Opinion
No. 32694.
April 12, 1937. Suggestion of Error Overruled May 10, 1937.
1. GUARDIAN AND WARD.
Guardian held liable to ward for premiums paid on ward's life policy, notwithstanding chancellor had authorized procurement of policy and expenditures thereunder, since investments in life policies are not specified in statute authorizing investments by guardian, but whatever value policy had, inured to benefit of guardian (Code 1930, sec. 1885).
2. GUARDIAN AND WARD.
Guardian held liable to ward for damage to realty owned by ward but no interest was allowable except from date of final decree approving final account.
3. GUARDIAN AND WARD.
Guardian held liable to ward for amount which guardian failed to bring forward from prior annual account through oversight of attorney who prepared subsequent account, but guardian was not liable for interest on such item.
4. GUARDIAN AND WARD.
Guardian, who had obtained authorization from chancellor to invest ward's funds in savings banks, and in loans, withdrew savings accounts because of apprehension as to soundness of banks, and whose annual accounts were not accompanied with detailed reports as to loans held not chargeable with interest because his accounts designated as cash assets represented by loans, where evidence showed that guardian accounted for interest which he collected, and that he did not use idle money for his own benefit (Code 1930, sec. 1889).
5. GUARDIAN AND WARD.
Evidence disclosing that ward's stock never paid a dividend after coming into hands of guardian, that only offer guardian ever had for stock was a nominal sum, and that guardian was not successful in realizing anything in bankruptcy proceedings of corporation which issued stock, held to transfer burden of proof to exceptor to show that at some time something could have been obtained out of such stock (Code 1930, sec. 1889).
6. GUARDIAN AND WARD.
Guardian must use reasonable diligence to acquire and to properly manage, ward's estate, and his failure to do so is negligence, but to make negligence actionable, person complaining must aver and prove injury.
7. GUARDIAN AND WARD.
Guardian held not chargeable with stock which was at one time held by guardian of ward's father, which stock never came to guardian's possession, and existence of which was not proven (Code 1930, sec. 1889).
APPEAL from the chancery court of Newton county. HON. A.B. AMIS, SR., Chancellor.
Flowers, Brown Hester, F.W. Bradshaw and Robert Burns, Jr., all of Jackson, and J.M. Carr, of Newton, for appellant.
It is the duty of the court to require and see that the guardian fully develops his case so that the findings of the court may be fair and just and not to encompass him or prevent the full development of the facts by applying the rules of evidence in the case of an ordinary party complainant. We concede that when a final account is contested, the burden is upon the guardian to substantiate his account, but that this is the extent of his burden. The account and a proper substantiation thereof makes out a prima facie case and the duty then shifts to the contestant to disprove or show error in those items which he seeks to contest which would stand as correct if no proof were offered for either side. In other words, the burden of proof in a matter of this kind necessarily must shift from time to time and this was contemplated by the Legislature by section 1744 of the Mississippi Code of 1930.
Austin v. Lamar, 23 Miss. 189; Roach v. Jelks, 40 Miss. 754; Griffith's Mississippi Chancery Practice, sec. 563; In re Kostohris Estate, 29 P.2d 829.
We submit that the record of this case presents such a situation of confusion that we cannot possibly see how the chancellor ever arrived at any conclusions at all and that it was his privilege and duty, under the law, because of this state of confusion, to remand the case for further proof and to require the parties to bring before the court sufficient evidence to enable the court to arrive at a fair and proper determination.
Gillis v. Smith, 75 So. 451; Quitman Lbr. Co. v. Turner, 48 So. 819; Witherspoon v. State, ex rel. West, 103 So. 134; Donly v. Ray, 6 So. 324; Clark v. Clark, 1 So. 835; Kirby v. Gay, 101 So. 705; Beard v. Green, 51 Miss. 854; McAllister v. Richardson, 60 So. 570; Clemons v. Dennis, 181 S.E. 387.
