Stianson v. Stianson ( 1918 )

SMITH, J.

[1] Action by plaintiffs, claiming as- c'otenants with defendant, to establish a trust in defendant as to real property, to iqjudet title in plaintiffs., anid! for an 'accounting for rents and profits. Defendant filed a demurrer to the complaint for want oif. facts, which was overruled, .and this ruling is assigned as error. Thereafter defendant answered, and 'the cause was tried .by the aoUrt upon, the merits, resulting adversely' to. defendant. It is settled! in this jurisdiction that the filing- of an answer ■and ¡a trial on the merits after a demurrer waives the demurrer and the right of appeal from an ádVersie decision thereon. Pierson v. Minnehaha Co., 26 S. D. 462, 128 N. W. 616, Ann. Cas. 1913B, 386. This w'aiver, however,' does not extend to am alleged error presenting a like question as to the sufficiency oif facts, or want of jurisdiction upon a proper record on appeal from the judgment. Pierson v. Minnehaha Co., 28 S. D. 534, 134 N. W. 212, 38 L. R. A. (N. S.) 261.

[2] It is) not the theory of our system' of appellate pro'Cedlure toi permit the reversal of judgments after á trial upon, the merits, for defects in pleadings- which might have been remedied by amendment prior to or at the trial. But the sufficiency o>r insufficiency of itihe facts proved at the trial, or wtant of jurisdiction •of ffie person -or subjert:m-aitter) apparent from the tidal record, may'always be reviewed upon .proper exceptions and assignments -of error. Questions as to the sufficiency or -insufficiency of the facts proved' are controlled! by the ■ rules governing the- review of findings of fact -by the trial court. Any questions raised by the demurrer 'as to -the sufficiency toif the -facts pleaded' have- become 'immiaterial, and' are not subject to re-view upon this appeal. But it is proper, regardless of tíre insufficiency of the pleadings, to 'review assignments or error which challenge the sufficiency of the evidence to sustain the findings and; judgment. The assignments of error in this rase present no question as to the competency or relevancy of evidence. The following facts are undisputed: One John K. Stianisoni 'died /intestate in Day county, on November 29, 1895. The decedent at the tilme of his death, was owner of the real property in dispute. The plaintiffs and defendant are heirs ait falw 'of the decedent, each entitled to an undivided one-fifth interest in said real property. On January 10, 1896, the defendant, on his own petition, was appointed administrator and qualified and acted until January 19, 1898, when '•administration proceedings were closed and he w&s discharged by drder of the county court. When John K. Stianson died, there was a mortgage on the real property in the sum of $350, which became due shortly after defendant was appointed administrator, remained unpaid, and wlas -foreclosed on March 27, 1897. Defendant purchased the land at the foreclosure sale in his own name for $433, ■the amount due on the mortgage, and on March 27, 1898, received' tire sheriff’s deed therefor in1 his own name. The deed was duly redortíled the day it was issued Prior to> receiving said deed, defendant was in possession of the premises as administrator. When he tolck possession1 of the property as administrator, in January, 1896, tine plaintiffs Katherine Stianson and Sam K. Stianson w.ere of adult age, and plaintiffs Laura tod Carrie Stianson, twin sisters, were about 10 years of age.

It will be noted-’, that tire sheriff’s deed was issued! to’ defendant about two month© after his discharge as administrator. From that time he remained in the exclusive possession, occupancy, and use of tine land, until the beginning of this action, on September 27, 1914. The plaintiffs Laura Stitoson and Game Stiansbn became of adult age more than 9 years prior to the commencement of this action. The mortgage and! tire proceedings on foreclosure were all malde matters’ of public record as they transpired. On February 29, 1916, after tire entry of judgment in the action awarding plaintiff's and defendants each a one-fifth interest ‘in tito real estate a© heirs and cotenants, the plaintiff Sam K. Sfciamsoo filed a disclaimer of any right or title thereto, and the judgment was modified to adjudge a dismissal of the action 011 its merits as to him. The effect of the modified' -judgment was to award to Katherine, Laura, and Carrie Stianson each a one-fifth interests in the land, the other two’-fifths interest. remaining in the defendant. Defendant denied] plaintiffs’ allegations of fraud in. suffering foreclosure proceedings, and in bis purchase of the land at the foreclosure sale; alleged that both the estate -and the plaintiff heirs were without funds oir resources to pay the mortgage -indebtedness; that plaintiffs Katherine Stianson and Laura and Carrie Stianson consented to his becoming .purchaser of their interests at the ‘foreclosure sale; that he had been in -open, notorious, ' and adverse possession since the date of the sheriff’ deed, with the full knowledge arid!' acquiescence of all the plaintiffs; pleadled both the 6 and io years' statutes of limitation; and: that plaintiffs had been guilty of laches which should! estop them- from maintaining this action.

