Gardner v. Cox

• Decision Date: 09 December 1992
• Citation: 843 P.2d 469,117 Or.App. 57
• Parties: In the Matter of the Conservatorship/Guardianship of Philip N. Blackman, an Incapacitated and Protected person. Lucretia A. GARDNER, in her capacity as Successor Conservator for Philip N. Blackman, a protected person, and Sanford Blackman, Appellants-Cross-Respondents, v. Rodney T. COX, individually and in his capacity as former Conservator for Philip N. Blackman, a protected person, and Western Surety Company, a South Dakota corporation, Respondents-Cross-Appellants. 8708-91670; CA A68965.
• Court: Oregon Court of Appeals

Page 469

843 P.2d 469

117 Or.App. 57

In the Matter of the Conservatorship/Guardianship of Philip N. Blackman, an Incapacitated and Protected person Lucretia A. GARDNER, in her capacity as Successor Conservator for Philip N. Blackman, a protected person, and Sanford Blackman Appellants-Cross-Respondents, v. Rodney T. COX, individually and in his capacity as former Conservator for Philip N. Blackman, a protected person, and Western Surety Company, a South Dakota corporation Respondents-Cross-Appellants.

8708-91670; CA A68965.

Court of Appeals of Oregon.

Argued and Submitted March 27, 1992.

Decided Dec. 9, 1992.

James R. Cartwright, Portland, argued the cause and filed the briefs for appellants-cross-respondents.

Pamela J. Stendal, Portland, argued the cause for respondents-cross-appellants. With her on the briefs were William B. Crow and Miller, Nash, Wiener, Hager & Carlsen, Portland, for respondent-cross-appellant Rodney T. Cox. G. Kenneth Shiroishi and Carney, Allen, Higgins & Tongue, Portland, for respondent-cross-appellant Western Sur. Co., joined in the briefs.

Before BUTTLER, P.J., and ROSSMAN and DE MUNIZ, JJ.

BUTTLER, Presiding Judge.

This appeal involves two proceedings that were consolidated for trial. In one, Gardner, as successor conservator of Philip Blackman, objected to the final account filed by Cox as convervator of Philip. In the other, Sanford Blackman, a son of Philip, sought to surcharge Cox for alleged breach of his fiduciary duty in managing the conservatorship. Western Surety Company (Western), Cox's surety, was joined as a party to the second proceeding. Gardner and Sanford appeal from a $50,000 judgment against Cox and Western, jointly and severally. Cox and Western cross-appeal from the same judgment and from the part of judgment against Western for attorney fees. We review de novo and affirm on appeal and on cross-appeal.

Philip became friends with Cox in 1975. Cox, who had experience investing in the stock market, served as consultant to Philip and his wife, Hency, advising them on investments. With Cox's advice, Philip and Hency purchased 10,000 shares of Borealis Exploration Ltd. (Borealis) common stock in 1983, paying between $.07 and $.15 per share. ¹ Later, they purchased additional shares of the stock. Both Philip and Cox later became actively involved in the company.

In 1981, Philip created The Blackman Family Trust ² and appointed Cox and Cox's wife as co-trustees. The trust instrument provided for distribution to the Blackman children and various charities on the death of Philip and Hency. In 1986, Philip executed his will, nominating Cox as personal representative and naming Hency, his children, certain friends and relatives and various charities as devisees.

After Philip suffered a stroke and entered a coma-like state in the fall of 1987, a conservatorship was created for him. Hency chose Cox as conservator, because he was a friend and because she and Philip trusted his experience with stocks and, in particular, his knowledge about Borealis. She died in December, 1987, and Philip still lives at the Robison Jewish Home.

At the time Cox was appointed conservator, Philip or he and Hency owned stock valued at $348,000, the majority of which consisted of 15,530 shares of Borealis stock. ³ All but 530 of those shares were held by Philip and Hency as joint tenants with the right of survivorship. Accordingly, the Borealis stock could not be sold without her consent and was not in Cox's possession. After Hency's death, ownership of all stocks held by the Blackmans as joint tenants became subject to administration in the conservatorship estate.

From the time that the Blackman's purchased it in 1983, the Borealis stock had fluctuated radically, reaching a high of $47 per share in 1986. During the 18 months before the conservatorship was established, the stock dropped from $47 per share to $22 per share. Yet, Philip and Hency did not sell any of it. Cox filed his first annual account for the conservatorship on March 1, 1989, covering the period October, 1987 through October, 1988. The decrease in fair market value to the conservatorship estate during that period was in excess of $193,000. An order approving his accounting was entered; there was no appeal. During his second year as conservator, the market value of the Borealis stock dropped from $134,460 to approximately $54,000 and, by November, 1989, the conservatorship estate was indebted to the Robison Jewish Home, where Philip was being cared for, for $34,510. Still, Cox refused to sell the Borealis stock and stopped paying Philip's bills, because he wanted to carry out what he understood to be Philip's desire to maximize the benefit to the charities, which were the principal devisees under Philip's will. He believed that the Borealis stock would increase in value, as it had done in the past.

After the hearing, the trial court ordered Cox removed as conservator and entered judgments against him and Western, jointly and severally, for $50,000, against Western for $26,521 for attorney fees and in favor of Western against Cox for $50,000 and $26,521. Appellants assign error to the amount of the award, arguing that the total loss to the estate resulting from Cox's failure to sell, in particular, the Borealis stock at the earliest opportunity totalled $337,000. Cox and Western cross-appeal, assigning error to the court's denial of their motion to dismiss, arguing that Cox did not breach his fiduciary duty in any respect and that the court erred in awarding appellants attorney fees. They also argue that, if Cox has any liability, the amount awarded is adequate.

In the management of a conservatorship estate, the conservator is required to comply with the "prudent person" standard in ORS 128.057(1):

"In acquiring, investing, reinvesting, exchanging, retaining, selling and managing property for the benefit of another, a fiduciary shall exercise the judgment under the circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their own funds, considering the probable income as well as the probable safety of their capital."

Gardner argues that, because Borealis was a speculative stock, it was an improper investment for a conservator to make or to hold. Clearly, it would have been improper for Cox to use conservatorship assets to buy such a speculative stock. See Marshall v. Frazier, 159 Or. 491, 527, 80 P.2d 42, 81 P.2d 132 (1938). Cox correctly points out, however, that Philip and Hency had bought the stock before the conservatorship was established and that they had not wanted to sell it. It was Cox's duty to determine whether and...