank. Following his appointment he with*154drew the funds of the estate from another bank and deposited them in his own, with funds already there belonging to the estate. Within thirty days after his appointment he participated with other directors of the bank in a meeting in which the voluntary liquidation of the bank was decided upon, and as a result of which meeting the bank was placed in the hands of the state banking department for liquidation. There was no attempt made in that case to show that the administrator was free from negligence. The trial court found against the administrator, and the case was affirmed on appeal.

The case of In re Scudder’s Estate, 21 Misc. 179, 47 N. Y. Supp. 101, 105, involved an administrator who was the managing officer of a bank in which, following his appointment, he deposited funds belonging to the estate, withdrawn from another banking institution. The court, in its opinion observes that there was considerable evidence given as to the financial condition of the bank, but adds that “it is not necessary to discuss said evidence at length.”

In the Oklahoma case the bank failed so soon after the deposit of the funds of the estate that it could scarcely be contended that one in charge of the bank would not appreciate and know the danger of its failing. Furthermore, the administrator, as the Oklahoma court pointed out, made no affirmative showing whatsoever as to his freedom from negligence. In the New York and Iowa cases, supra, evidence was received as to the exact condition of the bank, from which the court was able to conclude that anyone of reasonable prudence would have known that the bank was in imminent danger of closing.

As noted above, no evidence was offered on the trial of this cause as to the condition of the bank at any time, other than the testimony of the receiver, given some four months following its closing. His testimony was as to its condition on the date of the trial.

The only facts produced in the record tending to alarm a reasonably prudent person as to the condition of the bank are the following: (a) The bank had borrowed $88,000; (b) withdrawals were exceeding deposits; (c) the officers of the bank *155decided to require notice of the withdrawal of savings accounts in excess of $500 in accordance with known rules of the banking institution, although sufficient cash was available at that time to take care of the immediate needs of the bank, including the proposed withdrawal of funds. As against these facts we have the positive testimony of the cashier and the managing director to the effect that they had no reason to believe that the bank was in danger of closing until within a few days prior to the occurrence of that event.

If it be said that the circumstances enumerated supra tend to support a charge of negligence, when considered as against the positive testimony of the administrator which, if believed, absolved him from all negligence, created a conflict in the evidence, how fare the appellants? The trial court found that the administrator was free from negligence. This court will not reverse a judgment unless the evidence strongly preponderates against the decision of the trial court, and where there is a conflict in the evidence, and it furnishes reasonable ground for differing conclusions, the judgment will not be disturbed on appeal. (Kirby v. Hoeh, 94 Mont. 218, 21 Pac. (2d) 732; Baker v. Citizens’ State Bank, 81 Mont. 543, 264 Pac. 675.)

In the absence of evidence as to the condition of the bank following the appointment of the administrator, which would lead a reasonably prudent person to a different conclusion from that testified to by the officers of the bank, the evidence does not warrant a different conclusion from that of the trial court as to the savings account.

As to the two cashier’s checks, the evidence discloses that they were not paid by the bank. It also appears that the obligations for which they were tendered have been paid from other funds of the estate. The administrator is entitled to credit for the payment of these obligations. The funds deducted from the savings account for the issuing of these cashier’s checks have never been withdrawn from the bank. It appears in the record that no claim for this portion of the savings account has either been presented to the receiver or *156by him allowed. If the administrator has failed to present claims in the sum of $820 to the receiver, or failed to present them within the proper time, the estate has lost through his neglect so to do the sum of $820, with which sum he should be charged. The record, although it is clear that the debts owing by the estate have been paid for which the cashier’s checks were tendered, is not clear as to whether the administrator, when he made these payments, secured the checks. It is silent as to when the time for filing claims against the bank will expire, or when it did expire, if such is the fact.

It is accordingly ordered that the cause be remanded, with directions that further testimony be received as to the two cashier’s checks; and if it then appears that the administrator failed to file claim for the cashier’s checks and secure the allowance of such claim, that he be charged with the sum of $820; and, if it appears that proper claim has been filed and allowed, then the original order will stand affirmed. If the order appealed from stands affirmed, respondent will recover his costs. If the order is modified in accordance with this opinion, the appellants will recover their costs.

Mr. Chief Justice Callaway and Associate Justices Matthews and Stewart concur.