IN RE: RUSSELL'S GUARDIANSHIP.

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District Court of Appeal, First District, Division 2, California.

IN RE: RUSSELL'S GUARDIANSHIP. CLARK v. BOSWORTH.

Civ. 11859.

Decided: June 23, 1942

Morrison, Hohfeld, Foerster, Shuman & Clark, of San Francisco, for appellant. Linforth, Cannon & Miller, of San Francisco, William C. Stein, of Los Angeles, and Long & Levit, of San Francisco, for respondent.

The business affairs of Mrs. Lillian F. Russell, an elderly woman who owned property worth approximately $350,000, were for many years managed by an agent named Williams. On April 8, 1937, Mr. Williams advised Mrs. George M. Clark, a first cousin and one of Mrs. Russell's two surviving next of kin, that it was difficult for him to continue with this responsibility because Miss Montgomery, the nurse and companion of Mrs. Russell, would not permit him to discuss business matters with her. Subsequently Mrs. Clark's husband, George M. Clark, visited Mrs. Russell and Miss Montgomery at the former's Carmel home, and they agreed that he should replace Mr. Williams as the business representative. His then attorney prepared and Mrs. Russell executed a deed of trust dated May 5, 1937, in which she conveyed all her property to him as trustee. This deed gave him power of management and control, together with the right to sell the property and invest the proceeds. The entire net income was to be paid to Mrs. Russell during her lifetime, and, of course, the entire reversion would go to her estate. Williams was notified of the execution and recordation of this deed, but he refused to comply with Clark's request for all documents relating to Mrs. Russell's business affairs and possession of her property unless Clark would supply him with a physician's certificate to the effect that Mrs. Russell was competent at the time of the execution of the deed. On August 19, 1937, Miss Montgomery filed a petition to have Mrs. Russell declared incompetent, asking that Mr. Clark be appointed guardian of her estate as well as of her person. This petition was granted. At the hearing the court was not advised of the trust deed. On April 14, 1938 the present petition for the removal of the guardian was filed. Subsequently Clark filed a purported revocation of the trust deed, signed in his capacity as guardian and again as trustee. During the court's vacation, which interrupted the hearing on this petition, Mrs. Clark's sister, Mrs. Juliet B. Lane, filed a petition for the appointment of a guardian ad litem. The guardian so appointed brought suit against Clark to have the trust terminated, and a judgment was entered vacating and setting aside the deed of trust. Counsel for Mrs. Lane testified that the petition for the appointment of a guardian ad litem was prepared by Clark's counsel.

In granting the petition for removal of the guardian the trial court found that Mrs. Russell was incompetent at the time the trust deed was executed, and that Mr. Clark was aware of that fact; that Clark accepted his appointment as guardian knowing that the court was not advised of the trust; that Clark took no steps to terminate the trust or withdraw from it after his appointment as guardian until the petition for removal was filed; that the purpose of the suit by the guardian ad litem was to remove the adverse position which petitioner claimed Clark was occupying; that Clark verified his first inventory, though he knew it did not include certain personal property in his possession belonging to the estate; that Clark failed to use reasonable diligence to lease certain real property in Stockton belonging to the estate; that in his first account Clark obtained credit for certain disbursements made prior to his appointment as guardian, and failed to inform the court of such inclusions; that Clark was not a proper person to be guardian of the person of Mrs. Russell because her mental and physical condition required personal attention of a delicate and disinterested nature. As conclusions of law, the court found that Clark occupied a position adverse to the interests of Mrs. Russell and had violated Probate Code, section 1580, subdivisions (1), (3), (5) and the last portion of subdivision (2).

