Phillips v. Ball

1960 OK 145, 358 P.2d 193, 1960 Okla. LEXIS 516

• Court: Supreme Court of Oklahoma
• Decided: June 7, 1960
• Docket: 37554
• Status: Published

Opinions

BERRY, Justice.

The defendant in error, Merry X. Ball, hereafter referred to as “plaintiff”, instituted this action on December 7, 1953, against the plaintiffs in error, hereafter referred to as “defendants” or by name, to recover an undivided %ths interest in the estate of Dewey W. Smith, her deceased father who died intestate in 1942 a resident of Cotton County, Oklahoma, and for an accounting in connection with said interest and other equitable relief.

From order overruling defendants’ motion for new trial filed following judgment in plaintiff’s favor, defendants perfected this appeal.

Plaintiff, who was born in 1924 is the daughter of Dewey W. Smith hereafter referred to as “Smith”, and Clara Glass Smith, now Eaglin, hereafter referred to as “Clara”. This marriage was terminated in 1925 by divorce obtained on petition of Smith filed in the District Court of Oklahoma County, Oklahoma. After the termination of the marriage and shortly before Christmas in 1925, Clara left plaintiff at a boarding home for children in Oklahoma City and never returned for her. Clara failed to reveal her identity or the identity of the child and the Home was therefore unable to return plaintiff to her family or friends. Plaintiff was delivered by the person operating the Home to an organization in Oklahoma City known as the “Oklahoma Children’s Home Society”. She was subsequently adopted by Gordon and Mollie King. In the decree of adoption it was stated that plaintiff’s name should be changed from “Unknown” to “Merry X. King”. In 1942 plaintiff married C. C. Ball, Jr. Plaintiff did not learn who her father was until about 60 days before this action was filed.

In 1933 Smith married the defendant, Vivian Phillips, who is hereafter referred to as “Vivian”. Of this marriage the defendants, Betty Austin, nee Smith, and Wayne Smith, hereafter referred to as “Betty” and “Wayne” were born. In 1927 Clara remarried.

In August, 1942, Vivian instituted proceedings in the County Court of Cotton County to probate Smith’s estate. In said proceeding she sought to be and was appointed administratix of the estate. Vivian successfully represented that she and Betty and Wayne were the sole and only heirs-at-law of Smith. Plaintiff was neither mentioned directly nor indirectly in said proceedings. Vivian did, however, advise the attorney, (Mr. P.), handling said proceedings that there was a rumor to the effect that Smith had a child by a. former marriage, which information was given the County Judge. In fact, an unsuccessful effort was made to locate Clara, and the probate proceeding was left open for several months because of the “missing-child rumor”. However, and irrespective of the rumor, a “Final Decree” was promulgated in the probate proceedings on May 10, 1943, which decree was unappealed from. The decree reads in part as follows:

“It further appearing to the court that the following persons are the sole and surviving heirs at law of said decedent and are entitled to share in said estate in the following proportions, to-wit:

“Vivian Smith, widow, one-third, Betty Smith, daughter, one-third, Wayne Smith, son, one-third.

“It is therefore ordered, adjudged and decreed by the court that Vivian Smith, widow, Betty Smith, daughter, and Wayne Smith, son, are the sole and only heirs of Dewey W. Smith, deceased, and that an equal undivided one-third interest in and to the real estate and personal property above described be and the same is hereby transferred, vested, and assigned and conveyed to said widow and children forever.”

On July 27, 1943, Vivian instituted proceedings in the County Court of Cotton County for the purpose of being appointed guardian of the estate of her children, Betty and Wayne. She was subsequently appointed guardian of the estate of said children and as guardian effected the sale of an oil and gas lease to Cities Service Oil Company, hereafter referred to as “Cities Service”, covering the undivided two-thirds interest of the children in certain minerals that formed a part of the Smith estate. The minerals underlying the real estate described in the oil and gas lease subsequently proved to be productive of oil and gas and at the time this action was filed more than one million dollars worth of oil had been produced and sold from the real estate. Vivian also leased her interest in said minerals to Cities Service.

The proceedings to probate Smith’s estate and the guardianship proceedings by virtue of which an oil and gas lease covering Betty’s and Wayne’s mineral interests was granted to Cities Service are regular on their face, and long ago became “final” in the generally-accepted sense of the quoted word as understood by the Bench and Bar.

