Reily v. Crymes , 176 Miss. 133 ( 1936 )

This case was formerly before this court from a judgment on demurrer under the style of Pan-American Life Insurance Co. et al. v. Crymes, 169 Miss. 701, 153 So. 803, and the differing views of the judges are set forth therein. It was there held by a majority of the court that if the proof should sustain the allegations as to fraud, the bill would state a cause, and that liability would exist against the surety on the guardian's bond. The cause was remanded for proof on the issue of fraud, and the chancellor held that fraud was proven in that the guardian, at the time he procured an order for the loans to himself on several occasions, did not have on hand the money borrowed from the ward for himself, as guardian, on the security presented.

I am of the opinion that the proof on the hearing was utterly insufficient to establish fraud. The order of the chancellor permitted J.D. Crymes, individually, to borrow money from himself as guardian of his ward, and such order was entitled to prevail and the good faith of the transaction be held until there was clear and convincing proof that there was fraud in fact perpetrated upon the court by J.D. Crymes, Sr., in securing orders authorizing loans on the security presented therein. In Brown v. Barlow, 51 Miss. 7, in the first syllabus it is stated that, "The orders of the court upon the annual accounts of guardians import a sanctity and verity as to the matters set out therein, and constitute to that extent immunity to a purchaser." In the opinion it is stated that, "If the guardian in his ordinary annual accounts charges himself with the money as collected and on hand, and the court approves his account, and directs him to loan the money or retain it on interest; this is an adjudication that the fund, heretofore standing out on the securities of the purchase, has become amenable to its jurisdiction as money, and it accordingly disposes of it to make profit for the ward. That insues as clearly from the action of the court, as if it had entered up an order, formally declaring that the lien is satisfied. The partial or annual accounts of the guardian are prima facie correct as against the ward. Heard v. Daniel, 26 Miss. [451] 452, 453. Several cases hold that annual accounts are conclusive against the guardian, subject, however, to correction, for inadvertence and oversight, mistake or miscalculation. McFarlane v. Randle, 41 Miss. 411, 423; Johnson v. Miller, 33 Miss. 553; Coffin v. Bramlitt, Guardian, 42 Miss. [194] 206, 97 Am. Dec. 449. If partial settlements, passed in the probate court, have such dignity, and are so binding upon the parties who make them, it would be a hard rule which would impose upon strangers who ventured their money upon the faith of what they import, less insight and force. A purchaser from the vendee of the guardian, cannot claim the immunity of an innocent buyer, unless the records of the probate court show in some distinct and unmistakable form that the original debt has been paid, and the court has recognized the fact. That has been emphatically done in this case. First, the guardian has acknowledged that the debt has been paid to him, year after year, in his annual accounts. The court has approved these accounts, and upon each settlement has ordered the guardian to keep or loan the balances at interest. In several of these accounts the guardian charges himself with ten per cent. interest on these balances; the larger part of which was made up of the proceeds of the lands. On examination of these records, Mrs. Barlow, or her husband who negotiated for her, might unhesitatingly conclude that the debt to the guardian had been paid and the lien discharged."

In Coffin v. Bramlitt, 42 Miss. 194, 206, 97 Am. Dec. 449, cited above, it is stated in the syllabus that, "Guardians, executors, administrators, and other trustees, so long as they keep themselves within the line of their duty, and exercise reasonable care and diligence, cannot be made responsible for any loss or depreciation in the fund intrusted to them."

On the hearing of the case at bar in the court below, from which the appellants' appeal is prosecuted, the administrator of the deceased guardian did not testify as to what money and effects he had when he died, and the records of the administrator, J.D. Crymes, Sr., who died subsequent to the release of the appellants from their bond, were not introduced or examined to see what property and funds he had among his effects when he died. The guardian, Martha Crymes, first took out letters of administration on the estate of J.D. Crymes, Sr., deceased, and later J.H. Graham was appointed as administrator, and neither of them was introduced as a witness to show that J.D. Crymes, Sr., deceased, had ever converted any of his ward's property to his own use, or to show what transactions he may have made during his lifetime in disposing of the funds intrusted to him as guardian of his son. He must have had canceled checks showing what money was paid, either to himself or to third persons, and he must have had notes or other security or deeds of trust among his effects. He seemed to have had a safety deposit box in a bank, as shown in his accounts as guardian, and no proof was taken as to this box, or whether it was opened after his death, nor were there introduced any of the administrative proceedings, inventories, and reports. All that was introduced in evidence to sustain the charge of fraud was the ledger sheets of the First National Bank, which was subsequently liquidated, and most of its records destroyed.

