Decided October 20th, 1930.
1. A guardian may do anything within the scope of his powers without the least risk of personal liability for the consequences of his acts, provided he exercises the care and judgment of a man of ordinary prudence and sagacity.
2. Where a person occupying the position of trustee acts in good faith and with the sense and discretion that he would use in his private affairs in relying upon the advice or assistance of a supposedly competent attorney, he is excused from losses suffered through the error or criminal conduct of the attorney.
On appeal from a decree of the prerogative court advised by Vice-Ordinary Fielder, who filed the following opinion:
"Margaret Leonard (formerly Mannion) was appointed guardian of the estate of her four infant children May 13th, 1915. She filed an account dated January 3d 1928, for each child and in each account prayed allowance for, `July 30th, 1917, by amount paid out on bond and mortgage on property on Kensington avenue, Jersey City, owned by Fairy W. Garrick. This mortgage is now due and owing but the mortgagor claims that the mortgage is a forgery and refuses to pay the same — $800.' Exceptions to such allowance were filed by two children then of age and the orphans court disallowed the item in each of the four accounts. No opinion was filed, but the court's order recites that the money invested in the bond and mortgage was lost through the negligence of the guardian. Appeal was taken by the guardian and by the Massachusetts Bonding and Insurance Company, the surety on the guardian's bond, but on the hearing of the appeal no appearance was made by or for the guardian.
"As part of the infants' estate there came to the guardian's hands upon her appointment, a sum of money which she deposited in bank, subject to withdrawal on her check or draft countersigned by the bonding company. Mr. Kenny, a reputable man engaged in the real estate and insurance business in Jersey City many years, was the broker in procuring the guardian's bonds and he had aided the guardian in various ways in connection with her children's estate and had collected rents and placed insurance for her. About two years after her appointment as guardian, Louis W. Garrick, a member of the bar of this state, represented to Mr. Kenny that his mother, Fairy W. Garrick, desired to borrow $3,200 on bond and mortgage on property owned by her on Kensington avenue, Jersey City, and suggested the loan as a good investment for Mrs. Leonard, as guardian. Mr. Kenny appraised the property and finding it ample security for the loan desired, recommended it to the guardian and the bonding company, both of whom agreed to the loan and on Kenny's further recommendation, Garrick was authorized to make a title search. When he reported the search completed and the title good, the amount of the loan was withdrawn from the infants' bank accounts on checks signed by the guardian, countersigned by the bonding company and given to Mr. Kenny, who turned it over to Garrick in exchange for Garrick's receipt therefor and a bond and mortgage dated July 30th, 1917, purporting to have been executed and acknowledged by Garrick's mother, together with Garrick's certificate of title. The mortgage was recorded and, with the bond and certificate of title, subsequently delivered to the bonding company. On the face of the papers the loan was entirely regular, but it subsequently developed that Garrick had forged his mother's signature on the bond and mortgage. When the interest falling due January 30th, 1918, was not paid, the guardian called at Garrick's law office but he was absent and she called again in March of that year and found the office `nailed up.' Garrick had decamped and has not been heard of since.
"On the question of the liability of a guardian for a loss sustained by him, what our courts have said as to administrators, executors and trustees, applies. They have said that each case must stand on its circumstances and that a general rule applicable to all cases is that `all that executors are required to do is simply what any man of ordinary prudence and caution would, under like circumstances, have done. So long as an executor acts in good faith and with ordinary discretion and within the scope of his powers, his acts cannot be successfully assailed. No man is infallible; the wisest make mistakes, but the law holds no man responsible for the consequences of his mistakes which are the result of the imperfection of human judgment and do not proceed from fraud, gross carelessness or indifference to duty. An executor may do anything within the scope of his powers without the least risk of personal liability for the consequences of his acts, provided he exercises the care and judgment of a man of ordinary prudence and sagacity.' Monroe v. Osborne, 43 N.J. Eq. 248; Heisler v. Sharp, 44 N.J. Eq. 167; affirmed, 45 N.J. Eq. 367; Smith v. Jones, 89 N.J. Eq. 502.
"The guardian had every reason to rely on and to repose confidence in Garrick's integrity. He was a licensed attorney of this state and as such he was held out to be worthy of public confidence. At the time of this transaction he had practiced his profession for seventeen years and was held in good repute. He was an executor of the estate from which the infants had received their inheritance and it was he, as such executor, who paid or delivered to the guardian that inheritance in cash and securities. He acted as attorney or proctor for the guardian, after her appointment, in an application to the court for leave to use a portion of the principal of the infants' estate for their support and maintenance. Among the securities which Garrick, as executor, had delivered to the guardian was a bond and mortgage made by Fairy W. Garrick covering other property and on which interest was received regularly by the guardian. When the loan now in question was brought to the guardian's attention she was ill and confined to her bed where she remained for two months thereafter and she entrusted the details of the loan to Mr. Kenny, whose business experience qualified him to handle the matter better than she could. He, too, was well acquainted with Garrick and had done business with him on other occasions and he believed Garrick to be a reputable member of the bar. When Garrick delivered to him a certificate of title and a bond and mortgage purporting to have been executed and acknowledged by Fairy W. Garrick, he had no reason to suspect that Garrick was foisting on this estate a spurious security on which he had forged his mother's signature and he paid Garrick in cash the amount of the loan, took Garrick's receipt therefor and recorded the mortgage. It was not until six months later that Garrick's knavery was discovered but he had then left for parts unknown. This was not Garrick's only criminal act, for he was subsequently indicted for stealing $3,000 entrusted to him by another, on which indictment he has not been apprehended. It seems to me that throughout the transaction the guardian and her agent, Mr. Kenny, acted with ordinary prudence, caution and discretion. The sole criticism made by the exceptants is that the guardian should have given Garrick a check for $3,200 drawn to the order of Fairy W. Garrick, instead of cash, but it is the experience of everyone who has engaged in transactions of this nature, that the borrower is often not present at the closing of the loan and that the loan is as frequently paid in cash as by check and that in dealing with a member of the bar, whose professional standing has never been questioned, it is the custom to trust him to apply the cash placed in his hands for the purpose for which he receives it. Our courts have said that where a person occupying the position of trustee acts in good faith and with the sense and discretion that he would use in his private affairs in relying upon the advice or assistance of a supposedly competent attorney, he is excused from losses suffered through the error or criminal conduct of the attorney. Sharp's Case, 61 N.J. Eq. 601; In re Slater, 88 N.J. Eq. 296; Four Corners Building and Loan Assn. v. Schwarzwaelder, 88 N.J. Eq. 546.
"I conclude that under the circumstances of this case, the loss sustained cannot be charged to neglect or carelessness on the part of the guardian and that in this respect the order of the orphans court should be reversed.
"The bonding company and the guardian also appeal from so much of the order of the orphans court as allows a fee of $500 to counsel for the exceptants. The order does not specifically direct that such counsel fee shall be paid by the guardian, but if such is the intent, the order should in this respect also be reversed."
Mr. Donald M. Waesche and Mr. Harry A. Stiles, for the appellant.
Messrs. Child Shipman and Mr. Mark A. Sullivan, for the respondent.
The decree appealed from will be affirmed, for the reasons stated in the opinion filed in the court below by Vice-Ordinary Fielder.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, CAMPBELL, LLOYD, CASE, BODINE, DALY, DONGES, VAN BUSKIRK, McGLENNON, KAYS, HETFIELD, DEAR, WELLS, JJ. 14.
For reversal — None.