Summary
holding that statutory liability for interest is proper "where the guardian has used his ward's funds for his own benefit"
Summary of this case from Powell v. RoperOpinion
No. 42674.
April 14, 1952.
APPEAL FROM THE CIRCUIT COURT OF PETTIS COUNTY, DIMMITT HOFFMAN, J.
Fred F. Wesner, Henry C. Salveter, Sedalia, Tom J. Stubbs, Jack G. Beamer, Kansas City, Wesner Wesner, Sedalia, Stubbs, McKenzie, Williams Merrick, Kansas City, for appellant.
V. E. Willis and J. E. Jirmars, Kansas City, Lamm, Barnett Wolfe and D. S. Lamm, all of Sedalia, for respondents.
Exceptions to the final settlement of Anna Hoerman, Guardian, overruled by the Probate Court of Pettis County, were sustained by the Circuit Court and judgment entered against her for $36,076.30. The guardian and The Fidelity and Casualty Company of New York, which was the surety on her bond, have appealed.
On January 7, 1920, Mrs. Hoerman was appointed guardian for her son Theodore A. Hoerman, an insane veteran of World War I. Her letters were revoked on February 28, 1950, and E. R. Knox was appointed successor guardian, because she had converted to her own use disability payments of $28.75 per month, paid to her as guardian under a $5,000 war risk insurance policy issued to her son, in the total amount of $10,465. These payments covered the period from June 26, 1919 to November 25, 1949 and were paid by check made to "Mrs. Anna Hoerman as Guardian and Curator of Theodore A. Hoerman." Mrs. Hoerman testified that she kept these payments because she was advised by her attorney that she was entitled to them as the beneficiary under the war risk insurance policy. The Veterans Administration, although checking all her settlements, never discovered until 1949 that she was not accounting for these insurance payments.
As guardian of her son, Mrs. Hoerman also received government compensation awarded to him because of his disability which at the time of the final settlement was at the rate of $155.50 per month. She fully accounted for these payments in her settlements. Theodore A. Hoerman was never married and had no dependents when he became insane. He has been maintained in a Veteran's Hospital during the entire period of her guardianship and his estate has accumulated and investments made in United States Bonds of the face value of $14,900. However, beginning in January 1935, an allowance of $85 per month was made to Mrs. Hoerman as dependent mother of her ward. (She had previously received some direct payments from the Veterans Administration for this purpose but these were discontinued in 1934.) Thereafter, commencing October 1, 1940, these payments were reduced to $65 per month. This reduction was made because investigation by the Veterans Administration disclosed that she was using part of her allowance for the support of other adult sons. Mrs. Hoerman also received during her guardianship for her services as guardian (including some allowances for travel and for clothing and necessaries furnished to her ward) additional allowances amounting to $4,638.20.
Mrs. Hoerman was born in Germany and had only seven years of schooling. She came to the United States in 1893 when she was 18, and then had no knowledge of English. She can now speak English and read English print. She married William Hoerman in 1897. They lived on a farm until 1923, prior to which time her husband had become unable to work. They sold the farm for $11,000 and moved to Smithton into a house Mrs. Hoerman built with the first disability payments on her son's war risk insurance policy ($1,183.54 received in the first check) and money borrowed from his estate which she later repaid. Her husband died in 1927, leaving an estate of $7,519.05 in personal property. After being removed as guardian, Mrs. Hoerman conveyed the house to her son for an agreed credit of $7,000, at the request of her successor and the Veterans Administration. She is now being allowed (since December 1, 1950) $75 per month and the use of the house.
