Downs v. Rickards

4 Del. Ch. 416 | New York Court of Chancery | 1872

The Chancellor :—

The second interrogatory is objectionable because it is leading, but it also inquires, as do the 13th and 14th and the last clause of the 9th, as to the opinion of the witness about the defendant’s insolvency. This should be omitted and the questions confined to the witness’s knowledge of the defendant’s insolvency, not his opinion. It may also extend to general reputation. The proper form requires preliminary questions, such as, “Did you at such a date know Rickards’ reputation in his neighborhood for solvency, and how ? if yea, what was it ?”

The fourth interrogatory is objectionable as inquiring as to the existence of mortgages, and the third and latter clause of the fifth, as attempting to prove the existence and contents of judgments on September 27, 1867. This cannot be done by paroi, nor by a list unless duly certified. The record is the only evidence.

The object of the third interrogatory suggested in argument, was to prove that these judgments were paid since that date, and that certain entries of satisfaction though purporting to be made before, were in fact made since that date. This is admissible under interrogatories differently framed. They should inquire of the witness at what time a certain judgment (describing it) was paid ? If yea, how he knows it? at what time it was paid? by whom ? &c., whether before September 27, 1867 ?

Whether he knows when a certain entry of satisfaction (describing it) was made and signed on the record ? If yea, how he knows ? And when it was made and signed ? ■Whether since September.27, 1867?

The first clause of the fifth interrogatory should be answered so as to make the inquiry as to indebtedness on September 27, 1867, for which judgment had not been recovered.

The seventh interrogatory is not wholly objectionable, but is defective in not first eliciting whether the witness has any knowledge and how he obtained it.

The eleventh, twelfth and sixteenth interrogatories are admissible, but not sufficiently specific. The inquiry should be in the first instance, were you sheriff &c. ? How did you dispose of the proceeds of sale ? Did you apply them in payment of any, and what liens against the premises sold ? Did you apply any and what part of the same to such a lien or liens ? (describing it or them.)

E. Saulsbury, for the complainants.

There are two grounds of relief.

First. Actual fraud. The proof shews that Rickards sought the guardianship as a fraudulent artifice for getting the land and not for the benefit of the children. This is indicated by several circumstances. His active efforts to have himself substituted for the purchaser—his anxiety to be appointed guardian—his efforts to that end while bankrupt in fortune—his presenting to the Court a surety in failing circumstances.

Silence or non-disclosure, where disclosure is a duty, especially under a fiduciary relation amounts to fraud. Perry on Trusts, Secs. 169 and 178.

The seventh interrogatory is inadmissible as far as it inquires about mortgages and recognizances—They being matters of record—so also, the inquiry as to all unsold lands being levied on. The witness may be asked to state what lands Lofland holds, so far as he knows, and the levies must be proved by the record. The request to append to the deposition a certified list of liens is unobjectionable in the terms asked. If properly certified, it would be evidence by itself, if not, it would be subject to exception after publication.

Leave will be given to amend those • interrogatories which are objectionable in form and not as to the subject of inquiry.

The interrogatories were amended and the cause proceeded to a hearing.

He took the lands after his appointment, while guardian, thereby gaining an unconscientious advantage. It was then his special duty to guard the interests of the wards in this land or its proceeds ; such would have been his duty as a third person, a fortiori as against himself.

His not paying for the land was itself a fraud; by that the wards lost the advantage of following the trust fund wherever it might be traced.

But beyond this he falsely represented to the Court, that the money was in Mr. Reed’s hands, when is was not.

In equity, fraud may be presumed from the relations of parties, and its absence must be shewn in defense. 1 Sto. Eq. fur. Sec. 190; 1 Fonbl. Eq. 124, note (b); 3 Gr. on Ev. Sec. 254; Harrison vs. Guest, 35 E. L. & Eq. 487.

Equity will relieve against decrees obtained by fraud. Reigal vs. Wood, 1 Johns. Ch. 402; Sterry vs. Arden, 1 Ib. 269; Bottsford vs. Burr. 2 Johns. Ch. 412; 2 Sm. L. Cas. (449); Shedden, vs. Patrick, 28 E. L. and Eq. 56; Browne on Frauds Sec. 95.