Prior to the filing of the Tenth Annual Account, appellant presented a petition to the court for authority to take out a $5000 life insurance policy on the life of his ward, payable to the ward's estate and in response to his petition, the court authorized the taking out of the insurance policy and the payment of premiums thereon. No proof was offered during the trial of this cause as to this policy. The only part of the record dealing with this policy and on which the court based its opinion is contained at page 210 of the record. It consists merely of a statement by counsel for appellant that he would like to read the decree which was entered relative to taking out of this insurance policy. Whereupon the court interrogated counsel as to the whereabouts of the policy and counsel for appellee then announced, "We have the policy. It is in court today." This policy was in the hands of counsel for appellee, according to his own statement and he failed or refused to introduce the policy in evidence and it is not before this court today. It is one of the items on which he is seeking to surcharge this guardian and it was his duty to introduce the policy and to make proof thereon and although he stated in court that he had the policy, he made no attempt to produce it or offer it in evidence. We submit that the burden as to this item was on appellee.
Section 1885, Code of 1930; In re Parker, 77 S.W.2d 816.
The question of obtaining insurance for a ward in a guardianship matter is comparatively new in all the states and the decisions on this point are limited. The only case that we have been able to find that constitutes direct authority is the recent case of In re Guardianship of Burgy et al., 257 N.W. 791.
The only proof in the record is that the stock was worthless during the entire time and we submit that it was serious error for the lower court to hold appellant liable for the par value of this stock, and in addition thereto compounded dividends and interest thereon.
The law of this state with reference to the duty of guardians is clearly defined in the case of In re Adams Guardianship, 152 So. 837. It is specifically held in the Adams case that the only duty imposed upon a guardian is the exercise of reasonable care and diligence. There is nothing in the testimony of the appellant to indicate that he failed to exercise such care. In fact, the testimony is conclusive and clear that he did exercise reasonable care and diligence even to the extent of following the stock into the bankruptcy court and making proof of his claim therein.
Scoville v. Brock, 81 Vt. 405, 70 A. 1014; In re Fulton Trust Company of New York, Trustee, 257 N.Y. 132, 177 N.E. 397, 77 A.L.R. 499; Coffin v. Bramlett, 42 Miss. 194; In re Dempster's Estate, 162 A. 447.
Section 1885 of the Mississippi Code of 1930 provides that the guardian shall report to the court when he has surplus funds on hand not needed for expenditures for authority and direction as to the manner of investment. On September 6, 1923, appellant presented a petition to the chancery court of Newton county, showing that he had $1400 on hand not needed for expenditures and praying that he be authorized to deposit it in the Bank of Hickory at 4%, and on September 6, 1923, an order was entered by the court authorizing appellant to deposit $1400 on the Bank of Hickory at 4% interest, and yet, the lower court found that appellant had not strictly complied with section 1885 of the Code of 1930, and that he should be charged with 6% interest. We submit that this finding is entirely erroneous. This order specifically authorized appellant to deposit the sum of $1400 at 4%, and under no theory of law or reason could appellant be charged with 6% on this $1400. On September 12, 1923, appellant reported that he would have surplus money on hand not needed for current expenses and prayed that he be authorized to lend the money at not less than 6% per annum and an order was entered by the court authorizing him so to do. The court now finds that appellant has not strictly complied with section 1885. If this is not in compliance, we do not see how the section can be complied with. In spite of this order authorizing him to lend funds at 6% per annum, he is charged in the restated final account with 6% per annum compounded.
On June 9, 1925, appellant reported to the court that he had an opportunity to sell certain lands in the state of Florida belonging to his wards, and an order was entered by the court on June 9, 1925, authorizing him to sell the land for not less than $8000, of which one-fifth, or $1600, would belong to appellee and further authorizing him to deposit the proceeds in the Newton County Bank on time deposit at 4% per annum, or to lend it on first mortgage security at 6% per annum, and yet the lower court held that appellant had not strictly complied with section 1885 of the Code. We submit under this order, appellant had authority with regard to this $1600 to either deposit it at 4% or lend it at 6%. In other words, he was given an option and a discretion as to which he would do with the money and now on an action to hold him liable for interest, he is entitled to the most favorable option granted in that order, and he can only be held for interest on this sum of money at the rate of 4% per annum.
White v. Moore, 144 So. 696; In re Guardianship of Steward, 37 A.L.R. 441, 105 Neb. 787, 181 N.W. 941; Crump v. Gerock, 40 Miss. 765; Noble's Admr. v. Moses, 1 So. 217, 81 Ala. 530; Morgan v. Mortgage Discount Co., 129 So. 589, 100 Fla. 124.
