Guardianship of Styer, In re

• Citation: 536 P.2d 717,24 Ariz.App. 148
• Decision Date: 13 June 1975
• Docket Number: CA-CIV,No. 2,2
• Parties: In the Matter of the GUARDIANSHIP OF Lillian E. STYER, an Incompetent. Herbert J. SCHWAGER, former guardian, and Ruth Schwager, his wife, Appellants, v. Dean C. CHRISTOFFEL, guardian and conservator of the Estate of Lillian E. Styer, Appellee. 1637.
• Court: Court of Appeals of Arizona

Page 717

536 P.2d 717

24 Ariz.App. 148

In the Matter of the GUARDIANSHIP OF Lillian E. STYER, an

Incompetent. Herbert J. SCHWAGER, former guardian, and Ruth Schwager, his wife, Appellants, v. Dean C. CHRISTOFFEL, guardian and conservator of the Estate of Lillian E. Styer, Appellee.

No. 2 CA-CIV 1637.

Court of Appeals of Arizona, Division 2.

June 13, 1975.

[24 Ariz.App. 149] Timothy Weeks, Phoenix, for appellants.

Miller, Pitt & Feldman, P.C., by David J. Leonard, Tucson, for appellee.

OPINION

HOWARD, Chief Judge.

Appellant Herbert J. Schwager, the former guardian of the estate and person of Lillian Styer, and his wife, appeal from a superior court judgment which surcharged to them the sum of $381,403.21.

In 1960, Herbert Schwager was an investment advisor with a well-known stock brokerage firm. Among the stock portfolios he handled was that of Lillian Styer. Schwager had become a personal friend of Mrs. Styer and when her eyesight failed he petitioned for appointment as guardian of her person and property. He was appointed as guardian and was authorized by the court to receive the sum of $9,000 per year for his services. The inventory and appraisal filed by Schwager on September 24, 1969 showed the estate to have a value of $1,303,908.15.

In 1969, Schwager, pursuant to his petition, was authorized by the court to buy certain income-producing real estate for the sum of $145,000. In January of 1970, he again petitioned and received authority to buy certain vacant lands for $26,725. In March of 1970, he was authorized by the court to sell $205,000 worth of securities in the estate in order to place a building on the vacant land and also to execute a building contract. In July of 1970, Schwager was given authority to borrow the sum of $70,000 from the bank and pledge certain estate securities as collateral for the loan.

On January 20, 1971, it came to the attention of superior court Judge Lee Garrett, that there had been a great deal of activity in the estate and no accounting had ever been made by the guardian. He ordered the guardian to appear on March 26, 1971 and show cause why an order should not be entered requiring (1) an accounting, (2) a new inventory and appraisement and (3) a substantial increase in the guardian's bond. Prior to the date set for the hearing, Schwager was authorized by another superior court judge to borrow more money from the bank and to secure the loan with additional estate securities.

On March 18, 1971, Schwager filed an affidavit of bias and prejudice against Judge Garrett and the matter was permanently assigned to Judge Alice Truman, who, on April 5, 1971, ordered the guardian to file an account within sixty days.

On May 11, 1971, the attorney for the guardian retired from the practice of law and Richard Bailey, Esquire, now deceased, was substituted as Schwager's attorney.

Judge Truman granted several continuances to the guardian on the matter of the accounting. The record shows that in the meantime more money was borrowed from the bank, more stocks pledged as collateral and an accountin firm was hired by the guardian to prepare an accounting, all with court authority.

Finally, on June 9, 1972, the court, noting that no accounting had ever been made, removed Schwager as guardian and appointed Lillian Fisher as successor guardian. Thereafter Lillian Fisher acquired new counsel to aid her in determining what happened to the assets of the estate.

Schwager, who was still being represented by Richard Bailey, then filed an affidavit of bias and prejudice against Judge Truman in an attempt to disqualify her from acting in this matter. A hearing on the affidavit was held before Judge J. Richard Hannah who determined that there was no cause shown for disqualifying Judge Truman.

Judge Truman appointed a certified public accountant, Mr. Seby, as referee in order to determine the dealing of Mr. Schwager. Mr. Seby took testimony of various witnesses and filed his four-volume report.

Schwager noticed the taking of Seby's deposition and issued therewith a subpoena duces tecum. Upon motion of the new guardian, this notice and the subpoena was quashed. A hearing on the issue of surcharging Schwager was eventually held. The referee's report was introduced into evidence and upon stipulation of counsel only certain items were challenged. After hearing the evidence the court made extensive findings of fact and conclusions of law which led to the entry of judgment against appellants.

The record of Mr. Schwager's administration of his guardainship was indeed dismal. He decided that he needed to diversify the nature of the Styer estate which consisted almost entirely of common stocks. This was the reason for the purchase of the income-producing property. In 1970, when a major portion of the common stock was liquidated, Mr. Schwager constructed a building which housed two businesses, Tiffany West and Bridal Boutique, Inc. Tiffany West, a beauty salon, was a partnership comprised of his wife and another woman. Bridal Boutique was a disaster from the beginning. Schwager, without court approval, loaned money to Tiffany West and used at least $40,000 of the Styer estate funds to purchase for himself shares of stock in Bridal Boutique. Both businesses became defunct and Bridal Boutique filed in bankruptcy.

A separate corporation was used by Mr. Schwager to manage the building. Large sums of money were taken from the Styer estate and paid to the building management corporation which in turn paid out sums of money to Schwager and his family. It is also clear that Schwager commingled large sums of money from the sale of estate securities in his own personal bank account. By the time the new guardian took over the Styer estate the assets consisted of some shares of stock which were pledged as collateral to the bank on outstanding loans and a small piece of vacant property used in connection with the Tiffany West-Bridal Bridal Boutique building. The income-producing property, Mrs. Styer's house, and the Bridal Boutique-Tiffany West building had all been sold for taxes. The house was subsequently redeemed.

Appellants claim the following errors require reversal: (1) the quashing of the notice to take the referee's deposition and the subpoena duces tecum, (2) foreclosing discovery of the successor guardian's objection to the former guardian's accounting, (3) the referee's exceeding his authority, (4) the denial of appellants' motion for a change of judge, (5) improper surcharge of certain items and (6) inaccurate computation of the surcharge.

As for the first three claimed errors, assuming but not deciding that there was error, appella...