Opinion
December 16, 1941.
1. TRUSTS: Constructive Trusts: Distinction from Resulting Trust. A constructive trust arises 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 resulting trust arises where a person makes a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest in the property.
2. TRUSTS: Constructive Trusts: Unjust Enrichment. The plaintiff's petition alleges that fiduciaries breached their obligations to him and unjustly enriched themselves out of property in which he had a beneficial interest. These are allegations of constructive trusts.
3. LIMITATIONS OF ACTIONS: Trusts: Constructive Trusts. The statute of limitations runs against the beneficiary of a constructive trust.
4. LIMITATIONS OF ACTIONS: Trusts: Constructive Trusts: Failure to Allege Why Fraud Not Discovered. It appears from plaintiff's petition that suit was not filed until twenty-four years after the alleged fraudulent acts claimed to constitute a constructive trust, and sixteen years after he came of age. No allegation is made as to knowledge or discovery or that the facts were fraudulently concealed from him. A demurrer was properly sustained, as the petition alleges no facts tolling the statute.
Appeal from Circuit Court of City of St. Louis. — Hon. John A. Witthaus, Judge.
AFFIRMED.
E. McD. Stevens for appellant.
(1) The certificate of stock for twenty-four shares of stock was paid for by money or property of the plaintiff and his sister. It never belonged to Mrs. Elizabeth Kerber and a constructive trust arose by operation of law in favor of plaintiff. Calloway Bank v. Ellis, 238 S.W. 844, l.c. 847, and cases cited on page 874; Ambruster v. Ambruster, 31 S.W.2d 28. (2) Mrs. Kerber being the guardian of her minor son at the time of the issuance of the certificate of stock in her name, she being his trustee, could not purchase any outstanding title and hold it to her own use as against her cestui que trust, the plaintiff herein, and when as charged in the petition, the shares were purchased with plaintiff's funds or property, a trust resulted in plaintiff's favor. Edwards v. Gottschalk, 25 Mo. App. 549; Harrison v. Smith, 83 Mo. 210; Hougan Rlty. Co. v. Bank, 273 S.W. 772. (3) Even though it may be said Mrs. Kerber had a dower interest in the assets of Kerber Rowe, and partly used such interest to acquire the stock certificate, she being a trustee, mixed said property so that it could not be separated, nor the amount ascertained. Then the whole became both in law and in equity, the property of the trust estate and now belongs to plaintiff. Tuffs v. Lafshaw, 172 Mo. l.c. 373; Orr v. St. Louis, 291 Mo. 283; Snodgrass v. Moore, 30 Mo. App. 332; Moore v. Bank, 154 Mo. App. 516; Patterson v. Booth, 103 Mo. 402; Mialdna Bank v. Brightwell, 148 Mo. 358; Hynds v. Hunds, 253 Mo. 20; 65 C.J. 420. (4) As between the trustee and cestui que trust, the statute of limitations can never run. Elliott v. Landis Machine Co., 236 Mo. l.c. 567; Orr v. St. Louis Union Trust Co., 236 S.W. 642, 291 Mo. l.c. 404; Ewing v. Shannahan, 113 Mo. 188. (5) Plaintiff did not sustain any damage until the attempted disposition of the stock certificate. The statute did not begin to run until the filing of her will in 1939. Sec. 1012, R.S. 1939. (6) The defendants are all strangers to the trust, and the statute never runs in their favor. Ewing v. Shannahan, 113 Mo. l.c. 97. (7) Where a parent purchases property with funds of the child, a resulting trust arises pro tanto. Stevens v. Fitzpatrick, 218 Mo. 708; 65 C.J. 416. (8) The statute of limitations never runs in favor of a trustee ex maleficio. Elliott v. Landis Machine Co., 236 Mo. l.c. 567.
A.E.L. Gardner for respondents.