The trial court found, in substance, that the defendant, while acting as administrator, permitted’ the mortgage to' be foreclosed-, and purchased the land with intent to deftaludi .plaintiffs arid deprive them of their interest in the estate; that none of the plaintiffs had any knowledge of the. wrongful- acts of the defendant in thus acquiring -title to their interests ini the property, and dtid not lcnoiw of their rights until shortly before this action was commenced); that they had! proceeded with due diligence in seeking to enforce -thei'r rights, and that plaintiffs never knew of and never consented to or acquiesced1 in the purchase by defendant of their interests.

[3] Appellant assigns as -error the finding of the trial court that he suffered the mortgage to be fo-reclo'sed and purchased the laud! with intent to defraud plaintiff's and deprive them of - th-eir interest therein, contending that there is no evidence ion the record' to sustain such a finding. Appellant also assigns as error the finding Idf the trial court that plaintiffs' had no ’knowledge of dlefondiainifc’s alcte in acquiring title to the property,- -for the reason that such finding is against the preponderance of- the' ■ evidence and wholly unsupported thereby. Appellant further -assigns - -as error the finding of the -trial court that -the ” plaintiffs never acqjuiesaad in bis purchase and possession of,, -the -lapicj:,-.. alleging that such finding is contrary (to.,, the clear preponderance ’of the evidence. A --careful scrutiny of the evidence and of the entire recoird fails to show any act or any ¡conduct on the part of .defendant frota which an actual, fraudulent intenti might he inferred. Sto far as the record) ¡discloses he never attempted to conceal his acts, or .by word or deed to 'deceive or mislead plaintiff®, or any of them, in his .dealings with them or with the estate, or with, the real property. It ¡stands undisputed that the estate was insolvent, and that the general ¡creditors received only about 75 cents on the dollar from .the estate. It is shown by the testimony of the plaintiffs thainselwes that ¡they were, , wholly without means to- redeem ¡or protect their interests from the foreclosure sale. The undisputed evidence shows that ¡during ¡the period1 of administration ¡the rents and profits from the 'land were accounted for and turned into the ¡estate in full. The trial count found, in substance, that from the ¡date of the sheriff's deed, the defendant excludedl plaintiffs from possession ¡of the land; continued in uninterrupted possession thereof; received ¡the rents aod profits1 arising therefrom, during all the years from 1898; and paid the taxes on the land-each year down to ithe time df:; the trial. The purchase of ¡the entire estate at tire mortgage sale by the. respondent as cotenant was -not in itself a fraurfiulienit act. The trust -relation as to hisi cotenaints would arise ¡only after he ¡had acquired title ¡at such sale, and fraud in that relation wfoul'd have its. inception- only when he intended and attempted wrongfully to appropriate to his own use the interests of his ootemants.. ' Mandeville v. Solomon, 39 Cal. 125. His relation to the (property -as cotena-nt and bis relation to the same property ¡as .administrator ¡of the estate to which it 'belonged are distinct. The consequences which flow from- his acquisition of the title of his! cotenamts and .those which flow from, his purchase -of property belonging to. the ¡estate of which he was administrator are not controlled by the same presumptions and rules. But the trust ¡which would arise in either case is not an- express, but a constructive or implied, trust-. The relation of one acting- as administrator, to real .property which belongs to- toe estate must ¡be considered separately.

