Hoverstad v. First Nat. Bank & Trust Co., 9500

• Decision Date: 19 December 1955
• Docket Number: No. 9500,9500
• Parties: , 56 A.L.R.2d 938 Ingrid K. HOVERSTAD et al., Plaintiffs and Appellants, v. The FIRST NATIONAL BANK AND TRUST CO., a Corporation, of Sioux Falls, South Dakota, also known as The First National Bank, a Corporation, of Sioux Falls, South Dakota, et al., Defendants and Respondents.
• Court: South Dakota Supreme Court

Page 48

74 N.W.2d 48

76 S.D. 119, 56 A.L.R.2d 938

Ingrid K. HOVERSTAD et al., Plaintiffs and Appellants, v. The FIRST NATIONAL BANK AND TRUST CO., a Corporation, of Sioux Falls, South Dakota, also known as The First National Bank, a Corporation, of Sioux Falls, South Dakota, et al Defendants and Respondents.

No. 9500.

Supreme Court of South Dakota.

Dec. 19, 1955.

Rehearing Denied Feb. 16, 1956.

Henry C. Mundt and Acie W. Matthews, Sioux Falls, Bogue & Masten, Canton, for plaintiffs and appellants.

Jones & Matthews, E. G. Jones, Sioux Falls, for The First Nat. Bank & Trust Co., of Sioux Falls, defendant and respondent.

Blaine Simons, Sioux Falls, for appearing individual defendants and respondents.

SMITH, Judge.

Ole Rogn of Minnehaha County, South Dakota, died September 14, 1946. The residuary clause of his will reads, 'all the remainder of my estate to all my first cousins.' Eventually a residue of $75,313.38 was distributed among twenty-one first cousins of the testator pursuant to a decree for partial distribution and the final decree of the County Court of Minnehaha County, and the executor was discharged. Claiming to be first cousins, or lineal descendants of first cousins of the testator, and entitled to take under his will, the plaintiffs, residents of the Kingdom of Norway, brought this action in the Circuit Court of Minnehaha County against the executor and those first cousins of the testator who shared in the distribution of the residue of his estate. The complaint was assailed by motions, and two judgments of dismissal resulted. By these judgments it was ruled respectively that the complaint failed to state a cause of action against the executor, The First National Bank and Trust Co., on behalf of any of the plaintiffs, and it failed to state a cause of action against any of the defendants on behalf of the plaintiffs we have described as lineal descendants of deceased first cousins of the testator. The appeals by the plaintiffs present these rulings for review.

The averments of the complaint, the truth of which we must assume in considering the appeal from the judgment of dismissal dealing with the executor, reveal these facts. The plaintiffs, some of whom are first cousins of Ole Rogn, were not mentioned in the probate proceedings in his estate and received no part of the residue of his estate. They are residents of the Kingdom of Norway and had no knowledge of the death of Ole Rogn, nor of any of the facts revealed in the probate proceedings until long after the entry of the final decree. None of the notices of hearing on the respective petitions of the executor for probate of the will, for a decree of partial distribution, for settlement of its final account, or for final distribution was mailed to or received by the plaintiffs or any of them. The petition of the executor for probate of the will named eighteen persons as legatees and heirs. The same eighteen persons were named by the executor as the persons entitled to receive partial distribution in his petition dealing with partial distribution.

Thereafter three additional persons appeared in the proceedings, were recognized as first cousins of the testator, and, through a settlement with the originally named eighteen, shared in the partial distribution. The final account and petition for distribution of the executor named the above-described twenty-one persons as entitled to receive the residue, and such a distribution of the residue was decreed. There has been no appeal from the final decree and the executor has been discharged.

The executor distributed the residue to the twenty-one first cousins of the testator as directed by the final decree. Although it knew that Ole Rogn was a native of the Kingdom of Norway, it failed to make a reasonable and diligent attempt to ascertain whether he had first cousins in Norway and failed to give plaintiffs notice of the probate hearings above described. After partial distribution had been made, the executor was informed that Ole Rogn had heirs in Norway. Nevertheless it remained silent during the proceedings looking to final distribution and did not advise the court that the deceased had heirs in Norway. The described conduct of the executor is alleged to have been negligent and fraudulent.

The plaintiffs' prayer for relief includes the following: '1. Judgment that the Defendant bank is a trustee for and on behalf of the Plaintiffs and as such trustee it account to the Plaintiffs for their distributive shares of said estate. 2. Judgment against the Defendant bank for the sum of $34,759.98 as the indebtedness that the Defendant bank owes them for their share of the said estate because of its negligence, fraud or failure to duly exercise its trust duties as to the Plaintiffs or as the amount due because of the overpayment to the other Defendants.'

