Aetna Indem. Co. v. State

• Decision Date: 25 March 1912
• Docket Number: 15,437
• Citation: 101 Miss. 703,57 So. 980
• Court: Mississippi Supreme Court
• Parties: AETNA INDEMNITY CO. v. STATE FOR USE OF EVA MAE GILLASPY ET AL

57 So. 980

101 Miss. 703

AETNA INDEMNITY CO. v. STATE FOR USE OF EVA MAE GILLASPY ET AL

No. 15,437

Supreme Court of Mississippi

March 25, 1912

APPEAL from the chancery court of Newton county, HON. SAM WHITMAN JR., Judge.

Suit by the state for the use of Eva Mae Gillaspy and others against the Aetna Indemnity Company and others. Judgment for plaintiffs against the Aetna Indemnity Company and suit dismissed as to the other defendants. The Aetna Indemnity Company appeals and plaintiff prosecutes a cross-appeal.

The facts are fully stated in the opinion of the court.

Affirmed on direct appeal. Reversed on cross-appeal. Suggestion of error filed and overruled.

W. I Munn and Amis & Dunn, for appellant.

The case of the State v. Shackleford, reported in 56 Miss, 648 and the case of McWilliams v. Norfleet, reported in 60 Miss 987, both hold that the surety on a substituted guardian's bond is not liable for defaults or conversions occurring before the execution of the bond; and the case of State v. Shackleford, supra, further holds that since the surety is not liable for the value of the property or money converted by the guardian to his own use, the surety is not liable for the failure of the guardian to render an account of it. These cases, so far as we know, have never been criticised or overruled, and are the law in this state at the present time; and if so, then the Indemnity Company is not liable for the default of the guardian in converting said sum of one thousand seven hundred twelve dollars and thirteen cents belonging to each of his wards, prior to the execution of the substituted bond, nor is the Indemnity Company liable for the failure of the guardian to render an account of the sum so embezzled by him.

The above cases, as we understand it, dispose of the first two questions above stated, and the only remaining question is as to whether or not the Indemnity Company is liable for the failure of the guardian to collect from himself, as an individual, the sum previously converted to his own use.

The case most nearly analagous to the proposition last above presented, is the case of McWilliams v. Norfleet, reported in 63 Miss. 183. The facts of that case were as follows:

"In 1869, R. A. Roberts was made the guardian of Belle T. Means and her two sisters, minors, and executed the required bond. In 1872, Roberts and Anderson entered into a partnership for the purpose of carrying on a general merchandise business. Roberts, without any order of court, loaned the firm of Roberts & Anderson, of which he was a member ten thousand dollars of money belonging to his wards, taking the note of the firm therefor, payable to him, as guardian. In February 1873, R. E. Chew was taken into the firm as an equal partner, and the business of the old firm merged into that of Roberts, Anderson & Chew. In April 1873, Roberts, of his own motion, appeared before the court and executed a new guardian's bond with J. P. Norfleet, R. O. Woodson, J. R. Daugherty, W. S. Puryear, J. D. Fennell, and Jas. B. Potts as sureties. Both Roberts and Anderson were solvent long after the execution of this new bond, but Roberts made no effort to collect the note.

In 1880, Roberts, and the firm of which he was a member, failed. Mrs. Belle T. McWilliams, formerly Belle T. Means, exihibited a bill against Roberts, praying for a final settlement of his account as guardian, and made the sureties on the second bond parties to the suit."

In passing upon the facts of that case, the supreme court speaking through Arnold, J., holds the following language:

"A guardian's bond imports responsibility for losses occasioned by negligence or inattention, as well as for the corruption of the guardian. It cannot be that a breach of the first bond confers an infraction of the latter. They are liable not only for the money and assets of the wards' estate, which actually came into the hands of Roberts, but also for such as he might and could have collected and reduced to possession by a faithful administration of his office. Any other doctrine would be a novelty in the law in relation to guardians and trusts.

