Aetna Indemnity Co. v. State ex rel. Gillaspy

Mayes, C. J., delivered the opinion of the court. On the 27th day of June, 1899, Gr. M. Grillaspy was appointed as guardian of his three minor children by the chancery court of Newton county. At the time of the appointment there seems to have been' very little personal estate for him to take charge of, and the court required only a five hundred dollar bond to be executed for each child. It appears that each of these bonds had the same sureties. It appears that, after the guardian assumed the duties as such, he paid little attention to his accounting with the court for a long while, and there seems not to have been much necessity for the same, since little money came into his hands which required accounting to the court, and the. court itself seems to. have made some orders excusing the guardian from acsounting. None of these things become of importance in deciding this case, so we give this only passing notice. In December, 1905, the guardian received for each of the wards seventeen hundred, twelve dollars and thirteen cents, as the proceeds of the sale of their interest in certain timber sold to a lumber company. The validity of this sale is not drawn in question. When this amount due each ward was received by the guardian, he was only — 717 — •under a bond of five hundred dollars to each ward, and, although the guardian filed an inventory in the court on December 25, 1905, reporting the sale, and disclosing that on December 1, 1905, he had received for each of his wards the amount of seventeen hundred, twelve dollars and thirteen cents, the court did not at that time require any additional bond, although the guardian’s report showed that he held three times as much money for his wards as his bonds covered. On May 13, 1907, nearly eighteen months after the filing of the inventory showing the sale of the wards’ property, and when this amount had been in possession of the guardian since December 1st under the five hundred dollar bonds, it appears that an application was filed by the sureties on the first bonds, seeking to be released therefrom, and the court made an order that the sureties on the first bonds be relieved from further liability, and that a new bond be executed, which was accordingly done on the 13th day of May, 1907. This new bond was executed in the sum of six thousand dollars, and was given as a security for all three of the children. Accordingly, after the execution of the new bond, the guardian, without ever having made any settlement of his accounts up to this time under the old bond, was continued as guardian under this bond until some time in 1910, when he died. It indisputably appears that when the guardian sold the timber to the lumber company, in December, 1905, he received therefor the sum of twelve thousand, four hundred dollars, one-seventh of which, or the sum of seventeen hundred, twelve dollars and thirteen cents, belonged to each of the wards. It further appears that the whole amount, including the minors ’' interest, was deposited in the Bank of Decatur to the individual credit of G. M. Gillaspy, then engaged in a mercantile business, and all of said money was checked out to pay for the different indebtedness and for investments in conducting the business in which Gillaspy was engaged at the time, and — 718 — that this was done between December 1, 1905, and May 13, 1907, the date of the new bond. In other words, Gillaspy took this whole sum and treated it as his own, and converted it to his own use and disposed of it prior to the giving of the second bond, and that he had not only done this, but that he had overdrawn some four thousand dollars. "While the record unquestionably shows that while acting under the first bonds he had converted to his own use the money belonging to his wards, it also appears that on May 13, 1907, when this bond was executed, Gillaspy whs still solvent and worth several thousand dollars more than was due his wards. Therefore, when he executed this second bond, he was indebted to his wards for the amount of money which he had converted, and he was amply able to have paid their claim. It appears that in the latter part of the year 1909, and nearly two years after the giving of the second bond, and without ever having made any accounting to the court of the money of the wards .previously converted by him, Gillaspy became insolvent, and in the •early part of 1910 was put into bankruptcy, dying about May of the same year. After his death a suit was instituted by J. R. Rowzee, in behalf of the wards and describing himself in the suit “as guardian ad litem.” This suit is instituted in the chancery court against the bondsmen on both bonds, seeking to hold both sets of sureties liable. The case was heard, and the chancery court held that the second hond alone was liable for the indebtedness due by the guardian to the wards, and dismissed the suit as to the sureties on the first bonds. From this judgment the Indemnity Company prosecutes a direct appeal, and the so-called “guardian ad litem” prosecutes a cross-appeal. The bond compauy contends that the first bond is liable alone, and the “guardian ad litem” claims that both bonds are liable. ' The question is whether or not the first bond