Markel v. Transamerica Title Ins. Co.

• Decision Date: 05 June 1968
• Citation: 442 P.2d 97,103 Ariz. 353
• Parties: Edna (Van-Y)(Stanley) MARKEL, Appellant, v. TRANSAMERICA TITLE INSURANCE COMPANY, formerly known as Phoenix Title and Trust Company, Trustee, and Virginia R. Van-Y, Appellees.
• Court: Arizona Supreme Court

Page 97

442 P.2d 97

103 Ariz. 353

Edna (Van-Y)(Stanley) MARKEL, Appellant, v. TRANSAMERICA TITLE INSURANCE COMPANY, formerly known as Phoenix Title and Trust Company, Trustee, and Virginia R. Van-Y, Appellees.

Supreme Court of Arizona, In Banc.

June 5, 1968.

Rehearing Denied July 9, 1968.

Alan Philip Bayham, Raymond Huffsteter, Phoenix, for appellant.

Divelbiss & Gage, by G. David Gage, Phoenix, for appellees.

McFARLAND, Chief Justice.

This case is before us on a petition for review of the decision of the Court of Appeals, 6 Ariz.App. 585, 435 P.2d 714, affirming the judgment of the trial court. Decision of the Court of Appeals vacated.

In December 1939 plaintiff Edna Markel obtained a divorce from Earl E. Van-Y, hereinafter called Earl, in Sedgwick County, Kansas, where they were both living. The divorce decree approved a written property settlement in lieu of alimony, by which Earl agreed to give plaintiff 'one-half interest in any funds that may be obtained through' the sale of a parcel of real estate located in Arizona. Subsequently Earl married defendant Virginia Van-Y, hereinafter referred to as Virginia. The Arizona property passed, through several parties, to Virginia.

In 1957 she sold the property for $25,000, describing it as her sole and separate property. Transamerica Title and Trust Company (then called Phoenix Title and Trust Co.) was made escrowee and trustee. The transfer of the property to Transamerica, as trustee, was to expedite the deeding of part of the property each time a payment was made--an arrangement commonly known as a subdivision trust. Knowledge of this sale came to the notice of plaintiff, and, on April 30, 1959, she brought an action against Virginia and Transamerica, asking the court to hold that Transamerica hold the reversionary interest in the realty in trust for plaintiff; that Transamerica should hold $13,037.50 and interest for plaintiff's use and benefit, and in due course should distribute same to plaintiff; that Virginia be ordered to pay plaintiff $11,865 wrongfully paid to her by Transamerica; and that each defendant be restrained from making any disposition of Virginia's reversionary interest in the property or the proceeds of the trust, pendente lite.

Transamerica, though served, failed to appear, and a temporary injunction was granted by the court on May 18, 1959, ordering Transamerica not to pay out any money from the trust until further order of the court. Plaintiff posted a five-hundred-dollar bond.

On June 18, 1959, the court issued a permanent injunction which enjoined Transamerica from making any disposition of Virginia's reversionary interest, or her interest in the proceeds, until it paid her the sum of $13,037.50 and interest. The $500 bond was exonerated.

On January 22, 1960, the default judgment against Transamerica was set aside and the injunction necessarily fell with the judgment. Transamerica then made two payments to Virginia--$4,402 on February 17, 1960, and $4,214.57 on December 30, 1960.

Before any more payments were made, a hearing on the merits of the case took place, resulting in a judgment for defendants at the close of plaintiff's case. An appeal was taken, and, on February 2, 1966, we reversed and remanded the case for trial, holding that plaintiff had made out a prima facie case for the imposition of a constructive trust, in the trial court. Markel v. Phoenix Title & Trust Co., 100 Ariz. 53, 410 P.2d 662.

In 1962, 1963, and 1964, while the appeal was pending, Transamerica received and disbursed to Virginia the rest of the payments due, from the sale of the real estate, totalling over $8,000 including interest. On April 7, 1966, after our decision, plaintiff filed a second amended complaint, setting forth the facts alleged in the original complaint which we held in Markel v. Phoenix Title, supra, had been sufficiently proven to constitute a prima facie case for the imposition of a constructive trust. The amended complaint set out a copy of Edna's written property agreement with Earl, and alleged that it had been approved by her divorce decree; that Virginia had entered into an escrow and a secret trust agreement with Transamerica bearing number 2197; that thereafter Transamerica 'received and wrongfully made disbursements to Virginia Van-Y in the aforesaid trust after this action was commenced, for the sum of $13,037.50'; that defendants 'have fraudulently caused said funds to be transmitted to Virginia Van-Y * * * to deprive plaintiff of her rights to one-half the proceeds * * * and that defendants' aforesaid wrongful transfer was in breach of defendants' obligation, after being fully placed on notice of plaintiff's rights and was in direct breach of its duty to plaintiff. * * *' The prayer was for money only, in the sum of $13,037.50 and interest, and 'for such other and further relief as to the court may seem meet and proper.'