The plaintiff contends that Vivian’s failure to disclose the existence of plaintiff in the probate and guardianship proceedings constituted extrinsic fraud on her part and served to vitiate said proceedings in so far as the interest of plaintiff in her father’s estate is concerned; that Cities Service had knowledge that Smith was survived by a child who was not named in the probate proceedings at the time it acquired the oil and gas lease and, therefore, cannot be considered as a purchaser for value without knowledge of plaintiff’s claim; that the caveat emptor doctrine applied to the guardianship sale and if Cities Service had made inquiry it would have learned of; plaintiff’s claim. The defendants contend that the probate proceedings in the Smith case are regular on their face and the final decree being unappealed from is final and under the doctrine of res judicata serves as a bar to plaintiff’s action; that plaintiff’s action is barred by limitations; that Cities Service was a bona fide purchaser for value without notice at the guardianship sale of the oil and gas lease and as such should be protected.

Following an extended trial, the trial court found that plaintiff was a daughter of Smith and Clara and as such an heir to and entitled to take a stated portion of his estate; that she was entitled to an accounting from the other defendants because of her said ownership; that while Vivian was not guilty of intentional fraud, her acts constituted “resulting fraud” which served to vitiate in part the probate proceedings in controversy; that Cities Service was not an innocent purchaser of plaintiff’s undivided interest in the minerals underlying the real estate referred to in the oil and gas lease from Vivian as guardian of the estate of Betty and Wayne and that plaintiff’s interest is free of said lease.

On the fraud issue the trial court made these specific findings of fact:

“ * * * The Court further finds that Vivian Smith Phillips, the widow of Dewey W. Smith, and her attorney, William Powell, of Walters, Oklahoma, advised the County Court in the probate proceedings in the Estate of Dewey W. Smith, deceased, that there was a rumor that Dewey W. Smith had been married before his marriage to the defendant, Vivian Smith Phillips, and that there was a rumor that there was a child born of that marriage, but after search, they were unable to find such child. The Court further finds that this was a very strong rumor, and was well known by relatives of Dewey W. Smith and other persons, in and near Walters, Oklahoma, and that the defendant, Vivian Smith Phillips, was familiar with this rumor. The Court finds that while efforts were made on behalf of Vivian Smith Phillips to locate the child, that her acts in administering the Estate of Dewey W. Smith, without providing for this plaintiff, constituted resulting fraud, although her acts were not reprehensible and were not intentionally fraudulent.”

and

“It Is Further Ordered, Adjudged and Decreed that the acts of the defendant Vivian Smith Phillips in administering the Estate of Dewey W. Smith constituted and were not acts of intentional fraud but were acts of resulting fraud against this plaintiff * ⅝ *

In Steil v. Leverett, 133 Okl. 300, 272 P. 412, we held that where the proceedings ofi a county court are legal on their face, same are only subject to collateral attack where it is shown that extrinsic fraud was practiced in obtaining the judgment that is complained of.

We have held further in substance that acts which result in the court being imposed on and by which interested parties are prevented from having their interests protected, constitute extrinsic fraud that vitiates a judgment. See for example Cochran v. Barkus, 112 Okl. 180, 240 P. 321. But extrinsic fraud is actual fraud, therefore, intentional fraud. This will be found at p. 2,569, Vol. 3, Freeman ■on Judgments:

“ * * * Extrinsic fraud has been defined to be ‘actual fraud, such that there is on the part of a person chargeable with it malus animus, the mala sens, putting itself in motion and acting in order to take an undue advantage of some other person for the purpose of actually and knowingly defrauding him’ * * * ”

The trial court found in effect that Vivian was guilty of constructive fraud and not extrinsic or actual fraud. The phrase “constructive fraud” is defined at page 211, Sec. 2, 37 C.J.S. Fraud as follows:

“Constructive fraud is a breach of legal or equitable duty which, irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others, to violate public or private confidence, to or injure public interests. Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud.”

In view of the fact that the trial court found that Vivian was not guilty of extrinsic or actual fraud, which finding is sustained by the evidence, the proceedings to probate Smith’s estate and the guardianship proceedings must, as to Cities Service in the absence of knowledge on its part of plaintiff’s claim, be considered as valid and conclusive. The fact that said proceedings were conclusive and final as to Cities Service is not, however, decisive of plaintiff’s action against Vivian, Betty and Wayne who were unjustly enriched by the constructive fraud practiced on plaintiff in the probate proceedings.

