
    In re Estate of Howison.
    (Decided June 27, 1934.)
    
      Messrs. Sigler & Denlinger and Messrs. Cameron & Cameron, for plaintiff in error.
    
      Mr. C. A. Moopes, for defendant in error.
   Guernsey, J.

This is an error proceeding from a judgment of the Court of Common Pleas overruling exceptions filed by The American Surety Company of New York as surety on the bond of Benton Cahill as executor of the estate of Sarah Jane Howison, deceased, to the first and final account of Cahill as such executor in the Probate Court of Union county. The cause came into the Common Pleas Court on appeal from the Probate Court.

In the exceptions filed by The American Surety Company of New York, it is charged that the said first and final account of said executor is defective and incomplete in that it does not account for the assets of the estate in the hands of the executor at the time of the filing of the account and contains no statement that there are no assets.

The cause was submitted on an agreed statement of facts together with other evidence. The agreed statement of facts sets forth, in substance, the following facts:

Sarah Jane Howison died testate at Rich wood, Ohio, December 10, 1930; her will was probated in the Probate Court of Union county, on December 29, 1930, and Benton Cahill, of Richwood, who was named as executor in the will, was appointed executor of the estate. Cahill as executor executed and delivered to the Probate Court a bond in the sum of $170,000 in the usual form, for the faithful performance of his duties and accounting of the assets of the estate, with The American Surety Company of New York as surety.

Upon filing his bond Cahill assumed the discharge of his duties as executor of the estate and by direction of the court proceeded to have an appraisement made of the said estate. The appraisement was made on January 5, 1931, and duly filed in the Probate Court of Union county. The recapitulation of the assets belonging to the estate, as shown by the appraisement, is as follows:

Personal goods and chattels.............. $225.00
Monies belonging to decedent............ 22,651.54
Stocks and securities.................... 57,147.30
Accounts receivable.................... 1,000.00
Real estate............................. 2,500.00
Total.............................. $83,523.84

Among the assets which are shown in detail in the appraisement, were the following items:

Checking account in the Farmers Deposit Bank of Richwood, Ohio............... $3,209.08
Certificates of deposit in the Farmers Deposit Bank of Richwood, Ohio.......... 19,442.46
Total .............................. $22,651.54

Also included in the inventory were 21 United States Fourth Liberty Loan bonds appraised at $40,550.

In the administration of the estate,. Cahill as executor, on January 22, 1931, sold bonds of the face value of $20,000 for the sum of $21,016.67, being $20,000 principal, $216.67 interest and $800 premium.

Again, on February 6, 1931, he sold the remaining United States Fourth Liberty Loan bonds of the face value of $20,550 for the sum of $21,530.03, being $20,550 for the principal, $266.86 interest and $713.17 premium, making a total amount realized from the sale of all the 21 bonds belonging to the estate, of $42,546.70. ■ H1

On January 30, 3931, Cahill as executor of the estate, purchased from the Farmers Deposit Bank of Richwood, Ohio, certificate of deposit Number 2282 of that bank for $15,000 bearing interest at the rate of four per cent per annum, and on March 5, 1931, purchased from the said bank certificate of deposit Number 2362 for $20,000 bearing interest at the rate of four per cent per annum, both of the certificates being taken in the name of Benton Cahill, executor of the estate of Sarah J. Howison.

At the time of testator’s death she held among her assets a certificate of deposit Number 2052 of said bank for the sum of $5,000, dated November 19, 1930, which certificate of deposit is still outstanding and in the hands of Benton Cahill as such executor.

There were five other certificates of deposit in the Farmers Deposit Bank among the assets of testator’s estate at the time of her death, to wit, two for $5,000 each, one for $2,000, one for $1,500, and one for $942.46. The certificate for $942.46 was cashed by Cahill, executor, on January 17, 1931, and so charged in his final account; and the four remaining certificates amounting to $13,500 were exchanged by said executor on May 12, 1931, for a single certificate Number 2351 in the sum of $13,500, which certificate is also in the possession of Cahill as executor.

All deposits made by Cahill as executor in the bank were made without authority or order of the Probate Court of Union county, and no order was applied for or issued by the Probate Court for the sale of the 21 United States Fourth Liberty Loan Bonds which were sold by Benton Cahill, executor.

