In re Carlson's Guardianship

• Decision Date: 09 April 1931
• Docket Number: 22795.
• Court: Washington Supreme Court
• Parties: In re CARLSON'S GUARDIANSHIP.

297 P. 764

162 Wash. 20

In re CARLSON'S GUARDIANSHIP.

No. 22795.

Supreme Court of Washington

April 9, 1931

Department 1.

Appeal from Superior Court, King County; Homer Kirby, Judge.

Final accounting of John G. Price, guardian of the estate of Frances Carlson, a minor, to which Nina I. Brown, as guardian ad litem for Frances Carlson, filed exceptions. From a decree disallowing the account, the guardian appeals.

Affirmed.

Shorett Shorett & Taylor and Roberts, Skeel & Holman, all of Seattle for appellant.

Reynolds Ballinger, Hutson & Boldt, of Seattle, for respondent.

HOLCOMB J.

This is an appeal by the guardian from a decree by the court below disallowing the guardian's account, directing that the account be restated, charging the guardian with the original inventory value of the ward's estate, together with 6 per cent. interest from the date of the inventory, in the total sum of $19,657.64 less credits amounting to $696.92.

On December 5, 1925, upon petition of Nina I. Brown, the guardian ad litem in the present proceeding, John G. Price, was appointed guardian of the estate of Frances Carlson, a minor then fifteen years old. Nina I. Brown was soon thereafter appointed guardian of the person of Frances Carlson. The bond of Price was fixed and he thereafter filed a bond in the required amount, took the statutory oath, and proceeded in the execution of the trust. On February 1, 1930, upon petition therefor by Nina I. Brown, as guardian ad litem for Frances Carlson, pursuant to an order of the court, a citation was issued to Price by which he was required to appear on a day appointed, answer the petition, and show cause why a full account and report should not be filed forthwith. Price appeared in obedience to the citation, surrendered the assets of the guardianship estate in his possession into the custody of the clerk, and was given time to prepare his report. Thereafter, on April 3, 1930, Price filed a report denominated 'second report of guardian,' praying that he be allowed to resign and that his report be approved. Exceptions were filed by the guardian ad litem to this report, among other things, charging that Price was guilty of dereliction in his duties as guardian in dealing with himself and the corporation in which he was interested, concerning the estate of the ward, in continuing to hold investments of the ancestors under conditions that would result in loss, denying certain credits for disbursements claimed by the guardian, and alleging that the credits claimed were actually made out of a different trust. In effect, the guardian ad litem prayed that practically the entire account should be disallowed.

Upon the issues thus raised the matter was heard by the court without a jury, resulting in findings of fact, conclusions of law, and a decree, as above stated.

The guardianship accounts were intricate. The record is somewhat complicated and only a brief outline of the more important facts will be made in the beginning as it will be necessary to present others in discussing the contentions made by appellant.

It appears from the record that for years prior to the inception of the guardianship and throughout its entire history from 1913 to December, 1929, Price was the principal stockholder and chief executive officer of Northern Bond & Mortgage Company, a corporation, engaged in the investment and mortgage business in Seattle. As it will be necessary to mention this company a great many times in this opinion, for brevity it will henceforth be referred to as Northern Bond. Frances Carlson was the adopted daughter of Olaf Carlson and Isabella Carlson. The parents had for some years been clients of Northern Bond. They had accepted the judgment of Price in the matter of investments and had invested substantial portions of their estate in what are known in the record as collateral trust bonds of Northern Bond. When Olaf Carlson died intestate, his estate was distributed one-half to the surviving wife and one-half to Frances, the minor. Price was appointed the guardian of the estate of Frances and received the portion of the estate ordered distributed to her. It appears that a considerable portion of the assets thus received were the collateral trust bonds of Northern Bond. They were all set forth in the inventory of the guardian. On May 29, 1928, the guardian filed a report of investments and reinvestments which, aside from an item of interest received, does not purport to cover the receipts and disbursements of the trust to that day. On May 29, 1928, upon due hearing, that report of investments and reinvestments was approved by the court and a disbursement ordered for the guardian and his attorney's fee. The court had previously, in 1926 and 1927, by order, authorized certain disbursements for traveling expenses of the minor and for the purchase of an automobile. After the death of Olaf Carlson, Isabella Carlson died, leaving a will, which, among other things, provided:

