Rehearing Denied Feb. 15, 1956.
[80 Ariz. 31] Leonard S. Sharman, Phoenix, for appellant.
Phillips, Jones & Phillips, Phoenix, for appellees.
This is an appeal from a judgment in favor of plaintiffs in an equitable action brought by them against defendants Emma Honk, et al., to impress a constructive trust in plaintiffs' favor upon certain property which had been distributed by a decree of distribution in the matter of the estate of David Swanson (otherwise known as David Svenssen), deceased. The gravamen of said action is that the decree of distribution was procured by means of certain alleged fraudulent acts and conduct on the part of defendant Emma Honk during the course of probate of said estate.
The main point urged for a reversal is that the evidence adduced does not support the judgment.
From the record it appears that David Swanson, who originally came from Sweden, was a resident of Phoenix, where he died intestate on February 23, 1948, leaving an estate in Maricopa County, Arizona Emma Honk (defendant-appellant), an aged cousin of decedent living in Portland, Oregon, upon learning of his death nominated Attorney Harold J. Janson, of Phoenix, to act as administrator of said estate. This attorney started the probate proceedings but died shortly hereafter. Mrs. Honk then nominated Attorney James [80 Ariz. 32] J. Cox, Jr. of Phoenix to act as administrator de bonis non. Neither of the petitions for letters were signed by defendant Honk. The probate court, however, honored both nominations and the attorneys named were appointed administrators and proceeded to administer said estate. It is conceded that all the pertinent provisions of the probate code were meticulously followed. A final decree of distribution was entered on November 23, 1949, wherein it is recited that decedent left surviving him as his sole heirs at law: Emma Honk, a cousin, aged 72 years, of Portland, Oregon; and Charles Nelsson, a cousin, aged 70 years, residing in Sweden. All of said estate was ordered distributed to them, each to receive an undivided one-half interest.
On June 18, 1952, Karl Fritiof Karlsson, Adolph Natanael Karlsson and Nils Karlsson as plaintiffs (now appellees) commenced this equitable class action in the superior court against Emma Honk and Adolph Nelsson, defendants. (Adolph Nelsson is a son and sole heir of Charles Nelsson, now deceased, one of the original distributees. at the trial of the present case he consented that judgment be entered in favor of the plaintiffs in declaring a trust to exist as to any interest in the property then held by him as an heir of David Swanson.) The complaint alleges that plaintiffs and a goodly number of others (47 in all) are heirs at law-on the paternal side-of David Swanson, and have some right, title, claim or interest in and to the property therein described-which originally belonged to decedent. It is specifically alleged:
'That the claim of defendant Emma Honk is either the result of mistake or is fraudulent and based upon deceit and misrepresentation in that said defendant represented to the personal representative of the estate of said deceased that she was one of the sole two heirs at law of said deceased.'
The defendants first filed a motion to dismiss upon the grounds that the complaint failed to state a claim upon which relief could be granted. This motion was denied and later by her answer Emma Honk again attacked the sufficienty of the complaint to state a claim for relief; challenged the jurisdiction of the court; urged estoppel and that this is a collateral attack upon the decree of distribution; pleaded said decree as a bar on the ground that the matter is now res judicata; and specifically denied the allegations as to her deceit or misrepresentations.
The matter came on for trial before the court sitting without a jury, and thereafter judgment was entered on April 20, 1954, in favor of the plaintiffs, decreeing inter alia that defendant Emma Honk was a trustee as to said property for the benefit of plaintiffs and all those other (unnamed) heirs of decedent. Findings of fact not having been requested by either party none were made, but there is a general recitation in the judgment '* * * that all of the material allegations of plaintiffs' complaint have been [80 Ariz. 33] sustained * * *.' This appeal by Emma Honk followed.
There are a number of assignments of error. It is asserted that the complaint failed to state a claim for relief; that the court erred in not granting her motion to dismiss for the reason that the decree of distribution entered in the probate court, not having been appealed from, was conclusive and is now res judicata; the statute of limitations is urged and also laches on the part of plaintiffs; and finally, a claim that the evidence does not support the judgment.
At the outset it should be noted that neither in the trial court nor on appeal was the proposition advanced or argued that a mere mistake possibly resulting in an unjust enrichment of defendant at the expense of plaintiffs-standing alone-warranted imposition of a constructive trust. Hence there is no legal justification for us to discuss that matter here.
We are convinced the trial court ruled correctly in denying defendants' motion to dismiss the complaint, because this complaint, which seeks to establish a constructive trust upon the theory of deceit and misrepresentation or a mistake amounting to constructive fraud, is drawn upon a sound legal theory. If the decree was procured by extrinsic fraud, then equity will do justice by declaring that the distributees hold the property in trust for the rightful owners.
'It may be stated as a general rule that where the action of the successful party in probate proceedings, in concealing or failing to disclose to the court the existence of a person interested in the estate, amounts to fraud of any kind, and the defrauded person has thereby been prevented from learning of the proceeding or asserting his claim therein, the fraud in extrinsic, rather than intrinsic, and such person in entitled to equitable relief against the decree of the probate court.' Anno.-Probate Proceedings-Extrinsic Fraud. 113 A.L.R. 1235. (Emphasis supplied.)
