imposing constructive trust to convey title to a house to defendant, where defendant made substantial improvements over a period of years on the house her parents promised to give her, and where the facts established a confidential relationship between the plaintiff and defendant, who were father and daughter and who lived on the same property for years and provided each other mutual support and assistanceSummary of this case from Tikalsky v. Friedman
Submitted October 1, 1974. —
Decided October 29, 1974.
APPEAL from a judgment of the county court of Columbia county: WILLIAM R. CURRAN, County Judge of Juneau county, Presiding. Affirmed.
The cause was submitted for the appellant on the briefs of David Bogue and Bogue Bogue, all of Portage.
The cause was submitted for the respondent on the brief of Callahan, Arnold Stoltz of Columbus.
Plaintiff-appellant, Albert P. Meyer, appeals from a judgment wherein the trial court imposed a constructive trust on a certain piece of real property in favor of defendant-respondent, Marie Martha Ludwig, married daughter of the plaintiff. Facts relevant to the issues raised are as follows: In 1944, plaintiff, Albert P. Meyer; his wife, Ernane Marie Meyer; and their daughter, Marie Martha, defendant in this action, lived on a farm in the town of Wyocena in Columbia county. The farm was owned by the mother, Ernane Marie, and consisted of 200 acres with a house and farm buildings on it. The disputed portion of the farm involved in this appeal is a wedge-shaped piece which, in 1944, had a small building on it. It was located about one-half mile from the farmhouse and farm buildings. The disputed portion was enclosed with a fence on two sides, with the third side of the wedge-shaped piece of land bordering on a public road.
When the daughter, Marie Martha, announced her plans to marry Henry Ludwig and move to Detroit, Michigan, the mother, Ernane Marie, induced the daughter to stay in Wisconsin by telling her to fix up the little house on the wedge-shaped piece of land and it would be hers. Marie Martha and her husband, Henry Ludwig, moved into the house on March 21, 1945, and have lived there ever since. Before and after they moved into the house, they made considerable improvements to the property, including putting in running water, electricity, new floors, insulation and kitchen facilities. Some of the work was hired out, but much of it was done by the daughter, Marie Martha; her husband, Henry; and her father, Albert, the plaintiff. The daughter and her husband paid for the materials. The mother, Ernane Marie, helped with the wallpapering.
During the year 1954, the building was gutted by fire. The mother gave the $720 she collected in insurance payments to the daughter to help repair the building. The daughter and her husband made additional improvements after the fire, including the addition of a garage, driveway, bathroom, front porch and new roof. These improvements involved expenses of nearly $8,000, plus the labor of the daughter and her husband. Subsequently the daughter and her husband had the grounds landscaped, adding trees and shrubs.
The two families got along harmoniously, the daughter and her husband helping her parents with the farm chores. When a child, Albert, was born to the daughter and her husband, he spent considerable time at the farm home of his grandparents. Although the child had a room at both the residence of his parents and of his grandparents, he stayed primarily at the home of the grandparents and helped them with the farm work.
The plaintiff's wife and defendant's mother, Ernane Marie, suffered from a heart condition. The daughter testified that sometime after the fire her mother promised to take care of the matter of property going to the daughter in her will if the daughter and her husband rebuilt the fire-damaged building, but that health problems prevented her mother from going to see an attorney. The mother, Ernane Marie, died testate on November 8, 1961. Her last will and testament executed in 1949 left all her real and personal property to her husband, the plaintiff, Albert, for life or until he remarried, with the remainder estate going to the daughter, Marie Martha, and her son, Albert, in equal shares. The daughter testified she was surprised that the wedge-shaped parcel had not been willed to her but that she took no action in reliance upon advice from her father, the plaintiff, and an attorney. The wedge-shaped parcel was not inventoried as part of the mother's estate. Subsequently, Albert Ludwig, the son of defendant, Marie Martha, quitclaimed his interest in the wedge-shaped parcel to the defendant.
Following the death of her mother, the daughter-defendant, Marie Martha, continued in a harmonious relationship with her father, Albert, doing some cooking and housekeeping for him. Taxes on the wedge-shaped parcel were paid by the mother, Ernane Marie, during her lifetime, and following her death by the father, Albert. The daughter and her husband paid no rent, nor was any rent then demanded of them. Plaintiff made no attempt to interfere with the use of the property involved by the daughter and her husband. The daughter-defendant testified that the occupation of the land by her and her husband was open, exclusive and continuous. This situation continued until the year 1968 when some dispute arose between the plaintiff-father, Albert, and his daughter, Marie Martha, and her husband, Henry. Plaintiff began demanding rent to help pay for the taxes.
