State v. Ridley , 114 Tenn. 508 ( 1904 )

Mr. Justice Wilkes

delivered the opinion of the Court.

This is a bill to hold W. T. Ridley, trustee of Williamson county, and the United States Fidelity & Guaranty Company, his surety, liable for county funds deposited in an insolvent bank by the trustee, and thus lost to the county.

The chancellor, after a large mass of proof had been taken, held the estate of Ridley and the company, as his surety, liable for the funds, and for reasonable fees to the state revenue agent, who brought the suit, and his attorneys, and declined to find liability for a penalty of one per cent, per day, asked for in the bill.

Upon a reference to the master, he reported that the amount for which Ridley and his surety were liable was $13,305.91, and that the allowance to the revenue agent and his attorneys should he seven and one-half per cent, each on the amount recovered, and for these amounts judgment was rendered, from which both parties appealed.

The court of chancery appeals affirmed the decree of the chancellor, and gave judgment for $13,658.51 for the benefit of the county, and $1,024.38 for the revenue agent, for use of the State, and a like sum of $1,024.38 as fees for his attorneys, and against defendants, for all the costs of the appeal, and the cause was directed to be remanded to be further proceeded with.

From this decree both parties have appealed to this court, and have assigned errors.

The court of chancery appeals properly held that the liability of the defendants should be measured by the rules announced in State, use, etc., v. Copeland, 96 Tenn., 296, 327, 34 S. W., 427, 31 L. R. A., 844, 54 Am. St., 840, when applied to the facts of this case; in substance, that the trustee was not an insurer of the safety of the public funds, but was liable if he acted without proper diligence, caution, prudence, and good faith, and the fund was lost in consequence, and that such diligence, caution, and prudence must be exercised in selecting a depository for the public funds.

That court reports that it was matter of common information that the bank selected was of questionable standing, and that the trustee was warned by his friends that it was unsafe, and that public funds should not be put into it; to which he replied that it was nobody’s business, as he had made a good bond; that in making the deposit be secured to himself personal benefit, in that the bank paid the premium due from him to the guaranty company for making his bond, and one-half the salary of his deputy; that the capital stock of the bank was authorized to be $25,000, but only $1,100 was ever paid in, and not more than $5,000 was ever subscribed. It was a new bank; started in business about the time Ridley was elected trustee, and he could, and doubtless did, know the facts, but relied upon what he deemed the honesty of the management. There were other banks, of ample solvency and reputable standing, in Franklin, in which he could have safely kept the money.

That court, summarizing, says: Mr. Ridley’s administrator and security could not rely upon the fact that Ridley was honest, and, in his confiding nature, believed the bank to be safe, as it was not so considered by well-informed men in business circles in the community; and this he knew, or could have known in the exercise of that diligence, caution, and prudence required by law.

We think the court of chancery appeals and chancellor were eminently correct in holding Ridley’s estate and his surety liable under the facts found by them.

It is said, however, that after the failure the county court settled with the trustee or . his successor, and released him from all liability.

This defense was not set up in the pleadings.

The fact of the alleged release and settlement came into the record in this way:

After Ridley’s death his deputy was appointed his successor by the county court, and submitted a report to the court, whose object was, as found by the court of chancery appeals, to show what funds came to his hands as such successor.

It does not appear that Ridley’s administrator, or any one representing his estate, was a party to this report, or had anything to do with it.

In this report, Robinson, the successor, charged up Ridley with proper amounts, and gave him credit for warrants paid for uncollected taxes, for commissions, and for amount due from the Citizens’ Bank & Trust-Company, and for the cash turned over to him; and this report was spread upon the minutes of the court, with its approval, October term, 1902. The decree spreading it on the minutes recites that it was “read, approved, and adopted.”

McFarland, an expert, exhibited a copy of this report to his deposition, which was taken afterwards, and in this way it was embraced in the record; but it was never set up or relied on as a release in any pleading, but the defense was that Ridley kept his books correctly, made regular settlements and reports, which were approved, and that the county authorities knew where he kept the funds, and the auditing committee approved his accounts, that he was elected a second term to his office, and under bis administration tbe value of warrants on the county was brought up to par, and that tbis estopped tbe county to maintain tbis suit.

Without passing upon other matters of contention in regard to tbis paper or report, we quite agree with tbe court of chancery appeals that it was never intended as a settlement with Ridley or a release of bis estate from liability, but it was simply a statement to show what amounts went into tbe bands of Robinson, bis successor.

Very soon after it was filed and received, and approved by tbe court, it approved the action of the county judge in joining in tbis suit with tbe revenue agent; and it is very evident that no one then, or while tbe suit was pending below, imagined that this was a settlement and release.

After tbis report was made, tbe commissions due to Ridley were claimed by tbe county to go on bis indebted* ness. They were also claimed by Ridley’s administrator and by agreement were paid into' tbis case, and decreed by tbe chancellor to the credit of tbe county. No claim was then made that there bad been a settlement with and release of Ridley.

We think tbe finding of tbe court of chancery appeals on tbis feature of tbe case is entirely correct both as to tbe purpose and effect of tbis report.

We think tbe court of chancery appeals properly dis-i posed of tbe exceptions to tbe evidence offered, and it is not necessary to go into detail on tbis feature of the case.

Tbe suit was properly brought by tbe state revenue agent, and joined in by the county. State, use, etc., v. Kelly, 111 Tenn., 583, 82 S. W., 311.

We are entirely content with the fees allowed the revenue agent, and also those allowed his attorneys. The statute does not arbitrarily command the amount of the fee, and it should be fixed at a reasonable amount.

We think, also, the commissions earned between the failure of the bank and the death of Ridley were properly applied to reduce the amount of Ridley’s liability in his favor and in favor of his surety.

Upon the whole case, we see no error in the decree of the court of chancery appeals, and it is affirmed.