Spann v. First Nat. Bank of Montgomery

• Decision Date: 20 February 1941
• Docket Number: 3 Div. 316.
• Citation: 240 Ala. 539,200 So. 554
• Parties: SPANN v. FIRST NAT. BANK OF MONTGOMERY.
• Court: Alabama Supreme Court

200 So. 554

240 Ala. 539

SPANN v. FIRST NAT. BANK OF MONTGOMERY.

3 Div. 316.

Supreme Court of Alabama

February 20, 1941

Appeal from Circuit Court, Montgomery County; Eugene W. Carter Judge.

Bill for rescission and to establish a constructive trust by John E. Spann, a non compos mentis, suing by his guardian and next friend, Nora S. Dimmick, against the First National Bank of Montgomery. From a decree sustaining a demurrer to the bill complainant appeals.

Affirmed.

Bernard Lobman and Alex C. Birch, both of Montgomery, for appellant.

Steiner Crum & Weil and Sam Rice Baker, all of Montgomery, for appellee.

GARDNER Chief Justice.

The bill discloses that in 1922, Nora S. Dimmick was duly appointed and qualified as guardian for her brother, John E. Spann, a non compos mentis, whose estate consisted of funds from "War Risk Insurance Benefits" and "Disability Compensation Benefits". In the years 1926, 1927 and 1928 said guardian invested such funds for her ward, by a purchase from the First National Bank of Montgomery, in First Finance Corporation collateral trust gold notes, each payable at the office of said bank and bearing interest payable semi-annually at the rate of six per cent per annum.

The First Finance Corporation was a private corporation, an affiliate of, managed and controlled by, the First National Bank. The averments are meager as to the exact nature of these gold collateral notes, nor what, if any, value they possess. It is alleged, however, that these notes come within the class of investments prohibited by our State Constitution, § 74, and our statute, § 8149, Code 1923, a matter which the trust officers of the First National Bank should have known, and that such securities were purchased by the guardian on advice of said trust officers who knew the nature of the funds being thus invested.

The bill is filed upon the theory of a rescission of these transactions, containing an offer to restore the securities thus purchased, and seeks to have the defendant bank held as constructive trustee of the funds paid to it for such purchases, and to be made to account therefor with interest from the date of each such transaction. The bill is filed (November 7, 1939) in the name of the non compos mentis, John E. Spann, by his guardian and next friend, Nora S. Dimmick, who was his guardian when these investments were made and who continues as such guardian.

One of the grounds of demurrer sustained by the Chancellor was that the said guardian was a necessary party to this suit. The bill is not filed for recovery of any specific property or to fasten any lien thereon, or distribution of assets of the estate of the ward, nor does it contain any matter which affects the relationship between guardian and ward.

It merely seeks to fasten a pecuniary liability upon the theory the bank has received money, which in good conscience belongs to the ward, and is trustee of a constructive trust. Such a suit may be maintained at law. American Bonding Co. v. Fourth National Bank, 205 Ala. 652, 88 So. 838. Such being the character of this suit, the guardian was a necessary party. Silverstein et al. v. First National Bank, 231 Ala. 565, 165 So. 827; Adler et al. v. First National Bank, 233 Ala. 325, 171 So. 904; Kelly v. Wilson et al., 234 Ala. 455, 175 So. 551.

And indeed in these authorities the holding was such suits were maintainable by the guardian with no necessity that the ward be a party thereto. Counsel for complainant argue, and correctly so, that the title to the property is in the ward. 28 C.J. 1128; Longmire v. Pilkington, 37 Ala. 296; United States Fidelity & Guaranty Co. v. Montgomery, 226 Ala. 298, 146 So. 528.

The case of Kelly v. Wilson, supra, cited by defendant, holds nothing to the contrary. There the mortgage security was taken in the name of the guardian as such and in instances of that character the legal title is as there designated. The opinion notes 28 C.J. 1128, wherein is the statement: "Where a guardian takes an obligation running to himself as such, although it represents property of the ward, the legal title to such obligation is in the guardian". Complainant, therefore, insists that as the title to property is in the ward the suit is properly brought in the name of the ward and the guardian not a necessary party thereto. Reliance is had upon West v. West, 90 Ala. 458, 7 So. 830; Amann v. Burke, 237 Ala. 380, 186 So. 769; Kelen v. Brewer, 221 Ala. 445, 129 So. 23; Wallace v. Montgomery, 226 Ala. 25, 145 So. 419, and cases of like character. But these authorities concern some property right of the ward or cestui que trust and where the matter of title was of more or less controlling influence.