In her amended final settlement, Mrs. Hoerman attempted to account for the $10,465 which she had converted by obtaining an additional allowance for maintenance and support as her son's dependent from September 1919 to September 1950. The Probate Court made such an allowance of $33.26 per month for 30 years in the total amount of $11,973.60. The Probate Court found that this, with the amounts previously allowed to Mrs. Hoerman, would amount to an allowance of $75 per month for the 30 year period. The Circuit Court, on appeal, set aside this judgment and found in favor of the exceptors as follows: "That Anna Hoerman, former guardian and curator of Theodore Hoerman, is indebted to the said Theodore Hoerman in the principal sum of $10,465.00, together with interest at highest legal rate (8%) amounting to $32,611.30, or $43,076.33, from which should be deducted as a credit to which she is entitled $7,000.00, making her liable for the sum of $36,076.30."
Appellants contend that the Circuit Court erred in sustaining the exceptions to the final settlement. They say Probate Courts may apply equitable principles and may make allowances from the estate of an incompetent for the support of persons other than legal dependents and that they have authority, upon final settlement to approve disbursements made by guardians during their entire term. Appellants particularly rely upon State ex rel. Kemp v. Arnold, 234 Mo.App. 154, 113 S.W.2d 143, 145. However, it was recognized in that case, that the Probate Court "is a court of limited jurisdiction, possessing only those powers which have been conferred upon it by statute, and being wholly without equitable jurisdiction, even though it is permitted, when necessity arises, to apply mere equitable principles in the exercise of its statutory jurisdiction." It was held therein that the provision of Sec. 458.140 (statutory references are to RSMo 1949 and V.A.M.S.) for the Probate Court to make an order, in the estate of an insane person, "for the support and maintenance of his family", was authority for providing for the support of the widowed mother of the incompetent out of his estate. The Court held the word "family" should be construed to include "whomsoever it is the natural or moral duty of the head of the family to support, or who is dependent upon him for support". In that case, the incompetent had for many years maintained his home with his mother and had regularly contributed to her support the amount of the allowance sought. Furthermore, in that case the Court only decided that the Probate Court had authority to make an allowance and did not pass on the question of what allowance should be made. It is certainly no authority for making a retroactive allowance for a past period during which allowances were made from time to time in the light of the facts and conditions then existing.
There are conflicting cases, some of which appellants cite, on the right of courts to make allowances from an incompetent's estate for persons to whom he is under no legal obligation to support. See Citizens' State Bank of Trenton v. Shanklin, 174 Mo.App. 639, 161 S.W. 341; In re Heck's Guardianship, 225 Wis. 636, 275 N.W. 520; In re Beilstein, 145 Ohio St. 397, 62 N.E.2d 205; In re Flagler, 248 N.Y. 415, 162 N.E. 471; Annotations 59 A.L.R. 653, 160 A.L.R. 1435; 25 Am.Jur. 52, Sec. 79; 44 C.J.S., Insane Persons, § 90, page 242. Chancery Courts have been less restricted in making such allowances than courts acting under statutory authority. It is stated: "Great caution should be exercised with respect to making allowances to persons for whom the ward is not legally bound to provide; and it has been said that the practice ought rather to be narrowed than extended." 44 C.J.S., Insane Persons, § 90, page 243. Since the only authority for making such an allowance in this State is Sec 4.58.140, we do not think it can reasonably be construed to authorize what was done here. In the first place, the allowance made by the Probate Court includes eight years (1919-1927) during which Mrs. Hoerman was living with her husband on the farm (1919-1923) and in Smithton (1923-1927). All the evidence shows that she was not dependent upon her son during that time. Furthermore, there was no evidence before the Probate Court that the allowances thereafter made by it were insufficient or that she needed more than was allowed by it, when these previous allowances were made. In fact, the evidence is the other way: namely, that she had sufficient means not only for her own support but enough to contribute to the support of other children. We must, therefore, hold that the evidence before the Probate Court was insufficient to support this additional retroactive allowance.