On November 19, 1968, this action was commenced, initially concerning money transactions between the parties, possession of personal property and payment for household and farm services rendered. All causes of action and counterclaims were dismissed or superseded, except plaintiff's amended fourth cause of action for rent, defendant's first counterclaim for the value of meals prepared for plaintiff, and defendant's amended third counterclaim seeking title to the land on the basis of a constructive trust, adverse possession, estoppel and will construction. On December 13, 1972, trial to the court began. The trial court held that the evidence established a situation requiring that the title to the wedge-shaped parcel of the mother, Ernane Marie, and her husband, Albert, the plaintiff, should be impressed with a constructive trust in favor of the daughter-defendant, Marie Martha. Plaintiff's cause of action for rent was dismissed, as was defendant's counterclaim for groceries. On February 2, 1973, judgment was entered. On March 5, 1973, a motion for reconsideration was denied. Plaintiff appeals.
We end up affirming the judgment, but we will begin by reviewing the holding of the trial court and proceed to consider, one by one, the alternatives suggested and the issues raised.
Constructive trust. The trial court impressed a constructive trust on the parcel of real estate involved in favor of the daughter-defendant and divested the father-plaintiff of any interest in said parcel. The primary issue is whether the trial court's finding of a constructive trust was warranted on this record. Before, however, we get to applying facts to rule, we need to define the term and state the rule as to when a constructive trust may be impressed upon property in this state. Two cases in our court, one upholding imposition of a constructive trust, and the other finding inapplicable the imposition of a constructive trust, at least agree on the definition of the term. Both agree that in this state a constructive trust is to be "`. . . a device in a court of equity to prevent unjust enrichment which arises from fraud or abuse of confidential relationship and is implied to accomplish justice. . . .'" Both cases quote with apparent approval the Restatement suggested rule: "`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.'" However, while agreeing that fraud, positive or constructive, is not required, both cases go beyond the unjust enrichment-only test, suggested by the Restatement rule, to require something additional. Such additional or alternative basis for imposition of a constructive trust, stated in Massouras, and quoted with approval in Schmalz, are: "`. . . duress, abuse of confidence, mistake, commission of a wrong, or by any form of unconscionable conduct, [against one who] has either obtained or holds the legal title to property which he ought not in equity and in good conscience beneficially enjoy.'" The second of the two cases, decided a decade after the first, suggests that a balancing of the equitable rights involved is appropriate. However, we see such balancing of equitable rights as no more than a rewording of the requirement of unjust enrichment, along with at least one of the qualifying situations above listed, to warrant imposition of a constructive trust. While another recent case might appear to suggest an unjust enrichment-only test for applicability of the constructive trust doctrine, that case also sets forth and quotes with approval the Massouras rule with its listing of factors beyond unjust enrichment required for impressing a constructive trust in this state, so we do not see the Massouras rule as there, in any particular, modified or diluted.
Id. at page 228, quoting Estate of Massouras, supra, footnote 1, at pages 312, 313, in turn summarizing holdings of this court in Masino v. Sechrest (1954), 268 Wis. 101, 66 N.W.2d 740, and Nehls v. Meyer (1959), 7 Wis.2d 37, 95 N.W.2d 780.
Id. at page 228, quoting Estate of Massouras, supra, at page 313; both quoting: Restatement, Restitution, Constructive Trust, p. 640, sec. 160.
Id. at page 228, quoting Estate of Massouras, supra, at page 313, holding: "`We consider the language in Will of Jaeger (1935), 218 Wis. 1, at page 13, 259 N.W. 842, that a constructive trust does not arise in the absence of fraud, positive or constructive, to be a too-limited statement of the basis for the imposition of a constructive trust as a "formula through which the conscience of equity finds expression."'" (Citing Beatty v. Guggenheim Exploration Co. (1919), 225 N.Y. 380, 386, 122 N.E. 378, Cardozo.) See also: Richards v. Richards (1973), 58 Wis.2d 290, 298, 206 N.W.2d 134.
Id. at page 227, quoting Estate of Massouras, supra, at page 312.
Id. at page 229, stating: ". . . They [the residuary legatees] have not established a greater equitable right to John's property than Margaret [cousin of deceased] has."