The Farmers Deposit Bank of Richwood, Ohio, was closed by order of the Superintendent of Banks of the state of Ohio, on December 28, 1931, and is now in process of liquidation.

Cahill filed his resignation as executor of the estate with the Probate Court of Union county, on January 13, 1932, and his resignation was accepted. Fred A. McAllister was appointed by the court as administrator de bonis non with the will annexed and is the present qualified and acting administrator of the estate.

Cahill tendered to McAllister as such administrator, but McAllister refused to receive, as part of the assets of the estate, certificates of deposit in the Farmers Deposit Bank as follows:

No. 2052 for $5,000 with accrued interest of $200.00.
No. 2147 for $25 with accrued interest of $1.05.
No. 2282 for $15,000 with accrued interest of $543.33.
No. 2362 for $20,000 with accrued interest of $651.11.
No. 2531 for $13,500 with accrued interest of $337.50.

McAllister also refused to accept from Cahill an assignment of the cheeking account of said Benton Cahill, executor, in the Farmers Deposit Bank of Rich-wood, in the sum of $7,467.85. The total of the checking account and the certificates of deposit, with accumulated interest, is $62,725.84, for which amount a proof of claim was filed with the Superintendent of Banks of the state of Ohio. And a claim certificate was issued by the Superintendent of Banks, and is now held by agreement of all the parties in this case by McAllister, as such administrator, to whom all dividends on that claim are now payable.

McAllister, as administrator, has received from the Superintendent of Banks four cash dividends on the claim of the estate against said bank (amounting to $62,725.84) aggregating the sum of $28,226.61, and this sum of $28,226.61 should be credited on the claim of the estate against the resigned executor.

Cahill was at the time of his appointment as executor president of the Farmers Deposit Bank, of Rich-wood, Ohio, and actively engaged as such in the business operations of the bank and acquainted at all times with the financial condition of the bank, and continued in such capacity until the closing of the bank in December, 1931.

It further appears from the evidence in the case that the first and final account of Cahill as executor, to which the exceptions were filed, was filed in the Probate Court of Union county, on January 13,1932. And that such account is in the ordinary form of an executor’s account except that there is not included in the account a separate itemized statement showing the investment of the funds of the estate in the certificates of deposit hereinbefore referred to and the deposit of certain of the funds on checking account as herein-before set forth.

The charges against said executor in the account are itemized and amount to the sum of $80,398.16 and the credits of said executor in the account are also itemized and amount to the sum of $16,978.72, and in the recapitulation of the account it is shown that there is a balance due of the sum of $63,419.44 from the executor to the estate on said account. In the itemized statement of funds set forth in the account is a note of one J. W. Brady, 10 shares of common stock of the Farmers Deposit Bank, and judgments against A. J. Miller and Benjamin Solomon.

On the same day that the account was filed in the Probate Court, Cahill tendered his written resignation as executor, stating as a reason therefor that he was unable to distribute the amount shown to be the balance due the estate because of the fact that it was deposited in the Farmers Deposit Bank, which had failed. This resignation was accepted by the Probate Court. On February 27, 1932, the Probate Court approved the account and signed and filed the following entry:

“This day the first and final account of Benton Cahill, Executor of the Estate of Sarah Jane Howison, deceased, came on for hearing and settlement, due notice thereof having been published according to law. No exceptions having been filed thereto, and no one now appearing to except or object to the same; and the court having carefully examined said account and the vouchers therewith and all matters pertaining thereto, and being fully advised in the premises, finds the same to be in all respects just and correct and in conformity to law.

“Therefore the said account is hereby approved, allowed and confirmed.

“And the court finds a balance of sixty three thousand, four hundred and eighteen dollars and ninety eight cents ($63,418.98), in. the hands of said Benton Cahill, executor, due said estate; and the court further finds that the said Benton Cahill as such executor, has in his possession other property belonging to said estate, consisting of the following items, to wit:

“Certificate for ten (10) shares of common stock of The Farmers Deposit Bank of Richwood, Ohio.

“Note for two thousand dollars ($2,000).

“Judgment for two thousand seven hundred forty-eight dollars and eighty one cents ($2,748.81) in the case of Benton Cahill, Executor, vs. A. J. Miller, in the Court of Common Pleas of this county.