A.B. Amis, Jr., of Newton, for appellee.
Section 1744 of the Mississippi Code of 1930 provides: "Any person interested may, at any time within two years after final settlement, by bill or petition, open the account . . . and evidence shall be admissible in such cases to show the falsity of the account . . ." The section on its face shows the purpose of the rule that the burden is placed on him who files the bill or petition to open or falsify an account after final settlement. Certainly the burden would be on the complainant or petitioner. In the case at bar, however, there had been no final settlement and no bill or petition was filed to open a final settlement, but instead the final account was filed and exceptions were filed thereto. What then is the rule with reference to the burden? We say that, in effect, the guardian who offers the final account has the burden of proving the correctness of the final account. The final account in legal contemplation is nothing more nor less than an original bill. The exceptions thereto are nothing more nor less than an answer. With an original bill and an answer denying the material allegations of such bill, on file, then is the cause at issue, and, if so, upon whom is the burden? Certainly it is upon the complainant to prove by competent testimony the allegations of his bill so as that the relief prayed for may be granted. In the case at bar the appellant filed the final account and said that it was correct and asked that he and his bondsmen be discharged. The appellee filed exceptions to such final account and pointed out wherein such final account was incorrect. The burden then most assuredly was upon the guardian who offered the final account to prove the correctness thereof. Section 1744, Mississippi Code 1930, does not in any wise change the rule above announced because when one proceeds under such section he becomes the complainant or petitioner and the burden is on him to prove his case. Again we say that such section is not applicable in the case at bar.
This court in the cases of Crump v. Gerock, 40 Miss. 411, and McFarlane v. Randall, 41 Miss. 411, has held that a guardian may be allowed to correct palpable errors in his annual accounts. This the guardian clearly has the right to do, but in the case at bar when the matter was called to his attention, he made no effort to correct same but insisted that he had the right to hold such balance.
Insofar as the rule as laid down in Griffith's Mississippi Chancery Practice, section 563, and cited by appellant, we admit the rule and say that if that rule be here applied then most assuredly the burden will be on the appellant to prove his account. If no evidence be offered by the appellant to prove the correctness of his final account then most assuredly the account would fail of approval and allowance.
Ames v. Williams, 74 Miss. 404; In re Adams Guardianship, 152 So. 837; Coffin v. Bramlett, 42 Miss. 194.
The annual account is a part of the regular administration of the court, is intended to inform the judge and also interested parties of the status and general conduct of the guardianship, and is usually accepted and filed ex parte and without a hearing. Besides the ward, who is the party in adverse interest and who is legally and usually actually incapable of protecting his rights is in this matter the adverse party. It would, therefore, be grossly unjust to make the annual accounts conclusive against the ward, though they have been accepted by the court. 12 R.C.L., pages 46, 47.
On the question of the liability of the guardian for life insurance premiums as by him paid we take the position that section 1885, Mississippi Code 1930, is controlling.
Carlisle v. Love, 155 So. 197.
True it may be that this appellant had a decree of the chancery court authorizing the investment of funds in life insurance on the life of the ward, but we say that the chancery court cannot legally authorize the doing of an unlawful act. If the statute means what it says and what this court has construed it to mean, then the decree of the chancery court authorizing the purchase of such insurance is a nullity and does not protect the guardian because the purchase of insurance with the ward's funds is an illegal act.
We, like the lower court, think that the case of Owens v. Owens Estate, 37 So. 149, is controlling in the case at bar insofar as this stock question is concerned.
The rule with reference to the duty of the guardian is, as we understand it, as laid down in 12 R.C.L., page 47, under the title Guardian and Ward, wherein it is said: "But there should also be added by the court and surcharged to the guardian, any property, whether principal or income, which he would have received by the use of reasonable diligence."
McWilliams v. Norfleet, 63 Miss. 183; Coffin v. Bramlett, 42 Miss. 194; In re Adams Guardianship, 152 So. 837.
We take the position that the duty was on the appellant to take some action with reference to this stock. Had the appellant advised the court of the fact that he had such stock and that same was not paying dividends and asked authority to dispose of same or to sue for dividends the court would have granted such right. The guardian, however, did not so advise the court, but instead sat quietly by and allowed the concerns to be placed in bankruptcy and then says that the estate lost nothing because he does not think the stock ever was worth anything.
