Court Opinion

ID: 3531006
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:43:36.854344+00
Date Added: 2024-06-11T13:46:45.006911
License: Public Domain

I think the opinion of the St. Louis Court of Appeals is correct both as to reasoning and result, and should be approved instead of quashed, and hence I respectfully dissent from the principal opinion. That opinion states, "Defendants were apprised of the fact that the funds which plaintiff was trying to invest belonged to his insane ward." Moreover, the opinion concedes "that the purchase of the notes was in violation of the statute." Why? Because the securities were not of the kind prescribed by Sec. 418 R.S. '39 and Mo. R.S.A. But a word further as to the facts — The salesman of Stix and Company, who handled the transaction, testified: "On this particular occasion I knew that we were getting bonds for a non compos estate, and I went to Mr. Harry Stix, one of the senior partners and told him about it. . . . Mr. Stix with that knowledge . . . went into the market and bought these bonds from the Real Estate Mortgage Trust Companyfor resale to this non compos estate." It further appears that the securities were purchased at 98½ and resold to the guardian at 100, plus accrued interest, thus netting the defendants a profit. In view of the evidence touching the manner of going into the open market and purchasing the securities "for resale", I am unable to find validity in the distinction sought to be made as to whether the plaintiff bought the securities "from" or "through" the defendants.
I am in agreement with much of the principal opinion, and in particular the following: "Our conclusions are that a guardian who transfers the trust funds of his ward in violation of a statute and the recipient of the funds from such transfer are legally obligated to make restoration, regardless of whether or not they actually know that the guardian is without authority to make the transfer. A court order approving such transfer, contrary to the authority vested in the guardian by statute, affords no protection to the guardian or transferee. A third person, although not a transferee, who assists a *Page 985 
guardian in an illegal diversion of trust funds, with knowledge of such illegality, is liable for consequent loss to the beneficiary and will not be absolved by an unauthorized court order. A third person, not a transferee, who innocently assists a guardian in an illegal diversion of trust funds, without knowledge of the want of the guardian's authority to make the transfer and without such notice as would cause a reasonably prudent person, after inquiry, to conclude that the guardian lacked authority to make the transfer, should not be held liable."
Even disregarding the monetary profit accruing to defendants by virtue of the resale of these securities, and conceding, for present purposes, that defendants were not recipients of the funds under the first of the contingencies just noted, it seems to me that the case is squarely within the second contingency,1 thus compelling an entirely different result from that reached. I think its applicability is made more apparent and particularly emphasized by the next succeeding category. The "knowledge of such illegality," within the foregoing rule is, in cases of this kind (where defendants knew the funds were guardian's funds), supplied by force of the statute itself declaring the character of securities which are legal investments for guardian's funds.
Nor do I think, as the principal opinion seems to hold, the degree of culpability, as between the guardian and the defendants, is any measure of the liability of the latter to theinsane ward. The controversy is not between Sontag, in hisindividual capacity, and the defendants. The funds of the insane ward have been dissipated by [378] the guardian with the assistance (in a strictly legal sense) of the defendants, and the principal opinion remits the incompetent to a remedy against the guardian and his surety. Suppose they are insolvent. I think both the guardian and defendants are liable to her. The circumstance that the action is brought in the name of the offending guardian should not operate to defeat a claim against another who is also liable. In other words, had the present guardian been removed (and he should have been, because his interest is adverse to that of his ward), and this suit has been brought jointly against such removed guardian and the present defendants, I apprehend that, under the rule announced by the principal opinion, both would be answerable. Tipton, C.J., concurs.
1 A third person, although not a transferee, who assists a guardian in an illegal diversion of trust funds, with knowledge of such illegality, is liable for consequent loss to the beneficiary and will not be absolved by an unauthorized court order. *Page 986