Haudenschilt v. Haudenschilt , 129 W. Va. 92 ( 1946 )

James S. Haudenschilt appeared before A. C. Chapman, Commissioner of Accounts of Wetzel County, accompanied by his late ward, James Paul Haudenschilt, who was then of age, on the 1st day of March, 1934, and made what could only have been a final settlement of his account as guardian, at the same time turning over, according to the recitals in the commissioner's order, the equivalent of all assets in his hands as such to the plaintiff. The settlement was approved by the county court by its order entered on the 4th day of April, 1934. There was no objection to the confirmation of the report of the commissioner of accounts, nor appeal from the order of the county court confirming it, although the plaintiff was personally present in Commissioner Chapman's office and there, without objection, accepted the securities turned over to him. James S. Haudenschilt died on the 25th day of April, 1937. This proceeding was instituted February 10, 1939, and is an effort to surcharge and falsify an account which, according to the allegations of the bill of complaint, not contended by the plaintiff in error to have been sustained by proof, was the result of a fraudulent conspiracy between the commissioner and the guardian, not participated in by the county court that confirmed the commissioner's report, and therefore a total nullity. I believe that these conflicting theories, inconsistent on their face, have led to the confusion in the majority opinion, it being plain that an account that is totally void cannot be surcharged and falsified.

The majority opinion reopens and relitigates guardianship transactions that were laid before a commissioner of accounts in 1934, and permits those transactions to be used as instruments to set aside the order of the County Court of Wetzel County, acting under its constitutional jurisdiction to settle accounts, which passed upon their validity and held them good. It is perfectly clear that this is, in effect, setting aside a final decree by reason of transactions litigated in the proceedings on which the order under attack is based. That is called in the books "intrinsic fraud", as distinguished from "extrinsic fraud" or fraud in obtaining the decree or judgment sought to be set aside.

In my judgment the majority opinion is in error because:

First: The record does not support the conclusions of fact stated in the main opinion to the effect that fraud has been clearly alleged and has been proved by a plain preponderance of the evidence so that a reversal is justified.

Second: If the fraud dealt with in the main opinion is admitted, that opinion is still in error because it considers fraud involved in the transactions that were settled before the commissioner of accounts and confirmed by order of the county court as sufficient to require the order of confirmation to be set aside, although it does not affect the entry of that order and, as expressly stated in the majority opinion, fraud charged in connection with the actual entry of the order of confirmation is not sustained by proof, and none is alleged that could not have been shown before the commissioner of accounts or before the county court.

Hoping that it may throw some light on the question of law that follows, I will first discuss part of the material testimony that I believe controverts what the Court's opinion treats as established fact.

It does not clearly appear, although the opinion indicates that it was so, that there came into the hands of J. S. Haudenschilt as guardian of James Paul Haudenschilt the amount of $13,525.59. To the contrary the record discloses quite clearly that the only property the ward owned was that acquired as an heir at law and distributee of his father, and that upon the final settlement of his father's estate before Keifer, commissioner of accounts, the aggregate value of the property administered by Auttie Haudenschilt, as administratrix was $10,880.29. That was the exact amount with which J. S. Haudenschilt was charged before A. C. Chapman, commissioner of accounts, in a settlement made before him on July 1, 1932, as well as in the final settlement of March 1, 1934, and the amount for which the guardian accounted in full. The mistaken aggregate of $11,512.29 represented by the receipt given to Auttie Haudenschilt, administratrix, is accounted for, perhaps not clearly, but in some detail, by the proof taken. As stated, it does clearly appear that the only property owned by the ward was that received from his father's estate, and that the guardian accounted for its full value, in my opinion, including his ward's interest in the real estate sold after his father's death.