J.D. Crymes, Sr., is shown to have had a personal bank account from about 1922 until the release of Reily and Williamson from his bond as guardian and the acceptance of the Union Indemnity Company as surety; and this personal bank account shows checks to him from the United States government for his son and ward deposited in the accounts at various and sundry times. None of the checks drawn against this bank account were produced, nor was any witness produced to show to whom the money was paid. After the acceptance of the Union Indemnity Company as surety, J.D. Crymes, Sr., carried an account as guardian in said bank, as reflected by the ledger sheets, but these did not show the amount of money on deposit in the bank by him as guardian when he secured a loan as claimed in the petition for the said loan; and when the release of Reily and Williamson as sureties on his guardian's bond was ordered, Reily and his partner, Parker, testified as witnesses to the effect that when the first loan was made, Reily assisted therein, but that many years had passed, and his recollection was that Crymes had the money then on hand. Parker had handled the matter until after the release of Reily and Williamson, and his recollection was that Crymes, Sr., had money, but he could not say definitely how much, or exactly where, but that the loan was made in good faith, and Crymes represented then that he had a sufficient amount of money.

I think that the evidence was utterly insufficient to overcome the presumption and legal effect of the court's judgment that J.D. Crymes, Sr., Guardian, had cash on hand at the various times and dates the loans were made. The decree of the court showed that the security tendered was more than sufficient to secure the amount of money which the guardian borrowed.

We held in the former opinion that the court had authority under section 1885, Code of 1930, to authorize the guardian to borrow money from himself, and to pass upon the security which he gave as guardian to secure the loans so made.

There is no question about the security being ample, had the court not, after releasing Reily and Williamson, released a large part of the property embraced in the deed of trust therefrom. The loan would at all times have been well secured, and would now be secured.

The chancery court has constitutional jurisdiction, and the record need not show the facts authorizing the exercise of its jurisdiction in a particular case. Every presumption is indulged as to the validity and legality of the action of the chancery court. Ames v. Williams et al., 72 Miss. 760, 17 So. 762, where it was held that under the Constitution the court had general jurisdiction in guardianship matters, and did not depend upon statutes for its exercise, and that every presumption would be indulged to uphold its action.

In Cohn v. Winslow, 115 Miss. 275, 76 So. 264, it was held that when the chancery court designates the person to whom the money shall be loaned, and the loan is so made, responsibility does not thereafter attach to the guardian. In this case the guardian placed funds in the bank, under approval order of the court, and the bank failed. It was held that the guardian and sureties were not liable.

After the release of Reily and Williamson as sureties, and the acceptance of the Union Indemnity Company as such, the court first released the property described as lots 12 and 13 of the Mineral Springs Survey, for six hundred dollars, and permitted the guardian to take one hundred dollars for expenses incurred in laying out said property into lots; and directed that five hundred dollars be credited upon the debt. Thereafter, in 1929, after releasing appellants from the guardian's bond, the court released a large number of lots, embracing lots from 14 to 22, and a part of 23, of the Mineral Springs Survey, which was a valuable property in a growing section of the city, where lots had been laid out and water connections made, greatly enhancing the value of the property. It was recited in the petition that A.H. George had offered as much as nine thousand dollars for the property remaining and not so released, and that such property was more than ample security for the payment of the debt, and it was recited in the petition that the only reason this was not carried out was that A.H. George, because of failing health, did not perfect this offer by purchasing.

One of the decrees showed that some money was being used for improvements upon the property which would greatly increase its value, and that the city of Meridian was being extended in this direction; and in Reily's testimony it was shown that this property had been taken into the city limits subsequent to his release as surety for the guardian.

In 1925 the first annual account was filed, showing the money collected by the guardian and the loans made by the court to him, and the accounts were filed annually thereafter.

The appellants, Reily and Williamson, were released as sureties from the guardian's bond on June 4, 1925, and about the 10th day of June, while the Union Indemnity Company was the sole surety, a new loan was made, giving security ample in amount therefor. The local agent of the Union Indemnity Company at Meridian, trustee in the deed of trust, signed a petition for the release, representing that the remaining security was ample. The Union Indemnity Company at that time was perfectly solvent, and had a right to consent to the release from liability. That the chancery court has full power to authorize acceptance of property or security for the money of a ward whose estate is being administered in that court, is shown by sections 1880 and 1881, Code of 1930. The manner in which this power is exercised is not material. Ames v. Williams, 72 Miss. 760, 17 So. 762; Neely v. Craig, 162 Miss. 712, 139 So. 835. The far-reaching power of the chancery court in dealing with estates of infants and non compos mentis persons is illustrated by the cases of Kelly v. Neville,136 Miss. 429, 101 So. 565, and Crawford v. Solomon, 131 Miss. 792, 95 So. 686.

