Poole v. Bradham

• Citation: 141 S.E. 267
• Decision Date: 29 August 1927
• Docket Number: (No. 12259.)
• Parties: POOLE. v. BRADHAM et al.
• Court: United States State Supreme Court of South Carolina

141 S.E. 267

POOLE.

v.BRADHAM et al.

(No. 12259.)

Supreme Court of South Carolina.

Aug. 29, 1927.

On Petition for Rehearing Jan. 13, 1928.

On Petition for Rehearing.

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Compound.]

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Joint Debtors.]

Cothran, J., dissenting on petition for rehearing.

Appeal from Common Pleas Circuit Court of Clarendon County; E. C. Dennis, Judge.

Action by Frances Elizabeth Poole, an infant, by her guardian ad litem, etc., against Ella Bradham and others. Judgment for defendants, and plaintiff appeals. Affirmed.

Raymon Schwartz, of Sumter, for appellant.

Harby, Nash & Hodges and Lee & Moise, all of Sumter, for respondents.

STABLER, J. On November 17, 1910, one William Ridgeway executed and delivered to R. O. Purdy and R. J. Bland, two of the defendants in this case, his bond in the sum of $6,850, due and payable five years after that date, with interest at the rate of eight per cent. per annum, and a mortgage of real estate to secure payment thereof.

On the same date Purdy and Bland assigned, in writing, the bond and mortgage to Isaac Schwartz, the duly appointed and acting guardian of the estate of the infant plaintiff in this action, and, at the same time and in the same writing, guaranteed the payment of the debt and interest; and one A. Levi joined with them in the execution of the written guaranty. The following is the assignment and guaranty:

"For value, we hereby transfer, assign and deliver this bond to Isaac Schwartz, as guardian, together with the mortgage of real estate of even date herewith made to secure its payment, and guarantee payment of the debt and interest; and I, Abe Levi, one of the undersigned, also guarantee the payment of the debt and interest aforesaid."

On or about October 27, 1919, Isaac Schwartz, the guardian, executed on the bond a release in writing, as follows:

"I hereby release R. O. Purdy and R. J. Bland, from all liability under the above guaranty."

The interest was collected each year by one or more of the guarantors, and paid over to the guardian, Isaac Schwartz; on November 17, 1920, for the first time, default was made in the payment of, the annual interest. In the latter part of the year 1921, Isaac Schwartz resigned as guardian, and Raymon Schwartz, his son, was appointed in his stead. Subsequently, this action was commenced upon the bond and for the foreclosure of the mortgage. In the meantime the mortgagor, Ridgeway, had died, and his heirs at law were properly made parties to the action. The plaintiff, taking the view that her original guardian, Isaac Schwartz, was without authority to release the guarantors, Purdy and Bland, and that they were liable for the payment of the debt and interest, also made them defendants in the suit. A. Levi, the other guarantor, having died prior to the commencement of the suit, Selina Levi, as his executrix, was made a party defendant.

By their answer Purdy and Bland set up their release, and Selina Levi, as executrix, by her answer pleaded that the release of Purdy and Bland had operated to discharge, as a matter of law, the other guarantor, A. Levi. The matter was referred to T. H. Stukes, Esq., as special referee. In his report to the court he held that, as a matter of law, the guardian, Isaac Schwartz, was without authority to execute the release, that the release was null and void, and that Purdy and Bland were liable for the debtand interest under their guaranty; he held further that, as the release of Purdy and Bland was without authority of law and invalid, the defense set up by the estate of A. Levi must fall.

Exceptions were taken to this report by Purdy and Bland and by Selina Levi, as executrix, and the matter was heard by his honor, Judge Dennis, who, as to these questions, reversed the special referee, holding that the guardian, as a matter of law, had authority, for valuable consideration, to execute the release; that the release was executed for a valuable consideration, and that Purdy and Bland were not liable under their guaranty; and that, two of the guarantors having been released without the other's con-sent, such release operated, as a matter of law, to discharge the other.