As to the Pyles and Mason note for $2500.00, the theory of the defendant is that that sum was included in the aggregate of $10,880.29, charged to and accounted for by the administratrix of James F. Haudenschilt, plaintiff's father. The note for the entire purchase price of $2500.00 was payable to James S. Haudenschilt, special commissioner, and contained a provision "that the sum of $486.70 parcel of said note is for the benefit of and belongs to Auttie Haudenschilt, widow of James F. Haudenschilt, deceased", the named sum being the value of the widow's vested dower. According to the defendant's contention the note was not delivered to James S. Haudenschilt, but went into the hands of Auttie Haudenschilt, due to the fact that the price the land brought, as well as the face of the note, included the value of her vested dower, amounting to $486.70. The defendant contends that through mistake that amount was added to the face of the note in the settlement of Auttie Haudenschilt's account as administratrix, making the total of the note with which she was charged $2986.70. This amount, defendant contends, was included in an entry appearing in the administratrix's settlement before E. O. Keifer, commissioner of accounts, as follows: "Bank account, cash and book account $5,381.24". The defendant's contention is substantiated by the fact that the sum of the recognized value of the other property coming into the hands of James F. Haudenschilt's administratrix, fell short of the aggregate with which she was charged by Keifer, commissioner, in the exact amount of $2986.70. Concerning this contention, the plaintiff on cross-examination testified as follows (Record p. 397):

"Q. Now will you add the principal amount of that note of $2500.00 to the amount of $486.70, as shown in the note and tell us what amount you get?

"A. $2986.70.

"Q. And that is the same amount that your grandfather entered in his book after the notation promissory note, is it not?

"A. Yes, it looks as though she turned that note back to him.

"Q. That would indicate to you then that the Pyles and Mason notes were charged to your mother as a part of your father's estate rather than carried by your grandfather independently, does it not, is that right?

"A. That looks like it but the court proceedings doesn't show that.

"Q. Since you have seen your grandfather's cash book it indicates very strongly the Pyles and Mason notes were included in your mother's settlement?

"A. It may be that, it may be he includes something else there."

The reference to "something else there" is not explained by the witness nor elsewhere in the record. There are other less material respects in which I believe the statement of facts contained in the majority opinion should be amplified.

This is clearly one of those unfortunate occurrences in which a member of a family acted as a fiduciary under the misconception that his honesty would be taken for granted. James S. Haudenschilt was a highly provident saver and money lender. His grandson lived in his home after the death of his mother until he became of age. Evidently to avoid the expense involved, he neither employed counsel nor made the regular periodic settlements required by statute. He kept what is termed a "cash book", in which he entered what, in his opinion, were transactions affecting his ward's property. His ward's cash was deposited in the guardian's individual bank account. To that extent their property was commingled. In the settlement of March 1, 1934, before Chapman, commissioner, James Paul Haudenschilt apparently was dissatisfied with some of the loans which his grandfather, as guardian, had made of money belonging to him. In order to meet this situation fairly his grandfather brought before Chapman his ward's as well as his own securities, giving the ward the right to pick and choose as he saw fit. This the ward did. In the transfers involved, the ward took some notes payable to James S. Haudenschilt and the guardian acquired as his individual property notes payable to himself as guardian. Therefore, in the collection of these notes left on the old gentleman's hands in the final settlement in some instances he continued, after the final settlement, to use the title "guardian" in conducting business in fact his own. One of these instances the plaintiff here includes in his attempt to surcharge and falsify his grandfather's account as his guardian.

In addition to there having been no appeal from the guardian's settlement before Chapman, the estate of James S. Haudenschilt was settled before L. S. Hall, Commissioner of Accounts of Wetzel County. The contentions of the plaintiff here growing out of the guardianship of James S. Haudenschilt were laid before Hall, commissioner of accounts, as a claim against the latter's estate. The commissioner of accounts reported that the estate of the guardian had been settled before A. C. Chapman, that the settlement had become conclusively binding because its confirmation by the county court had not been appealed from. Under Code, 44-2-19, the claim of the plaintiff could not be reheard and relitigated in a proceeding to settle the personal estate of his guardian. The report of Commissioner Hall was confirmed by the County Court of Wetzel County, and the order was not appealed from within the statutory period. Instead, plaintiff brought this proceeding to surcharge and falsify the executor's account in the settlement of his grandfather's personal estate, and also to surcharge and falsify his guardian's settlement of accounts before Chapman, commissioner, as an additional charge alleging that the settlement before Chapman was void due to a collusive fraudulent understanding between him and James S. Haudenschilt, guardian. The allegations of the bill of complaint quoted in the majority opinion are clearly too general and vague to be regarded as a sufficient averment of fraudulent conduct to warrant relief. Before equity will lend its ear to what would otherwise be regarded as slander and vituperation, the charge of fraud is required to be definite and specific, and these charges do not come within the rule.

