Bryan v. Holzer
| Decision Date | 06 November 1991 |
| Docket Number | No. 90-CA-0377,90-CA-0377 |
| Citation | 589 So.2d 648 |
| Parties | James A. BRYAN and Elizabeth M. Bryan v. Frank H. HOLZER, Jr. as Conservator for the Estate of Beatrice I. Bryan. |
| Court | Mississippi Supreme Court |
Chester D. Nicholson, Nicholson & Nicholson, Gulfport, for appellant.
John G. McDonnell, Biloxi, for appellee.
Before ROY NOBLE LEE, C.J., and PRATHER and PITTMAN, JJ.
I. INTRODUCTION
On May 5, 1988, the court-appointed conservator for Beatrice Irene Bryan filed a complaint in the Chancery Court of Harrison County, First Judicial District, against the previous conservator, James A. Bryan, and his wife, Elizabeth M. Bryan, in two counts: (1) count one, directed against James and Elizabeth Bryan, alleged they were holding assets and property of the ward, Beatrice Irene Bryan, and sought damages plus interest stemming from intentional misappropriation of funds and defrauding of the estate; and, (2) the second count sought a judgment against the surety bonding company which had written James Bryan's conservatorship bond, Western Surety Company, for $20,000.00, the amount of the bond. James and Elizabeth Bryan appeal from an adverse judgment of $177,159.44 entered on March 26, 1990. This Court holds conservators, as fiduciaries of the ward's estate, can be held personally liable for violating the fiduciary duty and misappropriating estate funds; and, further directs that law firms representing the estate have the option of obtaining court assistance when unable to obtain the cooperation of the conservator in complying with statutory requirements governing the conservatorship. For the reasons below, this Court affirms the judgment against James and Elizabeth Bryan, and also affirms the judgment against the surety bonding company.
II. FACTS AND PROCEDURAL HISTORY
In March 1979, Beatrice Irene Bryan (the ward) was declared incompetent by court order and James A. Bryan, her nephew, was appointed conservator of her estate. The ward was a retired psychologist, and James Bryan's elderly maiden aunt. The initial estate inventory was filed with the court on January 1, 1980. Approximately two and a half years later, on June 7, 1983, an inventory and accounting was filed and approved by the court with a reservation concerning $28,000.00 listed as a "joint business investment" between the ward and James Bryan, the conservator. Some four years later, June 2, 1987, the estate's attorneys filed a motion for a hearing requesting conservator James Bryan report on the status of the conservatorship. Approximately six months later the conservator was removed by court order because of delays in filing accountings and inventories. The court appointed a conservator, Frank Holzer, the appellee herein, who, three months after appointment, filed the complaint which resulted in the action at hand. James and Elizabeth Bryan answered on June 6, 1988, asserting a general denial, and Western Surety Company answered and filed a cross-complaint on June 7, 1988.
Later an agreed final judgment was entered with Western Surety Company under the indemnification agreement, whereby if a judgment were taken against its principal (James Bryan), he would be liable to reimburse them.
After the conservatorship was established, James asked Elizabeth to keep the conservatorship books. At his behest she prepared a ledger in which she kept the checking account and expense records, and prepared all the checks for his signature. Elizabeth Bryan testified at length concerning the loans made to family members and friends from the conservatorship monies, and the gifts made to family members. She herself had received a loan from the ward's funds. Additionally, during one of the wards "lucid moments," she had told Elizabeth to buy herself a $600 ring.
Improvements had been made on the property owned jointly by the ward and James and Elizabeth Bryan on which the Bryan's mobile home sat and where they lived. This was also where the ward's mobile home, in which she lived prior to entering the nursing home, had been located. Although Elizabeth Bryan testified some of these expenditures had been for getting the ward's mobile home cleaned up for sale, this money all came from the conservatorship account. After the ward had been placed in the nursing home, they sold her trailer house for $8,000.00 at 12% interest. Elizabeth Bryan contended all these funds had been paid into the conservatorship account.
According to Elizabeth, after the conservatorship was established, she had written checks, which James signed, to pay obligations the ward had incurred prior to being declared incompetent. Some of these had been to Danbury Mint for $1,153.15 for a collection of small pewter cars which were a gift to James. Others had been written to Franklin Mint for $787.50 for a collection the ward had started. This collection was turned over to conservator Holzer. Still other payments had been made to Sears for about $2,820.47 to pay for some of the ward's clothes and a riding lawn mower which was used to mow the land around the mobile homes.