The plaintiff appeals to this court from the decree of Judge Dennis. There are many exceptions—too many. The main questions are few and may be thus stated: (1) Has a guardian authority to release, for valuable consideration, guarantors on a bond and mortgage belonging to his ward? (2) If he has such authority, is the alleged release in this case supported by a valuable consideration? (3) If the release of Purdy and Bland was valid, did the action on the part of the guardian in releasing them operate to release the third guarantor, A. Levi?

As to the first question, it appears that the holdings of the circuit judge are fully supported by authority. It is a well-established rule of law that it is the duty of the guardian to invest the funds of the ward, and that in making such investment he must exercise reasonable diligence and care in order to insure the safety of the investment and to produce an income for the ward.

In 12 R. C. L at page 1131, we find:

"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 modern motto 'safety first' applies nowhere more strongly than in the. investment of trust funds."

See, also, Nance v. Nance, 1 S. C. 209. In 15 Am. & Eng. Ency. of Law, at page 71, we find:

"The guardian has no power to relinquish, abandon, or release, without consideration, any right or interest of the ward, nor to bind him by admissions contrary to his interest."

In Capehart v. Huey, 1 Hill's Equity, at page 409, the court said:

"A guardian, as the officer of the court of equity, is charged with the preservation of all the rights and interests of the ward. He cannot, however, generally, change the nature or diminish the capital of the estate; but with this exception, he is authorized to do any act for the infant which a prudent man in the management of his own business would do."

Of course, a guardian can make a legal satisfaction of a mortgage belonging to his ward upon the payment of the debt in full, and in Werber v. Cain, 71 S. C. 346, 51 S.E. 123, it was held that a release or discharge of a mortgage by the guardian served to release the lien of the mortgage in favor of a subsequent mortgagee against the ward, although the mortgage debt had not in fact been paid, there being no evidence of fraud or collusion or notice that the mortgage debt was unpaid. The court said:

"It is clearly within the apparent authority of the guardian to execute a discharge and satisfaction of a mortgage to him as such, and cause the same to be entered of record, as it is his duty to collect and give acquittance for debts due him as guardian. * * * In the absence of any evidence of fraud, or collusion, or knowledge affecting plaintiff with notice that the mortgage had not in fact been paid, plaintiff had a right to presume that the guardian was not acting in conflict with his duty."

It being true, then, that the guardian may discharge the entire indebtedness and release all securities when the debt is paid in full, it follows that, for valuable consideration, he can discharge the indebtedness pro tanto or release a portion of the security.

Having reached this conclusion, about which there is little or no contention, we shall now proceed to consider the second question, namely, whether the release executed by the guardian to Purdy and Bland is supported by valuable consideration.

An examination of the record disloses that at the time of the execution of the release by the guardian the indebtedness evidenced by the bond and mortgage had long been due; that money was plentiful and good investments were scarce, that the security for the debt was worth at least $12,-000, nearly twice the amount of the loan, and that the investment bore interest at the rate of 8 per cent. per annum, and that such investments, with so high a rate of interest, were difficult to obtain. The bond and mortgage being due, the guarantors had a right, as a matter of law, to pay the indebtedness and have the security assigned to them by the guardian. Under these circumstances, Purdy and Bland, having on hand sufficient money to pay the indebtedness, through Mr. Bland, approached the guardian and stated to him that they desired to either pay the indebtedness and have the securities assigned to them or be released from all liability under their guaranty. The guardian asked to be allowed some time to think the matter over, which was granted, and after consideration, he decided, according to his own testimony, that it was to the best interest of his ward to release Purdy and Blandfrom their guaranty and retain the investment.

It is clear, then, that there was a valuable consideration flowing from Purdy and Bland to Schwartz, the guardian, through their consent and agreement to be released from the liability under their guaranty rather than to press their legal right to pay the indebtedness in full and take over the much desired investment themselves.

We are satisfied that all parties acted in good faith in the matter; there is no doubt, as is disclosed by the testimony, that the investment without the guaranty was a good one—in fact, it is doubtful whether a better one could have been secured by the guardian at that time—and that if the guardian had then applied to the court for permission to release the guarantors and be allowed to retain the investment, the court would have granted the...