Willbanks' Guardianship, Matter of

• Decision Date: 26 December 1978
• Docket Number: No. 19129,19129
• Citation: 37 Or.App. 795,588 P.2d 118
• Parties: In the Matter of the GUARDIANSHIP and Conservatorship of Lillian C. WILLBANKS, an incapacitated person. Lillian C. WILLBANKS, Appellant, v. Lavonne MARS, Respondent. ; CA 8881.
• Court: Oregon Court of Appeals

Page 118

588 P.2d 118

37 Or.App. 795

In the Matter of the GUARDIANSHIP and Conservatorship of Lillian C. WILLBANKS, an incapacitated person Lillian C. WILLBANKS, Appellant, v. Lavonne MARS, Respondent.

No. 19129; CA 8881.

Court of Appeals of Oregon.

Argued and Submitted July 25, 1978.

Decided Dec. 26, 1978.

Paul D. Schultz, Oregon City, argued the cause for appellant. With him on the brief was Hibbard, Caldwell, Canning, Bowerman & Schultz, Oregon City.

Ferris F. Boothe, Portland, argued the cause and filed the brief for respondent.

Before SCHWAB, C. J., and LEE, RICHARDSON and JOSEPH, JJ.

RICHARDSON, Judge.

This appeal is from an order overruling objections filed by the ward to the final accounting of the conservator. By her objections, which are set out below in six categories, the ward sought to have conservator surcharged for certain challenged expenditures made from the assets of the ward's estate.

The conservatorship was created on May 30, 1975. The ward was 80 years of age and due to a series of surgeries was incapacitated and unable to care for herself or manage her affairs. The estate consisted of a 47 acre farm, which contained the ward's residence, thirteen residential rental properties, seven secured mortgages and land sales contracts, and seven bank accounts. During the period of the conservatorship, conservator, her husband, and their three teenage daughters undertook to care for all of the ward's needs. Conservator had never before served as a fiduciary and was not skilled in accounting or finance.

Shortly after her appointment, conservator instigated a renovation of the farm to accommodate the raising of registered breeding cattle. The farm had been used for pasturing cattle several years earlier but had since become unsuited for such an enterprise and was used only for the growing of hay. In order to raise cattle on this land, conservator greatly expanded the barn and repaired and installed fences and gates. These repairs were billed to the estate in the amount of $8,463.19. After adapting the farm for breeding cattle, the conservator purchased livestock for $4,500 and expended another $3,522.11 on their care and feeding.

In the early summer of 1975, conservator harvested the hay crop on the farm, but because of rain much of the crop was spoiled. What could be salvaged was baled and used as cattle feed. The harvest expenses totaled $1,179. ¹

During the course of her serving as conservator, Mrs. Mars paid to herself, her husband and three daughters gifts totaling $900, which she claims in her final account. She also paid her daughters for the work they performed for the ward. In addition she requested that she be paid $5,460 for her services as conservator. A camera and an adding machine were purchased with estate funds to aid the conservator in her duties.

The ward filed a petition to terminate the conservatorship on May 17, 1976, and it was dissolved August 2, 1976. Conservator filed her final report October 7, 1976, to which the ward filed a lengthy and detailed objection on November 9, 1976.

The ward's objections to the accounting can be grouped into six categories for ease of discussion.

1. Cash expenditures for daily living expenses and cash allowances to the ward.

The trial court upheld the challenged cash expenses listed in conservator's final accounting by "giving to LaVonne Mars the benefit of the doubt whenever possible." The trial court was in error as to the applicable law. It is well settled that a conservator is a fiduciary, Ohio Cas. Ins. Co. v. Mallison et ux., 223 Or. 406, 411, 354 P.2d 800 (1960), and as such has a duty to accurately account for expenditures of funds entrusted to her, Storms v. Schilling, 25 Or.App. 209, 313, 548 P.2d 529 (1976).

After having reviewed the record at length and matched the exhibits to the challenged disbursements we conclude that $722.71 ² of the cash expenses were inadequately verified or were not supported at all and should have been denied. Roach's Estate, 50 Or. 179, 191, 92 P. 118 (1907). In so doing, we recognize that the accounting and verification was made more difficult by the ward's demand that many of her bills be paid in cash. For those items no cancelled voucher could be produced for verification, but that does not relieve conservator of the burden to support the expenditures.

The cash allowances to the ward are also challenged. It is clear that conservator did not obtain receipts for the advancements although it would have been to her benefit to have done so. Receipts may be difficult to secure in the quagmire of a family-fiduciary setting but in order to adequately substantiate such claims it most often will be necessary. Family relationships cannot excuse fiduciary's duty to account for the estate's assets. See e. g. Storms v. Schilling, supra.

However, the ward admitted receiving at least two of the allowances and did not deny the others. Further, she augmented the problem by intercepting some of the rental property cash receipts before they could be collected by the conservator. Conservator considered any of the intercepted rental money as a cash allowance to the ward for the month she received them. Because of her interference with conservator's duties, the ward is estopped to assert the inadequacy of the receipts for these allowances.

2. The improvements to the farm and the investment in the cattle enterprise.

The power of a conservator is set out in ORS 126.313. The authority to continue or participate in the operation of an enterprise without prior court approval is recognized. However, ORS 126.313(3), in accord with the general common law, see e. g., 39 Am.Jur.2d Guardian and Ward § 82 (1968); 39 C.J.S. Guardian and Ward § 70 (1976); Restatement (Second) Trusts § 227, Comment f (1959), does not grant authority to the conservator to begin a new business with the entrusted funds.

The purpose of a conservatorship is to manage and preserve the estate's assets and to apply them for the proper care of the ward, ORS 126.157(2). In order to meet the "prudent man" standard set out in ORS 128.057 a fiduciary must invest or reinvest the estate in the exercise of due care and diligence. A conservator is not an insurer of the funds of the estate, but any investment which is considered speculative is improper, Marshall v. Frazier, 159 Or. 491, 527, 80 P.2d 42, 81 P.2d 132 (1938). The business judgment required of a conservator leaves no room for the risk eager. At the hearing the conservator stated that it would take three to five years to realize the investment from the cattle. Commencement of an illiquid breeding cattle enterprise for an 80 year old ward, was speculative.

A conservator is bound to exercise scrupulous good faith in the management of the estate's affairs. Everything the conservator does must be for the benefit of the ward and to protect her economic interest. Larsell v. Clarke, 9 Or.App....