Second. It is also a case of constructive fraud.

(1.) The purchase was inconsistent with his duty as guardian, and was therefore precluded on grounds of public policy. Van Epps vs. Van Epps, 9 Paige 237; Greenlaw vs. King, 3 Beav. 49.

(2.) He did not in fact pay for the land and there is consequently a resulting trust. 14 Pick. 271 ; 10 Pa. St. 618, 626, 630; 30 Maine 136; 1 Johns. Ch. 582.

(3.) Whenever one holding a fiduciary character makes a purchase with trust funds, a trust results. Perry on Trusts Secs. 127; 35 E. L. & Eq. 48.

Taking the land without paying for it is equivalent to buying other land with these trust funds. Hamburg Bank vs. Tyler, 3 W. & 5. 373, 377; 11 Hump. 457; 2. S. & R. 531; 1 Clarke (Iowa) 226; 1 Strobh. Eq. 96; 49 Pa. St. 410; 2. Sugd. on Vend. 362.

(4.) If a person in a fiduciary relation uses his position to purchase with his own funds an interest in trust property or other property so connected as to be used with it, he must hold subject to the trust. Perry on Trusts, Secs. 127 and 200; Van Epps vs. Van Epps, 9 Paige 246; Clary vs. Bank of Orleans, 9 Pa. St. 663; Greenlaw vs. King, 3 Beav. 49; 2 Sto. Eq. Jur. Sec. 1261-5; 4 Cow. 739; Farman vs. Brooks, 9 Pick 212, 231-4; 55 Pa. St. no.

Ridgely and Massey, for the defendants.

The bill suggests but two' grounds of relief:—

One of actual fraud in the transaction in the Orphans’ Court where it is claimed a trust was raised in equity, and the other that thé defendant as guardian had purchased the land with trust funds and hence there was a resulting trust. We agree that either of these grounds bring the case within the principles relied on.

With respect to the claim of actual fraud, however, the fraudulent intention must be established conclusively, and upon the proof in this cause it is not. So also it appearing upon an examination of the evidence that this is not a case of funds in the hands of Rickards which can be identified and followed, with which he purchased the land.

As to the claim of a resulting trust; such a trust can only arise in two cases, (1) on a purchase of land with the.money of another, and (2) when the transaction is fraudulent and the party is held to be a trustee ex delicto.

We admit that Rickards would not have taken title had he sold, but when he contracted with Downs he was not guardian. The land had been converted before his appointment, and having contracted before his appointment he was bound to comply.

The validity of the sale was established by the confirmation of the Orphans’ Court after his appointment. He had no rights or duties touching the real estate; at his appointment, the wards held no real estate, under the effect given to these sales.

Upon the facts proved this case does not fall within any class of resulting trusts. Fisk vs. Sarber, 6 W. & S. 18; 2 Sto. Eq. fur. Sec. 1261; Kellum vs. Smith, 33 Pa. St. 158; Barnett vs. Dougherty, 32 Pa. St. 371; Darling vs. Hammer, 5 C.E. Green Ch. 220; Torry vs. Bank of Orleans, 9 Pa. St. 663; Eberts vs. Eberts, 55 Pa. St. 110; Baker vs. Vining, 30 Maine, 121.

There can therefore be no resulting trust and the case resolves itself into the single question of fraud in the giving of the guardian bond.

We are not bound to shew the absence of fraud which is never presumed. True it may be inferred from circumstances but these must be well established and conclusive. Duval vs. Cole, cited, 1 Md. Chy. Dec. 169.