Twenty-eight thousand dollars in conservatorship monies were used to construct a building which housed a machine shop located in the Bryans' back yard. After the machine shop was built, James Bryan, in order to promote the business, had purchased motorcycles and sponsored two brothers to race them. A 1980 Dodge van had been purchased from conservatorship funds for use in hauling the motorcycles, and in delivery operations associated with the machine shop; and, it was also regularly used by both Bryans for other purposes.
Testimony revealed James Bryan had purchased a bass boat, a couple of race horses, and a motor home. It was disputed whether these items were purchased with the ward's money.
During the time James was the conservator, the income into the ward's account had been her monthly social security check and her monthly retirement check from the VA. Elizabeth said these were mostly deposited into the conservatorship account, although some were cashed to buy personal items for the ward.
Richard G. Matheny, executive vice-president of Merchants Bank and Trust in Gulfport, revealed three certificates of deposit (CDs) had been taken out after the conservatorship had been established, in the amounts of $20,000, $21,000, and $22,500. These were all held in joint ownership with the payees listed as "B. Irene Bryan or James A. Bryan." About three and a half months after the $22,500 CD was issued, the records indicated it had been used as collateral on a $21,000 note which had been taken out by James Bryan. The stated purpose of the note was for the purchase of a motor home. Two months and twenty-one days later, the loan was repaid with the proceeds from cashing in the CD.
The trust officer of Hancock Bank testified concerning two CDs held by that bank. Both were issued in the names of "James A. or B. Irene Bryan." One was in the amount of $20,000 and the other was for $10,000. Both had been taken out after the conservatorship was established. The CD for $20,000 was issued August 16, 1979, and was cashed by James A. Bryan for $21,000 on February 17, 1981. The $10,000 CD had been cashed by James A. Bryan on March 16, 1981, after the conservatorship was established. Both were cashed before the 1983 court-approved accounting was filed.
The court-appointed conservator, Holzer, testified concerning the status of the conservatorship account and the books concerning the account, as he had received them from the Bryans. During his testimony, much of which contradicted portions of the testimony given by Elizabeth Bryan, the court sua sponte halted the proceedings and announced it was appointing an independent auditor to look at the accounts and help sort out the exact status. The court "extended" the proceedings in order to allow time for the examination. James and Elizabeth Bryan took exception to this, moved Holzer's evidence be entirely excluded and a motion to dismiss be entered in their favor since the plaintiff, Holzer, had failed to demonstrate the charges of fraud set forth in his complaint. This motion was overruled.
The proceedings began again on January 3, 1990, a day in vacation after the audit had been conducted.
John Ellis Montgomery, the court appointed expert, a public accountant and retired IRS criminal investigator in the intelligence division, provided a detailed report of his findings to the court. Based on his examination, it was his opinion many discrepancies and questionable transactions existed in the conservatorship account. All the CDs issued by the Hancock and Merchants Banks had been cashed and disposed of by April 1, 1981, over two years before the court-approved 1983 accounting had been filed, yet the CDs were listed as assets of the estate on the accounting. Two of the CDs, one for $15,000 and one for $21,000, had been cashed. There was no indication of how the proceeds were used, but they had not been deposited to the conservatorship account. The third CD, $10,000 on Hancock Bank, had been cashed March 16, 1981, and the proceeds used to make a $10,000 loan to a family member. The fourth CD in the amount of $22,500 was cashed, and the proceeds used to pay off James Bryan's commercial loan which he had taken out to purchase a motor home.
Although the ledger kept by Elizabeth Bryan indicated the interest payments, totalling $4,500 on one of the loans, had been made, these funds had not been deposited into the conservatorship account. Additionally, interest which accrued on the CDs totalled $9,182.86, but only $500 of this had been deposited to the conservatorship account.
The ledger indicated monthly payments of $158.67 had been collected from the sale of the ward's mobile home, for a total of $4,974.58. However, none of these monies had been deposited to the conservatorship account. The ledger reflected that four payments on yet another loan made to a family friend, had been...
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