[4] Respondent’s ¡counsel, contend that an administrator, as such, becomes the trustee of -an express ¡trust .as to the titl-e to real property belonging to the' estate. The fallacy of his assumption is apparent from the fact that toe title '.descends to and becomes vested in the ¡heirs upon the death of the -decedent, sub-' ject only to ite1 disposition for payment off creditors, and never becomes vested in the administrator 'in- the course of administration proceedings. Under ouir statute this is true also -of the title to personal property. 'Civil Code, § 1093. The administrator is vested, not with- the title, tot wiilth certain powers and duties as a trustee, and where, through a wrongful act 'constituting a violation of hliis duties as such trustee, he acquires the title to property, either real or personal, belonging to the estate, he holds such title as trustee Oif a resulting' trust, but not as trustee of an express trust. This is made entirely clear by section’ 1616, Civil Code, which declares that:

■“One who gains a thing by * * * the violation of a trust, or other wrongful act is * * * an involuntary trustee of the thing gained for the benefit of the person who would otherwise have had it”

—and by section 1609:

“An involuntary trust is one which is created by operation of law.”

It follows that Stiaason, even if it be held that lie violated his duty as administrator in acquiring title to the liamd, which w'e do not concede, holds it as trustee of a resulting or involuntary trust, and not as trustee of an express trust. Dillinger v. Kelley, 84 Mo. 561; Earl v. Halsey, 14 N. J. Eq 332; Johns v. Norris, 22 N. J. Eq. 102; Meanor v. Hamilton, 27 Pa. 137; Hollingsworth v. Spaulding, 54 N. Y. 636; Matter of Monroe, 142 N. Y. 490, 37 N. E. 517. Bor the purposes of this appeal, the character and inception off 'the 'alleged .trust title are material to- a consideration off the defenses of laches 'and the statutes' of limitation, in 'determining '.the time 'from whidhi such, statutes1 begin to rtm, Or from which laches may be imputed.

[3, 6] Whether appellant’s relatiioni to the 'property be such •as would arise out of wrongful 'dealings with the property. of his cotenants or his relation to the property he that of administrator fraudulently seeking tci misappropriate property belonging to’ the estate, a constructive trust only oouilid arise out off hlis acts maleficio. Ae to an express trust, the .rule is well settled that the ¡running of statutes of limitation! and laches begins at the time such trust is openly repudiated, or 'alots are 'done by the trustee which are hostile tie,. or in fraud of, the rights, of the beneficiarles, and' of which they have actual knowledge, or of facts from wMch knowledge must 'be imputed' to them, This case belongs in the class of constructive or involuntary trusts arising from- allegad wrongful acts. So far as the results which flow faioirn -tilie existence of -stuck a trust are concerned1, it -is wholly immaterial whether such acts a-re found to be fraudulent in fact, or be dieeme'd fraudulent in law. The intent wiith which the -acts were done becomes wholly immaterial. The trust anises- with the sarnie effect regardless of the intent. As to the title to this real1 estate, the defendant, prior to his purchase of the land, occupied no position of trust toward these plaintiff's, other than a duty to account, as administrator, for the rents and profits 'during and for the purposes of administration, Assuming 'fbr the purposes of this, appeal that 'defendant -by bis purchase of the land became the trustee of an involuntary trust as- to his ooten'ants, the •bar of the statute of -limitations and' the effect of laches remain to be considered, and are decisive of this. case. Appellant cites numerous authorities to the effect that neither l-aches nor statutes of limitation may be invoked by the trustee of an -express trust in -an action by -the cestui que trust to aiforce his rights. Perry on Trusts, § 863; Speidel v. Henrici, 120 U. S. 377, 7 Sup. Ct. 610, 30 L. Ed. 718; Lamberton v. Yeomans, 84 Minn. 109, 86 N. W. 894.