(1) It appears on the face of plaintiff's petition that the acts complained of by plaintiff and which form the basis of his alleged cause of action occurred in 1916, or twenty-four years next before the filing of this suit on July 26, 1940. Therefore, his cause of action, if any, is barred by the statute of limitations. Secs. 1013, 1014, R.S. 1939. (2) Plaintiff's alleged cause of action, if any, to establish a resulting or constructive trust in his favor as beneficiary in the twenty-four shares of stock issued to Elizabeth Kerber on the 29th day of August, 1916, was barred by the statute of limitations at the time of filing his suit on July 26, 1940. Secs. 1013, 1014, R.S. 1939; Zeitinger v. Annuity Realty Co., 325 Mo. 194, 28 S.W.2d 1030; Hudson v. Cahoon, 193 Mo. 547, 91 S.W.2d 72; Reed v. Painter, 145 Mo. 341, 46 S.W.2d 1089. (3) To establish a resulting trust, it must be pleaded and clearly shown that the funds of the person in whose favor the trust is sought to be established went into the purchase of the property involved. Gaugh v. Gaugh, 321 Mo. 414. (4) It is the rule in this State that final judgments of the probate court are as conclusive as judgments of a court of general jurisdiction. Sheetz v. Kirtley, 62 Mo. 417; McDonald v. McDaniel, 242 Mo. 172; Elevator Co. v. Thompson, 264 Mo. 595; Hidden v. Edwards, 313 Mo. 642. (5) Judgments of the probate court must be attacked, if at all, in a direct proceeding on the ground of defects apparent on the face of the record, or for fraud. Covington v. Chamblin, 156 Mo. 574; Reavis v. Reavis, 135 Mo. App. 199. (6) The statute of limitations is applicable to implied trusts, whether constructive or resulting. Zeitinger v. Annuity Realty Co., 325 Mo. 194; Meyer v. Wise, 133 S.W.2d 321; Shelby County v. Bragg, 135 Mo. 291. (7) Provision in limitation statute allowing ten years for discovery of fraud is subject to rule that one is deemed cognizant of facts which should or could have been known. Foster v. Petree, 141 S.W.2d 131. (8) General doctrine relative to discovery of fraud so as to take it without the bar of statute of limitations, required facts to be pleaded sufficient to relieve pleader of presumption and actual knowledge; and general charge of ignorance at one time and of subsequent knowledge, as well as mere silence is insufficient. Foster v. Petree, 141 S.W.2d 131; City of St. Joseph v. Wyatt, 274 Mo. 566, 203 S.W. 819. (9) In order to establish a resulting trust by parol evidence the proof must be so clear, cogent, positive and convincing as to exclude every reasonable doubt from Chancellor's mind. Mays v. Jackson, 145 S.W.2d 392. (10) Mere failure to disclose that cause of action existed does not prevent running of statute of limitations; there must be actual artifice to prevent knowledge of facts. Mere silence is not sufficient. Armstrong v. Union E.L. P. Co., 60 S.W.2d 1013; Piggott v. Denton, 46 S.W.2d 618. (11) Nothing less than conscience, good faith and reasonable diligence can call courts of equity into activity, and aid should not be granted to plaintiff who negligently slept on his rights, if any, for seventeen years after he became of age and suffered his demand to become stale. His alleged cause of action is barred by laches as well as the statute of limitations. Snow v. Funck, 41 S.W.2d 2; Smalley v. Queen City Bank, 94 S.W.2d 954; Breit v. Bowland, 100 S.W.2d 599; Hudler v. Guerdan, 113 S.W.2d 1040; Troll v. St. Louis, 257 Mo. 626.
This is a suit by Carl Kerber against his mother's executor, E.R. Riemeier, his sister, Vera Waterhout, his half brother, W.A. Rowe, his half sisters, Zula Myers and Hazel Wade, and the W.A. Rowe Floral Company, a corporation. The purpose of the suit is to have himself declared the beneficiary of a trust and the owner of twenty-four shares of stock, of the value of $24,000, in the W.A. Rowe Floral Company. The trial court sustained a demurrer to his petition for the reason that it failed to state a cause of action. He refused to plead further and the final judgment, from which he appeals, was entered.