Appellants further contend that it was not necessary to first obtain an order for expenditures but that the guardian could properly make them and then obtain approval on final settlement, citing St. Vincent's Sanitarium v. Murphy, Mo.App., 209 S.W.2d 560; Cross v. Rubey, Mo.App., 206 S.W. 413, 414; and Farwell v. Commissioner of Internal Revenue, 2 Cir., 38 F.2d 791. The St. Vincent's case involved necessaries furnished to the ward. Cross v. Rubey authorized expenditures "for the proper education, support, and maintenance of the minor"; but the questioned expenditures in that case were disallowed. The Farwell case involved the question of whether payments made for support of a sister of an insane person were a part of the incompetent's estate for purposes of federal estate tax; these payments had been approved by the Probate Court in Vermont. None of these cases rule the question of a retroactive allowance under Sec. 458.140. Furthermore, Sec. 459.140, which was in effect at the time this 30 year additional allowance was made, provides: "A guardian shall not apply any portion of the income or the estate for the support or maintenance of any person other than the ward, the spouse and the minor children of the ward, except upon petition to and prior order of the court after a hearing." The reasonable construction of this statute would seem to bar either a retroactive allowance or the use of funds without an order for any person other than the ward, his wife or minor children. Moreover, it cannot even be said here that the guardian applied funds of the estate for the purposes stated in the order because these funds which she converted were never put into the estate by her, but were kept as her own to do with as she desired and she used a considerable part in building the house. The effect of this order of the Probate Court is only to make an allowance for the purpose of covering the amount of these conversions and we must hold it invalid.
Appellants further contend that in any event Mrs. Hoerman should not be charged with interest at 8% compounded annually. They say that the only statutory grounds for charging interest against a removed guardian are the following:
Sec. 458.350 authorizing guardians of insane persons to loan money of the estate "in the same manner and under like circumstances as other guardians and curators are now required by law to loan the money of their wards".
Sec. 457.310 providing that guardians shall "loan the money of their wards at the highest legal rate of interest that can be obtained, on prime real-estate security, or invest it in bonds of the United States" (or other designated bonds); and that "the interest in such cases shall be paid annually, and if not then paid shall become a part of the principal and bear interest at the same rate."
Sec. 458.520 which provides: "Whenever any such guardian shall die, resign, or be removed from his trust, the probate court shall have the same authority as they have in like cases over executors and administrators and their sureties."
Sec. 465.080 which provides: "The court shall, at each settlement, exercise an equitable control in making executors and administrators account for interest received by them on debts due the estate, and for interest accruing on money belonging to the estate, loaned or otherwise employed by them".
Appellants argue that equitable control in assessing interest in this case would require something less than 8% compounded annually and they argue for relieving her of paying any interest. Sec. 465.080 does not seem to authorize relieving anyone from paying interest but appears to be for the purpose of compelling an accounting for interest. Furthermore, Sec. 462.270 provides that if executors or administrators use money of the estate "for their own private purposes, they shall pay interest thereon to the estate." It was held in Wolfort v. Reilly, 133 Mo. 463, 34 S.W. 847, 848, "where he (administrator) uses the money for his own private purposes, the law says he shall pay interest; and it is not a matter of discretion with the court." In State ex rel. Welch v. Morrison, 244 Mo. 193, loc. cit. 210, 148 S.W. 907, loc. cit. 912, we said: "In fact, the statute requires the payment by the executor of interest on any funds of the estate he uses for his own purposes, and this statute is mandatory." See also State ex rel. Ivie v. Ewing, 264 Mo. 331, 174 S.W. 382; In re Davis, Executor, 62 Mo. 450. Under Sec. 458.520, Sec. 462.270 is applicable here and it was mandatory upon the Court to enter judgment for interest, which under Sec. 