This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
A guardian occupies relations of trust and confidence towards his ward.1 During the continuance of the guardianship contracts between guardian and ward are voidable at the ward's election because of his disability2 as well as on the ground of constructive fraud. So if A, who is in a relation of personal trust to B, a guardian, obtains funds of B's ward, C, A is held as trustee for C.3 Such a contract may be ratified by the ward after acquiring full legal capacity.4 In a judicial proceeding in which the ward was represented by a guardian ad litem and the interests of the regular guardian and the ward were openly adverse, the guardian may by force of the decree acquire an interest adverse to that of the ward.5 A guardian can not acquire the property of his ward at his own sale, without disclosing his identity and obtaining the ward's consent, after the ward has full capacity to contract.6 So a guardian to whom his ward gave a power of attorney before he was appointed guardian, can not sell to himself under such power.7 So a sale by the guardian to her husband may be set aside at the application of the ward, even after confirmation, though the full price of the property was paid and no actual fraud existed.8 A guardian can not acquire any interest in the
36Neill v. Shamburg, 158 Pa. St. 263, 27 Atl. 992.
37Neill v. Shamburg, 158 Pa. St. 263, 27 Atl. 992.
38Neill v. Shamburg, 158 Pa. St. 263, 27 Atl. 992.
1Beaven v. Stuart, 250 Fed. 972; Gil-lett v. Wiley, 126 111. 310, 9 Am. St. Rep. 587, 19 N. E. 287; Pevehouse v. Adams (Okla.), 153 Pac. 65; Daniel v. Tolon, 53 Okla. 666, 157 Pac. 756; In re Anderson, 97 Wash. 688, 167 Pac. 71.
2During minority. Fridge v. State, 3 Gill & J. (Md.) 103, 20 Am. Dec. 463.
3Montgomery v. Rauer, 125 Cal. 227, 57 Pac. 894.
4Tenney v. Evans, 14 N. H. 343, 40 Am. Dec. 194.
5Corker v. Jones, 110 U. S. 317, 28 L. ed. 161.
6Hindman v. O'Connor, 54 Ark. 627, 13 L. R. A. 490. 16 S. W. 1052; Frazier v. Jeakins, 64 Kan. 615, 57 L. R. A. 575, 68 Pac. 24; Dickinson v. Durfee, 139 Mass. 232, 1 N. E. 416; Mann v. McDonald, 29 Tenn. (10 Humph.) 275.
7Horton v. Maine, 22 R. I. 126, 46 Atl. 403.
8Frazier v. Jeakins, 64 Kan. 615, 57 L. R. A. 575, 68 Pac. 24. (The ward may recover in ejectment from a sub sequent grantee who took with knowledge of the facts.) ward's property adverse to the interest of the ward.9 He can not purchase such property at a foreclosure sale.10 If the guardian buys in a dower interest in his ward's property, the ward may, at his election, accept the benefit of such transaction, and account to the guardian only for the purchase price, interest and taxes paid, charging him with rents and profits.11 If the guardian buys a claim against the estate, he can not charge the ward's estate with more than he actually paid for such claim.12 Even if he discloses his identity he must furthermore make full and complete disclosure to the ward of all material facts.13 Omission of a guardian to disclose the ward's property to the ward is constructive fraud, and avoids the contract.14 If he omits to disclose all the material facts and all the rights of his ward, the transaction may be set aside, even if he did not make such disclosure because he himself did not know what the legal rights of the ward were.15 Such contract must furthermore be fair and reasonable.16 The same principles apply to transactions after the relationship has terminated, but while the influence, trust and confidence continue.17 After the guardianship has terminated and the ward has acquired full contractual capacity, the relations of trust and confidence are presumed to continue for a while; and contracts between the parties,18 whether before19 or after20 the settlement between them are constructively fraudulent unless it is shown affirmatively that the transaction was fair, and upon full disclosure of all material facts. Thus contracts for the purchase or sale of property,21 or a contract settling the account of the guardian and releasing him from liability,22 are held to be presumptively fraudulent if entered into soon after the termination of the guardianship. The fact that the ward remains a member of the guardian's household is a fact to be considered in passing upon the validity of the transaction.23 If the guardian still has the estate in his hands and he is also the father of the ward, the presumption against the validity of a transaction whereby the guardian gains an advantage at the expense of the ward, is said to be so strong that it is scarcely possible to overcome it.24 A gift by a ward to the guardian is prima facie fraudulent.25
9Taylor v. Calvert, 138 Ind. 67, 37 N. E. 531; Johnston v. Loose, - Mich. - , 167 N. W. 1021.
