Little River Bank & Trust Co. v. Peskin
1966 Fla. App. LEXIS 4778, 189 So. 2d 507 (1966)
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Rule of Law:
An executor is not liable for losses to the estate caused by the embezzlement of its attorney, provided the executor was not negligent in selecting the attorney, did not improperly delegate all functions of the trust, and exercised due prudence and diligence in supervising the administration of the estate.
Facts:
- The appellant-bank, serving as the executor for the estate of Barbara A. Rosenthal, employed an attorney to assist in the estate's administration.
- A residence belonging to the estate was sold, generating net proceeds of $11,716.98.
- The executor's attorney handled the entire real estate transaction.
- At the closing, a check for the proceeds was made payable to the attorney and delivered to him.
- The attorney deposited the check into his trust account on August 14, 1963, and subsequently embezzled a portion of the funds.
- On the same day the check was deposited, the executor made inquiries about the proceeds and thereafter made diligent efforts to secure them.
- The executor recovered $8,100.00 of the embezzled funds, leaving a net loss to the estate of $3,616.98.
- It was stipulated by the parties that the executor was not negligent in employing the attorney and that the embezzlement was solely the attorney's act.
Procedural Posture:
- The appellee, a remainderman of the estate's residuary trust, filed objections to the executor's accounting in the county court.
- The county judge (trial court) entered an order finding the executor liable for the acts of its attorney and ordered it to pay the $3,616.98 shortage into the estate account.
- The executor, as appellant, appealed the county judge's order to the District Court of Appeal of Florida, Third District.
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Issue:
Is an executor liable for the embezzlement of estate funds by its attorney when the executor was not negligent in hiring the attorney and acted diligently to recover the funds?
Opinions:
Majority - Hendry, Chief Judge
No. An executor is not liable for the embezzlement of estate funds by its attorney when the executor was not negligent and acted diligently. An executor is a trustee required to act with prudence, but is not an insurer of the estate's assets. While an executor cannot delegate the entire administration of the trust, delegating a specific task like a real estate closing, including the collection of proceeds, to a qualified attorney is proper. Here, the executor was not negligent in hiring the attorney and, unlike cases involving 'supine inaction,' the executor acted promptly to secure the funds. The loss was sustained despite the executor's diligence, not because of a lack of it, so the executor cannot be held liable.
Dissenting - Pearson, Judge
Yes. The executor should be held liable because the attorney was acting as its agent. The executor had a mandatory statutory duty to take possession of the proceeds from the sale. By allowing the attorney to collect the proceeds without attending the closing or providing specific instructions for the funds' deposit, the executor failed to exercise the active vigilance required of a personal representative. This failure to properly direct its agent and secure the estate's assets constitutes a breach of the executor's fiduciary duty, making it responsible for the resulting loss.
Analysis:
This decision clarifies the scope of an executor's liability for the malfeasance of its agents, distinguishing between proper delegation and improper abdication of fiduciary duties. It establishes that an executor is not strictly liable for an attorney's criminal acts if the executor itself has not been negligent. The ruling protects fiduciaries who act prudently by focusing the liability analysis on the fiduciary's own conduct—diligence in selection and supervision—rather than imposing vicarious liability for the unforeseeable criminal acts of an agent. This precedent reinforces that liability stems from the executor's 'supine inaction,' not from the mere act of delegation.