The Chancellor :—

In this case, I am of opinion that the land sold as the property of the Downs minors, and purchased by the defendant Rickards, is, in equity, subject to a constructive trust for the minors. My opinion rests upon two distinct grounds. First. Excluding from consideration all question of actual fraud on the part of Rickards in obtaining the title, still, the case is left within the rule that a trustee shall not purchase property held by him in trust, so long as the trust continues. The disability of a trustee to buy at a sale conducted by himself, has never been doubted ; but it has been' questioned whether he might not purchase at a judicial salp of the trust estate made by some other officer or person, and not subject to his control. The principle upon which the disqualification of the trustee to buy the trust estate rests, is a very broad one, and extends, as well to sales conducted by others, as to those conducted by himself. The principle is that one shall not act for himself in any matter with respect to which he has duties to perform or interests to protect for another. The trustee of real estate, which happens, during the continuance of the trust, to fall under some judicial process of sale, such as execution process, sale in bankruptcy, or, as in this case, an order of the Orphans’ Court, stands in this position. Though he has not the management of the sale, he has in charge the interests of the cestui que trust, as they may be affected by the sale, and standing in the place of his cestui que trust, he is not allowed to act for himself. The principle looks, .not merely to prevent fraud in the management of the sale, but to the broader object of relieving trustees from any possible conflict between duty and self interest.

The rule is one of the widest application. It applies, not only to trustees, in the strict technical sense, but to all persons holding fiduciary confidential relations, such as assignees in bankruptcy, executors and administrators, attorneys and solicitors, and with the greatest stringency to guardians. 1 Story’s Eq. Jur. Secs. 321, 322; 2 Sugd. on Vend. Ch. 19, Sec. 2, par. 1. The prohibition does not depend upon any question of fraud or improper advantage made by the purchase. However fair the sale, and adequate the price, the Court will set it aside. In view of the difficulty of unraveling fraud in these transactions, the policy of the rule is,-to exclude the possibility of it by making the prohibition absolute. It is hardly an exception to this remark that the trustee has been allowed to deal directly with a cestui que trust who is sui jtiris under special and guarded circumstances amounting to a dissolution of the relation between them. 2 Johns. Ch. R. 376

The principle which excludes, as a purchaser, any person owing any duty to another touching the subject-matter of a sale, though a sale not conducted by himself, has been most fully discussed in a series of cases of sales in bankruptcy, where purchases by assignees, by commissioners and by solicitors in bankruptcy have been drawn into question. A series of such cases came before Lord Eldon, who gave the subject a very thorough examination. One of these cases is Ex parte James, 8 Ves. Jr. 337. Upon a sale of the bankrupt’s estate by the assignees, it was bid off by the solicitor of the assignees. The sale was treated by Lord Eldon as fairly made, and no undue advantage gained by the solicitor. Yet he would not allow the sale to stand, holding the solicitor to be within the principle of the rule which excluded the assignees themselves from purchasing ; and this, upon the ground that the solicitor, as the adviser of the assignees, was under a duty to them, and through them to the creditors and the bankrupt, incompatible with the relation of a purchaser. Nor, would the Lord Chancellor, in that case, on directing a re-sale discharge the solicitor in order that he might be at liberty, afterwards, to bid, since such a practice might enable one who, from a confidential relation to the property, had acquired special information touching its value to make a selfish use of it by getting a discharge instead of disclosing his knowledge for the advantage of the sale: He took in this case the strong and clear ground that, considering the difficulty in a Court of Justice of detecting fraud, and the general unfitness of cestuis qui trust to look after their interests in these transactions, the fidelity of the trustee should be secured by an absolute prohibition to purchase at all. In another case, soon after, Ex parte Bennett, 10 Ves. Jr. 381, upon a very elaborate examination, the same principle was applied to a sale, at which one of the Commissioners of the bankrupt, bid off the property for an absent person, that person being himself a competent purchaser. Lord Eldon held that the Commissioner could neither buy for himself nor for a third person. It should be observed here, that a Commissioner in bankruptcy had, as is fully stated in the case now cited, no control or management of the sale, that being vested by the statute of bankruptcy in the assignees. The Commissioner in bankruptcy held substantially the same relation to such sale as does the guardian'to a sale by a trustee appointed by the Orphans’ Court. Neither of them have any direct agency in, or control over, the sale, but both represent, generally, the interests involved in it, that is, the Commissioner represents the interests of the creditors, and the bankrupt and the guardian represent the interest of the infants; and both are to receive and dispose of the proceeds of the sale. In another case, prior to the two just cited, Ex parte Hughes, 6 Ves. Jr., 617, Lord Eldon held it extremely difficult, though the case did not require a decision of that point, to sustain the title of one of the creditors of the bankrupt, who,, having been consulted and having advised as to the mode and terms of sale, afterwards bid off the property, although without any fraud or bad faith. Lord Eldon, in laying so strong a hand as he does in these cases, upon all persons connected with proceedings in bankruptcy, was, doubtless, stimulated by his observations of the tendency to fraudulent practices in dealing with estates in bankruptcy, upon which tendency he comments in some of the cases before cited, and with still greater severity in 6 Ves. Jr. I. But the view taken by him in these cases equally apply to all persons holding fiduciary relations with respect to property subject to sale, and to none with more force and importance, as we shall presently see, than to guardians. And accordingly, the principle under consideration has received from the Courts the widest application. The views of Lord Eldon came under direct review in a later English case, Greenlaw vs. King, 3 Beavan 49. There the rector of a parish was authorized by act of Parliament, to raise, by the sale of an annuity, £2000 for rebuilding the rectory. The sale of the annuity and the disposal of the proceeds were to be subject to the approval" of the Bishop of the Diocese. Upon an effort being, made, without success, to obtain the required sum, at a percentage deemed low enough, the Bishop proposed, himself, to purchase the annuity at per cent, provided the rector could not obtain the money at a lower rate. No better offer being made, the annuity was sold to the Bishop. Upon a bill to set aside the sale, it was held by Lord Langdale, M>. R., and affirmed by Lord Cottenham on appeal, that the transaction, although confessedly fair and honorable on the part of the Bishop, was yet one prohibited by the rules established and necessary for the protection of interests committed to those holding fiduciary relations, and therefore could not stand. The Master of Rolls, (p. 61) quotes, with strong approval, Lord Eldon’s observations in the bankruptcy cases, as applying generally to all trustees and persons in fiduciary situations.