is liable to the exclusion of the second, or — 719 — whether or not the second bond is liable to the exclusion of the first, or whether both bonds are liable. It appears that the total sum due all the wards is over night thousand dolars; more than the total amount of both bonds; the second bond being for six thousand dollars and the first three bonds each being for the sum of five hundred dollars. We want to emphasize the fact that, although it appears that the actual conversion of the property by the guardian took place while-he was acting as guardian, under the first bonds, yet at the time the second bond was given, and for nearly two years after the guardian entered upon his duty as guardian under the second bond, he was solvent, and the amount due the wards could have been made out of.him at any time up to the latter part of 1909. It appears from the record that the sureties on the first bonds applied to the court, under the authority of Sec. 2407 of the Code of 1906, authorizing the court, on petition of the sureties, to require the guardian to execute a .new bond. It is practically conceded on both sides that this petition was filed, and that the court required the execution of a new bond. No question is raised as to the validity of the court’s action in this regard. The order is made by the court on the 13th day of May, 1907, and recites that “it is ordered by the court that the sureties be relieved from further liability on said bond, and that the new bond be'recorded.” From the order made by the court it plainly appears that a new bond, and not an additional bond, was taken, and it is also plain that this new bond was intended to be a security for further and not past derelictions of duty on the part of the guardian. In the case of State v. Shackelford, 56 Miss. 648, this court held that a guardian’s bond had no retrospective operation, unless such .bond plainly indicates an intention that it should have a retrospective effect. To the same effect are the cases of Lewenthal v. State, 51 Miss. 645; State v. Hull, 53 — 720 — Miss. 626; McWilliams v. Norfleet, 60 Miss. 987; McWilliams v. Norfleet, 63 Miss. 183. In view of the above decisions, and since it is plain that the guardian converted the funds of the wards ta his own use while- acting as guardian under the first bonds, it must follow that appellant is not liable on its bond for the actual conversion of the funds; but the first bondsmen are, and the court erred when it dismissed this suit as to them. This breach having occurred while the first bonds were current, those bonds are liable to all damages that accrue to the wards on account of that breach; but this conclusion does not result in releasing the sureties on the second bond. The amount of both bonds is not sufficient to make the wards whole, so there can arise in this case no conflicting rights as between the bondsmen themselves, or as to their liability between themselves. While the court held in the case of McWilliams v. Norfleet, 63 Miss. 183, when it was before the court for the second' time that the new bond of a guardian was prospective^ and not retrospective, it also held that a guardian’s-bond “imports responsibility for losses occasioned by negligence or inattention, as well as for the corruption,., of the guardian. It cannot be that a breach of the first.' bond confers any immunity upon the sureties on his second bond for an infraction of the latter. They are liable-not only for’money and assets of the wards’ estate which ‘actually came into his hands’ after the second bond was-executed but, also for such as he might and could have-collected and reduced to possession by a faithful administration of his office. Any other doctrine would be a novelty in the law in relation to guardians and trusts.”" And the court further holds that it is the duty of a guardian, whether acting under a first or a second bondr to “exercise reasonable care and diligence in the management of the wards’ estate, to collect debts and securities belonging to the estate, and to administer the721 trust confided to Mm for the benefit of the wards, and not for the advantage of himself.” In the McWilliams case, 63 Miss. 183, after declaring the above rule of law;, the court held the second bond of a guardian liable for the failure of the guardian to collect from himself and .partners, while solvent, a note which was lost to the wards on account of this neglect and the subsequent insolvency of himself and partners, although it appeared that the improper dealings with the fund of the ivards took place under a former bond. This rule was declared in the cases of Crump v. Gerock, 40 Miss. 765; Banks v. Machem, 40 Miss. 256; Moffatt v. Loughbridge, 51 Miss. 211, and in Ames v. Williams, 74 Miss. 404, 20 South. 