The allegations upon which he relies as stating a cause of action are as follows:
Prior to 1915 his father, John P. Kerber, and W.A. Rowe were partners in the floral business. His father died on January 31, 1915, and W.A. Rowe became the administrator of his estate. Rowe, as administrator, made a false affidavit that his father's personal estate did not exceed in value $200, when in fact his interest in the partnership was worth thousands of dollars; that the only asset listed as belonging to John Kerber was an undivided one-half interest in the 11:12 acres of land rented to the floral company and upon which the greenhouses were constructed. That Rowe made false settlements as to the cost of operating the floral business "for the purpose of deceiving the plaintiff's mother, Elizabeth Kerber, into believing that the business was of no value." Carl Kerber then alleges that when Rowe made final settlement of the partnership estate he appropriated all the personal assets of the partnership.
The petition states that on March 6, 1916, his mother was appointed his guardian by the Probate Court of St. Louis County. He was then fourteen years old. That at that time he had an interest in the floral partnership, but that the only asset listed in his estate as a minor was an undivided one-fourth interest in the 11:12 acres of land which was subject to the dower and homestead rights of his mother. He then alleges that Rowe caused his mother to petition the probate court for permission to sell the 11:12 acres and that Rowe became the purchaser, "paying nothing therefor at the time, but giving his notes for the entire purchase price thereof."
It is charged that in 1916 his mother, W.A. Rowe and Rowe's wife organized the W. [927] A. Rowe Floral Company corporation with a capital stock of $20,000, divided into two hundred shares. Real estate, including the 11:12 acres, conveyed to the corporation represented the paid up stock. The plaintiff states that the corporation took over all the personalty of the partnership, as well as the real estate; that W.A. Rowe appropriated one hundred seventy-five shares of the stock; that twenty-four shares were issued to his mother and one to Rowe's wife; "that the twenty-four shares issued to Elizabeth Kerber were in truth and in fact the property of this plaintiff, because this plaintiff had at said time an undivided interest in the Rowe and Kerber partnership, and that said Elizabeth Kerber, by reason of her position as guardian of the plaintiff, and by reason of her fiduciary capacity, received said stock as the property of plaintiff, and held the same as trustee for the plaintiff." He then says that he and his sister, Vera Waterhout, were entitled to receive fifty shares of stock and that Rowe was entitled to receive one hundred shares and is now trustee for the plaintiff of twenty-six shares.
Finally, it is alleged that plaintiff's mother died on July 16, 1939, and has attempted to will the twenty-four shares of stock to the plaintiff, his sister and two half sisters in equal shares, which she had no right to do, and that her executor is threatening to sell the stock for the alleged purpose of paying debts and that Rowe intends to become the purchaser.
It will be observed from the above synopsis of the plaintiff's petition that he was thirteen years of age when his father died in 1915; that he was fourteen when his mother was appointed his guardian; and that he was twenty-one in 1923 and thirty-seven when this suit was instituted in 1940.
The respondents contend that the acts of which the plaintiff complains took place twenty-four years prior to the filing of his suit and that, therefore, his claim is barred by the statute of limitations. [Secs. 1013-1014, R.S. Mo. 1939, 2 Mo. Stat. Ann., pp. 1139, 1143.]
The appellant's position is that as between the trustee and his cestui the statute of limitations never runs; that if the statute does run it did not begin until his mother died and attempted to dispose of the stock; that the plaintiff's cause of action did not accrue until his damages were sustained and capable of ascertainment (Sec. 1012, R.S. Mo. 1939, 2 Mo. Stat. Ann., p. 1136); and that, the defendants being strangers to the trust, the statute of limitations never ran in their favor.