Concerning charges of fraud against the dead, as here, the Supreme Court of Appeals of Virginia, quoting Mr. Justice Story's opinion in Prevost v. Gratz, 6 Wheat. 481, 5 L. Ed. 311, had this to say in Russell's Ex'rs. v. Passmore, 127 Va. 475,103 S.E. 652:

"Fraud or breach of trust ought not lightly to be imputed to the living; for the legal presumption is the other way; and as to the dead, who are not here to answer for themselves, it would be the height of injustice and cruelty to disturb their ashes, and violate the sanctity of the grave, unless the evidence of fraud be clear, beyond a reasonable doubt."

It is not now contended that there is a particle of testimony indicating fraud affecting Commissioner Chapman's report, and it was never contended that the order of the county court confirming it, which, I believe, is the controlling feature, was in any way irregular. The remaining allegations of fraud concerning the guardian's transactions I think are too indefinitely charged, but conceding that they do come within the rule, they do not charge fraud in the procurement of the entry of the commissioner of account's report, but, in effect, charge that the plaintiff was misled into believing that the report of Chapman was not to be the final report, and that there would be further proceedings before final entry was made. It is rather difficult to believe that the plaintiff went before Chapman with his grandfather after having become twenty-one years of age, and there accepted delivery of what Chapman's report called the entire assets of his estate, amounting to $9,051.03, substituting in lieu of certain securities that he thought might be questionable, securities of his grandfather, accepting his grandfather's thirty-day note for the difference of $172.88, and thereafter received a copy of Chapman's report, to which he did not except but permitted its confirmation, and now attacks that settlement as having been induced by fraud on the part of his grandfather, asserting that he believed it was not final.

I agree with the statement in the majority opinion that if there were fraud in the procurement of the order of the county court, confirming the report of its commissioner of accounts, then that order may be set aside in a chancery proceeding. I emphatically disagree with the statement that a proceeding to surcharge and falsify is one in which that can be brought about. To surcharge and falsify an account, the existence of the account necessarily continues. The proceeding is corrective, in theory, by items. It cannot attack the account entirely. That can, of course, be done in chancery but upon different grounds. A defendant in chancery is entitled to know what he has to meet and inconsistent theories of relief cannot be presented in the same bill of complaint.

Before concluding the discussion of facts, I wish to group four of what I think are outstanding matters that throw considerable light upon the motive of the plaintiff when considered in their immediate sequence. They are:

Plaintiff was twenty-one years of age on February 28, 1934, and the settlement before Chapman, commissioner, was made, he swears, at his dead grandfather's instigation, on March 1, 1934, when he received, partly from his own property and partly from his grandfather in lieu of paper belonging to his estate that he did not think good, the sum of $9,051.03 in securities, and his grandfather's note for the difference of one hundred seventy-two dollars and eighty-eight cents.

Plaintiff was married May 5, 1934.

On April 25, 1937, his grandfather and former guardian died, leaving a will in which because of "very liberal" advancements made to plaintiff's father and received by him upon his father's death, the plaintiff received but one-third as much personal property as the other beneficiaries.

The bill of complaint in this case was filed at March Rules, 1939.

As to the second question, there can be no doubt but that a county court in West Virginia, acting as a court of probate, exercises what is called primary or exclusive original jurisdiction, in matters of probate and settlement regarded generally as proceedings in rem. Final orders in proceedings of that nature have attached to them the solemnity and finality of a judgment at law or a decree in chancery. That being so, final orders in them can be set aside only for actual, not constructive, fraud, as discussed in the majority opinion, though mistake of fact may also be sufficient.