10Hawkins v. Reeves, 112 Ark. 389, 166 S. W. 562.
11Johnston v. Loose, - Mich. - , 167 N. W. 1021.
12Hanna v. Spotts, 44 Ky. (5 B. Mon.) 362, 43 Am. Dec. 132; Sparhawk v. Allen, 21 N. H. 9; Moore v. Shields, 69 N. Car. 50.
13Lataillade v. Orena, 91 Cal. 565, 25 Am. St. Rep. 219, 27 Pac. 924; Gillett v. Wiley, 126 111. 310, 9 Am. St. Rep. 587, 19 N. E. 287; Berkmeyer v. Kellermann, 32 O. S. 239.
14Lataillade v. Orena, 91 Cal. 565, 25 Am. St. Rep. 219, 27 Pac. 924.
15Waldstein v. Barnett, 112 Ark. 141, 165 S. W. 459.
16Tucke v. Buchholz, 43 la. 415; Ear-hart v. Holmes, 97 la. 649, 66 N. W. 898.
17Illinois. Gillett v. Wiley, 126 111.
310, 9 Am. St. Rep. 587, 19 N. E. 287; Baum v. Hartman, 226 111. 160, 117 Am. St. Rep. 246, 80 N. E. 711.
Iowa. Tucke v. Buchholz, 43 la. 415; Earhart v. Holmes, 97 la. 649, 66 N. W. 898.
Maryland. McConkey v. Cockey, 69 Md. 286, 14 Atl. 465.
New Jersey. Smith v. Boyd, 61 N. J. Eq. 175, 47 Atl. 816.
Oklahoma. Daniel v. Tolon, 53 Okla. 666, 157 Pac. 756.
Washington. In re Anderson, 97 Wash. 688, 167 Pac. 71.
18Beaven v. Stuart, 250 Fed. 972; Tucke v. Buchholz, 43 la. 415; Williams v. Powell, 36 N. Car. (l.Ired. Eq.) 460.
19McParland v. Larkin, 155 111. 84, 39 N. E. 609.
20Richardson v. Linney, 46 Ky. (7 B. Mon.) 571; Berkmeyer v. Kellermann, 32 O. S. 239; Daniel v. Tolon, 53 Okla. 666, 157 Pac. 756.
A contract between guardian and ward made after full disclosure and with independent advice,26 or asquiesced in for a considerable time with full knowledge of the facts,27 is valid. A sale after the guardianship has terminated, upon full disclosure of all material facts, and at the full market value, can not be avoided because the value soon afterwards has greatly increased.28
The purchase of the ward's property is not absolutely void,29 even if the guardian has not yet been discharged.30 The right of avoiding the transaction is one which is personal to the ward or those who claim under him.31 A stranger to the transaction can not avoid it because of constructive fraud.32
21McParland v. Larkin, 155 111. 84, 39 N. E. 609; Daniel v. Tolon, 53 Okla. 666, 157 Pac. 756; Eberts v. Eberts, 55 Pa. St. 110.
22Alabama. Ferguson v. Lowery, 54 Ala. 510, 25 Am. Rep. 718.
Illinois. Carter v. Tice, 120 111. 277, 11 N. E. 529; Gillett v. Wiley, 126 III. 310, 9 Am. St. Rep. 587, 19 N. E. 287.
Kentucky. Clay v. Clay, 60 Ky.(3 Met.) 548.
Maryland. McConkey v. Cockey, 69 Md. 286, 14 Atl. 465.
Pennsylvania. Wills's Appeal, 22 Pa. St. 325.
South Carolina. Johnson v. Johnson, 2 Hill Eq. (S. Car.) 277, 29 Am. Dec. 72.
23 Beaven v. Stuart, 250 Fed. 972.
24Baum v. Hartman, 226 111. 160, 117 Am. St. Rep. 246, 80 N. E. 711.
25Ashton v. Thompson, 32 Minn. 25, 18 N. W. 918; Wade v. Pulsifer, 54 Vt. 45.
26Waldstein v. Barnett, 112 Ark. 141, 165 S. W. 459; Brown v. Adkinson (Ky.), 58 S. W. 524.
27Davis v. Richards (Ky.), 58 S. W. 477.
28Kirschner v. Kirschner, 113 Mo. 290, 20 S. W. 791.
29Williams v. Canary, 249 Fed. 344.
30Williams v. Canary, 249 Fed. 344.
31Akin v. Bonfils (Okla.), 150 Pac. 194.
32 Akin v. Bonfile (Okla.), 150 Pac. 194.