No. 90-631 IN THE SUPREME COURT OF THE STATE OF MONTANA 1991

HAZEL HOWARD, Plaintiff and Respondent,


### v. MARIE DALIO, Defendant and Appellant

APPEAL FROM: District Courtof theEighteenthJudicial District, In and for the County of Gallatin, The Honorable ThomasA. Olson, Judge presiding.

COUNSEL OF RECORD: ForAppellant: J. David Penwell,Bozeman,Montana For Respondent: Mark A. Bryan, Bryan & Atkins, Bozeman, Montana

submitted on Briefs: May 23, 1991 

### AUf.? 

### 13

## 1991 Decided: August 13, 1991 Filed: 

# Ed3mitL CLERKOFSUPREMECOURT , STATEOFMONTANAJustice Terry N. Trieweiler delivered the opinion of the Court. Marie Dalio appeals the determination of the District Court of the Eighteenth Judicial District for Gallatin County, denying Daliotsmotion to set aside judgment entered in favor of Cecelia Prevost. We affirm the District Court. The issue on appeal is whether the District Court had jurisdiction to establish a constructive trust for the benefit of Cecelia Prevost. Hazel Howard, Cecelia Prevost, and Marie ~alio are sisters. Their oldest sister,May Ping Sellards, died on March 25, 1987. Priortoher death,Sellardspurchased sixcertificates ofdeposit, on which all four sisters were named as joint depositors. In her will, she also stated that her residual estate,which included the majority of her assets,was to go toher sisters in equal shares. Sellards became ill in 1984. In June 1985 Marie Dalio and her husband moved to Montana to take care of Sellards and handle many of her affairs. Between September 30, 1985,and February 17, 1987, Dalio cashed four of the six CDs created by Sellards. The day following Sellardstsdeath, Dalio cashed the other two CDs. While portions of theproceeds were put into Sellards and Daliots joint account, a significant amount of the proceeds was put into Daliotsown account or was unaccounted for. None of the sisters

were informed of Daliotsactions involving the CDs. Hazel Howard spokewith bank officialsafter Sellardstsdeath and discovered that all six of the CDs,totalling $121,861.66,hadbeen cashed. She then fileda complaint alleging fraud on thepart of Marie Dalio. Howard also alleged a constructive trust had been created for the benefit of both Cecelia Prevost and herself, and that Marie Dalio had breached her duty as trustee by her actions. Cecelia Prevostwas not joined as a plaintiff. However, the court

was asked inboth the complaintand in the final pretrial order to require that Daliopay one-third of the trust corpus to plaintiff and one-third to Cecelia Prevost. In fact, Dalio framed as one of the issues: 2. Are theother two survivingsisters,i.e. Howardand Prevost, entitled to any portion of the certificates of deposit on which their name appears

# .. . ? Following a bench trial, the District Court concluded that a constructive trust relating to theproceeds of the CDswas created with Marie Dalio as its trustee. The court found that Dalio owed one-third of the trust's proceeds, or $40,620.55, plus interest, to Hazel Howard. The court then stated that It[t]he other third shall be paid to the remaining sister, Cealia [sic] Prevost.It On July 23, 1990, judgment was entered against Dalio in favor of Cecelia Prevost in the amount of $40,620.55. Dalio thereafter moved to set aside the judgment on grounds that Prevosthad never been a party to the action, and that the court therefore lacked jurisdictionand couldnot enter judgment inher favor. Themotion was denied, and Dalio filed this appeal. Dalio does not here contest the judgment entered againsther in favor of Howard.Dalio contends that the lowercourterredby entering judgment in favor of Prevost because she was never a party to the action initiated by Howard. ~alioasserts that there was never a voluntary appearanceby or legal servicemade upon Prevost. Dalio cites Holt v. Sather, 81 Mont. 442, 264 P. 108 (1928), and Deich

v. ~eich, 136 Mont. 566, 323 P.2d 35 (1958) for the proposition that there must be either an appearance or legal service upon an individual for the court to acquire jurisdiction of that person, and that without jurisdictionthere cannot be a valid judgment in favor of that individual. BothHoltand Deichrelatetotheabsence of jurisdictionover

a defendant in an action in law. Neither case stands for the proposition that a court may not impose a constructive trust in equity without having all of the trust'sbeneficiaries before it. section 72-33-219, MCA, states that I1[a] constructive trust arises when a person holding title to property is subject to an equitable duty to convey it to another on the ground that the person holding title would be unjustly enriched if he were permitted to retain it.'' This Court, in Eckart v. Hubbard, 184 Mont. 320, 602 P.2d 988 (1979), held that creation of a constructive trust requires fraud, mistake, undue influence, violation of trust, or other wrongful acts. The District Court found Dalioguilty of fraud,undue influenceand abreach of trust. Those acts were sufficient to create a constructive trust, and aconstructive trust is subject to theprovisions of Montana's Trust Code.For that reason, the District Court had subject matter jurisdiction over the corpus or assets of the trust. Section 72-35-101, MCA, provides that: (1) The district court having jurisdiction over the trust pursuant to chapters 33 through 36 has exclusive jurisdiction of proceedings concerning the internal affairs of trusts.

