McDuffie v. McIntyre

The opinion of the court was delivered by Haskell, A. J. The facts of the case are simple. Heal estate belonging to infants was sold under an order of the court, and a bond and mortgage taken by the commissioner in equity to secure the payment of so much of the purchase money. A guardian was subsequently appointed, and the commissioner turning over to him, under an order of the court, the proceeds of the said sale, assigned to him the said bond and mortgage. The guardian sold and assigned the bond and mortgage, on which there was a balance still unpaid, to the plaintiff in this action. The purchaser paid the larger portion in money, but to the extent of about $700 he paid by a debt due to himself by the guardian personally. He (the purchaser) has now brought an action to foreclose the mortgage, and the question has arisen whether he or the infants are the .legal owners of tthe bond and mortgage. The infants claim that they are legally entitled. The foreclos — 560 — ure has been had, and the money is now in the hands of the court awaiting decision upon the point. The guardian has entirely failed to account, and is now insolvent, as are his sureties also. The Circuit judge has decided, first, that the guardian had the legal right to sell the bond and mortgage as if it had been his own; and, secondly, that even if he had not the legal right, the sale would have been made by the court under the circumstances, and should now be confirmed. The first conclusion of law is regarded by this court as entirely erroneous, and the second as based upon a presumption of facts which the evidence in no wise sustains. The cases of Bailey v. Patterson, 3 Rioh. Eq. 156, and Moore v. Hood, 9 Rich. Eq. 311, are conclusive on the point that a guardian has no legal title to the personal property of his ward, and that a sale by him is voidable, at the option of the infant, when he comes of age. In the former the purchaser was made to deliver up the property, while in the latter case the court said: “ It is not intended to be intimated that the purchaser in this case could not have been successfully pursued if he and the slaves had been found within the jurisdiction.” Page 327. The appellants only ask against the purchaser the proceeds of the judgment of foreclosure. They are entitled to that relief. The bond and mortgage have been held by the purchaser in trust for them, and must now be turned over to them as the legal owners. The remedy for the purchaser, if he has any, is against the guardian. This case is stronger, if anything, than that of Moore v. Hood, where the sale was made under an order of a court, but in a proceeding to which the ward was not a party. The Circuit judge, however, seems to rely on the case of Long v. Cason, 4 Rich. Eq. 60, and claims that the decision in that case “ draws a distinction between the sale of a chattel, such as a slave, and the collection of a debt, or the sale and assignment of a bond and mortgage and chose of the ward, and seems to recognize the legal power of a guardian to sell and transfer a bond and mortgage belonging to dn infant.” "We can find nothing in the case or elsewhere to justify such an inference, but, on the contrary, the whole tendency of the discussion in that case is the other way. What the case really does decide is thus plainly stated by the court in its con561 •eluding words: “ It it not necessary, in this case, to determine what may be the operation of the statute [of limitation] against an infant with guardian as to legal demands standing in the name of the infant. Our judgment is limited to the case presented. We hold that as to a chose of the infant not assignable at law, and peculiarly within the power and duty of the guardian, the laches of the guardian, in the absence of collusion, by •operation of the statute of limitations, bars the infant as to strangers, and leaves him to his remedy against the guardian.” The court does discuss what is “ within the power and duty of the guardian,” and in so doing distinctly recognizes the authority of Bailey v. Patterson, and disavows any recognition of the doctrine intimated in Field v. Schieffelin, 7 Johns. Ch. 150, and held in Bank of Virginia v. Craig, 6 Leigh 399, “that guardians have the same title to the personal estate of their wards as executors have to the personal assets of their testators.” The decision of Long v. Gasón was concurred in by the Chancellor, whose decree was adopted by the court in Bailey v. Patterson, and although another Chancellor (Dargan) dissented, it was upon grounds totally different. Examination of both opinions will show that the whole court assented to the proposition of law that “ the guardian is not possessed of any legal estate in his ward’s chattels or choses.” This fact in law is the very difficulty which the dissenting Chancellor cannot surmount; for, to his mind, the statute could only run against the guardian if the legal title was in him; while, to a majority of the court, it appeared that the possession of the right of action, with the power to receive and acquit, was sufficient. That such is the meaning is put beyond doubt by remarks in Moore v. Hood, by Chancellor Wardlaw, who delivered the opinion in both cases. In discussing “ the rule requiring beneficiaries to be parties, * * * although the trustees have the legal title,” and, a fortiori, where they have not the legal title, as in the case of guardians, he says, “ It was adjudged in Bailey v. Patterson, 3 Rich. Fq. 156, and recognized iu Gason v. Long, 4 Rich. Fq. 60, that a guardian has not the legal title of his ward’s chattels, and that his sale of them is voidable at the option of the ward. Long ago it was decided, in Inwood v. Twyne, — 562 — Amb. 419, 2 Eden 148, that a guardian could not change the character of his ward’s estate without the authority or sanction of the court, and this doctrine was recognized in Capehart v. Huey, 1 Hill Ch. 409.” The authorities upon the point are conclusive, and the judgment of the Circuit Court that the guardian had the right and the legal power to sell the bond and mortgage in question must be reversed. But the Circuit judge goes further, and comes to the same conclusion, in the results at least, upon the additional ground that such sale was a mere “ change of the nature of the infant’s estate,” which would have been directed by the court under the circumstances, and which the court should afterwards confirm. The doctrine upon that subject is thus well expressed in Long v. Cason: “In general, guardians cannot change the nature of infant’s estates, but they may even do that, as is said by