Seward v. Danaher (In re Sewards' Guardianship)

• Decision Date: 11 March 1921
• Docket Number: No. 21311.,21311.
• Citation: 105 Neb. 787,181 N.W. 941
• Parties: IN RE SEWARDS' GUARDIANSHIP. SEWARD ET AL. v. DANAHER.
• Court: Nebraska Supreme Court

105 Neb. 787

181 N.W. 941

IN RE SEWARDS' GUARDIANSHIP.SEWARD ET AL.

v.DANAHER.

No. 21311.

Supreme Court of Nebraska.

March 11, 1921.

Syllabus by the Court.

An approval by the county court, without notice to those interested, of a guardian's application to invest his ward's funds is not conclusive upon the ward of either the propriety or safety of the investment or of the reasonableness of the terms or rate of interest. In re Estate of O'Brien, 80 Neb. 125, 113 N. W. 1001, followed.

After a guardian has fully accounted for the principal of the funds of his ward invested by him, he is chargeable only with such a reasonable rate of interest thereon as he could have secured by the exercise of reasonable diligence and with due regard to the safety of the investment and with scrupulous fidelity to his trust; but he is always chargeable with the interest actually received by him.

There is no rule in this state requiring a guardian to account for the legal rate of interest upon his ward's funds invested by him, where he has actually received less, and where there has been no breach of his duty as guardian. In re Estate of O'Brien, 80 Neb. 125, 113 N. W. 1001, and Wilson v. Wilson, 90 Neb. 353, 133 N. W. 447, 1124, distinguished.

Evidence examined, and held that the guardian had properly administered his trust, and that there was no ground for his removal from his office and trust as guardian.

Appeal from District Court, Butler County; Corcoran, Judge.

In the matter of the guardianship of Bernard Seward and Leo C. Seward. Suit for accounting by Richard Seward father of the minors and another, against Michael Danaher, guardian. From a judgment for defendant, plaintiffs appeal. Affirmed.Roper & Shaw, of David City, for appellant.

Hastings & Coufal, of David City, for appellee.

CAIN, C.

This is a suit for an accounting brought against Michael Danaher, guardian of the estate of Bernard Seward and Leo C. Seward, minors, by their father, Richard Seward, and his niece, Kittie F. Noonan. The amount for which judgment was asked aggregates about $3,600. Removal of the guardian was also asked because of his alleged unlawful and negligent acts in handling the trust funds of his wards. The defendant was appointed guardian on July 6, 1909, and this suit was begun on May, 5, 1919, so that it relates to the administration of his trust for a period of about 10 years. The funds of these minors which came into the hands of the defendant guardian and which was their 2/33 interest in the estate of their deceased grandfather, John Danaher, amounted to $6,311.96. The guardian filed a true, but unsigned, inventory on January 28, 1910, showing his receipt of the above amount and the source from which it was derived. Appellants criticise the informality of this inventory, but, as the record shows that they referred to it in their petition, making it the basis of their suit, and as their counsel himself offered it in evidence, together with all other files in the guardianship matter, and as its accuracy is not questioned, we treat it and all other filings as authentic. Moreover, the guardian's undisputed testimony is that the inventory was accurate and that it set forth all the funds of his wards that came into his hands. It is established and admitted that the guardian has accounted for the entire principal sum received by him, with interest thereon at 5 per cent. per annum. The grounds of the wards' suit are as follows: (a) They seek to charge their guardian with the difference between the 5 per cent. interest actually received by him and 7 per cent., the “going rate” of interest on personal unsecured loans, or with the legal rate. This is the principal item of their claim and amounts to about $2,100. (b) That the guardian erroneously paid Daniel Danaher $225 for board and care of the minors and $15 for their clothing which was furnished before his appointment, and it is claimed that there was an agreement that no charge was to be made therefor. (c) That, if the guardian had loaned these funds upon tax free mortgages, he would have saved $465.05 paid for taxes. (d) The guardian paid Agnes Donohue $315 for the care and support of these minors, and it is claimed that, as their father had sufficient income from his farm and residence properties in Seward county to pay this item, the guardian should not receive credit therefor. (e) That the guardian was not entitled to the compensation of $215.29 received by him. (f) Other small items aggregating $8.33 were charged to the guardian in the petition.

