Smith v. Smith

224 F. 1, 139 C.C.A. 465, 1915 U.S. App. LEXIS 1838

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 28, 1915
• Docket: No. 2448
• Status: Published

Opinions

GILBERT, Circuit Judge.

The appellee brought a suit against the executrix of the will of his deceased guardian, alleging that the guardian in his lifetime had appropriated and converted to his own use the money of his ward; that the guardiam had presented to the court of his appointment accounts, including his final account, wherein he concealed his misappropriation of the ward’s money, and theréby fraudulently procured the court to settle and allow his said accounts; and that thereafter, when the ward attained his majority, the guardian settled with him on the basis of such final' account. The appellee alleged matter by way of excuse for his delay in bringing the suit. The prayer of his bill was that the decree of settlement be set aside, and that he recover from the appellant, as such executrix, the sum of $24,700, which was alleged to be the amount due the appellee upon a proper accounting. The answer denied conversion of the money and concealment and misrepresentation on the part of the guardian, and set up the defenses of res judicata, limitations, and laches. The court below, upon uncontradicted evidence, found facts which were sufficient to establish the charge that the guardian had appropriated to his own use funds of his ward. The court found the facts to be that in 1899 the estate of the appellee’s deceased, father was in administration in the same court in which the guardian was subsequently appointed. The heirs of the estate were the appellee and his two- sisters. The property of the estate was» sold at executor’s sale, and was purchased by the guardian in his individual right for $85,000. To- pay for the property he borrowed-money upon his notes, with interest at 9 per cent, per an-num. Eighteen months later, upon his application, he was allowed by the court to borrow the funds of his wards then in his hands, amounting to $82,000, at interest at the rate of 3 per cent, per annum. The money so borrowed was used by the guardian to pay his notes upon which he was paying interest at 9 per cent, per annum. The appellee attained his majority in October 1906. The final account of the guardian was settled on December 14, 1906, showing a balance due the ap-pellee of $23,954, which sum was paid him on December 15,1906. The appellee at that time had no knowledge of the misuse of the funds by the guardian, but in August,-1907, his suspicions were aroused by information received from his sister. He then commenced in the superior court for the state of Montana a suit against the guardian, wherein he alleged that the purchase by the latter o Í the property of the estate was fraudulent, and prayed for his distributive share of said property atid the accrued profits. In October, 1908, the guardian died at Battle Creek, Mich., and the appellant herein was, in November, 1908, appointed the executrix of his will, and was thereupon substituted as defendant in that suit. The cause was decided adversely to the appellee herein, and he appealed to the Supreme Court. The judgment was affirmed. Smith v. Smith, 45 Mont. 535, 125 Pac. 987. Thereupon the appellee moved for a rehearing in the Supreme Court on the ground that at least he was entitled to interest upon the money used by the’ guardian prior to the order of the court authorizing him to borrow it, and he asked that the suit be remanded, with leave to amend the complaint as a basis for such recovery. On November 14, 1912, the application was denied. On March 14, 1913, the appellee herein presented to the executrix his claim upon which the present suit is based, and thereafter, on May 17, 1913, he commenced the present suit. From the time when the appellee attained his majority until the time of the guardian’s death the latter was within Montana but 6 months, and thereafter until the present suit was commenced the appellant, the executrix, was within Montana, but 15 months. The appellant and the guardian were citizens of Montana, but at the time of the commencement of the suit the appellee had become a citizen of California.

[ 1 ] The court below found that the- guardian had violated his duty to the ward in using the ward’s money to pay his own debts and in failing to charge himself with the profits he thereby derived, and in concealing from the court in probate the fact that 18 months before he applied for leave to borrow the ward’s money at the extremely low rate of interest of 3 per cent, he had already appropriated the money to the payment of his own obligations, on which he was obligated to pay interest at 9 per cent. There can he no- question that that conclusion is fully sustained by the evidence, and that the court below was justified in decreeing the relief which was prayed for on the ground that the orders of the court in probate were procured by fraud Arrowsmith v. Gleason, 129 U. S. 86, 9 Sup. Ct. 237, 32 L. Ed. 630 Marshall v. Holmes, 141 U. S. 589, 12 Sup. Ct 62, 35 L. Ed. 870.