A constructive trust may arise from constructive fraud. In fact, where a party obtains legal title to property by fraud, violation of confidence, or in any other un-conscientious manner, equity will impress a constructive trust on property so obtained for one who in good conscience is entitled to it. See 89 C.J.S. Trusts § 139, p. 1018, and Lewis v. Schafer, 163 Okl. 94, 20 P.2d 1048. This was said in the second paragraph of the syllabus to Teuscher et al. v. Gragg, 136 Okl. 129, 276 P. 753, 66 A.L.R. 143:

“The holder of the legal title to lands will in equity be charged as trustee, where it was acquired by fraud or under such circumstances as to render it inequitable for him to retain.”

We are of the opinion that under the facts of this case, Vivian, Betty and Wayne hold that portion of the Smith estate that they took which in fact belongs to plaintiff, in trust for her. And we are of the further opinion that under said facts and because they were unjustly enriched at the expense of plaintiff, plaintiff should be allowed an equitable lien on all property in their hands that rightfully belongs to plaintiff as an heir at law of Smith. This will be found at page 837, Sec. 4, 53 C.J.S. Liens:

“ * * * The basis of equitable liens is variously placed on the doctrines of estoppel or unjust enrichment, or on the principle that a person having obtained an estate of another ought not in conscience to keep it as between them; and frequently it is based on the equitable maxim that equity will deem as done that which ought to be done, or that he who seeks the aid of equity must himself do equity. * * * ”

See also Mullens et al. v. Geo. C. Wright Lumber Co. et al., 182 Okl. 355, 77 P.2d 700.

The plaintiff, under the facts and as a matter of equity, is also entitled to an accounting from Vivian, Betty and Wayne, unless her cause of action against them is barred by limitations. 34 C.J.S. Executors and Administrators § 505, p. 412.

Plaintiff contends that the attorney, hereafter, referred to as “Mr. H.”, who handled the guardianship proceedings in controversy, was told that Smith fathered a child by his marriage to Clara, and that such knowledge on the part of Mr. H. was knowledge on Cities Service’s part of plaintiff’s claim as one of Smith’s heirs at law,This contention is based on the assertion that while Mr. H. was Vivian’s attorney he was also attorney for Cities Service, which relationship is said to have arisen out of the fact that Cities Service made a request of a lease broker (in the vernacular gave him a “ticket”) to buy the oil and gas lease in controversy, and that in order to acquire good title it was necessary to have a guardian appointed for Betty and Wayne who were minors and have the lease covering their interests sold at guardianship sale. In brief, that Cities Service is chargeable with knowledge possessed by an attorney for an agent of Cities Service. In view of the fact that the final decree in the Smith estate had been final some three years before the guardianship proceedings were instituted, which decree determined that Vivian, Betty and Wayne, were Smith’s sole heirs at law; that Mr. H. did not examine the abstract of. title for Cities Service which was done by an attorney in its regular employ; and the further fact that the findings of heir-ship in said probate proceedings are consistent with the proposition that Smith could have fathered a child by his marriage to Clara and said child could have died long before the probate proceedings were instituted, we are of the opinion that Mr. H.’s knowledge of an alleged missing heir is not, under the facts of this case, imputable to Cities Service. The findings of the trial court on the foregoing issue are clearly against the weight of the evidence.

Plaintiff also contends that since the doctrine of caveat emptor applied to tire guardianship sale, Cities Service was under a duty to make inquiry aside from those things that would appear in an abstract of title and that if inquiry had been made, Cities Service would have learned of the “missing child rumor” which if investigated would have led to plaintiff and her claim. In other words, plaintiff contends that Cities Service should have done that which it apparently took others years to do and which probably would never have been done but for the discovery of oil on a property forming a part of Smith’s estate.