The decree rendered by the probate court allowing the annual account of a guardian is final as to him in that court; the ward may re-open the account by bill of review but no such right is vested in the guardian.
Johnson v. Miller, 33 Miss. 553; Effinger v. Richards, 35 Miss. 540; Crump v. Gerock, 40 Miss. 765.
A guardian and his sureties are accountable not only for money collected and reduced to possession, and which actually came into his hands, but also for money which he might and could have collected by proper diligence.
McWilliams v. Norfleet, 63 Miss. 183.
Now as to the question of whether or not the lower court was right in charging the appellant with interest on the annual balances, we must first look to the provisions of section 1885, Mississippi Code 1930. As said by the lower court, the penalty of 8% interest seems to apply as a penalty pure and simple as against a guardian who fails to report to the court the fact that he has on hand surplus monies. If in truth and in fact the guardian shall have made annual accounts and shown thereby that he has on hand surplus monies as contemplated by such section, then the penalty shall not apply. On the other hand, however, if the guardian be directed to loan the money out at not less than 6% interest per annum, then certainly he will become liable for interest for his failure to so loan same out. Insofar as this record shows the guardian never at any time loaned any of the money out in accordance with the decree about which counsel complain. If this court should say that pursuant to the decree as rendered on September 12, 1923, the appellant had the right to loan these surplus monies out at not less than six per centum per annum then the question arises as to whether or not he did so loan same out at 6% per annum. So far as this record shows he did not loan out one penny of the money and the guardian cannot now be heard to say that he did.
McFarlane v. Randall, 41 Miss. 411.
Certainly the rule is and has always been in this state that a guardian having filed an annual account and by which he charges himself with a balance on hand in dollars and cents, cannot thereafter be heard to say that in truth and in fact he did not have the balance in cash but in securities. Or even conceding for the sake of argument that the guardian could show by parole testimony that he had invested the monies and that he did not have the money in cash, we submit that this record fails to show such. The record on the other hand positively shows that the guardian was given an opportunity to examine the records so as to show that he did actually make loans of this ward's funds, but said guardian failed to thereafter offer any proof to show any such loans as he claimed to have made of this ward's funds.
The next question raised by appellant is the question of liability of the appellant for the sum of $160 for damage to real property of this ward. In answer to counsel's contentions on this question, we merely wish to say that there is ample testimony to support the findings of the chancellor that the property had been damaged as much as $800 and that this ward was entitled to recover one-fifth thereof, she being the owner of an undivided one-fifth interest in said land.
Section 1878, Code of 1930.
Argued orally by F.W. Bradshaw, for appellant, and by A.B. Amis, Jr., for appellee.
On January 24, 1919, S. McCary was appointed guardian for his granddaughter, Orvella Horne. The guardian filed seventeen annual accounts, all of which were approved, and on May 6, 1936, he filed his final account, the ward being then married and having become twenty years of age. Soon thereafter the ward filed numerous exceptions to said final account, most of which exceptions were correctly overruled and disallowed by the chancellor. Other exceptions were sustained, which increased the admitted balance due to the ward by several thousand dollars, and the guardian has appealed.
We are of the opinion that only three of the exceptions were well taken and are sustained by this record. The first is in respect to the life insurance premiums. It appears that on March 2, 1928, the chancellor made an order on a petition presented by the guardian for that purpose, allowing the guardian to take a policy of life insurance on the life of his ward in the face amount of $5000 and to pay the annual premiums out of money of the ward on hand. The premiums were so paid each year, were carried in all subsequent annual accounts, which were all approved as aforesaid. In her exceptions the ward challenged this expenditure, and upon her coming of age before the final hearing, she expressly repudiated the insurance transaction and tendered the policy to the guardian.
The authority for this expenditure must be found, if at all, in section 1885, Code 1930, chapter 201, Laws 1914. In Carlisle v. Love, 170 Miss. 621, 636, 155 So. 197, it was held that the investments which the guardian may make under that section are only such as are therein specified, and since investments in life insurance policies are not so specified, we are compelled to hold that the chancellor had no authority to make the order mentioned nor to approve the expenditures thereunder. The guardian is, therefore, liable for each premium paid, together with 6 per cent. simple interest to be calculated from the date of each of the said premium payments; provided, however, and when, the ward shall deliver the policy of insurance to the guardian with whatever indorsements or assignments may be reasonably required by the insurance company, so as that whatever surrender or other value the policy may have, if any, shall inure to the benefit of the guardian.