“Judgment for two thousand nine hundred thirteen dollars and nineteen cents ($2,913.19), in the case of Benton Cahill Executor v. Benjamin Solomon, Court of Common Pleas of Marion county, Ohio, Case Number 21904.

“The court further finds that the said Benton Cahill has resigned as executor of said estate, and that his resignation has been accepted by this court; that thereafter, one Fred A. McAllister was appointed by this court, administrator with the will annexed, of said estate, and that the said Fred A. McAllister has.duly qualified as such administrator, and is now the duly qualified and acting administrator with the'will annexed of said estate of the said Sarah Jane Howison.

“And it is ordered by the court that the said Benton Cahill forthwith pay to the said Fred A. McAllister, as administrator with the will annexed of said estate, said balance of $63,418.98, and that the said Benton Cahill assign, transfer and deliver to the said Fred A. McAllister, administrator, said additional property above described. That according to correct addition there is due said estate $63,419.44.”

The evidence further shows that Cahill as executor, without the knowledge or consent of any of the beneficiaries of the estate, sold the Liberty bonds above mentioned, and deposited the entire proceeds in the Farmers Deposit Bank; also that he proceeded to collect a large amount of notes due the estate, and sold the real estate belonging to the estate, and deposited all the proceeds of these assets in said bank.

The proof further shows that at the time of Cahill’s appointment a large proportion of the assets of the bank was represented by real estate and real estate mortgages; that it had borrowed a large amount of money from other banks, and that its cash position was far below the legal reserve; that during the period of Cahill’s administration of the estate the cash withdrawals from the bank were of such proportion that they more than equalled the deposits from the sale of Liberty bonds and the collection of other assets of the Howison estate; so that from the time of the sale of the Liberty bonds there was never sufficient cash balance in the bank to have paid the deposits of the estate alone.

Cahill on cross-examination admitted that all the statements above set forth with respect to the condition of the bank were substantially true; that an attorney representing the beneficiaries of the estate had requested him to remove all or a greater part of the amount of the deposits of the Howison estate from the bank and place them in another bank, and that this request came to him within a short time after the beneficiaries had learned of the sale of the bonds. He testified that his chief interest in life was the preservation of the bank and had he not been connected with the bank, and had he known its condition as he did at this time, he probably would have placed all of his money in some other depository.

The certificates of deposit in the Farmers Deposit Bank? referred to in the agreed statement of facts hereinbefore set forth, with the exception of certificate Number 2147 for the sum of $25.05 which bore no interest, bore interest at the rate of four per cent per annum, and were dated and payable as follows:

■Number 2052, November 19, 1930, 6-12 months after date.

Number 2147, December 17, 1930.

Number 2282, January 30, 1931, 6-12 months after date.

Number 2362, March 5, 1931, 6-12 months after date.

Number 2531, May 12,1931,12 months after date.

The tender of the certificates of deposit and the assignment of the bank account of Cahill as executor made by Cahill to McAllister as administrator de bonis non with the will annexed of the Howison estate, was made on the condition that the same be accepted by such administrator at the face value thereof as assets of the estate to apply on the claim of the estate against Cahill.

There is no provision in the will of Sarah Jane Howison authorizing the sale of the Liberty Bonds or the investment of funds of her estate.

After the resignation of Cahill and before the account was confirmed, McAllister as administrator de bonis non with the will annexed of the Howison estate, upon the failure of Cahill to pay the amount found due on his account and ordered paid by the court, filed suit against Cahill and his surety for that amount.

As hereinbefore stated, the exceptions filed by The American Surety Company were based on the fact that the executor did not attach to the account an itemized statement of the assets in his hands consisting of a checking account and certificates of deposit in the Farmers Deposit Bank. The failure of the executor to attach such itemized statement was not in any way prejudicial to the surety company for, as shown by the evidence, all of the information that would have been shown in such statement was and is available to it from the testimony of Cahill as well as from other sources, and the filing of such an itemized statement would not of itself have had the effect of in any way reducing the amount for which the executor and his surety were held liable on the executor’s accounting of the estate, so that if the exceptions filed are treated as being limited to their terms they would necessarily have to be overruled.

However, such exceptions were treated by the parties, in the trial of this case, as exceptions to the failure of Cahill as executor to claim credits in his account for losses sustained by him on the deposits of funds belonging to the estate in the Farmers Deposit Bank through the failure of such bank, and will therefore be treated and considered in the same manner in this error proceeding.