The decision in the case at bar deprives the gratuitous sureties on the guardian's bond of the right to rely upon the solemn adjudication of the chancery court, made on hearing and inquiry. Such a doctrine is harsh and unjust. Instead of making the chancellor's judgment controlling and binding on the ward and the sureties, it makes the sureties, at their peril, determine the legality of the solemn judgment of the court. The statutes are intended to make the chancellor the final judge of the propriety of the acts of the guardian and of the sureties, and has given him full power to pass on the investment or the loans of the funds belonging to the ward, and has expressly provided that if he names the persons to whom a loan is made, or the security to be taken therefor, the guardian is not liable. This decision makes it extremely perilous for any person or surety company to make a guardian's bond, and in my opinion will result in mischief rather than benefit.

In Ames v. Dorroh, 76 Miss. 187, 23 So. 768, 71 Am. St. Rep. 522, this court held that the surety on a guardian's bond, from the date of its execution, is the creditor of his principal for all sums he is required to pay because of his suretyship, within the meaning of the statute against fraudulent conveyances. In the case before us, by virtue of this relationship, Reily and Williamson had a right to resort to the security given for the payment of any amount due by J.D. Crymes, Sr., as guardian; and if they should be required to pay any amount themselves, to be subrogated to the right of the ward therefor.

In 12 R.C.L. 1169, sec. 59, it is provided that, "The surety on a guardian's bond is a creditor of his principal from the date of its execution, though no default occurs until long afterward. The liability, whenever happening, relates back to the date of the contract. He can, therefore, maintain a bill in equity to set aside a voluntary conveyance made by the guardian to his wife after the date of the bond, but before occurrence of the default. If the surety has been compelled to make good a defalcation of the guardian, he is subrogated to any right of the ward against one who assisted in the defalcation." See, also, Aetna Indemnity Co. v. State, use of Gillaspy et al., 101 Miss. 703, 57 So. 980, 39 L.R.A. (N.S.) 961.

In Culliford v. Walser, 158 N.Y. 65, 52 N.E. 648, 70 Am. St. Rep. 437, it was held that as between different sets of sureties who undertake to secure the same debt, although in different stages of legal proceedings, the primary liability rests upon the last set, and various authorities are there collated by the editor.

In the case at bar, the chancellor in his decree in the court below held that the Union Indemnity Company was not liable for the amount the guardian had on hand at the time it became surety.

If there was any invalidity in the proceedings at all, it was in the release of the lots from the deed of trust which Crymes, Sr., as an individual, had given to Crymes, Sr., as guardian, as it appears no consideration was given to the ward by the parties securing the release.

In Water Valley Mfg. Co. v. Seaman, 53 Miss. 655, it was held that a guardian cannot release without payment any valid security belonging to the trust estate in his hands.

It is doubtful if the court below in the instant case had any right to proceed with the suit against the Union Indemnity Company, or to adjudicate anything with reference to its liability, or with reference to the relative rights between the parties, the Union Indemnity Company and Reily and Williamson, because of the loan. Before the issue was tried as fraud, the Union Indemnity Company had been placed in a receivership, and the chancery court of Hinds county had full charge of administering its affairs in Mississippi. Application was made by the complainant to the chancery court of Hinds county for permission to proceed with the suit in the chancery court of Lauderdale county, which application the Hinds county chancery court refused to grant, stating that the chancery court of Hinds county could give appropriate relief. However, the chancery court of Lauderdale county took the position that it could proceed to judgment, rendered a decree fixing liability as to the Union Indemnity Company, from which no appeal has been prosecuted.

We held in Rea v. O'Bannon, 171 Miss. 824, 158 So. 916, that a receiver appointed by judicial authority, in the absence of a statute to the contrary, cannot be sued without leave of the court which appointed him. We reiterated this holding in Sullivan v. Hughes, 172 Miss. 744, 161 So. 316, and Sullivan v. Calvin,173 Miss. 80, 161 So. 677. I mention this because of the possible error that affirming that decree might have, without proper reservation of the rights of Reily and Williamson to file a suit for contribution against the Union Indemnity Company, and to proceed against the property released from the deed of trust, to which release they were not parties.

I am personally of the opinion that the chancery court was in error in declaring liability against the Union Indemnity Company because it was in receivership, and the court having jurisdiction of the receivership had refused permission to proceed against it.

Cook, J., and Smith, C.J., also dissent.