The exception in respect to the damages to certain real estate owned by the ward is also well taken, and is sufficiently sustained by the evidence. This item amounts to $160; but as it is one for unliquidated damages, no interest is to be allowed upon it, except from the date of the final decree appealed from, to-wit, September 28, 1936. The other, or third exception, to be allowed is the item of $39.91, which the guardian failed to bring forward from his second annual account, through an oversight of the attorney who prepared the subsequent account. This item is to carry no interest charge.
All the other exceptions, so far as allowed by the chancellor, should have been overruled and disallowed. One of these items deals with interest on all the stated balances of cash on hand as shown by each annual account. Within due time after the guardian came into the possession of money of the ward not needed for current expenses, he reported the fact to the chancellor and petitioned for authority to make loans thereof. Part of the money was ordered to be put in bank on savings account at 4 per cent. interest and the remainder was directed to be loaned on security at 6 per cent. annual interest. The money which was directed to be deposited in bank on interest was so deposited, and was kept deposited until the guardian became uneasy over the banking situation and withdrew these deposits, there being more than $10,000 in all of such deposited funds, it being worthy of remark here that both the banks in which these funds were deposited subsequently failed. He testified, without dispute, that he kept the funds loaned on security so far as he could find safe loans with reasonable effort; and in view of the disastrous times and doubtful conditions during which he was burdened with this estate, we are prepared to commend his caution.
But his annual accounts were not accompanied with detailed reports showing each loan, to whom made, and the security therefor, and how much not loaned remained in cash. He simply charged himself with the total belonging to the ward as if cash in his hands, and charged himself with the interest collected and from whom. The accounts were so stated, however, that the chancellor could not in any of them have been mistaken, upon a careful inspection of them, that the cash reported as on hand was, in fact, nearly all loaned out at interest. The chancellor throughout all these years never at any time required the accounts to be more fully stated, the testimony of the guardian being undisputed that he furnished his attorney with the facts and the attorney made up the accounts therefrom, and they were approved.
When section 1889, Code 1930, which in the same form has been in all our Codes for years, is examined, it will be observed that what is specifically required of annual accounts is that receipts and expenditures shall be shown. There is nothing in the section which expressly requires a full and complete showing as to the entire status of the estate, whereas the general interpretation given to such statutes in well administered courts of probate, or those exercising similar powers in this country, is that the annual account of a guardian should be accompanied with a report showing the status and condition of the estate, its assets and the several kinds thereof, so far as there has been any change from the inventory, and how the lands have been managed, and, if rented, to whom and for how much, and if any lands are idle, the reasons therefor. And in the same quality of detail as to loans and investments, so that the ward or any person interested in him or her may, from time to time, obtain full information from the accounts and reports.
But for years in the past, and until recently, and even yet in perhaps the majority of instances, the average member of the bar has prepared his annual accounts simply by stating the receipts and expenditures, as was done in this case. And when the chancellor requires nothing further but accepts and approves such accounts, we are of the opinion that the guardian, who is a layman and must rely upon his attorney and the chancellor as to such details, ought not to be penalized in regard to formal matters for such reliance upon his counsel and the chancellor. Here, when under the present exceptions, the form of these accounts was challenged, the guardian offered to show to whom these loans had been made and how secured; but the chancellor rejected the proof because the accounts showed cash on hand instead of loans. Until section 1889, Code 1930, shall be so amended as to state in express words the proper practice as to accounts and reports, or until the chancellors shall have, by their administration, fully posted the bar as to the requirements, we think it unduly harsh to charge guardians with technical interest, unearned interest, in such a case as this, which is, that the evidence shows that this guardian accounted for every dollar of interest which he collected, that he did not allow money to lie idle in his hands without good excuse therefor, and there is no word of proof that he used the idle money, or any part thereof, for his own benefit, as was the case in Owens v. Owens' Estate, 84 Miss. 673, 37 So. 149.