Richards v. Richards, supra, footnote 5, at pages 296, 297, stating: "The constructive trust is an invention of equity by which liability is imposed to prevent unjust enrichment and unfairness. . . . [I]t is created by law to equitably prevent unjust enrichment, which arises when one party receives a benefit, the retention of which would be unjust as against the other." Citing Hanson v. Valdivia, (1971), 51 Wis.2d 466, 476, 187 N.W.2d 151, this court there stating: ". . . The underlying principle of a constructive trust is the equitable prevention of unjust enrichment." Citing Weber v. Sunset Ridge, Inc. (1955), 269 Wis. 120, 68 N.W.2d 706, 70 N.W.2d 5; 89 C. J. S., Trusts, p. 726, sec. 15, p. 1015, sec. 139, p. 1027, sec. 142.
Id. at page 297, quoting Massouras rule. See fn. 6 above.
With the above definition and test accepted, it follows that the imposition of a constructive trust here requires that the record establish (1) unjust enrichment on the part of the plaintiff-father; and (2) an abuse of a confidential relationship by the plaintiff-father. Fraud is not here claimed nor present, but it need not be. As to the fact of unjust enrichment, in the light of the substantial investments of time and labor and money over a long period of years in reliance upon the mother's promise that she would turn over the parcel of land to her daughter and son-in-law, we agree with the trial court that the plaintiff-father would be unjustly enriched if he were permitted to have the parcel of land involved. As to the abuse of a confidential relationship, the question is closer. However, it is clear that there was here a confidential relationship between the parties involved. It derives from the legal relationship of father-daughter, plus the exchange of labor, mutual support and assistance, and inter-family relationship of the father-mother and daughter-husband family units here involved. In the case cited above, involving a father-daughter relationship, this court found the father-daughter relationship, coupled with the age of the father, his lack of education and his turning over of savings to his daughter and son-in-law as sufficient to support a finding "of a confidential relationship sufficient to support a constructive trust." While the beneficiary of the constructive trust here is the daughter, not the surviving parent, such reversal of roles does not alter the fact that here, as in the case cited, there was a confidential relationship upon the strength of which the daughter and her husband invested their time, effort and money in the property involved, relying upon the promise of the mother that the parcel of land which they were improving would be willed to the daughter. There was an abuse of that confidential relationship when the mother failed to will or otherwise convey the parcel of land involved to her daughter. We uphold the trial court's holding that both unjust enrichment and abuse of a confidential relationship were here established and warranted the imposition of a constructive trust on the property in favor of the daughter-defendant.
Estate of Schmalz, supra, footnote 2, at page 228. As to right to rely on alleged false representations in constructive trust cases where fraud is claimed, see: Dombrowski v. Tomasino (1965), 27 Wis.2d 378, 387, 388, 134 N.W.2d 420, this court stating: ". . . There is some authority in our past decisions that an essential element of fraud is the right to rely on the alleged false representations. . . . We are of the opinion that this is not an essential element of constructive trust when grounded upon a confidential relationship, if there existed actual reliance by the promisee upon the promise made by the promisor. . . ."
Dombrowski v. Tomasino, supra, at page 388, this court stating: "The mere relationship of son-in-law and daughter to plaintiff did not create a fiduciary relationship. . . . However, this factor of relationship coupled with plaintiff's age [he was 68 years of age], lack of education, and the turning over of his savings to defendants without receiving any writing of any kind therefor, would support a finding of a confidential relationship sufficient to support a constructive trust." (Emphasis supplied.)
Promise not binding. The plaintiff-father argues that the promise made by his wife to their daughter to convey the property involved is not binding on him because it was not made by him. There are two weaknesses in the contention. The first is that the plaintiff, as father, stood in the same confidential relationship to their daughter as did his deceased wife. He had knowledge of the promise or understanding and benefited personally from the exchange of labor and services involved. If his argument on this point made him a stranger to the promise made by his wife, there would remain the issue of his abuse of the confidential relationship by his failing to convey his partial interest as legatee of a life estate in the property under the will of his wife. However, even if he were a stranger to the promise made, the relationship existing, and the benefits derived, there is no merit to the argument advanced. It was leveled in a recent case. There this court stated the applicable rule to be that: "`Where a person holding property transfers it to another in violation of his duty to a third person, the third person can reach the property in the hands of the transferee [by means of a constructive trust] unless the transferee is a bona fide purchaser.'" This court referred to an earlier case, where funds were embezzled from an employer to pay the premiums on an insurance policy, and this court concluded that a constructive trust was an appropriate remedy even though the beneficiary of the policy was ignorant of the embezzlement. In the Richards Case, this court held that mere ignorance of an original impropriety did not make the recipient an innocent purchaser or even a bona fide purchaser so as to make inappropriate impressing of a constructive trust upon the insurance proceeds there involved. The escape hatch the plaintiff seeks to use has been nailed shut.
