Ames v. Ames
757 S.W.2d 468 · 1988
Facts
R.E. Ames and R.G. Ames were employees of Threaded Steel Products Company and participants in its profit-sharing plan. Mike Ames, the plan's trustee, failed to distribute their shares after the plan's termination. Instead, Mike Ames deposited the profit-sharing funds into a certificate of deposit at Heights State Bank and wrongfully pledged these funds as collateral for commercial loans made to Threaded Steel Products Company. The bank, aware of Threaded Steel's poor financial condition and Mike Ames's role as trustee, subsequently used the CD funds to offset the company's commercial loans. R.E. and R.G. Ames had not authorized the use of their trust funds as collateral.
Issue
Did the district court err in denying the Appellants' Motion for Judgment Notwithstanding the Verdict against Heights State Bank, given that the evidence established the funds were profit-sharing trust funds and the bank knew this? Was the jury's finding that the funds were not profit-sharing trust funds against the great weight and preponderance of the evidence?
Holding
The court reverses the judgment in favor of Heights State Bank against R.E. and R.G. Ames and remands that cause of action for a new trial. The judgment against Mike Ames is affirmed and reformed with additional damages.
Rule
A bank is liable if it has notice or knowledge that a breach of trust is being committed by an improper withdrawal of funds, or if it participates in the profits or fruits of the fraud. If a bank knows that deposits by a debtor in his own name are in fact held by him in a fiduciary capacity, the bank may not apply such funds to the individual indebtedness of the debtor. A jury's verdict may be overturned if it is so against the great weight and preponderance of the evidence as to be manifestly wrong and unjust, and appellate courts can review a jury's 'failure to find' under this standard.
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