Believing that the second question turns on the jurisdiction of our county courts and the effect of their final orders, I wish to preface it by saying that in the dissenting opinion which I prepared in the case of Hustead v. Boggess, 122 W. Va. 493,12 S.E.2d 514, will be found references to DeVaughn v.DeVaughn, 19 Gratt. 556, and Dower v. Seeds, 28 W. Va. 113, for discussion of the constitutional powers of county courts. In the same opinion will be found references to our present Code, 44-2-19, and to the sections that, to my mind, were enacted for the purpose of implementing the exercise of our county courts' constitutional powers, and for the purpose of declaring that their decision in compliance with due process should be conclusive and binding upon all of the parties involved.

Prior to the adoption of the Code of 1931 this Court treated proceedings before county courts for the settlement of the accounts of fiduciaries as being ex parte only, attaching weight to the wording of the statute then in effect rather than to Section 24 of Article VIII of our Constitution, vesting in county courts probate jurisdiction and jurisdiction to settle accounts, neither in its nature being an ex parte matter. The statute in effect under which the conclusion in most of these cases was reached reads as follows: "The report to the extent to which it may be so confirmed, shall be taken to be correct, except so far as the same may, in a suit in proper time, be surcharged or falsified." Section 22, Chapter 87, Code. SeeVan Winkle v. Blackford, 33 W. Va. 573, 586, 11 S.E. 26. The phrase "in a suit in proper time" is governed by no express provision but it is to be observed that even at that time the statute permitted suits for the purpose of surcharging and falsifying, and not for the purpose of attacking in toto. An attack of that nature was left to the inherent jurisdiction of a court of chancery in which it would be entertained only for the same reasons that a final judgment might be set aside. If the confirmation of the report stood because not appealed from, or if appealed from, affirmed, it was to be taken as correct. If there were mistakes contained in the report, it could be surcharged or falsified in a proceeding brought for that purpose. The Van Winkle case indicates, by implication, I think incorrectly, that the jurisdiction of our county courts in probate matters and the effect of their findings in such matters, may be limited or extended by statute. That case seems to hold, however, that the statutory right to question a confirmed report, the order of confirmation having been allowed to become final, was then limited to proceedings to surcharge and falsify brought within a proper time.

I have already dealt with the constitutional jurisdiction of our county courts, which remains the same, the difference being that the Code of 1931 in its effort to implement the exercise of our county courts' jurisdiction to practicalize the settlement of estates, eliminated a good many statutory provisions, particularly the one under which the settlement of accounts was treated as ex parte only, that contributed to the then existing confusion and delay in matters of that nature. If the jurisdiction of the county court and the effect to be given its finding and judgment, is to be correlated with that of our circuit courts, and harmonized with the latter, as it must be, let us examine the constitutional jurisdiction of our circuit courts.

There is no question but that our Constitution at the time that the Legislature adopted the statute which this Court construed as granting county courts in settlement of fiduciary accounts ex parte jurisdiction only, expressly granted to circuit courts supervisory jurisdiction over county courts "by mandamus, prohibition or certiorari". That is our present constitutional provision applicable to inferior tribunals in general, the express provision concerning county courts having been eliminated. Supervisory jurisdiction, it would seem apparent, is in addition to appellate control, but is not the basis upon which are sustained proceedings to surcharge and falsify fiduciary accounts. Although none of the early cases correlate the jurisdiction of our county courts and that of our circuit courts, undoubtedly their conclusions were influenced by the fact that circuit courts were expressly granted so-called supervisory jurisdiction, and, consequently, some importance should be attached to the fact that in the amendment of Article VIII of our Constitution submitted in 1879 and subequently adopted, county courts were eliminated from the express provision concerning supervisory jurisdiction. Now the jurisdiction of county courts in probate matters is not constitutionally subject to the supervisory jurisdiction of our circuit courts. They may be made so by statute, but have not been. Proceedings to surcharge and falsify fiduciary accounts are subject to statute. That being so, it necessarily follows that the problem now before the Court is not the question of the inherent jurisdiction of a court of chancery, but is the question of construing Article 4, Section 20 and Section 19 of Article 2 of Chapter 44 of our present Code, and other sections of that Chapter read in connection therewith. If our circuit courts are not vested by constitutional provision or by statute with the right to supervise the proceedings of our county courts, then it would seem clear to my mind that their power or jurisdiction to surcharge or falsify fiduciary accounts, as distinguished from their power to review them on appeal, is subject to the finality of the county courts' orders or decrees. In my judgment the matter under consideration has been somewhat complicated and confused by the conflicting pronouncements of this Court in Travis v. Travis, 116 W. Va. 541,182 S.E. 285; Hansbarger v. Spangler, 117 W. Va. 373,185 S.E. 550; In re Long's Estate, 122 W. Va. 473, 10 S.E.2d 791;Steber v. Combs, 121 W. Va. 509, 5 S.E.2d 420; and Hustead v.Boggess, 122 W. Va. 493, 12 S.E.2d 514. This confusion I hoped had been largely clarified by the opinion of this Court inRitchie v. Armentrout, 124 W. Va. 399, 20 S.E.2d 474. However, I fear, as I said in my dissenting opinion in theHustead case, that the present position of this Court unnecessarily deprives a puzzling problem of what was hoped to be a final solution by virtue of the Armentrout opinion.