'Frances Carlson, my adopted daughter, has received one-half of the estate of my deceased husband, Olaf Carlson, from which she will receive an income. It is my desire that Frances shall have an income of One Hundred Dollars ($100.00) per month as long as she is attending high school, and the sum of One Hundred and Twenty-five Dollars ($125.00) after leaving high school and until she arrives at the age of twenty-one (21) years or as long thereafter as she remains in attendance at a university or college. I direct that my trustee hereinafter named give to my said daughter, Frances Carlson, which, added to the income she receives from the estate of Olaf Carlson, deceased, will make the sums above named during the said period of time. After arriving at the age of twenty-one years, or thereafter upon leaving a university or college, then I direct that my trustee invest the income from my estate and the entire estate be retained by my said trustee until my said daughter Frances Carlson arrives at the age of thirty (30) years and be thereupon distributed to the said Frances Carlson and this trust thereafter terminated.'

Price was nominated as executor of the will of Isabella Carlson, and under the above-quoted provision continued to act as testamentary trustee for the benefit of the minor Frances. There were thus created two distinct trusts in which Price is the trustee. He continued in both capacities up to the trial of this matter. The trusteeship involved about $19,000 of an estate and the guardianship an estate of about $15,000.

In his second report the guardian claimed credits for disbursements of $5,805.98, substantially the whole of which was disallowed by the court. The largest part of this item is made up of monthly disbursements to the ward and the guardian of her person, for her maintenance and support. Under the provisions of the last will and testament of Isabella Carlson, $50 a month was paid to Frances for her living and personal expenses, and $75 a month to Nina I. Brown as guardian of her person for her support and keep. Other credits or disbursements claimed by the guardian and disallowed by the court were certain store accounts for clothing, doctor bills, safe deposit vault rental, automobile insurance, automobile repairs, automobile payments, university tuition, and compensation of the guardian previously allowed by the court. The report of the guardian was prepared from an accountant's examination of the books. The bookkeepers or accountants of Northern Bond, who were at all times under the control and direction of Price, kept the books. Two different bookkeepers, who had been in the employ of the Northern Bond, testified for respondent. Identifying eighty-two items entered upon the books under the direction of appellant only one item, a payment of $15 to another guardian ad litem, on November 3, 1928, was charged to the guardianship account. Every other item was charged to the trustee account; that is, the administrator's account. Price, himself, testified that he had deputed the bookkeepers to make the bookkeeping entries against the proper funds. He also testified that he failed to give it to personal attention he presumed he should have given it. He claimed that he had no personal knowledge of the entries of the items of account, but that they were made by the bookkeepers who made them according to their own ideas of how they should be entered.

Northern Bond failed and became bankrupt in December, 1929. Its affairs had been large and active. Its office business was divided into a number of departments such as mortgage, bookkeeping, cashier, operating, and the like. It was from the above-mentioned bookkeeping entries that the trial court concluded that the $5,805.98 should be disallowed the guardian as a credit.

Respondent further charged the guardian with dereliction in his duties in that he retained the investments of the ancestors, or reinvested in like securities, after he knew they had become insecure. The securities in question were the collateral trust bonds of Northern Bond. Some of these were purchased by Price himself and the balance he received as part of the original estate. These bonds were the general obligation of Northern Bond, as maker, and secured by the deposit of collateral with trustees. The collateral consisted of local improvement district bonds, real estate contracts, and mortgages. Second mortgages were used in part and, generally, the security was of the junior grade. From these it appears that certain individuals acted as trustee of the collateral as well as a corporation known as Central Safe Deposit Company. In July, 1926, Northern Bond acquired control of Central Safe Deposit Company and took possession of its vaults. The two companies were, thenceforth, conducted in the same...