Hines v. Ayotte

• Decision Date: 09 February 1937
• Citation: 189 A. 835
• Parties: HINES, Adm'r Veterans' Administration v. AYOTTE.
• Court: Maine Supreme Court

189 A. 835

HINES, Adm'r Veterans' Administration

v. AYOTTE.

Supreme Judicial Court of Maine.

Feb. 9, 1937.

Exceptions from Superior Court, Aroostook County.

Proceedings in the guardianship of Walter J. Ayotte, an incompetent. To review a decree of the Supreme Probate Court approving the account of Edmund J. Ayotte, guardian, Frank T. Hines, as Administrator of the Veterans' Administration, brings exceptions.

Exceptions overruled, and decree affirmed.

Argued before DUNN, C. J., and BARNES, STURGIS, THAXTER, HUDSON, and MANSER, JJ.

C. M. Fitzgerald, of Portland, for appellant.

Parker P. Burleigh, Jr., of Presque Isle, and Pattangall, Williamson & Birkenwald, of Augusta, for appellee.

BARNES, Justice.

This case comes up on exceptions by appellant, as Administrator of the Veterans' Administration, to rulings of the Supreme Court of Probate of Maine, arising in litigation over the correctness of an account of the guardian, which was approved and allowed by the Probate Court.

From a time prior to April 12, 1921, to June 6, 1935, appellee, as guardian of Walter J. Ayotte, an incompetent beneficiary of the Veterans' Administration, a resident of Aroostook county, Me., received and accounted to the Probate Court for funds of his ward.

From first to ninth account, filed January 10, 1934, the guardian reported as on deposit in the interest-bearing Savings Department of the Van Buren Trust Company an annually increasing amount which reached the sum of $12,125.56, the amount reported in the ninth and tenth accounts as "tied up."

All accounts to and including the eighth, filed January 5, 1933, report the receipt of interest on deposits in savings departments of banks.

The characterization of deposit in a bank as "tied up," following the order to close the banks, issued by the bank commissioner, on March 4, 1933, is well understood by citizens of this state to mean unavailable at date of such closing, and probably subject to discount.

In his eleventh account as guardian the appellee included the following prayer:

"Your accountant from time to time, in his capacity as Guardian of Walter J. Ayotte, deposited funds belonging to his said ward, in the Van Buren Trust Company of Van Buren, Maine, in the name of 'Edmund Ayotte, Guardian of Walter Ayotte'. On March 4th, 1933, the Van Buren Trust Company was closed by the State Bank Commissioner and is now in receivership. Your accountant proved his claim before the Commissioners appointed, asking that this cliam be allowed as a preferred claim, which claim was disallowed. An appeal was taken and the Commissioners' findings were confirmed. He has done everything in his power to protect his said claim. All of these deposits were made in good faith, your accountant believing the said bank to be in a good, sound financial condition, at the time of making such deposits. Your accountant now believes that said deposit is of no value and asks to be allowed to charge off said asset, be relieved of responsibility therefor, and take a loss of $12,125.56"

Decree of the court on the el enth account was made at the July term, and reads as follows:

"State of Maine

"Aroostook, ss.

"At a Probate Court held at Van Buren in and for the County of Aroostook, on the third Tuesday of July in the year of our Lord one thousand nine hundred and thirty-five,

"Notice having been given pursuant to the Order of Court on the foregoing account, and the same with the vouchers produced having been examined by the Court, and the said accountant having made oath thereto, and it appearing that said account is just and true, it is decreed that the same be allowed and recorded.

"Ira G. Hersey, Judge of Probate." and from this decree appeal was duly taken, by the appellant as an administrative officer or agent of the United States Veterans' Bureau. U.S.Statutes, U.S.C.C.Edition, title 38, § 425 (38 U.S.C.A. § 425).

The position taken by the exceptant is that the appellee by depositing and leaving for a period of years, funds of his ward in the savings department of the Van Buren Trust Company did not make such investment of funds as shall protect a guardian from personal liability for depreciation of such funds by reason of the insolvency of the bank.