"The record shows that when the second bond was executed Roberts seld a note for ten thousand dollars payable to him, as guardian, made by a solvent firm of which he was a member, for money of his wards previously lent him without an order of the court for that purpose, and that for several years afterwards the note could unquestionably have been collected by proper attention, and that Roberts made no effort whatever to collect the note and that the money due thereon was lost. The sureties on the second bond are liable for the amount of the note and interest thereon at ten per cent, as well as for other money collected by the guardian; they became sponsors for his fidelity."

As we understand it, the difference between the case just quoted from and the case at bar, is this, to-wit: That in the McWilliams case, the guardian had dealt with the fund in his hands as trust funds. He had loaned the money at interest to the firm of Roberts & Anderson, and had taken the note of Roberts & Anderson for the amount loaned, payable to himself, as guardian. In that case, there was all the time a trust fund of ten thousand dollars actually in existence, represented by the indebtedness of the firm of Roberts & Anderson to the guardian, as evidenced by the note payable to Roberts as guardian. There was no conversion of the fund at all, but there was simply a loan made by the guardian of the funds of of the wards, without authority of court, and all the duty that he owed was the duty of using reasonable diligence in the collection of the amount due on this note; and the court held that because he could have collected it, and made no effort to collect it, he and his sureties were liable for the amount of the note, which was lost. In other words, the court placed the ground of liability in that case on the negligence of the guardian in failing to collect a note payable to himself, as guardian, and the same result would have been reached and the same rule applied, if the court, in the first instance, had authorized the guardian to make the loan that was made, or any other loan.

In this case, however, there was not at the time of the execution of the substituted bond, any trust fund in existence, excepting the sum of one hundred and ten dollars and sixty-eight cents for each of the wards. The guardian had long prior thereto embezzled and converted all the funds in his hands to his own use, excepting the said sum of one hundred and ten dollars and sixty-eight cents for each of his wards. He did not recognize or treat any sum other than the one hundred and ten dollars and sixty-eight cents as trust funds. So far as the estate of the wards was concerned it had been wholly confiscated and embezzled prior to the execution of the substituted bond, with the exception of the said sum of one hundred and ten dollars and sixty-eight cents; and because of that fact the guardian and the sureties on his original bond had become and then was absolutely and unconditionally liable to the wards for the conversion and confiscation of their estate, and no order of the court made ex parte could relieve them or either of them from this liability.

In the McWilliams case, at the time of the execution of the substituted bond, Roberts, as guardian, held, as guardian, a note payable to himself, as guardian, for ten thousand dollars which was a part of the assets of the estate of his wards in his hands, for which he was bound to account to the court, and touching the collection of which, it was his duty to exercise reasonable care and diligence.

In this case, at the time of the execution of the substituted bond, there was nothing in the hands of the guardian, as guardian, excepting the sum of one hundred and ten dollars and sixty-eight cents for each of his wards. He did not recognize the funds in his hands as trust funds at all, but claimed and used, and continued to claim and use the same as his own property and not as the property of his wards. The liability of himself and the sureties on his original bond had become fixed and absolute and nothing was ever done by the guardian or any one else to change that status in the least. The liability of the sureties on the original bond could not be shifted to the surety on the substituted bond by an ex parte decree of the court, or by any other act short of a special undertaking on the part of the surety in the substituted bond to that effect. It seems to us that there is no escape from the proposition that the sureties on the original bond are liable to the wards for the conversion of the funds by the guardian prior to the execution of the substituted bond. And if court should also hold that the surety in the substituted bond is also liable because of the failure of the guardian to collect the amount so embezzled by him, from himself, then the effect of such holding will be that the substituted bond was not, in fact, a new or substituted bond at all, but was an aditional bond or security.

J. R. Byrd, for appellees and cross-appellants.

This is a three cornered fight; the appellant, the Aetna Indemnity Company, contends that it is not liable but that cross-appellants, J. B. McAlpin et al., are liable, and J. B. McAlpin et al., cross-appellees, contend that they are not liable but that the Aetna Indemnity Company appellant, is liable, and appellees contend that they are both liable to them.

The proof in this case established beyond a doubt that G. M Gillaspy, guardian, was abundantly able to pay to his said wards every cent he was due them from the time he became guardian up to a few months before his death. That at the time the Aetna Indemnity Company's bond was...