As observed by the Court in Amann v. Burke, supra [237 Ala. 380, 186 So. 770]: "if the purpose is to secure their property rights in equity, persons of unsound mind and minors as well as adults, must be made parties". And in Kelen v. Brewer, supra [221 Ala. 445, 129 So. 25], with particular reference to West v. West, supra, the court said: "We suppose the rule of the cases referred to must now be followed, at least in cases in which the decree sought will conclude the minor in his property or estate".

But the present suit involves no property right or estate of the ward. Reduced to the last analysis, it is but a suit to collect an indebtedness owing by the defendant bank by virtue of its relation as a trustee of a constructive trust. An action at law for money had and received would serve the purpose. American Bonding Co. v. Fourth National Bank, supra.

Under these circumstances Sections 5689 and 5707, Code of 1923, are to be given effect as disclosed by the cases of Silverstein v. First National Bank, supra and Adler et al. v. First National Bank, supra. The instant case involves only the power and duty of the guardian in the administration of the ward's estate. "It is the settled law of this state that a guardian has the power to dispose of the personal estate of his ward, including the transfer of choses in action, without an order of court". Bank of Guntersville v. United States Fidelity & Guaranty Co., 201 Ala. 19, 75 So. 168, 169; Echols v. Speake, 185 Ala. 149, 64 So. 306, Ann.Cas.1916C, 332.

It is, of course, the duty of the guardian to collect any debt due the estate of the ward, and having notice of such a debt is chargeable with the amount thereof if lost through his negligence. Kelly v. Wilson, supra. Such a duty carries with it a corresponding power to perform it, upon the familiar principle that the means must be adequate to the end to be accomplished. "A trustee is clothed with the legal title whenever it is necessary to enable him to execute a trust created by law; and hence, it being the duty of a guardian to collect all debts due to his ward, he may maintain an action in his own name to enforce the collection of a note payable to his predecessor 'as guardian' for the ward" [234 Ala. 455, 175 So. 552].

Presumably, of course, the guardian has all along had in her possession the notes purchased by her from the defendant bank and in position to tender the same for rescission of the entire transaction, assuming, as we have in this opinion, that the purchase of these notes came within the prohibition of our laws. White v. White, 230 Ala. 641, 162 So. 368.

It may be here further observed that the fact the funds so invested were war risk insurance, or disability compensation benefits paid by the United States government, is without influence so far as this litigation is concerned. Robinson v. Williams, 229 Ala. 692, 159 So. 239, and authorities therein noted. The bill, therefore, presents a simple case of a guardian investing innocently, though illegally, funds of the ward, which transaction she not only had the power to rescind and recover the funds thus invested but had resting upon her likewise the duty to do so. And under the authorities herein noted the guardian alone may well maintain such suit.

The right of action in the guardian arose upon receipt of the money by the defendant bank and could well be sustained at law in a suit for money had and received. The statute of limitation of six years, Code 1923, § 8944, was therefore applicable as to any such action by the guardian. American Bonding Co. v. Fourth National Bank, supra; Sec. 6522, Code of 1923. "Whenever the subject matter of a trust can be sued for at law, the statute of limitations may be insisted on as a bar, although the remedy is pursued in a court of equity." Maury's Adm'r v. Mason's Adm'r, 8 Port. 211. And it is well established that a constructive trust is within the operation of the statute of limitations. American Bonding Co. v. Fourth National Bank, supra.

The first of these investments was made fourteen years, and the last twelve years, before the filing of this bill. During these years the guardian presumably retained the securities thus purchased or their equivalent, receiving whatever benefits accrued therefrom, and making no complaint nor effort to rescind the transactions. It thus appearing on the face of the bill that as to the guardian the cause of action is long since barred, it became incumbent upon the pleader to aver facts which would take the case from without the statute or...