The first question for consideration is whether as against the executor the attack the plaintiffs have made in the circuit court on the final decree of the county court is direct or collateral.

In ruling that the complaint fails to state a cause of action against the executor, the trial court observed: 'The executor made distribution of the estate as ordered in the decrees of the County Court. * * * In this action the decrees of the County Court are not questioned directly but as to the executor are attacked collaterally since the purpose of the action is to recover from the executor independently of the decrees although no claim is made that the executor benefited thereby.' We share that opinion.

In Adamson v. Minnehaha County, 67 S.D. 423, at page 426, 293 N.W. 542, at page 543, this court held,

'* * * An attack is collateral if made upon a judgment in an action that has an independent purpose other than impeaching a judgment, even though impeaching the particular judgment may be essential to the success of the action.'

Courts have frequently employed this guide in determining whether a particular attack upon a judgment is direct or collateral. Rowe v. Silbaugh, 96 Wash. 138, 164 P. 923, L.R.A.1918D, 466; 31 Am.Jur. 204, Judgments, Sec. 611; 49 C.J.S., Judgments, Sec. 408, p. 811; Freeman on Judgments, p. 606, Sec. 306.

In so far as the complaint is directed toward the executor we understand plaintiffs' theory to be that an executor is a trustee for the legatees and as such is duty bound to exercise that degree of intelligence and diligence which a man of average ability and ordinary prudence would exercise in like circumstances in searching for those who are entitled to distribution, and that he is also under obligation to disclose to the court such information as he gains to the end that the court may avoid error in distribution; cf. 21 Am.Jur. 498, Executors and Administrators, Sec. 227; Welch v. Flory, 294 Mass. 138, 200 N.E. 900, 106 A.L.R. 813; that the executor not only failed to measure up to its obligation to plaintiffs but represented that certain persons were entitled to distribution and concealed information from the court which contributed to the alleged error in distribution; that by reason of these facts the executor prevented plaintiffs from presenting their claims in the proceedings; and therefore, they are entitled to restitution from the executor in the form of a judgment equal to their loss. In anticipation of a contention by the executor that the final decree under which it acted shelters it from such a liability to them, the plaintiffs have assailed the decree as void for lack of jurisdiction and for extrinsic fraud. It seems obvious to us that this attack on the final decree is but incidental to the independent purpose of the plaintiffs to recover damages for the executor's alleged conduct, and hence that the attack is collateral.

In asserting that their attack on the final decree is direct and in equity the plaintiffs cite a group of decisions of which Hewitt v. Hewitt, 9 Cir., 17 F.2d 716; Purinton v. Dyson, 8 Cal.2d 322, 65 P.2d 777, 113 A.L.R. 1230; Caldwell v. Taylor, 218 Cal. 471, 23 P.2d 758, 88 A.L.R. 1194; and Sohler v. Sohler, 135 Cal. 323, 67 P. 282, 285, 87 Am.St.Rep. 98, are typical. In each of these cases equitable relief was afforded one who had failed to receive distribution from an estate because he had been prevented from appearing in the proceedings by extrinsic fraud. In granting relief, however, the court treated the decree as valid but charged the person who had received that which in all good conscience belonged to plaintiff as a constructive trustee on the theory of unjust enrichment. In writing of the power of equity to grant relief in such circumstances in Sohler v. Sohler, supra, the California court said,

'* * * It thus became the principle of the English courts of chancery, while permitting the probate to stand, as having no power to set it aside, to decree that the false legatee or wrongful executor was trustee for the rightful claimant. So here we hold that under our system the utmost that the court in equity could do, if it finds the facts to be as alleged, would be to decree that the defendant Paul Reuss holds title as trustee of the minor plaintiffs, * * *. This we believe to be the limit of the power in equity in dealing with the matter, and it is in accordance with the principle adopted by the English courts, expressed by Pomeroy as follows: 'Where probate is obtained by fraud, equity may declare the executor or other person deriving title under it a trustee for the party defrauded."

These cases, in our opinion, offer no support for the contention that in the alleged circumstances equity will ignore the decree of the county court and lay hold of an executor who was bound to execute that decree and has received nothing from the estate, and require him to respond in money damages to plaintiffs by way of restitution. The limit of the power of equity in such a situation was indicated by the court in Lathan v. Edwards, 5 Cir., 121 F.2d 183, 185. The action was against an...