The difficulty with this appeal and the question of whether or not the statute of limitations is applicable comes about through a failure to distinguish between resulting and so-called constructive trusts. The parties here treat them as the same, possibly because they are both sometimes called "implied" trusts.
"A resulting trust is to be distinguished on the one hand from an express trust and on the other from a constructive trust. An express trust is created only if the settler manifests an intention to create it, although the manifestation may be made by conduct as well as by words. A resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest in the property." [3 Scott, Trusts, sec. 4041, p. 2163; 2 Restatement, Law of Trusts, sec. 404, p. 1250.] " 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." Restatement, Restitution, sec. 160, p. 640; "The constructive trust may be defined as the device used by chancery to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs. . . . It must express the idea that the defendant has been under an equitable duty to give the complainant the benefit of the property ever since the defendant began to hold unjustly. . . . Obviously the constructive trust is not the product of the intent of the parties." [3 Bogert, Trusts, sec. 471, p. 1451-1453.] A constructive trust is a remedial institution as distinguished from substantive, the latter being typically exemplified by an express trust. [33 Har. L.R. 420.]
Though these distinctions have not always been scrupulously observed by our courts they have been recognized and stated. [Parker et al. v. Blakeley, 338 Mo. 1189, 93 S.W.2d 981; Ferguson v. Robinson, 258 Mo. 113, 167 S.W. 447; Leahey v. Witte, 123 Mo. 207, 27 S.W. 402.] For a criticism of Missouri cases and of certain authors [928] for failure to observe the differences see 2 Bogert, Trusts, sec. 451, pp. 1346-1348; 27 Har. L.R. 437.
Certainly the plaintiff's allegations as to W.A. Rowe fall within the above definitions of a constructive trust. It is charged, as to him, that as the administrator of the partnership estate and subsequently he appropriated to the floral corporation the personal property of the partnership which belonged to the plaintiff's father and of which the plaintiff was an heir. As we understand it he is thereby accused of breaching a fiduciary relationship, at least while he was acting as administrator of the partnership. The subsequent allegation that he personally appropriated the stock and gave personal property, which belonged to someone else, to the corporation is a charge of conversion. If the charges are true, Rowe was certainly guilty of unjustly enriching himself and the corporation out of that which justly belonged to the plaintiff and in such a manner as to entitle the plaintiff to restitution, unless his claim is barred by the statute of limitations.
The same is true of the allegations with respect to his mother. He expressly charges that she received the twenty-four shares of stock, which in fact belonged to him, by reason of her fiduciary capacity as his guardian. [3 Bogert, Trusts, sec. 481, pp. 1505, 1506; 3 Scott, Trusts, sec. 495, pp. 2410, 2411; 65 C.J., secs. 226, 229, pp. 476-479, 483-487; In re Kelley's Estate, 213 Mo. App. 492, 255 S.W. 1064.] He does not say she converted them, but that is the only construction one could reasonably give the allegations, especially in view of the fact of her disposing of the same shares by her will.
Our construction of the petition is that it charges the defendants with holding property which equitably they should convey or give to the plaintiff; otherwise they are and will be unjustly enriched at his expense. Such a charge calls for the application of and describes the equitable remedy designated a constructive trust. [Keeton's Heirs v. Keeton's, Admr., 20 Mo. 530; Smith v. Ricords, Administratrix, 52 Mo. 581; Ricords, Admx. v. Watkins, 56 Mo. 553; Landis v. Saxton, 105 Mo. 486, 16 S.W. 912; Shelby County v. Bragg, 135 Mo. 291, 36 S.W. 600; Johnson v. United Railways Co. et al., 243 Mo. 278, 147 S.W. 1077; County of Howard v. County of Moniteau et al., 336 Mo. 295, 78 S.W.2d 96; Johnston v. McCluney (Mo. App.), 80 S.W.2d 898.]
