Bemis v. Estate of Bemis

• Decision Date: 25 November 1998
• Docket Number: No. 27997,27997
• Citation: 967 P.2d 437,114 Nev. 1021
• Parties: Kevin Lynn BEMIS and Scott Ross Bemis, Appellants, v. The ESTATE OF Jack Lynn BEMIS, Rodney F. Blasius, Executor, Respondent.
• Court: Nevada Supreme Court

Page 437

967 P.2d 437

114 Nev. 1021

Kevin Lynn BEMIS and Scott Ross Bemis, Appellants, v. The ESTATE OF Jack Lynn BEMIS, Rodney F. Blasius, Executor Respondent.

No. 27997.

Supreme Court of Nevada.

Nov. 25, 1998.

Aebi & McCarthy, Carson City, for Appellants.

Peter Smith, Carson City, for Respondent.

OPINION

PER CURIAM.

Jack and Frankie Bemis were divorced on January 3, 1972. At the time of their divorce, Jack and Frankie had two minor sons, appellants Kevin and Scott Bemis, ages 13 and 12 respectively. The court entered a decree of divorce that incorporated a property settlement agreement (the "divorce agreement"). The agreement provided:

That the First Party [Jack Bemis] is the beneficiary of a California trust which will terminate within the next year; that First Party agrees that a trust will be established with the E.F. HUTTON COMPANY, as trustee, in the amount of TWENTY-FIVE THOUSAND ($25,000.00) DOLLARS, with the two (2) minor children as beneficiaries, and the trust and any accumulated interest be distributed to the beneficiaries, share and share alike, when the oldest one reaches the age of twenty-five (25). The beneficiaries shall be entitled to payments from said trust, including payments from the corpus thereof, when in the sole discretion of the trustees, said payments shall be necessary for the support, education, or general welfare of either one of them.

Kevin and Scott allege that to minimize the anxiety created by the divorce and to promote healthy father-son relations between Jack and his sons, Frankie rarely discussed the divorce with her children, and never mentioned the agreement. The pleadings indicate that Jack failed to establish a trust for Kevin and Scott, and the children never received any financial assistance from their father after the divorce.

On February 11, 1995, Jack died, leaving nothing to Frankie, Kevin or Scott. Kevin and Scott allege that upon Jack's death, Frankie informed them of the trust fund; prior to this time they had no knowledge of the provisions of their parents' divorce decree. On May 30, 1995, and June 7, 1995, Kevin and Scott filed creditors' claims against Jack's estate (the estate) to collect the money that Jack had agreed to hold in trust pursuant to the 1972 divorce agreement. The estate rejected these claims.

On August 22, 1995, Kevin and Scott filed suit against the estate alleging causes of action for conversion and breach of contract, and seeking equitable relief in the form of a resulting trust consisting of the $25,000 specified in the divorce agreement, including accrued interest. On September 1, 1995, the estate filed a NRCP 12(b)(5) motion to dismiss the claims as being barred by the applicable statutes of limitations. On December 4, 1995, the court granted the estate's motion. Kevin and Scott appeal from the district court's dismissal of their complaint.

For reasons discussed below, we conclude that the district court erred in dismissing Kevin and Scott's complaint as being barred by the running of the statutes of limitations.

DISCUSSION

A court can dismiss a complaint for failure to state a claim upon which relief can be granted if the action is barred by the statute of limitations. NRCP 12(b)(5); Shupe & Yost, Inc. v. Fallon Nat'l Bank, 109 Nev. 99, 100, 847 P.2d 720, 720 (1993). In reviewing a dismissal of a complaint, we must "determine whether or not the challenged pleading sets forth allegations sufficient to make out the elements of a right to relief." Edgar v. Wagner, 101 Nev. 226, 227, 699 P.2d 110, 111 (1985). In making this determination, this court must accept all the factual allegations in the complaint as true. Pemberton v. Farmers Ins. Exchange, 109 Nev. 789, 792, 858 P.2d 380, 381 (1993). "A claim should not be dismissed ... unless it appears to a certainty that the plaintiff is not entitled to relief under any set of facts which could be proved in support of the claim." Hale v. Burkhardt, 104 Nev. 632, 636, 764 P.2d 866, 868 (1988).

We have previously recognized a distinction between the "discovery rule" and the "general rule" of accrual of a cause of action for statute of limitations purposes:

The general rule concerning statutes of limitation is that a cause of action accrues when the wrong occurs and a party sustains injuries for which relief could be sought. An exception to the general rule has been recognized by this court and many others in the form of the so-called "discovery rule." Under the discovery rule, the statutory period of limitations is tolled until the injured party discovers or reasonably should have discovered facts supporting a cause of action.

