State of Missouri v. Title Guaranty & Surety Co.

• Decision Date: 06 August 1934
• Docket Number: No. 9911.,9911.
• Citation: 72 F.2d 595
• Parties: STATE OF MISSOURI ex rel. and to Use of STORMFELTZ v. TITLE GUARANTY & SURETY CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

72 F.2d 595 (1934)

STATE OF MISSOURI ex rel. and to Use of STORMFELTZ v. TITLE GUARANTY & SURETY CO. et al.^*

No. 9911.

Circuit Court of Appeals, Eighth Circuit.

August 6, 1934.

E. H. Gamble, of Kansas City, Mo. (S. M. Mandell, Hyde & Fischer, and Trusty & Pugh, all of Kansas City, Mo., on the brief), for appellant.

Wendell H. Cloud, of Kansas City, Mo., for appellee Title Guaranty & Surety Co.

Floyd E. Jacobs, of Kansas City, Mo. (Mitchel J. Henderson, of Kansas City, Mo., and John Farrington, of Springfield, Mo., on the brief), for appellee American Surety Co., of New York.

Before STONE and GARDNER, Circuit Judges, and JOYCE, District Judge.

GARDNER, Circuit Judge.

This is an appeal from a judgment dismissing appellant's amended petition after the court had sustained a demurrer thereto, and appellant had refused to plead further. The case was docketed below as an action at law but appellant moved to transfer it to the equity docket, but no action seems to have been taken on this motion. The court, in its opinion¹ sustaining the demurrer, said: "If in equity, the demurrers will be treated as motion to dismiss."

In the amended petition there are sixty-eight counts. In the first count it is alleged that appellee Luther J. Stormfeltz on November 7, 1911, was by order of the probate court of Mercer county, Mo., appointed guardian of his minor son, relator herein. The order of appointment required that he give bond to the state of Missouri with the appellee Title Guaranty & Surety Company as surety, in the penal sum of $250,000, conditioned for the faithful performance and discharge of his duties as guardian. He gave such a bond which was approved and accepted by the court, and he qualified as guardian of the person and estate of his ward, and remained such throughout the period of his minority. On or about November 8, 1913, the appellee American Surety Company guaranteed payment of and agreed to hold the appellee Title Guaranty & Surety Company harmless as against all liability on this bond, in consideration of which there was transferred to it the right to receive and retain all unmatured premiums, and thereafter all premiums on the bond were paid to the American Surety Company until the ward reached his majority, which was on February 28, 1925.

On March 28, 1925, the guardian filed in the probate court his purported final settlement, consisting of a report of debits and credits in his account, in which he accounted to relator for the sum of $145,235.56. Indorsed on the report is a recital, over the signature of the judge of the probate court, that the judge examined, approved, and filed it on March 28, 1925, and that it was recorded in Settlement Record Book 7 at page 369. On the same day the court made an order to the effect that there was due from the guardian to the relator as his ward the sum of $145,235.56, for which the guardian filed the ward's receipt, and that thereupon the settlement was approved and the guardian finally discharged. The receipt referred to in the order consisted of a statement signed by the relator at the foot of the report to the effect that he thereby acknowledged receipt in full of the properties and securities therein listed. It is dated March 26, 1925. The first day of the term in which the report was filed was February 9, 1925, and the term extended to and ended on May 9, 1925.

After setting out the foregoing facts, it is alleged: "The foregoing sets forth the entire judgment roll of the proceedings of March 28, 1925, and concludes the probate record of said guardianship. No reference to any final settlement is contained elsewhere in the records of said term or elsewhere in the records of said Court."

The amended petition alleges that the purported final settlement of March 28, 1925, was not filed in the probate court at least four weeks before the first day of said term "or at any time, excepting as hereinbefore stated"; that no copy thereof was delivered to relator four weeks before the first day of the term, or at any other time; that no notice stating the day upon or the court in which the guardian would make any settlement, final or otherwise, was delivered to the relator four weeks before the first day of the term, or at any other time; that through 1925 and for four years prior thereto relator lived in the guardian's home, and service of such notice could have been made on him; that no evidence was presented to or finding made by the court of the delivery of such notice, or copy, to relator before the commencement of the term, and the court did not order a notice of the filing of the exhibit or of the time and place at which final settlement was to be made, to be given by publication four weeks before the first day of the February term, or at any other time, in any newspaper printed in the English language and published in Mercer county, nor by printed handbills put up in six of the most public places in that county, designated by the court, and no such publication was made in any newspaper or notice posted in any place, and the settlement was filed and the order made without knowledge or notice on the part of the relator of any such filing or the rendition of any such order.

The petition also alleges that not only is the judgment of final settlement void because of the aforesaid jurisdictional defects, but further that there are certain extrinsic facts of fraud which vitiate the final settlement A detailed recital of the property embraced in the report and that omitted therefrom, according to the allegations of the amended petition, would seem to be unnecessary. The fraud alleged is that the guardian knew "that the settlement of account embodied in said exhibit was not a true and complete report of his account with relator, and knew that the averment therein contained that he had charged himself with all money and personal effects belonging to relator's estate for which said guardian had not previously accounted was false, and in that he wilfully and designedly suppressed and concealed from the court the true condition of said account, and of various appropriations and misapplications by him of relator's funds and property, and in that said fraudulent representations, suppression and concealment were to enable said guardian to procure, and it was only thereby that he did procure, the entrance of said order of final account and discharge."

The details of the alleged fraud need not be here recited. It is alleged that the relator's inexperience in business and his reliance upon the integrity and judgment of his guardian, and the concealment of the true condition of affairs from him after he attained majority, deceived him, and he was not put on inquiry as to the real state of affairs until about two years before the commencement of this action. The prayer for relief is: (1) "That said probate order of March 28, 1925, hereinbefore described, insofar as it purports to be a judgment of final settlement and discharge of said guardian, be adjudged void and held for naught," and (2) that the plaintiff recover the sum of $36,974.27 with interest.

The succeeding counts incorporate many of the allegations of the first count. The second count seeks recovery of the premiums paid the appellee surety companies; the third count alleges that on or about July 5, 1912, the guardian received for the account of the relator's estate the sum of $12,410, which he concealed from the probate court, and the relator failed to account for and converted to his own use. The prayer for relief, except as to the amount of money demanded, is the same as in the first count.

Count 4 alleges that through mismanagement and carelessness, $40,000 of relator's moneys, which were at all times during relator's minority in the possession of the guardian, were lost; that by reason of the failure of the guardian to invest such money, as required by the Missouri statutes, the relator lost in interest not less than $35,000. The prayer for relief is identical with that of the prayer in the first count, except as to the amount demanded.

Count 5 alleges that on or about December 30, 1916, the guardian wrongfully and fraudulently caused and permitted to be abstracted from a lumber yard belonging to the estate the sum of $1,000. Except as to the amount, the prayer for relief is identical with that in the first count.

All of the remaining counts of the amended petition are substantially identical with counts 5 and 6, except as to dates, amounts, and the lumber yard from which the diversion is alleged to have been made.

This action was originally commenced in the circuit court of Green county, Mo., and on ground of diversity of citizenship was removed to the District Court of the United States, for the Western District of Missouri. One of the grounds of demurrer was that the circuit court of Green county was without jurisdiction of the subject-matter in equity.

The parties appeared to be unwilling or unable to determine whether this is an action at law or a suit in equity, and apparently the lower court was in doubt on the question. As the appeal is from the judgment entered after sustaining the demurrer, the question to...