Slauter v. Favorite, Guardian
| Decision Date | 10 February 1886 |
| Docket Number | 11,662 |
| Citation | 4 N.E. 880,107 Ind. 291 |
| Parties | Slauter v. Favorite, Guardian |
| Court | Indiana Supreme Court |
Petition for a Rehearing Overruled Sept. 24, 1886.
From the Fountain Circuit Court.
Judgment affirmed.
J McCabe, C. M. McCabe and E. F. McCabe, for appellant.
W. C Wilson and J. H. Adams, for appellee.
The material facts contained in the special finding, stated in an abridged form, are these: The appellant was the guardian of Jennie B. and Fannie E. Hollowell, and while holding that trust lent twenty-one hundred dollars of the money of his wards to Wilson T. Moore. To secure this loan Moore executed to the appellant a promissory note and a mortgage conveying eighty acres of land, but in neither of these instruments was the appellant described as guardian, nor was the mortgage signed by Moore's wife. At the time the loan was made Moore lived thirty miles distant from the city of Attica, where the appellant resided; he was well known in "business circles, his financial standing and credit was excellent," and he had property, real and personal, of the value of twelve to fifteen thousand dollars, but he was at that time greatly in debt; this fact was, however, not known to the appellant, nor was it generally known. Ten days prior to the time the loan was made, the appellant examined the title to the land which Moore proposed to mortgage, and which he did afterwards mortgage, and found that there were no encumbrances. After the title had been examined by the appellant, Moore borrowed four thousand dollars from an insurance company, and executed a mortgage to the company to secure the loan on the land described in the mortgage executed to the appellant. The mortgage for the four thousand dollars was executed on the 1st day of October, 1873, that to the appellant on the 8th day of that month, and the four thousand dollar mortgage was recorded on the 4th day of the same month. Moore informed the appellant at the time he executed the mortgage to him, that there was no encumbrance on the land, and the former believed that the mortgage executed to him was the prior one. The land covered by the mortgage was worth twenty-four hundred dollars, and two hundred dollars of the mortgage debt was subsequently paid by Moore. On the 27th day of May, 1875, Moore became notoriously insolvent, and made an assignment for the benefit of creditors, and was openly and notoriously insolvent when the appellant made his final settlement as guardian and resigned his trust on the 7th day of June, 1875. When that settlement was made the note executed by Moore remained uncollected, and was by the appellant in his final report represented to the court as being secured by mortgage, and as being of the full face value. The appellant withheld from the court the information that Moore was then entirely insolvent, and that the mortgage securing the payment of the note was a second mortgage, and was not sufficient security. Upon the representation in the final report as to the value of the note and the sufficiency of the security, the report was accepted and approved by the court. The mortgage was not a sufficient security for the loan, and the note was not worth its face. At the time the report was filed the appellant had no actual knowledge that the mortgage executed to him was junior to that executed on the 1st day of October, 1873, but after the report was filed suit was brought to foreclose that mortgage, to which he was made a party. No other representations were made than those contained in the final report. The court stated the following conclusions of law:
The case as presented by the first conclusion of law is a hard one wherever the loss falls, whether upon the guardian or upon his wards, since the guardian was not guilty of any positive wrong, but acted in good faith, and his wards took no part, and, indeed, could take none, in the transaction which resulted in the loss of their money. Guardians must be held to exercise care and prudence in managing and investing the money of their wards, and lax rules upon this subject would lead to grave abuses and wrongs, but, on the other hand, guardians are not insurers of the safety of investments made by them, nor should they be held to an extraordinary degree of care, for to require that high degree of care would deter prudent men from undertaking the trust, and thus compel the courts to appoint incompetent or unworthy men to manage the persons and estates of infants. The interests of infants placed under guardianship would suffer quite as much from a rule too exacting and strict as from one too lax and liberal. The degree of care and prudence required of the guardian ought not to be higher than such as an ordinarily prudent man employs in his own affairs, and this is the degree which the law requires. An American writer says: "So far as the guardian acts within the scope of his powers he is bound only to the observance of fidelity, and such diligence and prudence as men display in the ordinary affairs of life." Schouler Domestic Relations, section 348. At another place this author says, in speaking of the guardian: "And to make him liable in ordinary cases, beyond the limits of good faith and a sound discretion, would be intolerable." In Lovell v. Minot, 20 Pick. 116, it was held that a guardian acting in good faith was liable only in the case of a failure to exercise a sound discretion, and Chief Justice Shaw, by whom the opinion of the court was delivered, said: "The rule was well laid down in Harvard College v. Amory, 9 Pick. 461, that 'all that can be required in such cases is, that the trustee shall conduct himself faithfully, and exercise a sound discretion;' and by this rule the court are of opinion, that the present case must be governed." The general subject received careful consideration in Jones' Appeal, 8 Watts & Serg. 143 (42 Am. Dec. 282), where it was said by Gibson, C. J., that,
The quotations we have made reflect the views of the courts upon this subject, and among other courts that share these views is our own. Marquess v. La Baw, 82 Ind. 550, see p. 553; Sanders v. State, ex rel., 49 Ind. 228; Norwood v. Harness, 98 Ind. 134 (49 Am. R. 739).
Where a guardian accepts a mortgage as security for a loan of his ward's money, it should, in all ordinary cases, be a first mortgage, for the guardian has no right to incur the peril caused by the existence of a prior mortgage, for it might readily happen that the estate of the ward could not furnish money to pay off the first mortgage, and in that event the security afforded by the second mortgage would be valueless. Second mortgages are precarious securities and guardians should not take them. Shuey v. Latta, 90 Ind. 136. But in this instance the guardian intended to take a first mortgage; it was for such a mortgage that he contracted, and such it was that he believed he was getting, nor did he actually know that it was not a first mortgage until after he had resigned his trust.
If the guardian acted in good faith and with reasonable diligence in taking the mortgage, he can not be held liable solely on the ground that the mortgage which he believed to be the senior one was made the junior one by the fraud of Moore, the mortgagor. The utmost care and prudence will not always guard against loss. In every loan that is negotiated there is some risk that no ordinary prudence or sagacity can avoid; in almost every case something must be trusted to the borrower's honesty. There are few cases, indeed, where one who lends money upon real estate security is not compelled to rely, to some extent, upon the statements of the mortgagor that there are no unrecorded mortgages, and the question upon this particular phase of the case narrows to this, was the guardian negligent in relying upon the...
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Slanter v. Favorite
...107 Ind. 2914 N.E. 880Slanterv.Favorite, Guardian, etc., and others.1Supreme Court of Indiana.Filed February 10, 1886. Appeal from Fountain circuit court. [4 N.E. ......