Honk v. Karlsson , 80 Ariz. 30 ( 1956 )

UDALL, Justice.

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 thereafter. Mrs. Honk then nominated Attorney James 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 sufficiency 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 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 is extrinsic, rather than intrinsic, and such person is 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 wrong. See, Butterfield 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 implied, must 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 named 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 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 the only cousins of David Swanson on his mother’s side.”

3. Attorney Janson was also nominated by defendant to be administrator of the estate of Mari Swanson, deceased (wife of David Swanson, who had predeceased him) ; in this document Emma Honk stated that there were no children as the issue of that marriage and reiterated what is shown above.

4. The deposition of Emma Honk, the 81-year-old defendant, was taken in Portland, Oregon, and it therein appears she came to this country from her native Sweden in 1893, was married to Karl Honk in 1903 in San Francisco, and had lived in Portland since 1908; David Swanson was her cousin and she had personally known him since 1908; Swanson’s immediate family, viz.: wife, brothers and sisters were all deceased; decedent had never talked to her about his family and she had never asked about them, “ * * * I don’t think he knew anything about his family, because he never talked about them, and I don’t believe there was anybody wrote a line to him”; decedent had lived in their house in Portland for a time and later lived in that area but only occasionally had they visited together; she had never heard of plaintiffs before this suit was filed, “ * * * but I don’t know Swansons on the father’s side because I went away from there (Sweden) when I was young.”

5. Karl Honk, aged husband of Emma Honk, testified that he had handled many of the business matters relative to decedent’s estate and held a power of attorney from Emma. His evidence was substantially the same as that of his wife. Particularly was this true as to lack of knowledge of decedent’s paternal relatives. He further testified that while he had made no independent search to locate other heirs, in the month of March, 1948 he had called on Axel Wide, the Swedish Vice-Consul in Portland, and:

“I told Mr. Wide that I had been down to Arizona and buried David Swanson, who was supposed to be the cousin of my wife, and we didn’t know of any more relatives of Karl Nelsson in Sweden, and my wife, Emma Honk, and we want to know if he can find out any more relatives.”

The Vice-Consul informed him that the matter was outside his jurisdiction but he would refer it to the Swedish Consul General in San Francisco; it was not until sometime after the estate had been distributed that he learned there were other heirs claiming an interest in this estate.

6. The only witness called by plaintiffs was Manne Lindholm of San Francisco, Consul General of Sweden (for the area embracing Arizona), who admitted that his predecessor had been informed by the Portland Vice-Consul of the death of David Swanson and that Mr. Honk

“* * * had told Mr. Wide that Mrs. Honk and her brother in Sweden, Charles Nelsson, were heirs, but it was likely that there were also other heirs." (Emphasis supplied.)

Official correspondence addressed to defendant from that office under date of May 10, 1950, further confirmed that the consulate was apprised of this fact as early as April of 1948.

7. Powers of attorney, given by the three plaintiffs and six other Swedish heirs to Manne Lindholm, Consul General, were admitted in evidence; these were executed and dated in the months of December, 1948, and January, 1949, while the decree of distribution was not entered until November 23, 1949; yet no action was taken to claim an interest in this estate until the complaint to establish a trust was filed in the instant action on June 18, 1952.

8. James J. Cox, Jr., the administrator d. b. n., testified relative to his correspondence with defendant Emma Honk and stated that the only investigation he made as to the heirs at law of decedent prior to filing petition for distribution, was to talk to Karl Honk and inquire of some people in Maricopa County. Apparently it was not until July 1951 that either Attorney Cox or the Honks learned that there were other heirs claiming an interest in the estate.

In considering the sufficiency of this evidence, we must be mindful of the yardsticks previously laid down in many Arizona cases relative to the quantum of proof necessary to establish fraud. In Eckert v. Miller, 57 Ariz. 94, 101, 111 P.2d 60, we discussed the nature of fraud and recognized there was in that case sufficient fraud to call into play the trust remedy. In Tucson Title Ins. Co. v. State Tax Comm., 59 Ariz. 334, 338, 127 P.2d 341, 342, this court refused to invoke a constructive trust under the facts of the case, saying:

“ * * * Nowhere is it pointed out to us where any fraud existed, and as we have said [in the MacRae case] in order to establish a constructive trusty fraud of some kind must be found in the transaction.” (Emphasis and insert supplied.)

In Brazee v. Morris, 68 Ariz. 224, 204 P.2d 475, we spelled out the difference between actual and constructive fraud, and the' quantum of proof necessary to establish each type. Therein we cited Rice v. Tissaw, 57 Ariz. 230, 112 P.2d 866, 869, to the effect that:

“Fraud is never presumed. Nor can it be found to exist on a mere suspicion as to the possibilities thereof. [Citing cases.] It must be established by clear and convincing evidence. * * * ”

The test applicable to the sufficiency of evidence to establish fraud was further delineated in the case of In re McDonnell’s Estate, 65 Ariz. 248, 253, 179 P.2d 238, 241, to wit:

“Fraud may never be established by doubtful, vague, speculative, or inconclusive evidence, and always the proof must be sufficient to overcome the initial presumption in favor of honesty. ‡ % if

Applying these legal principles to the undisputed evidence heretofore summarized we are unable to find in this rec-; ord a scintilla of evidence of deceit or misrepresentation on the part of defendant or her husband, Karl Honk, who acted as her agent in their dealings with the personal representatives of the estate — and concededly neither had any direct dealings with the probate court. On the contrary it indubitably appears that both the defendant and her husband acted in good faith and were open and aboveboard in calling to the attention of both the administrator and the Swedish Consul General that while they knew of no other heirs of decedent there might well be some. It should be noted that Emma Honk was not the administrator, hence she did not occupy a fiduciary or confidential relationship to the plaintiffs, nor did she have any legal duty to personally search for heirs in Sweden or elsewhere. Any lack of diligence on the part of the Swedish Consul or the administrator of this estate in searching out other heirs or apprising the court there might be some is not chargeable to defendant.

No extrinsic or collateral fraud on the part of the defendant having been shown, the judgment declaring a constructive trust cannot stand.

Judgment reversed with directions to enter judgment for defendant.

LA PRADE, C. J., and PHELPS, J., concur.