Court Opinion

ID: 9537746
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:22:26.45615+00
Date Added: 2024-06-11T14:56:56.611440
License: Public Domain

WINDES, Justice
(dissenting).
Judge STRUCKMEYER and I are unable to agree with the majority decision for two reasons: First, the majority err in holding that the defendant Emma Honk is not guilty of wrongful conduct amounting to extrinsic fraud; and second, we believe the majority further err in holding that no relief may be granted when one person by reason of an admitted mistake of fact secures the property of another and is unjustly enriched thereby.
The facts are neither disputed nor complicated. David Swanson died, leaving certain real property. There survived him as heirs the plaintiffs, the defendant-appellant Emma Honk and one Charles Nelsson. The defendant Emma Honk by nomination caused the appointment of an administrator who died before the estate was closed and then by nomination caused Attorney James Cox to be appointed administrator to complete the probate. Karl Honk, husband of Emma Honk, had power of attorney from his wife to handle the estate. The husband, not knowing who were the other heirs, contacted the Swedish consul and requested him to find out if there were other relatives. When Mr. Cox assumed his duties as administrator, he inquired of Mr. Honk and wrote Mrs. Honk making inquiry as to who were the heirs. Mrs. Honk advised him that she did not know decedent’s relatives on the father’s side but that she was the only relative on the mother’s side in the United States. Mr. Honk’s information to the administrator was to the same effect. Neither of them ever informed the court or the administrator that the Swedish consul was attempting to discover the exist*39ence and identity of other heirs. Cox petitioned the probate court to distribute the estate to Mrs. Honk and Nelsson as sole heirs and there being nothing to indicate other heirs, the property was so distributed. At this time, the Swedish consul had discovered nine other heirs in Sweden and secured their powers of attorney to protect their interests.
On May 10, 1950, less than six months after the estate had been distributed to defendant and Nelsson as sole heirs, the Swedish consul wrote Mrs. Honk as follows :
“You will perhaps recall that in April 1948 your husband called at the office of the Swedish Vice Consulate in Portland concerning the estate of your deceased cousin David Swanson, late of Phoenix, Arizona. It has not as yet been possible to settle this estate due to lack of information about all of the heirs. According to a proof of kinship received from Sweden the next of kin are cousins.
« * * * j assure you that any information you will be able to give concerning your above named relatives will be of great help in having this estate settled, and I trust you will please favor me with a reply in an early mail.
To this letter Mrs. Honk through her Oregon attorneys replied:
“Your letter of May 10th, file R 7 s/377, addressed to Mrs. Emma Honk, has been referred to the undersigned for attention.
“Please be advised that Mrs. Honk’s brothers and sister named in your letter are all deceased and had been unmarried. Johan Jonasson named in your letter, died in Portland, Oregon, about 1925 and was unmarried.
“We trust that this information fully answers your communication.”
It will be observed that there was no hint in this reply that the estate had been closed.
Upon the death of an intestate the title to real property immediately vests in the heirs. In re McDonnell’s Estate, 65 Ariz. 248, 179 P.2d 238. Consequently, when the estate was distributed, the effect of the decree was to divest the title of the rightful owners and give it to persons who had neither legal nor moral claim thereto. That this is wrong goes without saying. Our problem is whether the court of equity can and should correct such a wrong.
It has been well stated that:
“ ‘There is no written law placing a limit upon the power of equity to remedy and redress wrongs, neither is there any want of power in that regard in the written law. It is the crowning merit of our system that, so far as power is concerned, it is as limitless as the capacity of man to wrong a fellow man.’ ” Laun v. Kipp, 155 Wis. 347, 145 N.W. 183, 5 A.L.R. 655, quoted in Hewitt v. Hewitt, 9 Cir., 17 F.2d 716, 718.
*40The plaintiffs sue in equity alleging in the alternative that the wrongful taking by the defendant of plaintiffs’ property was caused either through mistake or fraud and asks that defendant be declared to hold plaintiffs’ property in trust for them. The majority decision is that a court of equity cannot grant relief for mistake in the absence of extrinsic fraud on the part of those benefiting by the mistake and that the foregoing facts do not amount to fraud.
We believe the majority erroneously holds that defendant’s conduct was not fraudulent. In fact, her conduct was such as amounted to an extrinsic fraud on the plaintiffs.
Mrs. Honk, knowing the consul was laboring under the impression the estate was still not settled, deliberately suppressed the fact that the estate was closed. She, through her attorneys, gave the consul useless information concerning heirs instead of advising him the estate was closed and that he needed no further information. Had she advised him, as she should have, that distribution had already been made, ample time remained for application under the provisions of Rule 60(b), Rules of Civil Procedure, section 21-1502, A.C.A.1939, to secure relief for surprise or excusable neglect by setting aside the decree of distribution. No court would deny relief under such circumstances. By thus keeping him in the dark and impliedly representing that the estate was still pending, the six-month period for securing relief under said section 21-1502 expired and plaintiffs were thereby deprived of an opportunity to be heard. As stated in the majority opinion and under all the authorities, conduct which operates to prevent one from appearing in court within the time allowed for appearance is extrinsic fraud.