[2] We find no merit in the plea res judicata. The suit in the state court of Montana was brought solely to recover specific property and the profits accruing thereon. The judgment of the Supreme Court establishing the validity of the sale determined all the issues in that suit. The court said:

“It may be tbat upon settlement of the guardian’s accounts he should have been required to pay a greater rate of interest, and for a longer period of time, than was actually required of him, but that question is not before us.”

[3] It is contended that the suit is barred for the reason that the ap-pellee failed to present his claim to the executrix within 10 months from the first publication- of her notice to creditors of the decedent to present their claims, as required by section 7522, Revised Codes. The provisions of that section, however, do not relate to a claim of the nature of that which is in controversy in this suit. ' Section 7525 declares :

“All claims arising upon contracts, whether the sama be due, not due or contingent, must be presented within the time limited in the notice, and any claim not so presented is barred forever.”

This has been understood by the Supreme Court of Montana to relate only to claims arising upon contract. In Re Higgins’ Estate, 15 Mont. 474, 39 Pac. 506, 28 L. R. A. 116, the court said:

“The creditor cannot maintain his suit under section 157, against an estate, unless he has presented the claim to the executor. And, by section 150, if the claim be one arising upon a contract, unless presented within the time limited in notice, it is barred forever, except under particular conditions.”

The decisions in Melton v. Martin, 28 Mont. 150, 72 Pac. 414, arid Dorais v. Doll, 33 Mont. 314, 83 Pac. 884, cited by appellant, are not authority for a different construction, because those were cases of claims arising upon contract. It is said that the statute of Montana was taken from that of California, and that before its adoption in Montana it had received a construction by the Supreme Court of California which would sustain the appellant’s contention. We do not find, however, that prior to the adoption of that statute by the state of Montana the Supreme Court of California had construed the California statute in the form in which it was then formulated, and since its .adoption by Montana it has been held in Hardin v. Sin Claire, 115 Cal. 460, 47 Pac. 363, that a claim based on a tort need not be presented against, the administrator or executor before beginning an action thereon. Section 7532, Rev. Codes Mont., provides that no holder of any claim against an estate shall maintain any action thereon, unless the claim is first presented to the executor or administrator. That statute was complied with in the present case. The appellee presented his claim before beginning the action.

[4] The principal question in the case is whether or riot the plaintiff is barred by his delay in bringing the suit. In considering this question we inquire: Eirst, what is the state statute of limitations in reference to such a cause of action ? The statute of Montana (section 6449, Rev. Codes) provides that a suit shall be brought within two years for relief on the ground of fraud or mistake, the time to be computed from the discovery by the aggrieved party of the facts which constitute the fraud or mistake. Section 6458 provides: 1

“If when the cause of action, accrues against a person, be is out of the state, the action may be commenced within the term herein limited, after his return to the state, and if, after the canse of action accrues, he departs from the state, the time of his absence is not part of the time limited for the commencement of the action.”

Section 6461 provides that:

“If a person against whom a cause of action exists, dies, without the state, the time which elapses between his death, and the expiration of one year, after tile issuing, within the state, of letters testamentary or letters of administration, is not a part of the time limited for the commencement of an action therefor, against his executor or administrator.”

The appellant invokes the rule that exceptions ha the statute of limitations are to be strictly construed, and that implied and equitable exceptions are not to be ingrafted thereupon, where the Legislature has not made the exception in express words, and contends that the exception expressed in section 6458 refers only to the absent debtor against whom the action originally accrued, and not to his personal representative, and that therefore the time during which the executrix in. the present case was without the state of Montana could not be excluded in computing the time within which an action should have been brought (citing State v. Clemens, 40 Mont. 567, 107 Pac. 896). In that case it was held that an exception to- the statute of limitations cannot be enlarged beyond what its plain language imports, and that when invoked the case must clearly and unequivocally fall within it. It is to he observed, however, that the court in that case was dealing with a provision of the Penal Code, and in construing it was governed by section 8096 of that Code, which provides that all provisions thereof “are to be construed according to the fair import of their terms.” In the present case we have to determine the meaning of a provision of the Civil Code, the construction of which is governed by section 6214 of that Code, which provides:

“The rule of the common law, that statutes In derogation thereof are to be strictly construed, has no application to this Code. The Code establishes the la\y of this state respecting the subjects to which it relates, and its provisions are to be liberally construed with a view to effect its objects and to promote justice.”