Lord Hardwicke in Inwood v. Twyne, Amb. 419, 2 Eden 148, under particular circumstances, and the court will support their conduct if the court would do it under the same circumstances. They are entitled, however, to the possession and management of all the property of their wards, and to the collection and disbursement of all the income, profits and credits arising therefrom. Their authority extends to bind the infants by all such acts as appear to be for the advantage of the infants, and for which the guardians are liable to account. I apprehend that a guardian has plenary right to receive moneys coming to his ward, and to prosecute, compound and acquit any debt or liability to the ward. He always acts under responsibility to his ward for the faithful and judicious performance of his trust, and is liable for any fraud, gross negligence or other breach of trust. But a stranger’ dealing with him as to the choses of the ward may rightfully presume that he is acting for the benefit of the infant, and in the absence of any evidence of collusion, does not partake of the guardian’s responsibility.” What is meant by “ possession and management of all the property of their wards ” is thus defined and limited in Moore v. Hood, supra: “Management of an estate implies its administration in its existing state, but the order here affected the corpus of the estate and changed its nature.” It will be seen that such was the effect of the “ man — 563 — agement ” in the present case. The Circuit judge relies on the opening and concluding sentences of the portion above quoted, and omits to take any notice of the intervening expressions. The remarks with regard to strangers dealing with guardians are in no sense connected with the sentence of Lord Hardwicke. That part refers to transactions which are in their nature voidable at the option of the ward, but confirmable by the court if, under the circumstances, they seemed really wise and proper, though the guardian hád not the legal power; while the latter portion, in speaking of stangers dealing with guardians, relates only to those transactions which flow out of the exercise of the properly legal powers of guardians, for which, while the guardians are responsible, strangers are not liable where there was no collusion. For instance, if the mortgagor had satisfied the bond and mortgage by paying the money to the guardian, and the guardian wasted the money, the mortgagor would not be liable because of the waste. But if, on the other hand, the payment had been made by means of a debt due by the guardian personally to the mortgagor, or the money had been paid with the understanding that it would be loaned back to the mortgagor without security, or for other purposes of misapplication, there would be fraud or collusion on the part of the stranger, and he would be liable. That a stranger is not protected, either at law or in equity, in the purchase of property to which the vendor has neither legal title nor power of sale, is too obviously a general proposition to need authority, and that is just the case where a guardian sells the property of his ward without authority from the court. The only grounds upon which such sale can be confirmed are those which would have induced the court at the time to order the act to be done, together with the other, that it has turned out to the advantage of the ward. The evidence produced in the case will not permit such a conclusion. The sale of the bond and mortgage was for, in part, money, and in part a debt owed by the guardian personally to the purchaser. It cannot for a moment be said that the court would have ordered such a proceeding. The change of the nature of the estate was practically from a bond secured by real estate into a loan to the trustee without any security. It was, in law, a fraud on the part of the — 564 — trustee, and the mode of payment was notice to the purchaser, for it was, per se, a misappropriation of the ward’s money, and gave him full warning that he was proceeding entirely at his own risk, relying upon the guardian and his sureties to account to the ward. The evidence is conclusive that the character in which the guardian held the bond and mortgage was known to the purchaser, for it was upon the instruments themselves. The part payment by debt past due, and owed by another than the guardian as guardian, was in itself a misapplication, and the circumstantial evidence that the whole amount was to be put by the guardian to his own use, and that .the purchaser ought to have suspected it, (if he did not know it,) is very strong. Such being the case, the burthen of proof is entirely upon the purchaser. Neither he nor the guardian have produced a tittle of proof that the whole amount was not misapplied, nor anything to justify such use of the property of the ward. It was, in substance, a loan without security to a party against whom there were at the time judgments to large amounts unsatisfied, and his circumstances at best embarrassing. And, as has been so well said in Spear v. Spear, 9 Rich. Eq. 184, by way of comment upon the case of Sweet v. Sweet, Spears Eq. 309, the guardian’s bond is not to be regarded as the security required by law for investments of money belonging to the estate. “ It is proper,” says the court, “for the security of his [the guardian’s] beneficiaries and his own sureties, and for the avoidance of litigation of a particularly disturbing character, that the trust estate should be secured doubly: first, by stock or bonds, in which it may be invested, and then by his own bonds.” Thus, a trustee who gives his bond for the faithful performance of his duties, is bound to treat the trust funds exactly as a trustee who has not given such a bond, to act tvith the same diligence and to obtain the same security on his investments. The conclusion of the court is, therefore, that the sale was without authority of law; that the evidence shows no grounds which would justify the court in confirming the sale; that, on the contrary, the circumstances are such as would have rendered the purchaser liable, (Rhame v. Lewis, 13 Rich. Eq. 269,) if. the legal title in the vendor had been proved, and only the breach of trust with collusion on the part of the — 565 — purchaser had been the question; that therefore the sale is void as against the wards, and they are legally entitled to the benefit of the proceedings in foreclosure to which they have been made parties. The case is remanded, that such proceedings as may be necessary may be had, in conformity with the views herein expressed. Motion granted. Willard, C. J., and McIver, A. J., concurred.