Brokerage Firm Deemed Culpable for Improperly Conveying Assets to Ward’s Guardian

In Art v. Erwin, 2011 Ohio 2371 (Ohio Ct. App., Franklin County May 17, 2011) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law], a probate court held that a brokerage firm was not liable for improperly conveying a ward's (Guzay) assets to the ward's guardian (i.e., Davis, the ward's daughter). Following the conveyance, the guardian's husband embezzled the assets. The probate court reached its conclusion because:

Butler Wick [the brokerage firm] transferred the securities and cash in Guzay's brokerage account to an account under Davis' control. The probate court assumed that, as guardian, Davis was a "proper person" to take possession of estate assets.

However, on appeal, the court held that the probate court erred because the brokerage firm was culpable under ORC Ann. 2109.52. The court held that:

Culpability under R.C. 2109.52 turns upon whether the defendant has unauthorized possession of an estate asset or in some way has impermissibly disposed of an estate asset. A financial institution impermissibly disposes of an estate asset if it conveys an estate asset in its possession to an unauthorized individual. To prove a financial institution's culpability under R.C. 2109.52 for such action, the interested party must establish three elements: (1) the financial institution made a conveyance (2) of assets belonging to the trust estate (3) to a party unauthorized to take possession of the assets.

... The only question in dispute, therefore, is whether Butler Wick conveyed the estate assets to a person who was not authorized to take possession of them.

To resolve this question, we must first determine who took possession of the transferred estate assets. The evidence shows that Butler Wick transferred securities and cash from a brokerage account held in the name of "Katherine A. Guzay" to a NFS brokerage account held in the name of "Davis A. Erwin, Guardian for Katherine A. Guzay." Thus, Davis, acting as her mother's guardian, took possession of the transferred estate assets.

Next, we must determine whether Davis, as Guzay's guardian, was authorized to take possession of the transferred estate assets.

(citations omitted)

The court held that the guardian lacked authority to take possession of the transferred assets. The court held that:

Both the letters of guardianship and the rules of the probate court limit a guardian's authority to take possession of estate funds held in the name of the ward. ... the letters of guardianship that the probate court issued Davis state that, "[f]unds being held in the name of the within named ward shall not be released to the Guardian without a Court Order directing release of a specific fund and amounts thereof." ... Consequently, without a specific court order, Davis lacked the authority to seek the release or take possession of funds held in Guzay's name. Despite this restriction on Davis' authority, Davis never secured a probate court order permitting the release of the assets from the Butler Wick account, which was held solely in Guzay's name. Davis, therefore, did not have authority to take possession of the estate assets after their release and transfer.

(citations omitted)

For more information about LexisNexis products and solutions connect with us through our corporate site.