The burden cast on a purchaser at a guardianship sale is not as onerous as plaintiff asserts it to be. In Moroney et al. v. Tannehill et al., 90 Okl. 224, 230, 215 P. 938, 943, it is stated that “The doctrine (of caveat emptor) has been so relaxed that the purchaser at a judicial sale is entitled to expect and obtain a sound marketable title to the property sold.” We stated in the 6th paragraph of the syllabus to Jackson v. Carroll et al., 86 Okl. 230, 207 P. 735, 736, that “If the record of a judicial sale shows a legal title upon its face, together with all other records which the law requires a purchaser to take notice, and the purchaser has no actual notice of any fact that impeaches and destroys the validity of the record title * * * and in addition thereto the purchaser has paid a consideration for his title, then the purchaser has a right to stand upon his title, notwithstanding the title may in fact and in truth be fraudulent, void, or a nullity as between the parties and all persons with notice, actual or constructive. * * * ” See also 39 C.J.S. Guardian and Ward § 139, p. 231.

In view of the fact that the judicial proceedings upon which the sale was based were regular on their face, which statement also applies to other things appearing in the record title, and in view of the further fact that plaintiff’s claim at the time of the guardianship sale consisted of a rumor, we decline to hold that under the caveat emptor doctrine Cities Service was under a duty to make inquiry and learn of the rumor or investigate the rumor to the extent of discovering plaintiff and making known to her her relationship to Smith.

There remains for consideration Vivian’s, Betty’s and Wayne’s contention that plaintiff’s action against them is barred by limitations.

The fact that this action was not filed for a number of years following entry of the final decree in the probate of Smith’s estate does not under the facts show that plaintiff’s action is barred by limitations. As heretofore pointed out, the facts develop that constructive fraud was exercised in obtaining said decree and for said reason plaintiff had two years from the date she discovered or should have discovered the fraud by the exercise of due diligence within which to institute this action. American Nat. Bank of Enid v. Crews et al., 191 Okl. 53, 126 P.2d 733. The evidence shows that plaintiff did not learn of her relationship to Smith or of facts bearing upon the claims that she asserts in this action until a very short time before this action was filed and that irrespective of diligence on her part she could not have learned of her relationship to Smith by the exercise of diligence. Plaintiff, and for that matter, the adopting parents, had no clue which if pursued would have developed the facts upon which plaintiff’s action is based. Plaintiff’s link with her past had been completely broken at such a tender age that her mind did not grasp nor retain pertinent facts that would serve to establish her parentage and result in knowledge of the claims made in this action.

We are of the opinion that under the facts Cities Service acquired a valid oil and gas lease to the minerals that said lease purports to cover subject, however, to the rights of plaintiff as an heir of Smith beginning in so far as Cities Service is concerned on the date she filed this action. If Cities Service remitted oil or gas runs to Vivian or Betty or Wayne after this action was filed in which plaintiff had an interest as one of Smith’s heirs, Cities Service must account to plaintiff for her interest in said runs and it must, of course, in the future in disbursing proceeds from oil or gas produced treat plaintiff as owning that portion of the Smith estate that plaintiff is found to own. Cities Service is not liable to plaintiff, however, for lease bonus, delay rentals, or proceeds of oil or gas runs paid to Vivian or Betty or Wayne prior to the filing of this action.

We are of the further opinion that Vivian, Betty and Wayne are each liable for and must account to plaintiff for any portion of Smith’s estate that they took which in fact belonged to plaintiff, including any accruals from such property such as lease bonuses, delay rentals, oil or gas runs or rents; that said parties hold in trust for plaintiff any properties of the Smith estate or accruals therefrom that plaintiff as an heir at law of Smith was entitled to take; that plaintiff has an equitable lien upon said properties to the extent of their indebtedness to plaintiff and that said parties should fee directed and ordered to convey or deliver over to plaintiff her interest in any property that they presently own, possess or control. In our opinion the end result of a judgment to the foregoing effect will only place plaintiff in the same relative position that she would have been in had her identity been known and disclosed in the proceedings to probate the Smith estate.

Affirmed in part and reversed in part and remanded with directions for further proceedings consistent with the views herein expressed.

Jackson, J., having certified his disqualification in this case, Honorable W. W. Godlove, Lawton, Oklahoma, was appointed Special Justice in his stead.

WILLIAMS, V. C. J., and HALLEY, JOHNSON and BLACKBIRD, JJ., concur, DAVISON, C. J., WELCH and IRWIN, JJ., and GODLOVE, Special Justice, dissent.