Before the time when the Uniform Veterans' Guardianship Act, P.L. of Maine 1929, c. 31, R.S. c. 81, became effective, express provision for investment of his ward's funds by a guardian may be found only in R.S. c. 80, § 22, which reads as follows:

"On petition of the guardian or any party interested, the judge, with or without notice to other persons interested, as he deems necessary, may authorize or require the guardian to sell or transfer any personal property held by him as guardian, or any pews or interest in pews, belonging to such estate, as goods and chattels, and to invest the proceeds of such sale, and also all other moneys in his hands, in real estate, or in any other manner most for the interest of all concerned; and may make such further order, and give such directions, as the case requires, for managing, investing, and disposing of the effects in the hands of the guardian, or for buying in any particular estate, remainder, reversion, mortgage, or other incumbrance upon real estate belonging to the ward."

Subsequent to effective date of Veterans' Guardianship Act, supra, a further provision reads: "Every guardian shall invest the funds of the estate in such manner or in such securities, in which the guardian has no interest, as allowed by law or approved by the court." R.S. c. 81, § 12.

Within this state then the money of a ward must be invested "in real estate, or in any other manner most for the interest of all concerned." Rev.St.1930, c. 80, § 22.

Security of the investment, availability as need arises, and the rate of return are considerations governing a guardian.

First and most important is the probability of security of the investment, and on this phase of the case the guardian and the Judge of Probate knew that the law which provided for the security of deposits in the savings departments of trust companies, at the time these deposits were made read as follows: "Every trust company soliciting or receiving savings deposits * * * shall segregate and set apart and at all times keep on hand so segregated and set apart, assets at least equal to the aggregate amount of such deposits."

"Such assets so segregated and set apart shall be held in trust for the security and payment of such deposits." R. S.1930, c. 57, §§ 89, 90.

It is true that the guardian may not be relieved of responsibility if without inquiry he deposits funds of his ward in a bank then insolvent or of questionable soundness.

But it would be unjust and inequitable to require guardians to deposit the funds belonging to their wards in banks at their own or their bondsmen's peril.

Such a rule would impose unreasonable responsibilities upon them and prevent prudent business men from assuming such responsibilities.

The true rule, expressed by a unanimity of both federal and state authorities is well stated in 12 R.C.L., p. 1131: "No duty is more clearly imposed by the very nature and purpose of a guardianship than to invest the ward's funds in such a manner as to produce an income, and unless the statute expressly requires it, the guardian can make such investments without an order of court. * * * In making investments the guardian must act in absolute good faith, and with reasonable diligence to insure the safety of the investment.

"The motto 'safety first' applies nowhere more strongly than in the investment of trust funds * * * in investing trust funds the element of speculation and that of favoritism are alike forbidden. On the other hand skilled financiers cannot usually be obtained as guardians; the office is very often a labor of love, and if the rule of prudent investment were applied too strictly, injustice might often be done, and ordinary persons would be unwilling to accept the responsibility. Only such care as may be expected from honest and faithful men of reasonable intelligence should be required."

The rule in Maine is expressed in Emery v. Batchelder, 78 Me. 233, 241, 3 A. 733, 737, adopting the expression of the Massachusetts court, Harvard College v. Amory, 9 Pick. 446, 461; "All that can be required of a trustee to invest, is that he shall conduct himself faithfully, and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds; considering the probable income, as well as the probable safety of the capital to be invested." See, also, Mattocks v. Moulton, 84 Me. 545, 24 A. 1004; Appeal of Moore, 112 Me. 119, 121, 90 A. 1088, 1089, Ann. Cas.1917A, 645.

It is not argued that the deposit of $4,442.97 in the savings department of the bank prior to August, 1924, was not justified, nor that the return expected and for years realized was not satisfactory.

With the safeguard of sound assets, under the statute, segregated to assure the security of "savings deposits" in trust companies, and in reliance upon the surveillance of the department of banking of the state, it seems unquestionable that a guardian was justified in considering such a deposit as a safe investment.

No evidence was introduced that any one was apprehensive of loss on deposits in this bank until the closing of all banks in 1933. A trustee would have learned, upon inquiry among men interested to know of the ability of trust companies to pay deposits in full, during the period under discussion here, that their reputation was generally good.

No evidence appears that the Van Buren Trust Company was an exception.

The diligent, discreet, and prudent investor of trust funds should be held harmless when, under the circumstances of this case, insolvency of the bank occurs.

Moreover, at intervals, this guardian filed for scrutiny and...