The issues as stated in the first complaint were clear and would have permitted recovery. The second complaint, after setting forth the facts alleged in the first complaint in regard to the written property settlement in the divorce decree, the sale and the payments thereunder to Transamerica as trustee, further alleged the subsequent wrongful disbursements. As it is, the second amended complaint may be described by the words used in Barnes v. Eastern and Western Lumber Company, 205 Or. 553, 287 P.2d 929, in which the Supreme Court of Oregon said:

'* * * The facts stated in the complaint would have permitted recovery, as we have indicated, on several theories. Among the possible theories were deceit, conversion * * *, money had and received, the recovery of specific property by constructive relief, or any other theory within the scope of restitution.'

The allegations of the second complaint in the instant case are sufficient to permit plaintiff to prove her original contention that defendants were, and still are, constructive trustees of the proceeds of the sale of the property. The new material is also sufficient to permit plaintiff to prove the elements of a conversion of those proceeds, as she alleges a wrongful transfer of the money by Transamerica after knowledge by it of plaintiff's claim of the right to possession of the funds.

If defendants had any doubts of what was meant by the allegations of the second amended complaint, they could have moved for a more specific statement. Long v. Arizona Portland Cement Company, 89 Ariz. 366, 362 P.2d 741; Davidson v. All State Materials Company, 101 Ariz. 375, 419 P.2d 732. Rule of Civil Procedure No. 8 (16 A.R.S.) states that the complaint need contain only a 'short and plain statement of the claim showing that the pleader is entitled to relief' and a 'demand for judgment for the relief to which he deems himself entitled. Relief in the alternative or of several different types may be demanded.' See Lun v. Mahaffey, 94 Or. 292, 185 P. 746.

Transamerica filed a new answer, admitting--with the following exceptions--all of the allegations of the complaint: (1) It denied (on information and belief) that the property settlement agreement existed; (2) It denied that the trust agreement between it and Virginia was secret; (3) It denied that the $13,037.50 received by it and disbursed to Virginia was disbursed wrongfully; and (4) It denied (on information and belief) that it fraudulently transmitted funds from the trust to Virginia, and alleged that it had no information of any fraud or wrongdoing. The answer also alleged that it was not under any injunction when it disbursed the funds.

Denial (1) may be ignored, since Virginia, in answer to interrogatories, admitted the existence of, and her knowledge of the contents of, the property agreement. Denial (2) is completely immaterial. Denial (3) is clearly a legal issue, rather than a fact question; it must be resolved by the application of legal principles, not by the introduction of evidence. Denial (4) must be construed to mean that Transamerica had no knowledge of any fraud or wrongdoing on the part of Virginia at the time it accepted the trust, since there can be no doubt that it had knowledge of her wrongdoing after the case was tried the first time. It was a party to the first appeal and was represented by counsel throughout that appeal.

It is therefore clear that the real issues in this case are: 1. Was Transamerica's action in disbursing funds to Virginia, after knowledge that plaintiff claimed them to be encumbered with a constructive trust in her favor, wrongful or fraudulent? and 2. Was Transamerica excused from the consequences of its disbursements because of the trial court's judgment and plaintiff's failure to try to get a stay order? These issues present questions of law, not fact; hence, they may be resolved on a motion for summary judgment.

Such a motion was filed by Transamerica, on the ground that there was no material issue of fact. In support thereof, it attached an affidavit setting out the dates and amounts it had paid Virginia from money received under the trust. The affidavit contained nothing else! In reply to the motion, plaintiff filed only a memorandum of authorities and did not controvert the affidavit. Transamerica also filed a memorandum of authorities.

On October 14, 1966, the trial court applied Rule 56(e), Rules of Civil Procedure (16 A.R.S.), and granted summary judgment to Transamerica, stating as its reasons (1) that plaintiff failed to respond with specific facts and affidavits, and (2) that there was no genuine issue of fact raised by the pleadings.

The first reason represents an incorrect application of Rule 56(e). That rule states that if plaintiff does not respond with specific facts, summary judgment 'if appropriate' shall be entered against her. This is but another way of saying what is said in Rule 56(c)--namely, that judgment shall be entered if it appears that there is no genuine issue of fact And that 'the moving party is entitled to a judgment as...