In addition to the foregoing deceitful conduct, Mrs. Honk advised the administrator nominated by her that she did not know the relatives on the father’s side. She turned the matter over to the Swedish consul with the request he investigate in order that they might learn who were the relatives. Before this investigation was completed, when the administrator requested information concerning other heirs,, he was not informed of the pending investigation by the consul. The estate was closed and she took plaintiffs’ property apparently without even making inquiry of the result of the consul’s efforts. Had inquiry been made, it would have shown that he had discovered nine other heirs but had not completed his mission and was not ready to close the estate. If the Honks wanted to be honest, they would have either sought the result of the consul’s inquiries or advised the administrator in order that he might have secured the information. They “jumped the gun” and took distribution of property belonging to others without effort to discover the results of the consul’s search which they instigated, and without advising either the administrator or the court of the possibility of the existence of plaintiffs. *41Because of defendant’s silent conduct, it was untruthfully represented to the court that defendant and Charles Nelsson were the sole heirs and defendant was given plaintiffs’ property. Had the court been advised that the consul was working on the problem of discovering heirs, it certainly would never had made this erroneous distribution.
Had Mrs. Honk upon inquiry by the administrator expressly represented she and Nelsson were the only heirs, no one could well say she was not guilty of a fraudulent misrepresentation. She is legally in the same position when upon inquiry she concealed from the administrator information which would lead to the discovery of heirs. There is no distinction between the giving of false information and the failure to give correct information. Hewitt v. Hewitt, 9 Cir., 17 F.2d 716.
When inquiry was made of her and her attorney in fact, they failed to disclose this important fact of the consul’s investigation. She also failed to inform the consul the estate was closed. Under such circumstances, one’s duty is to make a full disclosure of all important facts concerning the matter. A partial statement of the truth is as fraudulent as a misstatement of the truth. 23 Am.Jur., Fraud and Deceit, section 83, page 861; 37 C.J.S., Fraud, § 16(c), p. 247.
The United States court of appeals, ninth circuit,- was presented with a similar problem in Hewitt v. Hewitt, supra, wherein a widow who was acting as administratrix failed to disclose to the court that decedent left an adopted son as an heir and because of such failure, the adopted son was omitted from the distribution. After the closing of the estate, the adopted son sued all the distributees for his share. Her excuse for not advising the court was that her husband said he had heard the adopted son was dead. In rejecting her contention, the court said:
“She made no inquiry for the adopted son, at his last known place of address or elsewhere, and maintained silence solely because of the hearsay statement made to her by her husband some years before. Had she communicated all of these facts to the court, it is not at all likely that a decree of distribution would have been entered without directing further investigation or inquiry — at least we have a right to so presume. Nor will we speculate as to what might have happened, had she pursued the proper course.”
The court further held that the failure to tell the court the full facts amounted to an extrinsic fraud upon the missing heir. Had Mr. Cox, the administrator, known of the consul’s efforts to locate plaintiffs in Sweden, the last-mentioned case would be completely applicable. The defendant, the beneficiary of her ill-gotten gains, owed a like duty to tell the administrator the full truth when inquiry was made of her.
The majority hold that the only mistake which authorizes relief is a mistake in*42duced by extrinsic fraud. This erroneously places mistake and fraud in the same category. In fraud there is wrongful conduct, actual or constructive, generally activated by evil motive, whereas in mistake there is no wrongful intention, actual or implied. The majority’s view is founded upon the California district court of appeals decision of Hewitt v. Linstead, 49 Cal.App.2d 607, 122 P.2d 352, 354. Even this decision states that this “does not mean that mistake unconnected with fraud will not warrant relief under the proper circumstances” and cites the case of Bacon v. Bacon, 150 Cal. 477, 89 P. 317, 321. In that case the supreme court of California declared the erroneous distributees held property in trust for the right distributees and stated:
“It is urged that the power to review judgments extends only to cases where they have been procured by fraud, and that it does not exist with respect to judgment wrongfully given by reason of mistake either of the court or of the injured party. No such distinction is recognized by the authorities. The text-books all declare that such relief can be given where the former judgment was the result of a mistake, unmixed with fraud, and not the result of the negligence of the injured party.” (Emphasis supplied.)
The foregoing statement of the California supreme court is correct. It is in harmony with the Restatement of Law, Restitution, section 126(c), wherein it is said:
“ * * * where a trustee or other fiduciary, in the distribution of assets held for others pays money to a person whom he mistakenly believes to be a beneficiary, the real beneficiary is entitled to restitution from the transferee, unless the latter is a bona fide purchaser * * * ”
Under this statement is the following illustration :
“2. A, administrator of B’s estate, pays money out of the assets to C, B’s brother, whom both A and C believe to be B’s sole relative. Later D, B’s son and next of kin, believed to be dead, appears. D is entitled to restitution from C.”