Immediately after the guardian had filed his inventory showing that he had $6,311.96 of his wards' funds in his hands, he filed in the county court a written application to be empowered to invest as much thereof as was not required for the minors' support. Upon this application, on January 28, 1910, the court made an order reciting that the guardian was present in court personally and by his attorney, Arthur J. Evans, and authorizing the guardian to loan $2,000 of the funds to his brother, James Danaher, and $4,000 thereof to the guardian himself. This the guardian did, taking personal notes therefor. Thereafter, during the ten years, he annually reloaned the funds to his brothers and to himself, taking notes therefor, always at 5 per cent. interest.

[1] The guardian and his brothers each owned a Butler county farm worth $200 an acre and were financially responsible. All loans were repaid with interest. Richard Seward, father of these minors, was himself under guardianship from 1912 to the time of the trial. On January 28, 1911, the guardian filed with the county judge an application to be authorized to loan $4,000 to John Danaher and $2,000 to Michael Danaher, each at 5 per cent. interest, and on February 8, 1911, the court made an order authorizing these loans on the terms stated. On February 6, 1912, the guardian filed his annual report. On February 28, 1913, the guardian filed application to loan $3,486.65 to James Danaher and the remainder to himself, all at 5 per cent. interest, and the court authorized the loans upon the terms named and directed the guardian to take the personal notes of the borrowers therefor. Verified annual reports were filed by the guardian of all his acts, and setting forth to whom the several loans were made and the interest derived therefrom. On February 27, 1919, the guardian was authorized to loan $6,000 to himself on second mortgage at 5 1/2 per cent., and this was done. In none of these applications was any notice of any kind given to any one. Appellants claim in their brief that the guardian made 17 different loans to himself and brothers without any authority whatever from the court, and that the 10 other loans made by him were pursuant to ex parte orders of the county court, and we think the statement is true. We do not think that these ex parte orders of the county court altered the liability of the guardian for the funds of his wards. In the case of In re Estate of O'Brien, 80 Neb. 125, 113 N. W. 1001, this court held:

“Section 27, c. 34, Comp. St. 1907 [Rev. St. 1913, § 1654] requires a guardian to apply to and receive from the county court an order authorizing him to loan the funds of his ward. If he loans his ward's funds without such authority, and a loss ensues, he is liable therefor. * * * The approval by the county court, without notice to those interested, of the usual annual reports of a guardian, wherein he reports loans of his ward's funds without an order of the court, is not equivalent to an order of the court, authorizing the guardian to make such loans.”

In the body of the opinion in that case this court said:

“Reference to the section of the statute above quoted will disclose that it was the intention of the Legislature that there should be a hearing before the court and notice given to those interested, that an investigation as to the desirability of the proposed loans should be had before the court, that evidence might be taken upon this question of those qualified to give an opinion, and that the court, after hearing the evidence, should render a judicial act in directing or refusing the order to make the loans.”

[2][3] But, though these ex parte orders of the county court do not change the extent of the guardian's liability in this case, the filing of his applications therefor and his comprehensive annual reports show at least his good faith in the premises. He testified that he acted under the advice of his attorney, Judge Evans, until the latter's death in 1913, and thereafter under the advice of other attorneys, and that he kept the father of these minors fully informed of these loans, and that there was no criticism upon his acts until the commencement of this suit. The appellants earnestly contend that the guardian should be charged with 7 per cent., the legal rate of interest on these funds, citing In re Estate of O'Brien, 80 Neb. 125, 133 N. W. 1001, and Wilson v. Wilson, 90 Neb. 353, 133 N. W. 447, 1124, in support of their contention. But both these cases may be readily distinguished from the case at bar. In the O'Brien Case, the guardian loaned his ward's funds on personal direction of the county judge, but upon mortgage security that was wholly insufficient, and there was a total loss of the funds, while in the instant case there was no loss of either principal or interest of the funds at all. In the O'Brien Case, the court had no basis for fixing the rate of...