See also: Banc.Prob.Prac.2d, Vol. 5, Sec. 1177; Trusts and Trustees, Bogert, Vol. 3, part 1, Sec. 477, p. 46; Hewett v. Linstead, 49 Cal.App.2d 607, 122 P.2d 352; Francon v. Cox. 38 Wash.2d 530, 231 P.2d 265; Hewitt v. Hewitt, 9 Cir., 17 F.2d 716. As is pointed out in Caldwell v. Taylor, 218 Cal. 471, 23 P.2d 758, 759, 88 A.L.R. 1194:
'* * * Since the probate of a will is a matter exclusively within the jurisdiction of the probate court equity may not set aside the probate, but it may declare the beneficiary a trustee for those who have been defrauded. * * *'
It is a fundamental principle of equity that no one can take advantage of his own [80 Ariz. 34] wrong. See, Butterfiled v. Nogales Copper Co., 9 Ariz. 212, 217, 80 P. 345. As is stated in 89 C.J.S., Trusts, § 139 a.:
'* * * So, the doctrine of constructive trust is an instrument of equity for the maintenance of justice, good faith, and good conscience, resting on a sound public policy requiring that the law should not become the instrument of designing persons to be used for the purpose of fraud. * * *' (Emphasis supplied.)
In the case of MacRae v. MacRae, 37 Ariz. 307, 312, 294 P. 280, 282, this court laid down a definition of a constructive trust which has often been cited in subsequent decisions, to wit:
'A constructive trust is one which does not arise by agreement or from the intention of the parties, but by operation of law, and fraud, actual or constructive, is an essential element thereto. Actual fraud is not always necessary, but such a trust will arise whenever the circumstances under which the property was acquired make it inequitable that it should be retained by the one who holds the legal title. These trusts are also known as trusts ex maleficio or trusts ex delicto. Their forms and varieties are practically without limit, as they are raised by courts of equity whenever it becomes necessary under the particular circumstances of the case to prevent a failure of justice, but the element of fraud, either actual or impliedMust always be present.'
In other words the courts hold that where the evidence shows the prevailing party, by some extrinsic or collateral fraud, has imposed upon the court by preventing a fair submission of the controversy a constructive trust will be declared. 'Extrinsic fraud' may consist in deception practiced by the successful party in purposely keeping his opponent in ignorance of the proceedings so that an appearance will not be made in court. See, Zaremba v. Woods, 17 Cal.App.2d 309, 61 P.2d 976, 981.
The California courts have extensively dealt with this matter of a constructive trust after a final decree of distribution. The case of Hewett v. Linstead, supra, was an action to impress a trust on property distributed to heirs on the ground that the decree of distribution was procured through mistake and extrinsic fraud. The District Court of Appeal, in reversing the imposition of a trust, held first that where, as here, the distributees were innocent of any wrongdoing, the excluded heirs could not successfully impose a trust on the ground of 'mistake' even though a provision of the California Civil Code, section 2224, expressly nadmed mistake as a ground for imposition of an involuntary trust. Secondly, the court laid down this rule (49 Cal.App.2d 607, 122 P.2d 355):
'* * * where a legatee knows of the existence of other heirs, and, for the purpose of defrauding such heirs [80 Ariz. 35] and benefiting himself, fails to notify the court of the existence of such heirs, and knowingly files false petitions with the court representing there are no such heirs, he is guilty of extrinsic fraud warranting the imposition of a trust on the fraudulent distributee's interest.'
The rule was succinctly summarized in the case of Federal Farm Mortgage Corporation v. Sandberg, Cal.App., 209 P.2d 58, 62, affirmed 35 Cal.2d 1, 215 P.2d 721:
'* * * in order to secure relief in equity for fraud or mistake in the making of a decree of distribution, the claimant or the purported distributee must have been kept in ignorance of his rights by some act of the person to whom distribution was made.' Cf. Thayer v. Fish, 49 Cal.App.2d 618, 122 P.2d 358; Rosenbaum v. Tobias' Estate, 55 Cal.App.2d 39, 130 P.2d 215.
We are in accord with these holdings of the California courts. It seems to us this rule best allows a court of equity to administer justice in such a case without an unwarranted weakening of the finality of a probate decree of distribution.
With the above rule in mind, to complete a disposition of this appeal, we need only consider the following assignment:
'5. The lower Court erred in awarding judgment to the plaintiffs and declaring the defendants to be trustees of the property in question for the benefit of plaintiffs, for the reason that the evidence did not substantiate the invocation of a constructive trust by the Court, there being no evidence of extrinsic fraud.'
The evidence, which is uncontradicted, comes either from the lips of defendant Emma Honk and her husband Karl Honk, or from statements in writing which were admitted as exhibits in the case. Briefly, here is what the record shows:
1. In nominating Harold J. Janson to be appointed as administrator, defendant stated under oath, inter alia:
'I, Emma Honk, am the only surviving heir of David Swanson, deceased, residing in the United States of America; I am a cousin of said deceased * * *.'
2. Later in nominating Mr. Cox to be administrator d. b. n., exactly these same words were used. In an accompanying letter, dated December 15, 1948, addressed to Attorney Cox, this statement appears:
'Wish to advise you that I do not know the relatives of David Swanson on his father's side. I am the only relative in the United States on his mother's side. I have a brother Carl Nelson, Hogboda, Box 3, Sweden, and we are ...