(2) The district court having jurisdiction over the trust pursuant to chapters 33 through 36 has concurrent jurisdiction of the following: (a) actions and proceedings to determine the existence of trusts;

(b) actions and proceedings by or against creditors or debtors of trusts; and

(c) other actionsandproceedingsinvolvingtrusteesand third persons. Daliowas properly served and subject to the jurisdiction of thecourt,allowingthe impositionof a constructive trust in favor of all its beneficiaries. Jurisdiction over theperson upon whom the trust is imposed is pivotal, but all potential beneficiaries need not be parties. Instructiveon this issue is 76Am.Jur. Trusts § 282. It states: 

### A court of equity in the exercise of its jurisdiction and control oftrustsand their administrationmay assume jurisdiction of a particular trust and direct that thereafter the trust is to be administered under its direction, and in many instances may make appropriate ordersanddecrees, without havingall interestedparties before it, so long as they are not prejudiced in any substantive rights.~ecelia Prevost was certainly not prejudiced by her absence

as a party to this litigation. That is evident from the fact that she has appeared to oppose her sister's appeal from the judgment entered in her favor. Neither was ~alio prejudiced by her sister's absence as a plaintiff in this action. She was aware from the complaint and from the plaintiff's allegations in the pretrial order that plaintiff sought to imposea constructive trust for thebenefit of both the plaintiff and Cecelia Prevost. She was aware that the plaintiff sought to have the corpus of the trust divided equally among thethree survivingsisters. The sameproof that established the trust for the benefit of Howard established a trust for the benefit of Prevost. Dalio contends that she was denied the opportunity to prove her defensethat an actionby Prevostwould havebeen barred by the statute of limitations. However, the plaintiff's first cause of action was based upon fraud which did not accrue until the aggrieved party discovered the facts constituting the fraud. 9 27-2-203, MCA. The District Court found, as a matter of fact, that there was no evidence or testimony that Dalio ever informed any of her sisters that she was cashing in the CDs. That evidence could have been offered without Prevosttspresence. Furthermore, plaintiff's second cause of action sought to create a constructive trust. The statute of limitations applicable to that cause of action was 5 27-2-202(3), MCA, which allows commencement of theactionwithin 3years. The record in this casediscloses that the first CD was converted to her own use by Dalio on September 30, 1985,and that thisactionwas commenced onMay 12, 1988, whichwas less than 3 years later. Therefore, we conclude that Daliols ability to present her defense, based upon the statute of limitations, was not impaired by the fact that Prevost was not named as a plaintiff. Neither has there been any reason offered by Dalio why Prevostlsdeposition could not have been taken, had her testimony been necessary in order to support any of Daliols affirmative defenses. In fact, through much of the proceedings Prevost was listed by Dalio as a witness. The Ninth Circuit has had opportunity to rule on a matter similar to the instant case. In In re Allustiarte, 786 F.2d 910 (9thCir. 1986), the court ruled that the failure to join spouses of grantees of realproperty in an action to impose a constructive trust was not fatal to the action, even though that trust would have detracted from their interest in the property. The court stated: If the court determines that a judgment rendered in the personls absence will be adequate to protect his interests,the person is not indispensable. Joinder is not required where the absent parties1 interests are adequatelyprotectedby those who arepresent. Therecord demonstrates that the interests of the absent spouses were adequately protected by the Allustiartes who were at trial. The absent spouses were not prejudiced by the failure to join them as parties since their interests were identical to their spouses who were named in the action.In re Allustiarte, 786 F.2d 910, 919 (9th Cir. 1986) (citations omitted). We conclude that Prevost's rights as a beneficiary were identical to Howard's. Her interests were adequately protected, and Dalio's interestswere not adversely affectedby the fact that she was not personally named as a plaintiff. Accordingly, we affirm the judgment of the District Court.

We Concur: A ,,I /-I

Chief Justice