The principal question of law here involved was examined thoroughly and the Court's opinion, prepared by Judge Rose, fully covers the question of the probate powers of our county courts in the case of Ritchie v. Armentrout, 124 W. Va. 399,20 S.E.2d 474, the second syllabus of which reads as follows: "The order of a county court confirming a report of a commissioner of accounts, regularly made, by which a claim against the estate of a decedent referred to him is disallowed, if not appealed from, is a bar to a motion for judgment by the claimant subsequently made on the same cause of action in a circuit court." In other words, the final order of a probate court carries the conclusiveness of a final judgment or decree. If that be so, it does not do to say that that is true on the law side but not in chancery. The difference is in the functions of the court: not a change in the order's status. It is true, of course, that a judgment may not be attacked on the law side, though a pretended judgment may be disregarded if plainly void on its face because then it is no judgment. A voidable judgment may be set aside in a court of chancery only, that fact not lessening one whit the clear allegation and proof of substantial grounds required, such as mistake, fraud, etc.

In addition to the foregoing, there is a marked distinction between fraud used in obtaining the entry of a judgment and fraud that affects the actual controversy before the court in the proceeding in which the judgment was entered: the first is a reason for setting aside the judgment, the second is not. The leading case in the United States based upon this distinction is United States v. Throckmorton, 98 U.S. 61, 25 L. Ed. 93, the second syllabus of which reads as follows: "The frauds for which a bill to set aside a judgment or a decree between the same parties, rendered by a court of competent jurisdiction, will be sustained, are those which are extrinsic or collateral to the matter tried, and not a fraud which was in issue in the former suit." In Moffat v. United States, 112 U.S. 24, 32,28 L. Ed. 623, it was held that false testimony or forged documents used in the proceeding which terminated in the judgment under attack were not sufficient because they had been considered in the original proceeding. Here a decree is disregarded or set aside because in the, I think, mistaken opinion of the majority there was constructive fraud in two items of the guardian's confirmed report. The following cases will be found to sustain the rule laid down in theThrockmorton and Moffat cases: Price v. Smith, (Tex.Civ.App.), 109 S.W.2d 1144; Camp v. Ward, 69 Vt. 286, 37 A. 747, 60 Am. St. Rep. 929; Bolden v. Sloss-Scheffield Steel Iron Co., 215 Ala. 334; 110 So. 574, 49 A.L.R. 12-06; Caldwell v. Taylor, 218 Cal. 471, 23 P.2d 758, 88 A.L.R. 1194;Purinton v. Dyson, 8 Cal. 2d 322, 65 P.2d 777, 113 A. L.R. 1230; Turley v. Owen, 188 Ark. 1067, 69 S.W.2d 882; Sohler v.Sohler, 135 Cal. 323, 67 P. 282; Fealey v. Fealey, 104 Cal. 354,38 P. 49, 43 Am. St. Rep. 111; Pico v. Cohn, 91 Cal. 129,25 P. 970, 27 P. 537, 25 Am. St. Rep. 159; Donovan v. Miller,12 Idaho 600, 88 P. 82; Graves v. Graves, 132 Iowa 199,109 N.W. 707, 10 L.R.A. (N.S.) 216; Clark v. Clark,64 Mont. 386, 210 P. 93; Michael v. American National Bank,84 Ohio St. 370, 95 N.E. 905, 38 L.R.A. (N.S.) 220; Clinton v.Miller, 96 Okla. 71, 216 P. 135; Robertson v. Freebury,87 Wash. 558, 152 P. 5, L.R.A. 1916B 883; Electric PlasterCo. v. Blue Rapids City Township, 81 Kan. 730, 106 P. 1079, 25 L.R.A. (N.S.) 1237; Hockenberry v. Cooper County State Bank,338 Mo. 31, 88 S.W.2d 1031.