The litigation was begun in April, 1938, by a sister–in–law of Mrs. Russell who had been paid a monthly stipend by the incompetent which was discontinued by the guardian soon after his appointment. The petition was based upon section 1580 of the Probate Code. An answer having been filed the cause went to trial on May 10, 1938 and testimony was offered by petitioner on these three issues––the competency of Mrs. Russell when the deed of trust was executed, the adverse interest of the guardian, and whether he had used due diligence in leasing certain real property of the estate. The appellant stipulated that Mrs. Russell was incompetent when the deed of trust was executed, but objected to all evidence relating to that issue and to his knowledge of her mental condition upon the ground that it was not relevant to the causes for removal specified in the code section. The cause was continued for hearing to June 23, 1938, and at the opening of the session counsel for appellant renewed his motion to strike out this testimony on the grounds stated. During the course of the argument counsel for the respondent stated “Counsel objected to all the testimony,” and the trial court agreed that such was the case. After argument the court again failed to rule on the motion and stated that a ruling would be deferred until the testimony was in. But testimony was then taken tending to show that both before and at the time of the execution of the deed of trust Mrs. Russell was incompetent, and this testimony was received for the purpose, as stated by the trial court, of showing that the petitioner knew, or should have known, the condition of Mrs. Russell when he assumed to act under the deed. At the close of the testimony of the third witness called for this purpose the motion to strike was renewed, the counsel for petitioner thereupon stipulated that all the testimony of the three witnesses called to prove the state of mind of Mrs. Russell and appellant's knowledge of her condition should be stricken from the record and the issue eliminated. Other testimony was taken at this hearing upon other issues and, upon June 30, 1938, the cause was submitted for argument. New counsel were then substituted for the petitioner and, upon their motion and over the objection of appellant, petitioner was relieved of the stipulations theretofore made and the whole cause was reopened for trial. A great part of the testimony taken at the second trial related to the issue upon which respondent puts her main reliance––the “fraud” of appellant in concealing from the probate court the existence of the deed of trust at the time of his appointment as guardian.

It is appellant's contention on this appeal that this evidence relating to his conduct in procuring the letters of guardianship and his failure to disclose the trust relation at the time of his appointment is a false issue in a proceeding for removal under section 1580 of the Probate Code and that its injection into the trial was prejudicial. The respondent contends that it was both proper and non–prejudicial. Respondent states her position in this way: “The grounds or causes of removal relied upon, and found by the court to exist, divide themselves into two classes, (1) whether the court was deceived and imposed upon in appointing Clark guardian; (2) whether, after his appointment, the ‘causes' specified in Subdivisions 1, part of 2, 3 and 5 of section 1580 of the Probate Code, or any of them existed.”

We should first direct attention to the propriety of the attack upon the appointment of the guardian as an issue in the proceeding for his removal. But at this time it should be said that, though respondent's briefs teem with charges of “fraud,” “deceit” and “misrepresentation” there is no evidence to support the charges, and no findings were made supporting the assertions. The trial should have been conducted upon the issues framed in the pleadings––that appellant should be removed for grounds stated in section 1580 of the Probate Code––not that the order of appointment should be vacated because of fraud or other irregularities in the order.

The code section specifies as grounds for removal of a guardian:

“(1) For waste or mismanagement of the estate, or abuse of his trust;

“(2) * * * for continued failure to perform his duties;

“(3) For incapacity to perform his duties suitably; * * *

“(5) For having an interest adverse to the faithful performance of his duties.”

It is apparent from a reading of the section that irregularities in the proceedings leading to the appointment of a guardian are not included as a ground for removal. It is appellant's contention that such form of attack must be made in a motion or suit to set aside and vacate the order of appointment. In this contention appellant is sustained by the great weight of authority. In Re Wall's Estate, 48 Cal.App.2d 8, 119 P.2d 165, this court held that a motion to vacate an order appointing a guardian made long after the expiration of the period prescribed by section 473 of the Code of Civil Procedure was governed by all the rules applicable to collateral attack. To the same effect is In re Marmaduke's Estate, 130 Cal.App. 449, 453, 20 P.2d 69, 965. In the early case of Guardianship of Raynor, 74 Cal. 421, 16 P. 229, an order removing a guardian was reversed because based upon a ground not specified in the code section; and in Re Estate of Atkins, 121 Cal.App. 251, 255, 8 P.2d 1052, it was held that when a guardian has once been appointed the letters cannot be revoked for other than the reasons specified in the code. However, the Supreme Court, in Re Guardianship of Howard, 218 Cal. 607, 610, 24 P.2d 486, expressly declined to hold that the code section furnishes the exclusive grounds for removal, and has thus left the question in some doubt. But since that decision In re Guardianship of Sturges, 30 Cal.App.2d 477, 501, 86 P.2d 905 and In re Guardianship of Sherman, 42 Cal.App.2d 251, 108 P.2d 717 adhered to the rule that the code section was controlling.