In this country, the exclusion from becoming pur-, chasers, of all trustees having any duty to perform, touching the subject-matter of a sale, though the sale be a judicial one and not under their direct control, may be considered equally well settled. Van Epps vs. Van Epps, 9 Paige 237, is the leading American case. There, the complainant having a farm which was subject to a mortgage for $5,000, sold it for $15,000, taking from the purchaser, in part satisfaction of the purchase money, other real estate, and for the residue, a mortgage of the purchaser on the premises sold for $6000. The mortgage was taken in the name of the complainant’s son, who was the defendant in the suit, and the land taken in exchange was also conveyed to the son, both the land and the mortgage being held by him upon certain trusts for the complainants. The purchaser had, as part of the consideration for the farm sold to him, assumed the mortgage for $5,000, which was" a lien upon it at the time of sale; but failing to pay it, the mortgage was foreclosed and the farm brought to a sale under it, at which sale the defendant being, as before stated, a trustee for his father under the subsequent mortgage for $6,000, bought the farm. Here the purchaser was not trustee of the farm which was sold, but only of the $6,000 mortgage which was a subsequent lien for the benefit of his father, the complainant. But the Court held him to be within the principle of the general rule, which prohibits a trifstee to purchase the estate which is the subject of the trust ; and the principle is thus broadly put by the Chancellor, “that no party can “be permitted to purchase an interest in property and “ hold it for his own benefit where he has a duty to perform “ in relation to such property, which is inconsistent with the “ character of a purchaser on his own account and for his “ individual use.” Prior to that case, in Hawley vs. Cramer, 4 Cowen 717-733, the subject had been very fully ex-' amined upon all the authorities, and it was there held that the attorney, in an execution, was disqualified to bid at a Sheriff's sale without the consent of his clients, the creditors, or unless their debt should be satisfied. In that case, he was not allowed to bid as agent for some of the creditors in the' execution to the exclusion of others. Precisely the same point was afterwards determined in Pennsylvania, in Leisenring vs. Black, 5 Watts 303, and in Bartholomew vs. Leach, 7 Watts 473, an agent having charge of unseated lands was held disqualified to purchase at a sale for taxes. So, in Kentucky in Oldham vs. Jones, 5 B. Mon. 458. In Ex parte Wiggins, 1 Hill (S. C.) Ch. (354), one of the assignees of an insolvent, bid at a sale of the insolvent’s real estate which had been sold under an order of the Court, made upon a bill filed by the assignees to marshal the assets and settle the estate. The sale was directed to be made by a commissioner of the Court, under the superintendence of the assignees. Upon the question whether the sale should be confirmed, it was argued that this, being a sale by order of the Court and made by a commissioner, was not within the general rule. But the Court of Appeal, affirming the decision of the Chancellor, held the contrary. They say, “it is not merely against unfairness in the sale that the “ principle is intended to guard. The cases (referring “ mainly to the decisions by Lord Eldon before^ cited) “suppose, that, in consequence of his connection with “ the estate, as trustee, he may have acquired important “information as to its value,—such as the existence of “ mines,—which the Court can never be sure he has fully “ communicated ; and no one undertaking to act for the “ benefit of others shall be permitted to act for his own “advantage in the same matter and the sale was set aside, notwithstanding it had been reported, upon a reference to the Commissioner, to have been bona fide and for an adequate price. The case cited in the argument for the defendants from 6 W. & S., Fisk vs. Sarber, does not impugn this principle, although, upon the facts, the decision is not in harmony with it. That was a sale of an insolvent debtor’s estate by the Sheriff, under a mortgage, and the assignee of the insolvent was held by a majority of the Court qualified to bid at the sale. The Court puts its decision upon the ground that, by the seisure under the execution, the assignee “became divested of his trusteeship in regard to it ; that all his power and control “over it ceased, so that he had no duty whatever to per“form in respect to it, in the slightest degree incompatible “with his buying it at the lowest price for which it may be “obtained.” The Court, by the whole tenor of the decision, conceded that, if any duty remained to be performed or interest to be protected by the assignee, he could not purchase : but they assumed that the duty of the assignee, and his charge of the interests of the insolvent, wholly ceased with his control of the property. On that point the decision would be very difficult to maintain ; and the opinion of the dissenting Judge (Rogers) seems to me, with all deference, much better sustained authority.