The other two main exceptions allowed by the chancellor dealt first with the ward's one-fifth interest in the capital stock of the A-I-M Percolating Corporation of Virginia. The undisputed testimony shows that this stock never paid a single dividend after it came into the hands of the guardian, that the only offer the guardian ever had for the stock was a nominal sum by one of the officers of the corporation, and that the corporation went into bankruptcy in 1932, and that although the guardian took steps to realize something in the bankruptcy proceedings, he was unsuccessful. This was sufficient in our opinion to transfer the burden of proof to the exceptor to show that at some time something could have been obtained out of this stock, and to suggest some course by which this probably could have been done. The ward is in no position to allege that the guardian should have gone to Virginia to inquire into this matter, for she objected to the allowance of the expenses of the guardian, who made two trips to Florida to look after an orange farm there, out of which the guardian finally realized by sale a sum larger than any person connected with these estates had ever considered as likely to be obtained. The exceptor offered not a word of proof as to the value of this corporation stock at any time after it came into the hands of the guardian, or any proof that he could at any time have obtained enough out of it to cover the expense of pursuing it. It was stock acquired not by the guardian, but by the deceased father and mother of the ward long before the guardianship was begun. The record is suggestive of the probability that the corporate stock was simply what is commonly termed wild-cat stock, which is often found among the papers of decedents, especially those who were inclined to take a chance, an inclination which is disclosed by the orange farm investment of this particular decedent.
And for stronger reasons the chancellor should have rejected, in the second place, the exception in regard to the stock, Ferrodine Chemical Company, also a Virginia corporation. This stock never came into the hands of appellant at all. It was at one time held by Hopkins, guardian of the father of the ward, the father having become non compos mentis. Hopkins reported this stock in his inventory of December 9, 1918, together with the said A-I-M Percolating stock. On June 18, 1923, Hopkins reported that these stock certificates had been destroyed by fire and asked authority to go to Virginia to see about a reissuance thereof, or to employ an attorney to protect the interests of the estate in that matter, and an order was made in accordance with the prayer of that petition. It appears that the A-I-M Percolating stock was reissued and was delivered to appellant by Hopkins, but nothing further anywhere appears as to the Chemical Company stock; no dividends were ever reported by Hopkins on this latter stock, and it was not turned over to appellant when the Hopkins' guardianship was closed.
There is no doubt of the legal obligation of a guardian to use reasonable diligence to get into his possession, and to properly manage, the estate of his ward after it comes into his possession. His failure to do so is negligence; but in order that negligence shall be actionable, it is an essential element that the person complaining has been injured by that negligence; and this injury must not only be averred by the complaining party, but he must produce some proof of it. These are all elemental principles of the law, applicable as well to guardianship as to any other relation in life. There is not a word of proof that this chemical company was in existence at the time of the close of the Hopkins' guardianship, from which it follows that appellant cannot be held liable for failure to obtain from Hopkins the stock in the then nonexistent corporation — nonexistent so far as the proof in this case shows. Had this stock been delivered by Hopkins to appellant, or had there been any proof that the corporation was then or subsequently in existence, it may be that the burden would have been on the guardian to offer such proof as to disclose prima facie that the stock was worthless, or that nothing substantial could be realized out of it; but here the case rests simply on a presumption that a private corporation shown to have had a previous existence in a distant state continued to exist, as a going concern, and this without any proof as to the previous nature, business, or financial stability of the company. The experiences of the last several years admonish us against the allowance of that particular presumption in the absence of the proof last mentioned, except as slightly probative and subject to be overthrown by slight circumstances. The proof seems sufficient to overthrow the presumption here, in that Hopkins, whose reports and petitions to the court throughout indicate that he was a man of capacity and integrity, never reported a dollar of dividends on this particular stock and was never required to do so, and apparently never succeeded in getting a reissue of the burned certificate, thereby indicating that the concern was no longer in active existence.
The court properly ruled on the question of attorney's fees in regard to the final account and the contest thereof, and properly allowed the guardian the additional compensation mentioned in the decree.
The decree is affirmed in part and is in part reversed, and the cause is remanded with directions to disallow all exceptions except the three first hereinabove mentioned, and that the court render a final decree in accordance with this opinion.
Affirmed in part, and in part reversed, and remanded with directions.