The losses on deposits through the failure of the bank, for which the surety company claimed Cahill was entitled to claim and receive credit, are divided into five classes, to wit:

1. Losses on deposits of proceeds of Liberty Bonds, the sales being unauthorized, and the deposits made on interest bearing time certificates of deposit.

2. Losses on deposits of other funds of the estate derived from the sale and collection of assets on interest bearing time certificates of deposit.

3. Losses on deposits of funds of estate on interest-bearing time certificates of deposit issued in name of executor in place of certificates of deposit issued to his testator for deposits made in her lifetime.

4. Loss on deposit represented by intérest bearing time certificate of deposit issued to testator which became due approximately six months before failure of bank, and which remained in same form as originally issued, until closing of the bank.

5. Loss on deposit of funds of estate in checking account and on non-interest bearing demand certificate of deposit.

The question to be determined, therefore, is whether under the facts in this case the executor, Cahill, was entitled to claim and receive on his final account credit for these losses on deposits of funds of the estate in the Farmers Deposit Bank, sustained through the failure of that bank.

The liabilities of executors and administrators are those that grow out of and are necessarily attached to the fiduciary relation they have assumed. Good faith and the care that any prudent man would exercise in the management of his own affairs are essential to the just performance of their duties. They cannot be excused for neglect of what is plainly for the interest of the trust confided to them. The question is, has the executor acted in the discharge of his duties as he ought to have done in the management of his own business? Ramsey, Admr., v. McGregor et al., Admrs., 13 Dec. Rep., 578, 1 C. S. C. R., 327.

Executors and administrators must employ such diligence as prudent men of discretion and intelligence generally employ in their own like affairs. In re Kruger’s Estate, 141 Misc., 475, 252 N. Y. S., 688.

"When the correctness of a credit taken by an administrator in his account, is challenged, the burden of establishing the validity of such credit is upon the administrator. Fourth paragraph of syllabus, Steward v. Barry, Admr., 102 Ohio St., 129, 131 N. E., 492; 18 Ohio Jurisprudence, 311, Section 249.

An executor or administrator is presumptively chargeable with the appraised value of the items appearing in the inventory and appraisement of his decedent’s estate, but is entitled to claim credits on such charges where the amounts realized from such items are less than the appraised value thereof, and for losses incurred in the administration of the assets represented by such items, provided such losses are not sustained through his failure to exercise proper care. If he fails to claim credit for losses sustained by him, he is chargeable with the full amount of said assets. On the other hand, if he claims credit for losses, the burden of establishing the validity of such credits is upon him.

Applying these rules to the facts in the case at bar, it appears that the executor is entitled to credit for the losses on deposits of the funds of the trust sustained through the failure of the bank in which such deposits are made, only if he exercises the good faith and the care in making such deposits, as men of ordinary prudence would exercise in the management of their own affairs, and the burden is upon him to establish that he exercised such good faith and care.

As stated above, the facts in this case show that the bank was in a precarious condition from the time of the appointment of the executor until its closing, and that after the sale of the Liberty Bonds and the deposit of the funds arising therefrom, in the bank, it at no time had cash sufficient to pay off the amounts deposited by the executor with it.

It further appears as a reasonable inference from the testimony that the Liberty Bonds were sold and the proceeds deposited in the bank for the purpose of bolstering up the credit of the bank without regard to the safety of the funds deposited by the executor. The evidence instead of establishing that the executor exercised good faith and the care that men of ordinary prudence would exercise in the management of their own affairs, in the making of such deposits, shows.that the executor failed to exercise such good faith and care, and consequently is not entitled to credit for the losses sustained by him through the failure of such bank.

Furthermore, the sale of said Liberty Bonds -by the executor without authority or order from the court, amounted in law to a conversion of such bonds for which the executor was liable, irrespective of the care or lack of care he used in depositing the proceeds thereof.

The deposits of the proceeds of these bonds, as well as the deposits of the proceeds of the other assets of the estate, on interest bearing time certificates of deposit, constituted investments and not ordinary deposits of funds. Such investments were unauthorized and the executor is chargeable with the full amount thereof irrespective of whether such deposits were made in good faith or bad faith and with care or lack of care.

