Court Opinion

ID: 9735459
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:16:25.198293+00
Date Added: 2024-06-11T18:26:58.729515
License: Public Domain

HERNDON, J.
I concur in that portion of the majority opinion which holds that the first cause of action of appellant’s second amended complaint alleges facts sufficient to state a cause of action for relief in the form of a declaration that respondents received the $33,000 of insurance proceeds as trustees of a constructive trust. However, I dissent from the holding that the facts alleged in the second, third and fourth causes of action are not sufficient to state a cause of action against respondents.
As I understand the law, the trustee of a constructive trust is personally liable to the beneficiary of the trust if he knowingly uses or dissipates the trust fund in a manner which is violative of the rights of such beneficiary. If, as appellant’s pleading alleges, the executors, with full knowledge of appellant’s adverse claim, and with knowledge of the facts constituting the basis of such claim, nevertheless used the funds in controversy to pay creditors’ claims and expenses of administration without awaiting an adjudication of the merits of appellant’s adverse claim, they did so at their peril. (20 Cal. Jur.2d, Executors and Administrators, § 260, pp. 420-421.)
It may be granted, as the majority opinion holds, that the executors acted properly in collecting the proceeds of all the insurance policies of which the estate was the named beneficiary and that it was their duty “to maintain the right of the estate to such property until it [was] finally judicially determined that it [was] not the property of the estate.’’ (Cf. Elizalde v. Murphy, 11 Cal.App. 32, 36 [103 P. 904].) However, it does not follow that they were justified in paying out *729the insurance proceeds adversely claimed by appellant to discharge debts of the estate prior to some appropriate adjudication of appellant’s adverse claim.
The majority opinion agrees that it is the law that “The representative has no right ... to collect the proceeds of an insurance policy that is not an asset of the estate; and if he does so, he holds the proceeds ... as the agent or trustee for the benefit of the beneficiary.” The majority further observe that “the key word in this proposition is ‘beneficiary’,” and further that “When respondents performed the acts complained of, the estate was beneficiary. ’ ’
The foregoing quotations from the majority opinion appear to me to betray a basic misconception. As I understand it, the key word “beneficiary” as used in the quoted rule of law means the equitable owner of the proceeds and the beneficiary of the trust. If appellant’s claim to these insurance proceeds is ultimately found to be a valid claim, then the executors received and held these proceeds as the trustees of a constructive trust. To the extent that appellant’s adverse claim is valid, she was in equity the true beneficiary of the insurance policy as well as the beneficiary of the resulting constructive trust.
The majority opinion acknowledges that “The court in Elizalde, supra, declared that property not properly part of the estate could not be applied against decedent’s debts” but declares that “where the status of the property is controverted, the applicability of this rule must be determined by the facts of the case.” After the observation that “Unfounded claims of trust between the decedent and the claimant cannot be allowed to disrupt the administration of an estate,” the following question is posed: What were the executors supposed to do between the notification by appellant that she claimed the proceeds and the bringing of her action to enforce her claim ? ’ ’
It seems to me that the obvious answer to the foregoing question is this: That in view of appellant’s claim, and the disclosure of the very substantial basis upon which her claim to ownership of the insurance proceeds was grounded, the executors should not have disbursed the fund in question without awaiting an adjudication of the validity of appellant’s claim. The executors would have been well advised, I believe, to have filed in the probate proceedings a petition for instructions.
*730In view of the more realistic modern concept of probate jurisdiction as recently enunciated in Estate of Baglione, 65 Cal.2d 192, 196-197 [53 Cal.Rptr. 139, 417 P.2d 683], it seems probable that the ownership of the fund in question could have been litigated and decided in the probate proceeding. However, if it were held that the Probate Court lacked jurisdiction to adjudicate the controversy, that court would have instructed the executors to proceed in the appropriate forum to the end that the rights of the parties with respect to the fund in controversy might “be determined by the facts of the ease. ’ ’
I agree that respondents’ allegation that appellant had filed a creditor’s claim afforded no basis for the order sustaining the demurrers. Moreover, even if it were a stipulated fact that such a claim had been filed and approved, I seriously doubt that the legal inconsistency in the theories underlying the presentation of an ordinary creditor’s claim and the assertion of a claim based upon the alleged existence of a constructive trust is such that the filing of the creditor’s claim would operate to estop the claimant from asserting the alternative legal theory. In other words, there is nothing misleading or self-stultifying in the conduct of a litigant who says in substance, “I claim these insurance proceeds as their equitable owner, but if it be held that this claim is legally untenable then I am at least entitled to assert my claim as a creditor. ’ ’
I would reverse the order of dismissal as to all counts.
Appellant’s petition for a hearing by the Supreme Court was denied March 6, 1968.