The respondent seeks to escape this uncertainty by the contention that the matters occurring prior to the appointment are admissible here to show appellant's “incapacity to perform his duties suitably” and for “having an interest adverse to the faithful performance of his duties.” The discussion of these points is weakened by the unwarranted repetitions of counsel's charges of fraud. There is no fraud in the case except in respondent's briefs. If respondent's case rested upon fraud we should expect to find some evidence and a finding concerning it. The evidence plainly shows that the appellant accepted the deed of trust for the purpose of managing the estate for the benefit of the incompetent and that it was in the nature of a general power of attorney substituting appellant for Williams, who theretofore had acted as agent for the incompetent having charge and control of her property. This deed purported to convey to the trustee all property owned by the trustor for the sole purpose “to manage and control said trust estate and invest and reinvest the same and to pay the whole of the net income from said property to Lillian F. Russell, party of the first part herein, during her lifetime,” and provided that the trustee should “hold, manage and control the said property during the existence of the trust estate.” Thus the trust terminated upon the death of the trustor and the entire reversion would become a part of her estate, without any beneficial interest going to the trustee. It is also disclosed that the appellant did not at any time act under the deed, did not take possession of any of the property of the incompetent, and received no benefits from the transaction. It appears that the deed of trust was executed on May 5, 1937; that appellant was appointed guardian August 26, 1937; that on March 4, 1938 respondent commenced this proceeding for his removal as guardian; that on October 5, 1938 a final judgment was entered terminating the trust. The trial of the proceedings for removal of the guardian was commenced May 10, 1938; after several partial hearings and continuances, and amendments to the petition, including allegations relating to the judgment terminating the trust, it was finally submitted and findings and judgment were entered January 4, 1940. It is thus apparent that when the cause was heard and determined the deed of trust was dead and did not at that time create an adverse interest in the guardian.

This presents the first question argued by appellant––whether the findings upon this issue support the conclusion of law that the guardian had “an interest adverse to the faithful performance of his duties,” or that because of it he was incapable “to perform his duties suitably.” Preliminarily it must be noted that this “interest” or unsuitability, must be determined as of the time of the judgment. It is not sufficient that the guardian might have had an adverse interest ten years before his appointment, or ten days before, or ten days after. The question is whether, when the cause is heard and determined, he has “an interest adverse to the faithful performance of his duties.” The rule is well stated in Drake v. Green, 10 Allen, 124, 92 Mass. 124, where the court upheld an order refusing to remove an administrator because he had endeavored to take an advantage of the estate prior to his appointment. The court said: “In so deciding, we do not mean to adopt to its full extent the ground taken by the respondent, that the cause of removal must be in every case an evident unsuitableness arising since the appointment. It must be an existing unsuitableness at the time when the petition for removal is heard. For it is not enough to show that the administrator was unsuitable at the time he was appointed, without showing further that the disqualification has continued, or has been revived. The appointment has been regularly made, and, if not appealed from, is valid and conclusive. All parties in interest were notified according to law, and their remedy, if they were dissatisfied with the appointment, was by appeal. The person appointed, whether suitable to discharge the trust or not, has become the administrator, perhaps because no one took the trouble to prove his unsuitableness. On a petition to remove him, the court does not reconsider the question whether his original appointment was proper. That has been adjudicated. His qualifications when he was appointed may incidentally be introduced in evidence, in order to show what his present qualifications are. But if since his appointment he has not become a suitable administrator, he has become an unsuitable one, and may be removed for that cause upon petition, although the present unfitness may have existed before his appointment to an equal degree, and would have been a good cause for refusing to appoint him in the first instance.” (Emphasis ours.) To the same effect is Odlin, Guardian, v. Nichols, 81 Vt. 219, 222, 69 A. 644, 645, where the court, in refusing removal of an executor, said: “When his competency is challenged on the score of interest, the question is to be considered with reference to the situation of the estate at the time. If his interest will not conflict with the duties still to be performed, there is no occasion for removal. The matter in which it was claimed that the rights of the petitioner would be jeopardized has been disposed of.” And, in Murray v. Angell, 16 R.I. 692, 693, 19 A. 246, it was said: “* * * the purpose of a removal is not punishment for omitting to exercise a discretionary right, which he might properly, and as a general rule ought to, exercise, but the security and benefit of the estate. For this reason, the alleged cause of unsuitableness must exist at the time of the removal. The court does not reconsider the question whether his original appointment was proper.” (Italics ours.) For these reasons we must hold that all evidence relating to the execution of the deed of trust must be confined to the single issue whether, at the time of the hearing, appellant was unsuitable to perform his duties as guardian.