In the case at bar the court below in the opinion said:

“At common law, neither absence from the realm nor death suspended the operation of limitations. This was an evil and tended to defeat justice, in that at such times there could be no service of process and no effective prosecution of a cause of action. The object of section 6438, supra was to furnish a remedy. The evil to be remedied and the object to be accomplished thereby attach no less to the ease of absence of a personal representative than to the case of absence of a debtor. Prosecution to effect and justice are hampered equally in both cases. The reason for the scatntd is as potent in one as in the other. And though the literal reading of section 0158, supra, may support defendant’s contention, it must yield to what must be assumed to have been the legislative intent, that is, to suspend limitations whenever absence from the state of the pai'ty defendant, be he debtor or personal representative, prevents effective prosecution of a cause of action” (citing Hayden v. Pierce, 144 N. Y. 512, 39 N. E. 638; Smith v. Arnold, 1 Lea [Tenn.] 378; and Wilkinson v. Winne, 15 Minn. 159 [Gil. 123]).

We concur in this view of the meaning and intention of the exception expressed in section 6458, the object of which was to afford a remedy in cases where, on account of absence of the defendant from the state, obstacles might intervene to the successful prosecution of the plaintiff’s right of action. We are of the opinion that the appellant here is within the plain meaning of the statute. The cause of action first accrued against the guardian; the time during which he was out of the state tolled, for that period, the statute of limitations. From and after the appointment of the executrix the cause of action was against her. She was the person against whom it had then accrued, and the time of her absence is to be excluded from the time limited for the commencement of such an action.

[5] While the court below sitting as a court of equity was not bound by the state statute of limitations, it was proper for it to follow that statute, unless facts were shown which rendered its application inequitable. In Kelley v. Boettcher, 85 Fed. 55, 62, 29 C. C. A. 14, Judge Sanborn said:

“The meaning of this rule is that, under ordinary circumstances, a suit in equity will not be stayed for laches before, and will be stayed after, the time fixed by the analogous statute of limitations at law; but if unusual conditions or extraordinary circumstances make it inequitable to allow the prosecution of a suit after a briefer, or to forbid its maintenance after a longer, period than that fixed by the statute, the chancellor will not be bound by the statute, but will determine the extraordinary case in accordance with the equities which condition it. * * * When a suit is brought within the time fixed by the analogous statute, the burden is on the defendant to show, either from the face of the bill or by his answer, that extraordinary circumstances exist which require the application of the doctrine of laches; and, when such a suit is brought after the statutory time has elapsed, the burden is on the complainant to show, by suitable averments in his bill, that it would be inequitable to apply it to his case.”

That doctrine has been applied in numerous cases. Broatch v. Boysen, 175 Fed. 702, 99 C. C. A. 278; Boynton v. Haggart, 120 Fed. 819, 57 C. C. A. 301; Cunningham v. Pettigrew, 169 Fed. 335, 94 C. C. A. 457; and Brun v. Mann, 151 Fed. 145, 80 C. C. A. 513, 12 L. R. A. (N. S.) 154. In the case last cited, the court held that the doctrine,of laches is an equitable principle, which is invoked to promote, but never to defeat, justice, and that it has no function where the analogous action of law is not barred, and no> unusual conditions require its application. We find no conditions in the case at bar which are of such a nature as to constitute through the 'plaintiff’s delay the defense of laches. The considerations which -affect that defense are, generally speaking, whether the rights of innocent persons have intervened, whether the witnesses are dead or have disappeared, and whether the situation of the parties has changed to the defendant’s prejudice. In McIntire v. Pryor, 173 U. S. 38, 59, 19 Sup. Ct. 352, 360 [43 L. Ed. 606] the court said:

“We do not wish to be understood as holding that the plaintiff, even in the case of actual fraud, may wait an indefinite time, or always so long as the statute of limitations would permit him to bring an action at law before asserting his rights; but where the fraud is clearly proven, the court will look with much more indulgence upon any disability under which the plaintiff may labor as excusing his delay.” •

The important distinction to be observed between the case at bar and the decision'of this court in Newberry v. Wilkinson, 199 Fed. , 118 C. C. A. 111, is that in the latter case the statute of limitations at law had run, and the court was therefore dealing with a case which presented a prima facie presumption of laches. The court held that the plaintiff had not shown such facts and circumstances as to excuse his delay beyond the period fixed by the analogous statute of limitations, and that he did not show that the defendant’s position was no worse by reason of the delay than it was previously, and the court pointed to certain facts in the case which it said tended to indicate that the delay had been prejudicial to the defendant.

The decree is affirmed.