The certificate of deposit for $5,000 issued by the bank to the decedent prior to her death, and permitted by the executor to continue in her name in the same form after his appointment until the failure of the bank, and the certificate of deposit for $13,500 issued in the name of the executor representing certificates in that aggregate amount standing in the name of the testator at the time of her death, stand in no better position, in so far as the right of the executor to claim credit for the losses on same is concerned, than any of the other deposits, as the executor had the same title to these deposits as he had to the other funds of the estate and owed the same duty toward them as he owed in regard to the other funds of the estate. As the executor had personal knowledge of the unsafe condition of the bank, it was his duty to withdraw the amounts of these certificates from the bank and deposit them in a safe bank, and his failure to do so was negligence for which he and his surety are liable.

The checking account and the deposit in the non-interest bearing demand certificate of deposit maintained by the executor in the bank stand on the same basis as the other deposits in so far as the executor’s right to claim credit for losses on account of the failure of the bank. And as he did not exercise good faith and proper care in depositing these funds in the bank and permitting them to remain there, he is chargeable with the full amount of such deposits.

The tender by Cahill to McAllister, administrator, of the certificates of deposit and the assignment of the bank account did not alter the rights of the parties, as the administrator was not required to accept the certificates and account at their face value as conditioned in the tender, but had the right to demand and receive them as assets of the estate and to apply the amount that may be realized from them on the amount found due from said executor on the settlement of his account.

As the executor resigned, it was the duty of the Probate Court to settle his accounts as of the time of the resignation, and the Probate Court was not required to and could not wait until the. complete liquidation of the bank and the application of the funds derived from such liquidation to the amount chargeable against the executor to fix and determine and order paid, the amount due from the executor on such accounting, and consequently the order made by the Probate Court finding the amount due on such accounting from the executor and ordering it paid forthwith, was properly made.

Furthermore, after the filing and approval of the final account, the beneficiaries of the estate of the testator were entitled to receive payment of the various amounts owing them by the estate, and funds for this purpose would have been then available except for the negligence of the executor in depositing the funds of the estate as aforesaid, and it would be unjust and inequitable to punish them for the negligence of the executor by requiring them to wait for the amounts due them, until the slow process of liquidation of the bank had been completed and the deficiency then ascertained and recovery had from the executor and his surety for such deficiency. The executor, upon the payment of the amount found due from him to the estate on an accounting, is entitled to be' subrogated to the claim of the estate against the bank on account of such deposits and to the benefit of any dividends that may be paid thereon, and consequently neither he nor his surety is prejudiced by being required to pay the amount found due from him on his accounting prior to the liquidation of the bank.

As the account of the executor showed the amount due to the estate from him and since the executor was not entitled to any credit for losses sustained by him in the manner above set forth, the order of the Probate Court finding the amount due and ordering the same paid, and the judgment of the Common Pleas Court overruling exceptions to the account, were not erroneous.

Plaintiff in error relies on the case of In re Kruger’s Estate, supra, as authority for the proposition that a final judicial settlement of the account of the executor could not be made for the reason that the obligations of the bank to its depositors are now only in process of liquidation since it is probable that additional dividends or payments will be made from time to time in the future on account thereof, and that final settlement must be deferred until a complete liquidation of the affairs of the depositor has been accomplished.

The Kruger case differs from the case at bar in the following particulars: First, the court in that case found on the facts and law that the administrator was guilty of no negligence or improper action whatsoever in making the deposit of the estate funds and that consequently he is not liable to surcharge under the present proceedings by reason thereof, while in the case at bar the executor was guilty of negligence and improper action in making the deposits of the estate funds and is not entitled to credit for losses sustained by reason thereof. Second, in the Kruger case the administrator did not resign but continued to act, and as tbe administrator was not liable for prospective losses tbe court properly found that a final judicial settlement of tbe account of tbe administrator could not be made until tbe liquidation of tbe bank was completed, while in tbe case at bar tbe executor resigned and bis resignation made a final judicial settlement of bis account necessary and tbe executor is liable for tbe losses sustained.

Holding tbe views hereinbefore expressed, the judgment overruling tbe exceptions to tbe first and final account of tbe executor is affirmed.

Judgment affirmed.

Crow, P. J., and Klinger, J., concur.  