The doctrine announced in these authorities is applicable only to -express trusts and has no application t'oi constructive or in•yiokinitiary trusts. Newsom v. Bartholomew County, 103 Ind. 526, 3 N. E 163; Hecht v. Slaney, 72 Cal. 363, 14 Pac. 88; Matthews v. Simmons, 49 Ark. 468, 5 S. W. 797; Speidel v. Henrici, 120 U. S. 377, 7 Sup, Ct. 610, 30 L. Ed. 718. In Broder v. Conklin, 121 Cal. 282, 53 Pac. 699, that court says:

“No -repudiation of a constructive -trust by the trustee is required in order to set the -statute of limitations' in motion. A cause of action is- created im'favtor of -tilie 'beneficiary at the very moment the law creates the - trust.” Lammer v. Stoddard, 103 N. Y. 672, 9 N. E. 328.

As we have seen, no express trust was created by appellant's-purchase and acquisition of -tine title. It is clear that plaintiff’s right to an action in -equity to -establish an invlciltmtary trust a'ccru-ed' ■ -tilie instant appellant acquired sindh title. To meet this proposition, respondents contend) that appellant's acquisition of tibie 'title of -bis 'coitenants was fraudulent in law, and! that tinder section 60, Code Civil Procedure, a cause of action will not be deemed! to 'have accrued until the discovery by the' aggrieved parties “of the facts constituting the fraud.” The finding of tire trial Court as ito plaintiffs’ discovery of tibe fraud is not sustained by the evidence or the law. In this case every fact essential to disclose andi to constitute a constructive trust in appellant was matter of public record flor more than 17 years before this action was begun, anidl for at least 9 years- after tibe minors became of age. Plaintiffs must be held to have known that the land 'had1 belonged to the deceased, -and .that they had' interests therein -as his heirs; that defendant was 'acting tas administrator -of the estate-; that the land wias mortgaged, and that tthie estate waist without ^mio-ney or ■resources to .pay the mortgage; that the mortgage was foreclosed and the land bought in -by defendant while acting as- administrator.

Briefly stated, the following falcfsi are undisputed': On the 19th day 'of January, 1898,.the defendant was discharged as administrator of.itihe estate of John K. Sitianson. Hie purchased the land- at foreclosure stale on March 27, 1897. The Sheriff’s deed was issued on the 27th day of March, 1898-, and on .that date was dWliy recorded! in the office of the register of -deeds of Day county, sfcmethi-ng more than -two months after Mis discharge as such administrator. Since that time -and up to the beginning of this action, on September 27, 1914, as found by the trial court, the dletf-end'amt remained in the exclulsiive possession, occupancy, and use of the land. It is undisputed that Katherine St-iansOn and Datura and- Carrie Stiianson at all times lived in- tibe immediate vicinity of, and sometimes visited, the land. Plaintiff Sam K. Sfianson. is- nbi fenger a party to this action. None of the plaintiffs was -under any legal disability for over 9 years of tibi-s time. Tills action- was 'begun at lealst 9 years -after the disability of minority of two of tibe plaintiffs had ceased. Dinning all this time the defendant was in -sole possession', olaltoing- title, . paid the taxes, and received and appropriated! to his own use rents- and profies frlom tibe -land, and wias never called! upon to account tihereftor by plaintiffs, nor.did plaintiffs at any time offer to contribute to. the payment of tire mortgage indebtedness, or faxes, or make any claim to the lanid: as. tenants in common or otherwise. During all this time the foreclosure proceedings and! the sheriff's1 deed ■to defendant were of public record1, as were ail matters, relating to the administration of thie estate. There is absolutely nothing in tine record tending to show (that -defendant ever sought to or did -mislead plaintiffs as to their legal right's,, or sought to- conceal, or attempt to conceal-, from them any act on Ms part -relative to this land, -either as administrator* or as cotenant.

[7, 8] Defendant haidl the right as -cotenant, to purchase the property under an outstanding incumbrance for his own protection. Mandeville v. Solomon, 39 Cal. 125; Stevens v. Reynolds, 143 Ind. 467, 41 N. E. 931, 52 Am. St. Rep. 422; Reed v. Read, 122 Mich. 77, 80 N. W. 996, 80 Am. St. Rep. 541; Marris v. Roseberry, 46 W. Va. 24, 32 S. E. 1019; McFarlin v. Leaman (Tex. Civ. App.) 29 S. W. 44; 17 Am. & Eng. Enc. of Law (2d Ed.) 639.