But to come now to the case in hand,—that of a guardianship. Perhaps there is no other trust created bylaw, except only a trust for a lunatic, which is so comprehensive in its duties, and attended with such utter dependence of the cestui que trust upon the integrity of the trustee, and which, therefore, is so important to be guarded against any bias of interest in the trustee. The guardian stands to the ward in loco parentis, with duties not less than those of a parent in their scope and sacredness, so far as concerns the property of the ward. And certainly, the charge of the ward’s interests in real estate assumed by the guardian on his appointment, must follow the property throughout the process of conversion under the order of the Orphans’ Court. Though he is not the trustee of the Court to conduct the sale, he still remains the trustee of his ward to watch over and protect his interests in the whole proceeding.

It is well known that, in point of fact, the guardian exercises a material influence over the proceedings, requiring in him, for the safety of the minor, entire disinterestedness. He is, in these cases the petitioner for the order of sale ; and upon his judgment and information, the Court mainly rely in granting or refusing; the order. Ordinarily the guardian is appointed the trustee to sell, and if there be any reason for his not acting in that capacity, still his choice of an attorney practically determines the appointment of the trustee. It can rarely happen that the guardian’s knowledge of the property, its condition, advantages and value, will not be necessary, or, at least, beneficial, in fixing the terms and mode of sale ; and his disinterested advice must, in many cases, be useful to the trustee pending the order, and also to the Court on its return. Further, it cannot be without importance that a vigilant oversight of the whole proceeding should be exercised by some one in the direct interest of the minor ; and by whom but the guardian is this duty to be discharged ? Considering both the influential relation of the guardian to the proceeding, and the helplessness of the ward, it is difficult to put a stronger case for the principle that one charged with the protection of the interests of another in a transaction shall take no interest in it himself.

But it was insisted in argument that Rickards was a purchaser before he became the guardian. I cannot so treat him. He was appointed guardian, September 27th 1867. The sale was returned to him October 31st, following. That is the date of his purchase. Before then,-he had no real connection with the sale. He was not a bidder, and his understanding with Downs, the bidder, that the property should be returned to him at Downs’ bid, brought him under no responsibility to the trustee or to the Court. His appointment as guardian, charged him with the care of the ward’s interests, as they might be affected by the subsequent return of the order and confirmation of the sale, and disqualified him from taking, subsequently, any interest under those proceedings. I say nothing as to what would have been the effect of his having been a bidder at the sale before his appointment as guardian.

