Goodwin v. American Sur. Co. of New York

• Decision Date: 25 May 1937
• Docket Number: 26555.
• Citation: 68 P.2d 619,190 Wash. 457
• Parties: GOODWIN v. AMERICAN SURETY CO. OF NEW YORK et al.
• Court: Washington Supreme Court

68 P.2d 619

190 Wash. 457

GOODWIN v. AMERICAN SURETY CO. OF NEW YORK et al.

No. 26555.

Supreme Court of Washington

May 25, 1937

As Amended August 6, 1937.

Department 2.

Appeal from Superior Court, Lincoln County; C. G. Jeffers, Judge.

Action by Joseph Zealand Goodwin against the American Surety Company of New York, the Harrington State Bank, and another, wherein first-named defendant filed a cross-complaint against the second-named defendant. From a judgment in favor of plaintiff against the American Surety Company of New York and another but exonerating the Harrington State Bank from any liability to either plaintiff or the surety company, the American Surety Company of New York appeals.

Modified.

Floyd J. Underwood, of Davenport, and Graves, Kizer & Graves, of Spokane, for appellant.

Roy C Fox, of Spokane, for respondent Goodwin.

Pettijohn & McCallum, of Davenport, for respondent Harrington State Bank.

STEINERT Chief Justice.

Plaintiff brought this action against three defendants, namely, his former guardian, the surety on the guardian's bond, and a local bank, to recover certain sums of money alleged to have been paid by the guardian from the funds of plaintiff's estate to the bank without authority. The guardian defaulted in the action. The surety and the bank appeared separately and in their answers denied liability. By way of cross-complaint against the bank, the surety asked to be subrogated to any rights which plaintiff might establish against the bank. Trial Before the court, without a jury resulted in a judgment in favor of plaintiff against both the guardian and the surety, but exonerating the bank from any liability to either the plaintiff or the surety. This is an appeal by the surety alone and is adverse to both the plaintiff and the bank.

For convenience and brevity, and as occasion may require, we shall hereinafter refer to Joseph Zealand Goodwin, the plaintiff respondent, as plaintiff, son, or ward; to Harrington State Bank, a corporation, the other respondent, as the bank; to American Surety Company of New York, a corporation, as appellant, or surety; and to Eli Goodwin, defendant, but not a party to this appeal, as guardian, or simply as Goodwin.

Lillie May Goodwin, wife of defendant Goodwin, and mother of plaintiff, died intestate in Lincoln county in 1920, leaving an estate consisting of her community interest in a large wheat farm near Harrington, Wash., and certain lots in the town of Harrington, and a like interest in certain personal property including live stock, machinery, farm equipment, household furnishings, and $800 in Liberty bonds. She left, as her sole heirs at law, her surviving husband and her son, the plaintiff, who was then six years of age. The entire property in which Mrs. Goodwin had a community interest was appraised at $53,370.50. The wheat farm, which we will hereinafter at times refer to as the home place, was incumbered with a mortgage in the sum of $9,000, on which there was delinquent interest amounting to $720, and with delinquent taxes amounting to $825.

After his wife's death, and until some time in 1928, Goodwin continued to farm the home place in much the same way as he had done for many years Before .

On November 23, 1921, which was a year after his wife's death, Goodwin was appointed, and qualified, as guardian of the person and estate of his son, the plaintiff. Appellant became surety on the guardian's bond in the sum of $2,000. The bond contained the following provision:

'The condition of this obligation is such that if the above named Principal Eli Goodwin who has been appointed guardian for Joseph Zealand Goodwin, minor shall faithfully discharge the office and trust of such guardian according to law and shall render a fair and just account of his guardianship to the superior court for the county of Lincoln from time to time as he shall thereto be required by such court, and comply with all orders of the court, lawfully made, relative to the goods, chattels, moneys, care, management and education of such minor, * * * or his * * * property, and render and pay to such minor * * * all moneys, goods, chattels, title papers and effects which may come into the hands or possession of such guardian, at such time and in such manner as the court may order or adjudge, then this obligation shall be void, otherwise to be and remain in full force and effect.'