The case is unlike Hynds v. Hynds, 253 Mo. 20, 161 S.W. 812; Hynds v. Hynds, 274 Mo. 123, 202 S.W. 387; and Stoff v. Schuetze et al., 293 Mo. 635, 240 S.W. 139, in which the fiduciaries admittedly held the property for the benefit of another, thereby creating a resulting trust, if not an express trust. [4 Bogert, Trusts, sec. 953, pp. 2768, 2769.] It is unlike Orr v. St. Louis Union Trust Co., 291 Mo. 383, 236 S.W. 642, and Ewing v. Shannahan, 113 Mo. 188, 20 S.W. 1065, both of which were resulting, if not express trusts. Nor is it comparable to Elliott v. Landis Machine Co. et al., 236 Mo. 546, 139 S.W. 356, which was a resulting trust of personal property.
Holding, as we do, that the plaintiff seeks to charge the defendants as the trustees of a constructive trust, the statute of limitations is applicable to him and to his cause of action unless there is some allegation in his petition precluding its application. "The right to enforce a constructive trust may be terminated as a result of the plaintiff's laches, or the running of the Statute of Limitations, or by other defenses which terminate the plaintiff's right to restitution." [Restatement, Restitution, sec. 179, p. 722; 4 Bogert, Trusts, sec. 953, pp. 2766-2768; 3 Scott, Trusts, sec. 481, pp. 2355-2356; 1 Perry, Trusts, sec. 230, pp. 404-405; 34 Am. Jur., sec. 108, pp. 88-89.] This is particularly true of constructive trusts based on detected fraud, or when the plaintiff relies on facts of which he has long had full knowledge. When the fraud is perpetrated or when he obtains and has full knowledge of the facts upon which he relies as creating a constructive trust his cause of action is complete and since he is fully aware of it there is nothing to prevent the statute from running. And, the question of which statute should be applied is determined by the nature of the claim. [Keeton's Heirs v. Keeton's, Admr., supra; Smith v. Ricords, Admr., supra; Landis v. Sexton, supra; County of Howard v. County of Moniteau, supra.]
Carl Kerber was thirteen when his father died in 1915. He was fourteen when his mother is alleged to have violated her duties as his guardian by selling the land and taking the stock in her own name and when Rowe converted the property. He was, therefore, under such a disability as [929] to prohibit the running of the statute until he reached his majority in 1923. As we understand it, he was thirty-seven when this suit was instituted in 1940, so that sixteen or seventeen years elapsed after his majority and before he sought restitution.
There is no allegation in the petition that he had no knowledge of the facts upon which he relies or that knowledge of them came to him within the time allotted by either the five or ten year statute of limitations. Nor does he say that the facts had been fraudulently concealed from him. [Shelby County v. Bragg, 135 Mo. 291, 298, 36 S.W. 600.] In fact his argument here is, at least as to the twenty-four shares held by his mother, that he "sustained no damages resulting from his mother's taking the certificate(s) in her name, until she attempted to dispose of it by her last will." We submit, however, that it is not damages and the testamentary disposition of the stock of which he does or could complain, but is the wrongful conversion of his stock and property, which is alleged to have occurred in 1916. So far as the petition is concerned he may have always known the facts and, for that matter, it is difficult to assume, at least in the absence of appropriate allegation, that his mother had concealed the facts from him all that time. [Johnson v. United Railways Co., 243 Mo. 278, 297, 147 S.W. 1077.] The fact that the petition shows there was no repudiation of the trust by his mother does not alter the consequences. There is nothing in the petition to show that she ever acknowledged the existence of a trust. If she had we would have an entirely different problem. The important question here is whether or not the petition alleges any reason or excuse sufficient to toll the running of the five or the ten year statute of limitations. The plaintiff's petition wholly fails to state any fact or circumstance tolling the statute and the trial court properly sustained a demurrer to his petition
The judgment is affirmed. Westhues and Bohling, CC., concur.
The foregoing opinion by BARRETT, C., is adopted as the opinion of the court. All the judges concur.