Again, the confirmation of the sale by the Orphans’ Court was relied on as a bar to any equity of the complainants founded upon the disqualification of Rickards, as guardian, to become the purchaser. The argument assumes for the confirmation the effect that the Orphans’ Court adjudgged him, though the guardian, to be a proper purchaser. To have this effect, it should appear that the. Court confirmed the sale with judicial cognizance of the fact that the returned purchaser was guardian, as if that fact had been set forth in the trustees return of the sale. A Court could have judicial cognizance only of facts brought to its notice in the proceeding before it. In this case, Rickards’ guardianship was not disclosed to the Court by the trustee’s return, or otherwise, by anything that appears of record. This is the true answer to the argument; but it may nqt be amiss to add that it may be taken as quite certain that the attention of the Court was in no way drawn to the fact and, of course, it is not supposable that the Orphans’ Court carries in its mind all the appointments of guardians which have been made in it. Let it be observed that a decree of this Court, according to the prayer of the bill, does not impeach or set aside the action of the Orphans’ Court in confirming the sale and ordering a conveyance. It leaves the legal title of Rickards under the deed ordered by that Court unaffected, but charges the title .thus acquired, with a constructive trust, in equity, arising out of and resting upon considerations which were not brought under the cognizance of the Orphans’ Court, and was not the subject of its judicial action. There is, therefore, no conflict of jurisdiction.

Thus far, I have considered this case as if the purchase by Rickards was wholly free from fraud, wishing to recognize, for the future government of this Court, the wholesome rule that no sale to a trustee of the trust property, during the continuance of the trust, however fair in its terms, will be permitted, whether the sale be one made by the trustee himself or a judicial sale made by another person, subject to the exceptions, if such it be, of a fair dealing between the trustee and a cestui que trust who is sui juris, under such circumstances as amount to a termination of the trust relation between them.

I am not able, however, to acquit the guardian, in the present case, of what the law treats as fraud in this purchase ; and this brings us to the second ground for raising an implied trust for the minors. I do not mean that Mr. Rickards intended to cheat his wards. Doubtless, he considered the guardian bond as a sufficient security; but he did, in fact, get the land of his wards by means of a gross breach of his duty as their guardian is not paying over the purchase money—a breach of duty greatly imperilling his wards’ interests. Further, he enabled himself to do this by practicing a deception upon the Orphans’ Court in his petition for an order on the trustee to pay over the purchase money to him. And again, upon a view of all the circumstances and of the actual results, it is impossible to resist the conviction that this guardianship was obtained and used as a contrivance for getting the land without raising and paying over the purchase money.

The purchase money was $3750.00, yet the trustee, when he made his return, had in hand, as the answer of Rickards states, only some $400. Mr. Reed, the Trustee, in his testimony, says that Rickards had paid him $1257.82. The discrepancy may be accounted for by the fact that $750.00 represented the value of the dower, which would leave in Mr. Reed’s hands about $400.00 on account of the purchase money of the title of the minors. The difference is not material to the case. Certain it is that, for the bulk of the purchase money, no cash was in hand at the return of the sale. The answer of Rickards states that, instead of the money, he gave the trustee his “check or bond.” The trustee’s testimony is, that Rickards gave him “notes and bonds of undoubted “character”—“which,” the witness says, “ were taken “by me as good and available at the time.” It is perfectly immaterial which is correct. Then followed the trustee’s return of sale and the confirmation by the Court. Then the petition of the guardian to the Court, setting forth, in express terms, as a fact, that there was then “in ‘‘the hands ” of the trustee, “the sum of $3617.45 belonging to the wards of the petitioner” and praying an order of the Court directing the trustee “ to pay over into the “hands of the petitioner the said sum of $3617.45 ” The Court seeing nothing more in the transaction than appeared on its face, made the order, whereupon the trustee, after deducting the costs, paid over to Rickards, as guardian, the small balance left of the cash which he had received from Rickards, as purchaser, and handed him back the securities, whatever they were. A receipt in the usual fotm was taken from the guardian, which closed the business. Now, these are facts all on the record, and not at all in controversy. They are not touched by the denials of the answer. They present two features of fraud.