The rationale behind the discovery rule is that the policies served by statutes of limitation do not outweigh the equities reflected in the proposition that plaintiffs should not be foreclosed from judicial remedies before they know that they have been injured and can discover the cause of their injuries.

Petersen v. Bruen, 106 Nev. 271, 274, 792 P.2d 18, 20 (1990) (emphasis added) (citations omitted).

NRS 11.190(1)(b) provides a six year limitation period for contract actions, but is silent as to when such a cause of action accrues. ¹ However, we have previously applied the discovery rule to contract actions, holding that an action for breach of contract accrues as soon as the plaintiff knows or should know of facts constituting a breach. Soper v. Means, 111 Nev. 1290, 1294, 903 P.2d 222, 224 (1995). The three year limitations period provided in NRS 11.190(3)(c), which governs Kevin and Scott's conversion claim, is also silent as to time of accrual. In Hartford Accident and Indemnity Co. v. Rogers, 96 Nev. 576, 613 P.2d 1025 (1980), we implied that a conversion cause of action accrues no later than the time at which the injured party becomes aware of the taking. Today, we conclude that the statute of limitations for conversion is discovery based.

In a discovery based cause of action, a plaintiff must use due diligence in determining the existence of a cause of action. Sierra Pacific Power Co. v. Nye, 80 Nev. 88, 389 P.2d 387 (1964). Whether plaintiffs exercised reasonable diligence in discovering their causes of action "is a question of fact to be determined by the jury or trial court after a full hearing." Millspaugh v. Millspaugh, 96 Nev. 446, 448, 611 P.2d 201, 203 (1980). Dismissal on statute of limitations grounds is only appropriate " 'when uncontroverted evidence irrefutably demonstrates plaintiff discovered or should have discovered' " the facts giving rise to the cause of action. Nevada Power Co. v. Monsanto Co., 955 F.2d 1304, 1307 (9th Cir.1992) (quoting Mosesian v. Peat, Marwick, Mitchell & Co., 727 F.2d 873, 877 (9th Cir.1984)).

At this stage of the proceedings, there is no evidence to suggest that Kevin and Scott had any knowledge that would put them on inquiry notice to investigate potential claims they may have had against their father prior to his death. Nothing in the record developed thus far indicates that Kevin and Scott knew that a marital settlement agreement existed, much less that they were the beneficiaries of such an agreement. Nonetheless, the district court determined that Kevin and Scott had access to the agreement because it was a public record, and they should have previously inquired into the terms of their parents' divorce and their father's obligations pursuant thereto. We disagree.

In the instant situation, it cannot be said as a matter of law that Kevin and Scott should have known of their parents' divorce agreement simply because it was public record. Cf. Allen v. Webb, 87 Nev. 261, 485 P.2d 677 (1971). ² Whether Kevin and Scott exercised due diligence in discovering their cause of action is a question of fact which on remand should be determined by the trier of fact. The district court imposed an affirmative obligation on Kevin and Scott, upon reaching the age of majority, to investigate whether they may have had claims to pursue arising from their parents' divorce agreement. We can think of no policy to be served by imposing such an obligation on the children of divorce. ³

Accordingly, we conclude that the district court erred in dismissing Kevin and Scott's legal claims as being barred by the statute of limitations. The trier of fact must determine when Kevin and Scott knew or should have known of facts giving rise to their conversion and breach of contract claims.

Alternatively, Kevin and Scott's complaint seeks relief in equity, asking the district court to impose a resulting trust on the $25,000 which Jack had agreed to put into an express trust for their benefit pursuant to the divorce agreement, in addition to accrued interest. Implied trusts are equitable remedies; the basic objectives of both constructive and resulting trusts are the recognition and protection of property rights that have arisen in an innocent party--the vital tenet is one of equity. ⁴ Cummings v. Tinkle, 91 Nev. 548, 550, 539 P.2d 1213, 1214 (1975).

"Despite some confusion in the courts between resulting and constructive trusts, the concepts are distinguishable.... [A] constructive trust, unlike a resulting trust, does not require that the parties specifically intended to create a trust." 76 Am.Jur.2d Trusts § 163 (1992). "The constructive trust is no longer limited to [fraud and] misconduct cases; it redresses unjust enrichment, not wrongdoing." Dan B. Dobbs, Law of Remedies § 4.3(2) (2d ed.1993). See also DeLee v. Roggen, 111 Nev. 1453, 1457, 907 P.2d 168, 170 (1995) (quoting Locken v. Locken, 98 Nev. 369, 372, 650 P.2d 803, 804-05 (1982)) (reiterating that " '[a] constructive trust is a remedial device by which the holder of legal title to property is held to be a trustee of that property for the benefit of another who in good conscience is entitled to it' ").

In Locken, we held that a constructive trust exists where: "(1) a confidential relationship exists between the parties; (2) the retention of legal title by the...