But it should be said here that it is a matter of doubt whether the existence of the trust relation would have been a ground of attack upon the order of appointment. Certainly there was no evidence, and no finding, that if this relation had been disclosed to the probate court it would have caused that court to refuse to appoint the appellant as guardian. And it is not clear that, because of the peculiar nature of the trust, the relation would have been a good ground alone for denying the application, if that relation had been disclosed at that time. Where there is no other beneficiary of a trust, but where the trustor and the sole beneficiary are one, the position of the trustee is precisely the same as that of a “trustee of a fund to be applied to the child's support,” who, in section 1407 of the Probate Code, is expressly preferred for appointment as guardian of a minor. This statutory preference given such a trustee for appointment in the case of a minor is persuasive as indicating that the Legislature did not intend the relation to be a cause for removal under section 1580, because the latter section applies to guardians of both incompetents and minors.

But, aside from this, we are unable to hold that the interest of the appellant under the deed of trust was an “adverse” interest in contemplation of the code section. As trustee under the deed he was protecting her rights alone. As guardian of the estate he was doing the same thing. Persuasive evidence that there was no adverse interest is the conceded fact that for more than two years nothing was done or attempted under the deed of trust, and no claim of right was asserted under its terms.

For these reasons the conclusion of law upon which the judgment is based––that from the time of his appointment up to September 29, 1938, appellant occupied a position adverse to the interest of the ward––is not supported by the findings and is contrary to the only relevant evidence.

The trial court also drew the conclusions of law, based upon these same findings of fact, that the appellant was incapable of performing his trust suitably, and was guilty of an abuse of his trust as guardian. These conclusions, all based upon the evidence of the deed of trust, the circumstances under which it was executed, and the failure to disclose it when the letters of guardianship were granted, must fail for the reasons heretofore stated.

Findings were made disclosing the proceedings leading to the appointment of a guardian ad litem and the proceedings instituted by him to cancel the deed of trust. And it was found that the attorneys who represented the guardian ad litem expected to be paid for their services from the estate. From these findings the conclusion of law was drawn that appellant was guilty of waste or mismanagement of the estate, or of incapacity to perform his duties as guardian. The simple answer is that there could be no waste unless the probate court improperly approved the expenditure, and that the mere conjecture of error in this respect cannot support the conclusion of law.

The only finding of fact which is attacked by the appellant as not sustained by the evidence is that relating to his failure to rent the real property situated in Stockton to the advantage of the estate. This finding is relied on to support the conclusion that the guardian was guilty of a “continued failure to perform his duties.” The evidence on this issue proved nothing more than that various real estate agents, unsuccessful in procuring from appellant an exclusive contract to handle the property, ventured the opinion that he had been negligent in its management. The property referred to had been rented for $750 a month. When it became vacant the appellant offered to rent it for $500, but none of the witnesses was able to procure a tenant. Some testified that the estate should expend $25,000 in renovation of the building. All testified that they had no tenant ready to take the property. The trial court asked counsel for respondent what he thought the appellant should have done other than what the evidence showed he did do, but counsel made no answer. The evidence is wholly insufficient to show “waste or mismanagement,” “failure,” or “incapacity to perform his duties suitably.”

The trial court found that the appellant had failed to include in his inventory certain jewelry, silverware, books and similar articles, but that he thought he had told his attorneys about these articles when they prepared the inventory, and that they were of such inconsiderable value that it was not necessary to include them. The jewelry and silverware were safely deposited with a bank in Pacific Grove, had been carefully inventoried by the manager of the bank in appellant's presence, and both retained duplicate copies of the list of articles. The contents of the safe deposit box as shown by this list were intact at the time of the hearing. The books were moved to appellant's home and were of little if any value. The trial court accepted the explanations of appellant and did not find that the failure to include these articles in the inventory was wilful, intentional, or a fraudulent concealment. Respondent's argument that a fraud was committed by appellant is not supported by the findings made and is not supported by any competent evidence.

Other grounds urged are either so unsubstantial or are covered by what is said herein that it is unnecessary to prolong the opinion by giving them special consideration. The views herein expressed as to the application of section 1580 of the Probate Code require a reversal of the order removing appellant as guardian of the person of the incompetent as well as the portion removing him as guardian of the estate. In re Guardianship of Sherman, 42 Cal.App.2d 251, 253, 108 P.2d 717.

The judgment is reversed with costs to appellant chargeable to the estate.

NOURSE, Presiding Judge.

STURTEVANT and SPENCE, JJ., concurred.