1st. A breach of guardian’s duty to his wards. What was his duty ? To raise the purchase money that it might be held and invested as a trust-fund. It is not true that the guardian is a mere debtor to his ward, at liberty to deal with the fund as if it were money borrowed, and so to subject it to all the hazards of business or speculation. He is a trustee, holding a fund not his own, which it is his duty to keep separately invested in his name, as trustee, free from all risks affecting his own affairs. It is quite as strictly a trust fund in his hands, and, as such, to be invested for the minors, as if it were money held for the minors by the Orphans’ Court. The guardian’s omission to so deal with it is a gross breach of trust. I speak only of the legal character of the omission to invest, not imputing criminal motive; for it may be that it is not the common impression that the relation of a guardian is so strictly fiduciary as I have put it ; probably there has been some relaxation from the estimate of it held in times past, and it is likely that good and well-meaning men acting as guardians do use the money of their wards, considering themselves as mere debtors rather than trustees. But they mistake their true legal relation. It is true that the guardian, on his appointment,, gives bond with surety ; but for what object ? Not for the payment of a debt properly so called ; but, in substance and effect, the bond is a security for the faithful performance of his duties as guardian, one, and a most important one, of which duties is, the safe investment of his ward’s money as a trust-fund. It is also true that if, at the termination of the guardianship, the balance due to the ward is, in fact, paid, the ultimate purpose of the bond is satisfied, and the guardian discharged, whatever he may have done with the money ; but, though a final settlement discharges him from the consequences of having converted the money to his own use, it does not justify him or render the conversion any the less a breach of duty at the time. Now, how just and important this view of a guardian’s relation to his ward, and of his duty respecting the trust fund is, there could be - no more forcible demonstration than the history of this case, taking the facts assumed for the defendants. It is argued, and I have not been obliged to question it, that the bond of Rickards and Lofland was, when given, in September 1867, an adequate security; and yet, within three years, both confessedly were insolvent, their property sold by the Sheriff, Rickards removed from the guardianship and the estate of these minors lost, except what may be rescued under the decree of this Court. Doubtless this is an extreme case, but, considering the vicissitudes of business, the general speculative habit, and especially how far the sufficiency of sureties has come to depend upon fluctuating values of property, it must be apparent that, if the estates of wards cease to be treated as trust funds and may legitimately be employed by the guardian in his private business, or for speculations, (and if one be allowed so must be the other,) then the interests of minors left, as they will be, to all the risk now so largely affecting the solvency of many guardians and sureties, will become,in many cases, wholly insecure. The only really adequate security, such as the law contemplates, is in treating the ward’s property as a trust fund and holding the guardian strictly to the responsibilities of a trustee. I cannot, therefore, accept the theory of the answer, that it was wholly immaterial whether Rickards paid over the money to the trustee so as to create a trust fund for the minors, to be invested for them, either by the Orphans’ Court or by their guardian, thus securing them in all events as the law contemplates, or whether he paid no money and received and invested no money, thus throwing his wards solely upon what is essentially an uncertain and what, in this case, proved to be worthless security, the guardian bond. The Orphans’ Court, had the transaction been disclosed to it, would have considered the difference material enough to have either required the money to be raised and paid into Court for investment there,or to have removed the guardian and appointed another. It may well be that a guardian, rightly regarding his duty and his ward’s interests, would deem it a needless formality to pay over money as a purchaser, and with the same hand take it back as guardian ; but a guardian, acting only with such a purpose, will be found to have afterwards raised and invested a .trust fund for his ward. Supposing that were afterwards done, then it would be true, as the answer insists, that it matters not whether the 'cash be paid to the trustee and returned to the guardian, or receipts be exchanged, that is it would not matter, practically, in the result, though still it would be an improper dealing with the Court. So much for the guardian’s breach of duty in this transaction to his wards.