The foregoing principles were applied even where, through error of law without any wrongful conduct, one thought to be an heir received a distributive share to which others were entitled. Moritz v. Horsman, 305 Mich. 627, 9 N.W.2d 868, 147 A.L.R. 117.
The true basis for a declaration of a constructive trust, whether through mere mistake or fraud, is whether under the facts one party has been unjustly enriched at the expense of another. Usually the facts involved misconduct of some nature but such is not necessary.
*43“It (constructive trust) is raised by-equity in respect of property which has been acquired -by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it.” 54 Am.Jur., Trusts, section 219, page 169.
A constructive trust is created when one “in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy”. 54 Am.Jur., Trusts, section 218, page 168. (Emphasis supplied.)
The late Judge Cardozo clearly stated the principle as follows:
“A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.” Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 122 N.E. 378, 380.
Restatement of Law, Restitution, section 160, uses this language:
“Where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it, a constructive trust arises.”
These principles are sound and to the extent they are ignored injustice follows, as it does by the majority decision. These principles applied to the facts in this case would compel a different, and just, conclusion. This court has ruled many times that unless committed by former decision, we will follow the law as announced in the Restatement. For some reason the majority has chosen to depart from these rulings and anchor their decision to a California district court case, Hewitt v. Linstead, supra, which was construing a California statute. We have no such statute.
The majority claim that plaintiffs did not claim relief on the ground of unjust enrichment caused by mistake. Plaintiff's plead both mistake and fraud. In their brief, they call the court’s attention to the fact they sought relief on two alternative bases, i. e., mistake and fraud. If the majority intend to inferentially rule that by not using the phraseology of unjust enrichment by mistake, plaintiffs waived the benefit of the correct rules of law applicable to the issue presented to the court, it would be a rule unknown in the annals of American jurisprudence.
We feel, therefore, that the majority are clearly in error when they establish the precedent that when one heir through mistake of fact receives the property rightfully belonging to another heir, equity will not grant relief without a clear showing of extrinsic fraud. A simple illustration shows the result of such a precedent. Sup*44pose a prisoner of war was thought by all to be dead. Several years later he showed up in a prison camp. Had his father died during this absence and the estate mistakenly distributed to other heirs, he would have no possibility of relief for the reason that the recipients committed no wrong but were only honestly mistaken. Absent the rights of third parties, we cringe to think equity could not rectify the wrong. Under its power to correct honest mistakes of fact which result in injustice, equity can and should see that justice prevails.
At the time of the litigation, Charles Nelsson was deceased and his son and sole heir, Adolph Nelsson, was entitled to Charles’ distributive share. It may be said to Adolph’s credit that upon discovery of the facts, he filed a separate amended answer admitting both the fraud and mistake alleged by the plaintiffs, undoubtedly recognizing the truth that it would be unconscionable for him to retain plaintiffs’ property.
Whether equity and good conscience will impel the court to relieve against a wrong is a matter that rests within the bosoms of the judges passing upon the matter. There can be no prescribed legal definition as a guide, and the degree to which it operates correctly is dependent almost entirely upon that intangible thing we call sense of justice. ' Permitting the defendant to retain property which rightfully belongs to another offends our sense of justice and does not harmonize with our conscience. Neither in the record nor in the majority opinion does there exist any fact that warrants a finding the defendant in justice and good conscience is entitled to keep plaintiffs’ property. There are no equities in her favor. They are all to the contrary. Since equity appeals to the conscience of the court, we have no hesitation after examining our conscience in requiring return of this property to its rightful owner.
Appellant contends that by reason of the statute of limitations and laches plaintiffs cannot recover. Neither of these matters was pleaded as a defense. Under all the authorities the statute of limitations must be pleaded, otherwise it is waived. Trujillo v. Trujillo, 75 Ariz. 146, 252 P.2d 1071. Under our rules either laches or the statute of limitations is an affirmative defense and is waived if not pleaded. Rules of Civil Procedure, Rule 8(c), section 21-406, A.C. A.1939, and Rule 12(h), section 21-436, A.C.A.1939. Consequently, these matters should be ignored. While the majority do not rule that plaintiffs are guilty of laches, there is a hint that in some wise they are to blame for the delay. That they are blameless is clear. They relied on the consul from whom the fact that distribution had been made was deliberately concealed. The consul assumed the estate would not be closed until he had discovered all the heirs. Whatever delay there was resulted in no injustice to defendant nor to third parties. *45She is not injured if required to return property she never owned and no third party is interested.
The judgment of the trial court should be affirmed.
STRUCKMEYER, J., concurs.