Opinion
10-09-1886
OSBORNE v. MONROE and others.
M. Rosenkrans and J. Linn, for complainant. L. Van Blarcum and F. J. Swazye, for defendants.
On bill for relief.
M. Rosenkrans and J. Linn, for complainant.
L. Van Blarcum and F. J. Swazye, for defendants.
BIRD, V. C. I have given this case the fullest consideration in the hope of being able to see my way clear to protect the defendants from the charges of the complainant, and at the same time to complete justice to the complainant, who at the time of the transactions complained of was an infant, and the ward of the defendant Munroe. I say this because I believe that the defendant Munroe acted in good faith. But I must remember that, unless the case be a clear one, the infant, who was innocent, ought not to suffer loss, even though there may be some doubt as to the extent of that loss. As the case is considered, all will agree that the complainant has the very highest claims upon the regard and watchfulness of the court.
In 1868, Munroe and S., as guardians, under the directions of this court, sold the lands of O. and L., infants, for $5,496.15. They received in cash $1,000.15, and bonds and mortgages for $4,496. The mortgages were on the property conveyed. Of this amount, $1,832 was set apart and secured that the interest might be paid to the widow during her life. The interest on the balance, $2,664, was to be paid to M. and S.; and the whole $2,664 was to be paid in equal portions to O. and L., as they arrived at age, and the $1,832 was also to be paid to them on the death of the widow, if she survived their arriving at age, and, if not, when they did arrive at age. The interest was fully paid, and, in 1875, $1,164 was paid on the principal, thus reducing the incumbrance from $4,496 to $3,332. This payment was made and indorsed on the bond and mortgage which secured the amount of the purchase money payable to O. and L. as they came of age, leaving due thereon $1,500. S., one of the guardians, having died, M., as surviving guardian, took a new mortgage of that date (1875) from the then owner of the premises for the $1,832, and assigned the other mortgage to Cole for $1,500. He thus voluntarily surrendered the first lien, and lost all control thereof, and made the other mortgage a second lien. The interest was paid on the Cole mortgage until 1877, and, not being paid thereafter, it was foreclosed. The lands were sold for $1,500. Thus the balance, $1,832, due to M. as guardian, is lost, unless M. is personally liable. The bill seeks to charge him with such liability. His bondsmen are brought in.
The answer avers good faith. M. swears that he acted, not only in good faith, but under the advice of counsel. The argument in behalf ofM. is that although the money was well secured in 1868, yet, long before it became due, there was such depreciation in values that the security was doubtful, and that this was so notwithstanding the payment of $1,164 in 1875. This being so, it is said that the sale and assignment to Cole of the old mortgage for $1,500, and securing to him a preference over the mortgage for $1,832, by taking a new mortgage for that amount, did not alter or affect the rights of M. as guardian or of his wards, since he had the same security that he held before; that is, altering the securities did not increase or diminish the value of the land.
This, perhaps, is the turning point in the case. Were not his rights or interests as guardian affected and altered by this surrender and change of securities, notwithstanding the value of the land remained the same? It is true the same amount, and no more, remained as a lien upon the premises. But was it of no value to have the control of the first mortgage? Do not all business men seek such control? Is it of no value to be able to say whether, in such case, there shall be a foreclosure or not, and a sale or not? Has not many a doubtful claim been satisfied in full by prudence and good management? Manifestly, it is of great value to have control of the first mortgage. But it is said the court must judge of these things by results; that in this case the premises were offered at public sale by the sheriff, and that every effort was made to secure the highest price, and that they sold for only $1,500, having sold nine years before for $5,498. Yes; it is true that the course pursued produced such a result. But, accepting this method of reasoning, it will at once appear most unfortunate that we know not, and cannot know, what would have resulted had the guardian retained his securities, and foreclosed (if that became necessary) on his own account, or had called upon this court, from whence he derived his authority, for instructions and aid in the matter. When courts of equity are asked to accept results, and to ratify them, it must appear very clearly that the result reached is the most favorable. If there exists a reasonable probability that a different course might have secured a more advantageous result, I cannot understand how a court of conscience can close its eyes to such fact, and relieve a trustee from liability, and cast the loss on an innocent cestui que trust. It seems to me that the reasoning of defendants' counsel is fallacious, and to stand upon it would be an abuse of a very salutary rule.
But is there not a most reasonable probability—indeed, do not the facts show—that very much more than $1,500 might have been realized on this security had M. retained the original lien intact? Just group the principal facts, and consider whether or not they do not so strike the understanding with unremitting force, turn them as one will. The lands were sold for $5,496. In cash $1,000 had been paid. M. and S., two able, competent, and interested men, under the obligations of an oath, and in full view of their legal and moral obligations, accepted mortgages for the balance ($4,496) on the land sold. The interest was paid until 1875, when $1,164 more of the principal was paid, leaving only $3,332 still due. It was only necessary to realize a trifle over $33 per acre (therebeing 99.93 acres) to secure the balance due, for lands which they had sold for $54 per acre. M. allowed this same tract to be sold for $1,500, and at the time of that sale it is shown by the witnesses called by M. that it was worth from $2,000 to $2,500. Hence that the result would have been different, under a wise management by the guardian himself, is placed beyond speculation. With such a showing, can any court justify the guardian, and say that his ward should bear the loss rather than he? I conclude not.
The charge is made in the bill that in making this change of securities the guardian acted in his own interest, and not in that of the ward, which, it is claimed, is shown by the fact that he used the money received from Cole to answer his own personal ends. M. does not meet this charge in his answer, and in his evidence he supports the charge by saying that he thinks he did not use it all. This fact tends very strongly to raise the belief that he was acting more in his own behalf than in his wards'.
Again, the guardian makes an effort to excuse his conduct, and fix the responsibility for the present situation, by showing that he made investments of money in a house and lot, at the request of his wards and their grandmother, that they might have a home together, at an expense of about $1,500, which the infants promised to accept a deed for on arriving at age, but Which they now refuse to do. Such transactions, however honest or well meant, are wholly unavailing; and this circumstance is only an additional proof of the great wisdom of the rule which seldom if ever tolerates any such dealings between guardian and ward without the sanction of the court first being had.
I will advise a decree according to the prayer of the bill, with costs.