The other feature of his conduct to be now noticed, is the deception practiced upon the Orphans’ Court in order to make the expedient effectual. The practice of our courts, both the Orphans’ Court and the Court of Chancery, contemplates that, in the case of a sale not on credit, the purchase money be paid to the trustee before his return of the sale ; that it be deposited by him in Bank to the credit of the Court. Usually the trustee, in his return, makes a statement to that effect. In this case, the trustee’s return states nothing as to payment of the purchase money. Mr. Reed appears, from his testimony, to have been under the impression that a trustee is at liberty to accept from a purchaser anything satisfactory to himself, leaving the Court to the trustee’s personal reponsibility for the forthcoming of the money after the land is gone. This case is a clear mistake. In no case would the Orphans’ Court knowingly confirm a trustee’s sale until the purchase money shall have been paid and deposited ; and the fact ought always to be so returned by the trustee. Here, then, the Court was misled in a matter material to its action, though, in saying this, I impute no intentional wrong to the trustee. Then, next, the Court was directly deceived by the guardian in representing, by his petition, that the money was in the trustee’s hands, and praying an order for its payment over to him, when in point of fact, the trustee held a very small portion of the whole purchase money. But for this statement, the order for payment to the guardian would not have been made.

There is another feature of the case which cannot properly be overlooked. The evidence leaves an irresistible impression that the guardianship of these wards was accepted for the purpose of getting, by means of it, their land without the necessity of raising the purchase money at the return of the sale. The answer denies that the guardianship was sought as a means of acquiring the property without paying for it. Doubtless this is true.

Mr. Rickards, I fully believe, felt himself able and expected, ultimately, to pay for his purchase ; that is, by charging himself as guardian, and settling with his wards at their majority. It may also be true, as the answer alleges, that when he agreed with Downs to be returned as the purchaser, in July, 1867, he did not contemplate becoming the guardian. This expedient may well have been an after-thought. Certain it is,—for Mr. Reed, so testifies—that at the regular term of the Court commencing September 27th, to which the order was returnable, Mr. Rickards could not comply, and hence the return was postponed, It is also certain that Mr. Rickards then, neither surrendering the opportunity to purchase nor being able to comply, became appointed guardian. Now, under these circumstances, the use that was expected to be made of the guardianship would be fairly inferable from the use that in fact was made of it; but here the testimony of Martin R. Ford comes in and puts, beyond inference, the preconceived purpose of Mr. Rickards ; for Ford says that, in a conversation between them, before the appointment, Rickards asked his, the witness’, opinion “ about being appointed such guardian and the buying of the Downs “farm,” and said that “if he could be appointed guar“dian of the Downs children, he could buy the Downs “farm, as he would not have to pay the children’s money “until they came of age." He also stated, in the same conversation, what there is no reason to doubt, viz : that the mother of the children desired him to be appointed. But the point is not whether he sought the guardianship as a volunteer, but what use he proposed to himself to make of it should he comply with the mother’s wish.

What then,upon a general view, is the case presented ? It is this ; Mr. Rickards, while about purchasing the land of the two children of tender years, and being unable t'a comply with the obligations of a purchaser, takes the guardianship of the children as a means of effecting the purchase without, in fact, raising and paying over the purchase money, as was required by the practice of the Court, and his duty as a purchaser. It was an arrangement which would have been most certainly thwarted by the Orphans’ Court if disclosed to it,, yet the Court, being not only kept in ignorance of the transactions between the trustee and the guardian, but actually misled by the untrue statement of the guardian’s petition, is made itself the instrument for giving effect to the expedient; and thus the guardian, by a gross breach of trust, effected through a fraud on the Court, acquired his wards’ land Without providing for them the security of a trust-fund such as the law contemplates, but throwing them back upon the guardian bond, which he ought to have known-was a very precarious security, and which proved to be on utterly worthless one, thus, in the result, stripping his wards of their whole estate, except such as may be secured by a decree of this Court; and the effort to save even so much of it he is now resisting. I have no hesitation in dealing with this as a case of legal fraud. At the same time, I believe that Mr. Rickards did not intend ultimately to defraud the wards, although certainly he was not duly sensitive to the interests of the children and to his duty as.their guardian.

Let an interlocutory decree be entered for an account of the rents and profits of the land since Mr. Rickards held it, and of the money paid for it, and expenses incurred by him for its benefit.