Immediately upon qualifying as guardian, Goodwin petitioned the probate court for leave to place a $14,000 mortgage on the home place, the proceeds of which were to be used to take up the existing mortgage which was then past due, and to pay delinquent taxes, the necessary operating expenses of the farm, and living expenses of himself and plaintiff.

In that petition, and throughout all the subsequent court proceedings, the plaintiff's legal interest in the home place was described as an undivided one-half interest in the entire farm. The briefs herein likewise refer to plaintiff's interest in the same manner, and we will, therefore, consider plaintiff's interest in the home place as being an undivided one-half interest therein.

After a hearing at which plaintiff was represented by a guardian ad litem, the petition of the guardian was granted, and shortly thereafter the mortgage for $14,000 was executed.

On November 21, 1923, Goodwin and the bank entered into a written agreement by the terms of which the bank agreed to sell and Goodwin, individually, agreed to buy a section of wheat land, hereinafter referred to as the Gohlman place, for the sum of $34,600, of which $18,000 was to be paid by the assumption and payment of an existing mortgage in a like amount, and the balance of which, or $16,000, with interest, was to be paid by sacking and delivering to the bank at a warehouse in Harrington one-half of all crops to be harvested from the land over a period ending December 15, 1931, on which date the amount then owing on the contract was to be paid in full.

On March 2, 1925, certain arrearages having accumulated, the contract was modified to the extent that the total purchase price was increased to $37,400, of which $15,000 was to be paid by the assumption and payment of the existing mortgage then standing in that amount and the balance of $22,400 to be paid upon the same terms as those provided in the original agreement.

Goodwin operated the Gohlman place from the time of its purchase from the bank until some time after 1928. Although that was his separate property, he nevertheless operated it in connection with the home place, that is to say, the machinery and equipment in which the plaintiff owned an undivided one-half interest were used on both places and the annual receipts from the sale of grain from both went into one check and were deposited by Goodwin in the bank to his personal credit. The Gohlman place produced crops in 1925 and 1927 and probably, to a small extent, in 1928. It did not produce anything in 1926.

Payments were made by Goodwin to the bank on the Gohlman land contract in the years 1925, 1926, 1927, and 1928, respectively. It may be well to state at this point, that these payments form the basis of this lawsuit. The amounts paid on the contract in 1925, 1926, and 1927, together with the taxes paid in those years on the Gohlman land totaled $14,190.60, one-half of which, or $7,095.30, is claimed to have been paid from funds belonging to plaintiff. The payment made in 1928, amounting to $5,119.56, is claimed to have come from the same source, but will be treated separately.

On October 26, 1926, the guardian petitioned the court for permission and authority to place a new mortgage of $18,000 on the home place. In the petition it was recited that the former mortgage of $14,000, with accrued interest, had become due, that taxes were delinquent, and that for the past year or more the land had not produced sufficient to pay the expenses of operation, interest, taxes, and living requirements of the guardian and plaintiff, and that, in addition thereto, there was owing by the guardian the sum of $4,295, with interest. At the same time, the guardian filed a report and account of his doings and operations from the time of his appointment to the date of the report.

It appears from the report that the total amount of receipts from wheat raised on the home place during the entire period up to that time was $29,474.96, and that the amount paid for farm operations and interest was $26,287.89; however, according to the report, the balance of receipts was more than equaled by a sum of $6,300 which the guardian and ward owed jointly at the time of the guardian's appointment. This was the first, and only, report made by the guardian prior to 1935.

After a hearing, at which plaintiff, then about twelve years of age, was represented by a guardian ad litem, the report was approved, the guardian's petition was granted, and the new mortgage was executed. At the same time, and upon demand of the mortgage company loaning the money, an additional bond was executed by the appellant surety company in the sum of $16,000. That bond contained the same obligations and conditions as those above quoted from the original bond. Upon these two bonds the liability of the appellant in this action is rested.

In December, 1926, and again in December, 1927, the guardian procured an order from the probate court authorizing him to borrow from the bank sums of money, the amounts not being specified, for the purpose of carrying on farming operations on the home place for the years 1927 and 1928, respectively. It does not appear that the plaintiff ward was represented at either of the hearings at which such permission was granted.

While Goodwin was operating the Gohlman place, from 1924 to...