Montgomery v. First National Bank of Newport

George Rose Smith, Justice. This case went off below on demurrer, the chancellor holding that the plaintiff’s complaint showed on its face that her asserted causes of action were barred by laches. This appeal is from the ensuing orders of dismissal. The complaint names three defendants: The First National Bank of Newport, administrator of the estate of the plaintiff’s father, Lucas G. Balch; American Employers Insurance Company, surety on her father’s bond when he was serving as her guardian; and the Newport Federal Savings & Loan Association. In substance the complaint asserts: The plaintiff was born on August 15, 1941. In 1951 she became entitled to $12,500 as the proceeds of an insurance policy upon the life of her brother. Her father was appointed by the probate court as her guardian, with the defendant American Employers as the surety on his bond. Balch, as guardian, collected and invested the insurance money. In October of 1959 he obtained an order of the probate court which recited that he had turned his daughter’s property over to her when she attained her majority. The property then consisted of $2,900 in Government bonds, a savings account of $10,000 on deposit with the defendant Newport Federal, and a small bank account that does not appear to be in issue. The plaintiff’s father, in obtaining the probate court order (and, presumably, in obtaining his discharge as guardian), presented what purported to be his daughter’s receipt, acknowledging the delivery of her property. That receipt, the complaint goes on to say, either was forged or was procured by fraud. None of the plaintiff’s property was ever delivered to her. To the contrary, her father, during the rest of his life, assured her that he held at least $12,500 of her money, which he would account for in due time. It was not until after her father’s death on November 21, 1965, that the plaintiff first learned that he had misappropriated the assets of the guardianship. The complaint sought judgments in appropriate amounts against Balch’s estate, against the surety company, and against the savings and loan association. Preliminarily we mention a procedural point. Two of the defendants filed answers merely denying the allegations of tlie complaint. The plaintiff then filed a motion for summary judgment, with a supporting affidavit. She now contends that the chancellor erred in permitting the defendants, while the motion forisummary judgment was pending, to amend their pleadings by raising the issue of laches by demurrer. This argument is without merit. In effect the appellant insists that the following language in the summary judgment statute freezes the state of the pleadings the moment a motion for summary judgment is filed: ‘ ‘ The adverse party prior to the day of hearing may serve opposing affidavits. The judgment sought shall be rendered forthwith if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Ark. Stat. Ann. § 29-211 (Repl. 1962). We are unwilling to say that the legislature, by referring merely to “the pleadings ... on file,” intended to prohibit the trial court from allowing the pleadings to be amended after a motion for summary judgment is filed. Rather, the summary judgment act must be read in harmony with our Civil Code, now almost a century old, which declares that the court may at any time, “in furtherance of justice,” permit pleadings to be amended. Ark. Stat. Ann. § 27-1160. We are not persuaded that the summary judgment statute was meant to change our policy to one that would in substance be one in furtherance of injustice. On the merits, the court was in error in sustaining the demurrers of the bank, as administrator of Balch’s estate, and of the insurance company, as surety on the guardian’s bond. In equity, limitations (and laches) may be raised by demurrer if the complaint shows the cause of action to be barred and fails to allege facts sufficient to remove the bar. Mueller v. Light, 92 Ark. 522, 123 S. W. 646, 31 L. R. A. (n.s.) 1013 (1909). But here the complaint, construed liberally on demurrer, asserts two grounds for suspending the running of the statute: First, that Balch concealed his fraud (Kurry v. Frost, 204 Ark. 386, 162 S. W. 2d 48 [1942]), and, secondly, that as a guardian Balch was a fiduciary, so .that limitations did not begin to run until there had been a repudiation of his trust. State ex rel. Atiy. Gen. v. Van Buren School Dist. No. 42, 191 Ark. 1096, 89 S. W. 2d 605 (1936) ; Sconyers v. Sconyers, 141 Ark. 256, 216 S. W. 1045 (1919). It might be argued that the guardian’s surety, not having been an actual party to the fraud, is entitled to rely upon that section of the Probate Code which permits a probate court to set aside a guardian’s settlement for fraud only if the petition is filed within three years after the guardian’s discharge. Ark. Stat. Ann. § 57-645 (Supp. 1965). That section of the Code, applicable to guardians, parallels a similar section that applies to personal representatives. Section 62-2912. The Probate Code Committee’s comment to the latter section suggests that the section was drafted to extend the power of the probate court — a power that had formerly been narrowly limited with respect to orders approving final settlements. See, e.g., France v. Shockey, 92 Ark. 41, 121 S. W. 1056 (1909). There is-no indication.that the Committee meant to curtail the long-recognized power of the chancery court over such settlements. Quite the opposite, the Committee’s comment implies that the remedial powers of a court of equity are to continue. Hence the extension of the time within which a probate court may reopen a settlement does not aid the surety company in this suit in equity. Upon the remaining aspect of the case the chancellor correctly sustained the demurrer of the savings and loán association. There is no allegation of any misconduct whatever on the part of that company. The only permissible inference from the meager facts asserted in the complaint is that the association may have allowed Balch to withdraw the deposit. A depository of trust funds, however, incurs no liability in permitting withdrawals by the trustee unless in so doing it knowingly participates in a breach of trust. Restatement,'Trusts (2d), § 324, and Ark. Annotations. The bare allegation that some of the ward’s funds were formerly on deposit with the savings and loan association falls decidedly short of stating a cause of action against the ássociation. Affirmed in part, reversed in part, and remanded. Harris, C. J. and Byrd, J., dissent.