Id. at page 388, this court stating: ". . . While the cases on constructive trust are usually concerned with a situation where there is breach of duty to convey the entire interest of the defaulting promisor in a particular parcel of real estate, we can perceive of no reason why the same principle should not apply to a breach of duty to convey a partial interest such as a life estate."
Richards v. Richards, supra, footnote 5.
Id. at page 298, citing and adopting the rule as stated in 5 Scott, Trusts (3d ed.), p. 3444, sec. 470.
Truelsch v. Miller (1925), 186 Wis. 239, 202 N.W. 352.
Richards v. Richards, supra, footnote 5, at page 298, citing and quoting Truelsch v. Miller, supra, footnote 15, at page 252, this court stating that constructive trust may be asserted "`. . . against third parties to whom the property has been transferred with knowledge of the trust or who have paid no consideration for it, provided the identity of the trust fund can be established.'" (Emphasis in text.)
Id. at pages 298, 299.
Statute of limitations. The plaintiff-father contends that even if a constructive trust is here established, his daughter-defendant is barred from asserting her claim by the statute of limitations. The applicable statute of limitations does include constructive trusts within its scope. The Demos Case makes clear that it is sec. 893.18 (4), Stats., that applies, requiring an action to be brought within ten years from the accrual of the cause of action. The parties in their pleadings and briefs refer to a six-year statute of limitations apparently applying sec. 893.19 (9), dealing with claims against a decedent or his estate, or sec. 893.19 (7), pertaining to actions grounded on fraud. However, the action here is not brought against the estate of the mother, and it is not grounded on fraud. As Demos makes clear, it is the ten-year limit of sec. 893.18 (4), that applies. Defendant's amended counterclaim upon which the claim of constructive trust is based was filed May 26, 1971. The earliest date on which an action for imposition of a constructive trust could have accrued was November 8, 1961, the date of the mother's death. The mother's promise to will the land to her daughter could not be breached until she died leaving a will which did not fulfill her promise. Thus the action was commenced within the applicable time period and is not barred by the applicable statute. So holding requires no consideration be given to the daughter-defendant's claim that if the action is barred by the statute of limitations the plaintiff-father is estopped from asserting such statute as a defense.
Estate of Demos (1971), 50 Wis.2d 262, 269, 184 N.W.2d 117, this court stating: "It is well established that provisions limiting the time in which an action may be brought are applicable to suits seeking equitable as well as legal remedies. . . ."
"`Within 10 years. . . .
Changing the will. The plaintiff-father submits that the trial court's imposition of a constructive trust on the parcel of land involved is a belated amendment of the final judgment in the probate of the last will and testament of his wife, Ernane Marie. He submits and relies principally upon prior holdings that if such judgment is not ambiguous and the time for appeal has passed, then it is final even if in error, unless obtained by fraud. He cites cases holding that the final judgment in an estate probate proceeding ". . . must be recognized as a judicial determination and expression of the intent of the testator. When the time to appeal has gone by, if the language of the judgment is plain and unambiguous and its meaning clear and definite, no resort to the will or the circumstances of its making may be had. . . ." As we see it, this argument misconceives the legal consequences of a final decree in a probate proceeding and the equitable rights involved in the imposition of a constructive trust upon property, the legal title to which is never in the name of the person seeking to have a constructive trust imposed. The heirs or legatees do not receive, under a final judgment in the probate of an estate, any more title than the testator had to give. If, in an appropriate subsequent proceeding, there is an impressing of a constructive trust upon the interest of the testator in a piece of property, the constructive trust follows the property to the legatee or heir who receives title from the testator. The challenge is not to the fact of transfer but to what is in fact transferred under the will. In the case before us, analysis of the trial court's findings of fact and conclusions of law makes clear that the court determined (1) that the mother, Ernane Marie Meyer, had legal title to the disputed property at the time of her death; (2) that the plaintiff-husband-father, Albert Meyer, was a successor to that legal title for his widowerhood; and (3) that a constructive trust should be imposed upon such property based on abuse of a confidential relationship and to prevent unjust enrichment. The daughter-defendant's title arises from the constructive trust created, not from a change or revision in the prior judgment construing the will and dividing the estate of the plaintiff's wife and defendant's mother.
Adverse possession. For the purpose of completeness only, we note the daughter-defendant's argument that in the event a constructive trust is not here imposed she is entitled to the property under adverse possession. With a constructive trust impressed upon the property in favor of the defendant-daughter, there is no reason to consider this second line of defense. When a first vessel crosses a sea to a desired harbor, there is no good purpose served by finding out whether a different ship could have made the same successful journey.
By the Court. — Judgment affirmed.