United States Ex Rel. Willoughby v. Howard, 302 U.S. 445 (1938)
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United States ex rel. Willoughby v. Howard
No. 30
Argued November 10, 1937
Decided January 3, 1938
302 U.S. 445
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Syllabus
1. By the common law, it is the duty of a trustee or receiver, unless relieved by agreement, statute, or order of court, to exercise reasonable care in the custody of the fiduciary estate. P. 450.
2. In respect of the care of the funds of the bankrupt estates here involved, the duty of the trustee or receiver was not limited, by any agreement, statute, or order of court, to depositing them in one of the depositories designated by the court under U.S.C. Title 11, § 101. Pp. 450-452.
3. Although designation by the court of depositories for funds of bankrupt estates limits the discretion of the depositing officer and may render him absolutely liable for the loss of funds placed elsewhere, it does not relieve him of the duty of exercising care and prudence within the field left to his discretion. Pp. 451-452.
4. The mere imposition of statutory duties does not remove liability for breach of existing common law duties. P. 452.
5. The contention that the Bankruptcy Act established a depository system -- analogous to the depository system established by Congress for the deposit of Treasury funds -- which relieved trustees and receivers wholly of the duty of exercising care as to the condition or stability of a depository cannot be sustained. P. 453.
6. As trustee or receiver of 123 separate bankrupt estates, H gave bond in each case conditioned, inter alia, on the faithful performance of his official duties. In a bank which made personal unsecured loans to him, and which was one of twenty available designated depositories, he deposited funds of the estates totaling more than eight time the penalty of the bank’s depository bond. He continued to maintain the funds there, although he knew of several heavy runs on the bank, and that its deposits and resources were dwindling. The bank closed its doors, and subsequently actions were brought on the bonds given by H.
Held:
(1) The exercise of ordinary care in making and maintaining deposits, even though made in a designated depository, was part of H’s official duties, and he and his surety are liable on the bonds if he failed in this respect. P. 454.
(2) The evidence on the issue as to whether H had failed in the faithful performance of his official duties was ample -- particularly in view of the personal loans to him -- to justify submitting the question to the jury. P. 454.
87 F.2d 243 reversed.
Certiorari, 301 U.S. 677, to review a judgment reversing a judgment for the plaintiffs in three suits, consolidated for trial, against the principal and surety on a number of fidelity bonds given by the principal as trustee or receiver of bankrupt estates.