Ear more than 9 yeans these- plaintiffs, with, knowledge of all the facts, have slept -upon their -rights without seeking' to participate in the benefits of the purchase by- defendant of this property at toe foreclosure sale, and without .at any time (differing to pay any share of toe incumbrance on the land, oir any of the taxes accruing thereon, for more toon 17 years. Plaintiffs are in no •position to allege that they wieire without knowledge, during at least 9 years, of -every fact essential to the assertion of tiheir legal rights. Public records: are equivalent to actual knlolwledge of facts there appearing. Ft. Pierre v. Hall, 19 S. D. 663, 104 S. W. 470, 117 Am. St. Rep. 972; Coe v. Sloan, 16 Idaho, 49, 100 Pac. 354; Commissioners v. Renshaw, 23 Okl. 56, 99 Pac. 638, 22 L. R. A. (N. S.) 207, with monograph note. Lewis v. Welch, 47 Minn. 193, 48 N. W. 608, 49 N. W. 665, is a case largely relied upon by -respondent. An administrator foreclosed a mortgage belonging ta the estate and', employed a third! person to- bid- in the property -for his benefit. Tire fact that tole administrator was the real purchaser was concealed from toe heirs, arid dildl not appear -oif record. The administrator was held to be the trustee of -an express trust because the mortgage itself was property of toe estate; and, the land) 'being procesáis, of the mortgage, he was charged* as- trustee as .though; money 'had been received instead' of land. It wias -held that because toe plaintiff bad1 no, notice, actual or constructive, that the purchase w'as for the 'benefit of the administrator, he was not guilty of laches', and that the statute of limitations d!ildf not run until the discovery of that fact. B'ut ithe oaurt reserved a decision as to what might have been the rights of the parties had the -administraticr himself oipenly bid ini the property, paid! the purchase price, land accounted for the same as administrator of the estate.

It is isuggestied! that the decision of this court in Bidwell v. Smith, 23 S. D. 120, 120 N. W. 880, should rule this, case. That oase involved a breach of trust by an administrator, but did- mot involve lany question of title to either real or -personal property. Bidwell, while acting as administrator, was authorized by the county court to 'compromise a cMirn flor $1,964 against the estate by paying $425. He thereupon bought ¡arad took an assignment of the claim to himself, and sued the heirs, flor $1,964. This court held him guilty of a breach of duly, and that the estate should be given, the benefit of the transaction.' That case did not hold' that the acquisition by the trustee of an express trust, of a title to trust property, where the title had not been placed in him by the terms of ‘the express trust, would result i,m tine creation of an express trust as to such title, which appears to be the view of some oif our associates.

[9] While the rule is well settled that equity w(ill mot permit a coltenant to acquire ,am. adverse 'claim .to common property through administration .proceedings! or otherwise for his own benefit to the exoiusion of his doitemants, it requires the exercise of reasonable diligence on the part of a coltenant, having or ■charged with knowledge of all the facts, in making an election to participate in the benefits of such transaction, 'and within a reasonable time to bear his portion of the expenditures necessarily involved therein. He will mot be permitted to- make such election a means of speculation by delaying until some circumstance, such as an increase in value of the land, may determine his course. We are clearly of the view that this case falls, within the rule announced in Savage v. Bradley, 149 Ala. 169, 43 South. 20, 123 Am. St. Rep. 30. Plaintiffs, with full knowledge, actual and implied, of all the material facts affecting their legal rights, have so long acquiesced in the acts of the defendant as tioi render the granting of relief inequitable and to charge them with) laches .su’ch as will bar the assiartion of their rights. Stevenson v. Boyd, 153 Cal. 630, 96 Pac. 284, 19 L. R. A. (N. S.) 525; Mandeville v. Solomon, supra; Craven v. Craven, 68 Neb. 459, 94 N. W. 604.

The order •amid) judgment of tire trial court are reversed.