The Iowa Supreme Court has applied the doctrine pronounced in the cited cases to the decree of a probate court confirming the final report of an executor in Bradbury v. Wells, 138 Iowa 673,115 N.W. 880, 16 L.R.A. (N.S.) 240, the opinion reading in part: "An order discharging an executor may be impeached for fraud or mistake clearly and satisfactorily established will be admitted; but it is not every fraud, or every mistake which will have that effect. The matter complained of must be something extrinsic or collateral to the matter tried upon the original hearing, and not a fraud or mistake in the very matter on which the judgment was entered or order made. Tucker v.Stewart, 121 Iowa 716, 97 N.W. 148; Graves v. Graves, 132 Iowa 199, 10 L.R.A. (N.S.) 216, 109 N.W. 707; United States v.Throckmorton, 98 U.S. 61, 25 L. Ed. 93." The discussion inMurrel v. Murrel, 21 S.C. Eq. (2 Strobh) 148, 49 Am. Dec. 664, as to the reopening or setting aside of an approved account because of allegations and proof of fraud, misrepresentation, or concealment of facts is quite apt to this case.

The Supreme Court of Oregon in the case of Froebrich v. Lane,45 Or. 13, 76 P. 351, in speaking of the probate jurisdiction of its county court and of a statute similar to ours, and the extent to which matters considered in its findings which were reviewable by appeal, would be heard in a court of chancery in a proceeding to set them aside, had this to say: "So that the fact that the county court is accorded exclusive jurisdiction in the first instance has no peculiar emphasis or force to differentiate its final orders or decrees from those of any court of record possessing exclusive jurisdiction within its compass. The equitable remedy of which we are now treating has its just limitations, however. It cannot be utilized for the correction of errors and irregularities, and, where the party has had an opportunity to be heard in the original proceeding and to have the matters revised on appeal, but has neglected to avail himself thereof, he is not entitled to redress in the equitable forum. Galbraith v. Barnard, 21 Or. 67,26 P. 1110; Handley v. Jackson, 31 Or. 552, 50 P. 915, 65 Am. St. Rep. 839; Conant's Estate, 43 Or. 530, 73 P. 1018."

I do not think that the decision of this case turns upon the question of doing away with proceedings to surcharge and falsify fiduciary accounts. It does involve the question of whether the possibility of that proceeding is to be permitted to lurk until barred by laches, with its shadowy uncertainty, or is to be limited to a specific period so that fiduciaries and business in general may know beyond doubt when all possible liability of personal representatives and their bondsmen has ended and estates are settled in all respects. I believe that the Legislature plainly intended to make confirmation of a settlement that under the terms of the statute has become irrevocably final, conclusive as to all parties included in the commissioner's notices or who have appeared before him. A settlement does not become irrevocably final until the time to apply for a writ of error to the order of confirmation has expired or four months after its entry. In Re Estate of Edwin A. Durham,119 W. Va. 1, 191 S.E. 847. Therefore, in my opinion, a proceeding to surcharge and falsify may, under the holding of this Court in Travis v. Travis, 116 W. Va. 541, 182 S.E. 285, that equity can interrupt the jurisdiction of county courts in settlement proceedings, be brought at any time between the completion of the commissioner's report, and the expiration of four months after the order of confirmation. This, of course, would not apply to a proceeding to set aside the order of confirmation for a reason that would make a final judgment or decree voidable.

For the foregoing reasons, believing that the majority of the Court has erred in considering both the facts and the law, I respectfully dissent. I am authorized to say that Judge Riley concurs in this memorandum.