Cunningham v. Cunningham

• Decision Date: 20 January 1927
• Docket Number: 1 Div. 417
• Citation: 111 So. 208,215 Ala. 484
• Parties: CUNNINGHAM v. CUNNINGHAM.
• Court: Alabama Supreme Court

111 So. 208

215 Ala. 484

CUNNINGHAM v. CUNNINGHAM.

1 Div. 417

Supreme Court of Alabama

January 20, 1927

Appeal from Probate Court, Mobile County; Price Williams, Judge.

Petition of Charles A. Cunningham, as guardian of the estate of Edward L. Cunningham, a lunatic, now deceased, for final settlement of his guardianship, with objection by S. Walter Cunningham heir at law and distributee of Edward L. Cunningham. From the decree, S. Walter Cunningham appeals. Reversed and remanded.

Harry T. Smith & Caffey, of Mobile, for appellant.

Inge &amp Bates, of Mobile, for appellee.

BOULDIN J.

"A clear duty of the guardian, defined by statute, is to loan the moneys of the ward, and, in making loans, to require bond and mortgage, or good personal security. *** When, on the credit of the borrower alone, whether an individual, or a partnership, or a corporation," he hazards the money of the ward, he departs from the line of his authority and duty and becomes an insurer against loss to the ward. Whatever be the credit or solvency of the borrower, the guardian is absolutely liable for a loan without security--"liable, because the loan is a breach of trust, a violation of duty." Code,§ 8149; Lee v. Lee, 55 Ala. 590; May v. Duke, 61 Ala. 53; Lee v. Lee, 67 Ala. 406; McGowan v. Milner, 195 Ala. 44, 70 So. 175; Leach v. Gray, 201 Ala. 47, 77 So. 341, 7 A.L.R. 890.

It is without dispute that the guardians loaned the ward's money to the corporation of which they were the managing officers and stockholders on the demand note of the corporation, without security; that the accruing interest from year to year was not paid, but credited to the guardian's account on the books of the corporation, and that cash dividends on the ward's stock were retained by the corporation as loans on open account. credited in like manner; that this continued until the bankruptcy of the corporation ensued in 1924, resulting in a loss to the ward's estate. However free from any purpose to cause ultimate loss to the ward, this action of the guardian was in law a devastavit. He must be held to the same accountability as if he had personally made use of the funds. Cases, supra; also, Brewer v. Ernest, 81 Ala. 435, 441, 2 So. 84.

No commissions can be allowed on the funds thus converted or invested in breach of trust as defined by positive law. McGowan v. Milner, 195 Ala. 44, 70 So. 175; Leach v. Gray, 201 Ala. 47, 77 So. 341, 7 A.L.R. 890; Ramsey v. McMillan, 214 Ala. 185, 106 So. 848.

Compound interest at 8 per cent. per annum must be charged. In lending money to a corporation of which the guardian is the managing officer, and interested as a stockholder, the guardian of necessity is representing opposing interests. Making such loan without security, outside the law and in breach of trust, he must, as above stated, and as often declared, be regarded in the same position as if he had appropriated the money to his own use. While a severe rule, perhaps, it is sanctioned by experience and could not be relaxed without exposing the helpless to the risk of losses which the law has expressly declared shall not be incurred. McGowan v. Milner, 195 Ala. 44, 70 So. 175.

The partial settlement of 1925 is presumed to be correct, but subject to re-examination on final settlement, and, if found incorrect, is to be corrected. Code, § 8206. The rulings in partial settlement are not subject to review by appeal, but are reviewable after final settlement when re-examined on such settlement. Code, § 6115, subd. 5.

The letter from the judge of probate approving the loan of the ward's funds to Cunningham Hardware Company on its demand note can furnish the guardian no protection. No authority was vested in the court or judge to authorize or ratify a loan in violation of law. The guardians were chargeable with knowledge of such want of power. In re Bates, 70 Okl. 321, 174 P. 743; Fidelity & Deposit Co. v. Freud, 115 Md. 29, 80 A. 603; American Surety Co. v. Sperry, 171 Ill.App. 56.

Under the undisputed evidence the court erred...