877. The law announced by the above cases is the universal law, so far as we have been able to ascertain it. When this second bond was given, although the actual conversion of these wards’ property had taken place under the first bond, the guardian was solvent and fully able to pay the amount then due the wards. The amount was lost to them because the guardian failed and neglected to pay over the amount to them as he should have done, and it was because of this neglect- that they lost their money. It is true that in this case it was a. debt owing by the guardian to the wards and not the-debt of a third party. It is also true that the neglect of the guardian was the failure to pay over for the wards,, while he was solvent, and from himself, a sum of money which he had converted, and which belonged to them. But this fact can not affect the legal principle. The duty imposed by law for him to protect his wards from loss-by neglect to exercise reasonable diligence to collect-debts owing to them, rested more heavily upon him when he was their debtor by his own wrongful act than it would if he had merely failed to collect a debt from some third party. Under these circumstances the law would hold his bondsmen liable under a state of facts — 722 — that might exculpate them under other circumstances. A rule of law that would exculpate a guardian for failing to collect from himself when he had wrongfully converted the funds of his ward, merely because the debt was owing by him and he as an individual would have to make the payment to himself as guardian, would be a perversion of the right, and we apprehend that no court will ever so hold. Of course, it must appear in ■every case that the guardian was solvent and could have been made responsible during the currency of the second bond. In short, it must be shown that the wards have actually suffered loss by reason of the neglect. If it were shown that the guardian was insolvent, and that at no time during the life of the second bond could the amount have been collected, the second bond would not be liable for the neglect, because no damage was •done by it. In the case of Johnson v. Hicks, 97 Ky. 116, 30 S. W. 3, the court held-that, “if one was solvent when he qualified as guardian, a note then due from him to the wards’ ■estate will be treated as'cash assets, rendering the sureties on his bond liable for the amount of the note,” if he subsequently becomes insolvent without having paid the ward the amount due him, the bond is liable for this failure on the part of the guardian to do his duty and collect the debt, and, of course, it can make no difference whether the debt due the ward is a note or on open account. The evidence of the indebtedness does not affect, in any way, the liability of the bondsmen for. same. So, also, in the case of U. S. Fidelity & Guaranty Co. v. State, 40 Ind. App. 136, 81 N. E. 226, it is held that “where one is appointed guardian of a minor’s estate, who at the time of assuming the trust is personally indebted to the estate, the guardian must pay the debt, separate the amount of it from his own funds, and invest it for the benefit of the ward, if he be solvent at the time, and his failure to so invest it is a conversion of that — 723 — .amount of the ward’s funds to his own use, and the bond is liable.” See, also, State v. Gregory, 119 Ind. 503, 22 N. E. 1; Sargent v. Wallis, 67 Tex. 483, 3 S. W. 721; Mattoon v. Cowing, 13 Gray (Mass.), 387; McGill v. O’Connell, 33 N. J. Eq. 256; Martin v. Davis, 80 Wis. 376, 50 N. W. 171. There was a breach', of both bonds and the amount adjudged to be due the minors absorbs both bonds. Both having been breached during the currency of each, neither had a right to complain that both are made liable for the breach that occurred during the currency of -each bond. Both are independently and separately liable in the full penalty, since the damage done to the wards exceeds the penalty of both. The burden that «either bond is made to bear is neither lessened nor increased by the fact that the other is also liable for a different breach- of faith in regard to the preservation of the same fund. Both bonds were given to make •secure the funds, and, if it takes them both to do that for which they were given, neither has any ground of complaint. If no second bond had been given, the first would have been liable, because the actual conversion had taken place during its currency. If the money had .simply been owing the guardian from a third person, and had been lost to the wards by the neglect of the .guardian, the second bond would have been liable; and this is just what occurred, except that the debtor was the guardian himself. But it is further argued that this suit cannot be maintained, because brought by Rowzee as “guardian ad litem,” and not as next friend. In answer to this argument we have only to say that where a minor’s interests are at stake, and when the record shows that a person instituting a suit is in reality acting as the “next friend” of the minor, this court willl not look with critical eyes on the characterization which the next friend chooses to give himself in the pleadings. We shall treat him as — 724 — in truth what he is, the friend of the minor, and trust to the sound judgment of the infant’s court to require of him the full discharge of his duty to the minor, by whatever name such person chooses to designate his representative character. It follows that this case is affirmed on direct appeal, and reversed on cross-appeal, with direction to enter judgment here on cross-appeal against the sureties on the first bond for the full penalty of the bond. So ordered. Affirmed on direct appeal. Reversed on cross-appeal. Suggestion of error filed and overruled.