457.310 is properly compounded annually. Sec. 457.310 has been held to be the authority both for fixing the rate and for compounding annually; and it has also been held that where the guardian uses the ward's money himself he should be charged the highest legal rate compounded annually. Berry v. Berry, Mo.App., 218 S.W. 691; Richardson v. Allen, Mo.App., 185 S.W. 252; State ex rel. Deckard v. Macom, Mo.App., 186 S.W. 1157; Cross v. Rubey, Mo.App., 206 S.W. 413; Mills v. Smith, Mo.App., 92 S.W.2d 939; In re Ermeling's Estate, Mo.App., 131 S.W.2d 912 and In re Keisker's Estate, 350 Mo. 727, 168 S.W.2d 96. In the Berry case, in ordering a judgment for 8% interest, the Court said: "Defendant suggests that 'the highest legal rate of interest' is 6 per cent., and not 8 per cent. The natural meaning of 'highest legal rate' is the highest rate allowed by law. Under section 7180, R.S. 1909, this is 8 per cent. We sometimes speak of the 'legal rate' as being 6 per cent., meaning that in the absence of an agreed rate the law fixed 6 per cent. (section 7179, R.S. 1909), but when we use the term 'highest legal rate' 8 per cent. is meant. Certainly no one would understand section 444, R.S. 1909, commanding guardians to loan the ward's money at the 'highest legal rate' to be a command to loan at 6 per cent. It means 8 per cent. as the law reads (section 7180), and meant 10 per cent. when that statute before amended permitted that rate; and, when the courts speak of charging a guardian who has used the funds of his ward in his own business instead of loaning it on real estate security as the statute directs with the highest legal rate of interest, 8 per cent. is meant and not 6." [218 S.W. 693.]
While we think the guardian in the Berry case was properly charged with 8%, we believe our cases indicate that the Court does have some discretion as to the rate of interest and that 8% is not a mandatory requirement in all cases. At least there is no statute making such a requirement. Six per cent was assessed in Wolfort v. Reilly, 133 Mo. 463, 34 S.W. 847, in Richardson v. Allen, Mo.App., 185 S.W. 252, in Re Stevens' Estate, Mo.App., 116 S.W.2d 527, and In re Hutcherson's Guardianship Estate, 239 Mo.App. 801, 199 S.W.2d 899. Likewise, in the Davis case, supra, 62 Mo., loc. cit. 454, this Court said there was no abuse of discretion by the Probate Court in exercising its equitable control by assessing less than the highest possible rate of interest. See also Title Guaranty Surety Co. v. State of Missouri ex rel. and to Use of Stormfeltz, 8 Cir., 105 F.2d 496. The general rule appears to be that there is some discretion to consider the circumstances of the case but where the guardian has used his ward's funds for his own benefit he is properly charged with legal interest at the highest rate permitted by law, compounded annually. 39 C.J.S., Guardian and Ward, § 87, page 153; 30 Am.Jur. 20, Sec. 25. However, the circumstances of this case are unusual and the Circuit Court apparently acted on the theory that it had no discretion as to the rate, saying: "Her good faith or actions upon advice of counsel are not at issue." After learning the true situation, Mrs. Hoerman said she wanted to do what was right and immediately conveyed her house to her son. With greater diligence, the Veterans Administration could have given her correct information much sooner. Under all the facts of this case, we think it would be proper to fix the interest rate at 6% compounded annually and order the judgment modified to that extent.
Respondents asked judgment in their exceptions against both Mrs. Hoerman and the surety company and complain that the Circuit Court judgment was against Mrs. Hoerman alone. They ask that we order judgment against the surety for $16,000, the amount of the guardian's bonds, but cite no authority which would authorize us to do so. It is true, as they state, that the surety company participated in the trials in the Probate and Circuit Courts. See In re Switzer, 201 Mo. 66, 98 S.W. 461. While this would make the judgment herein binding upon them as to the amount due from Mrs. Hoerman, Restatement of Judgments, Secs. 83-84, it does not authorize the entry of a judgment against them on the guardian's bonds in this proceeding. See State to Use of Wherry v. Darby, 11 Mo.App. 528. To get judgment on these bonds, it is necessary to bring suit on them. See Sec. 522.150 and other provisions of Chapter 522.
It is ordered that the judgment be modified as to rate of interest as herein specified and as modified the judgment is affirmed.
All concur.