Shiels v. Nathan

This is an action, brought under section 1589 of the Code of Civil Procedure, to recover from the estate of Michael Shiels, deceased, certain real estate for the benefit of the creditors of the estate of Bernard Shiels, deceased.

It appears from the complaint that Bernard Shiels died December 31, 1902, leaving a will by which he devised all his property to Michael Shiels, naming him as executor; that Michael was duly appointed as executor, and was thereafter, to wit, November 6, 1903, discharged from his said trust; that plaintiff was duly appointed administratrix with the will annexed shortly thereafter and ever since has been and now is such administratrix; that Michael died intestate, in the state of Nevada, on December 12, 1905, leaving estate in the county of Sacramento, this state; that defendant was duly appointed administrator of his estate, April 5, 1906, by the superior court of said county and now is such administrator ; that before and at his death, Bernard was indebted to Mary Shiels in the sum of $1691, with lawful interest from November 14, 1890, upon a claim arising out of an agreement of separation (the said Bernard and Mary being husband and wife) and a division of their community property theretofore had between them, “all of which will more fully appear from a copy of the claim of said Mary Shiels, which is hereto annexed (i. e., to the complaint) marked Exhibit A and is hereby referred to and made part of this complaint”; that on March 7, 1906, said Mary presented to Hon. Peter J. Shields, judge of the superior court of said county, for his approval and allowance, her said claim against the estate of said Bernard Shiels, deceased (amounting then to $3505, principal and interest), “accompanied with a statement of the facts out of which said claim arose,” which said claim was, on said March 7, 1906, allowed and approved by said judge and duly filed in the office of the county clerk. It is then alleged that on December 26, 1902, said Bernard was the owner of certain described real estate referred to in the complaint, situated in said county, and also had on deposit in the Sacramento bank the sum of $1800, and that

“In the Matter of the Estate of Bernard Shiels, Deceased.

“The undersigned, a creditor of Bernard Shiels, deceased, presents her claim against the estate of said deceased, with the necessary voucher for approval, as follows, to wit:

“Estate of Bernard Shiels, Deceased,

“To Mary.Shiels, Dr.

“March 7, 1906. To money owing, due and unpaid from said Bernard Shiels at the time of his death, to claimant founded upon the facts set forth in the statement hereto annexed, and which is made part hereof, and is explanatory of this claim........................$1,691.00

Interest owing, due and unpaid on said sum of $1,691.00, from the 14th day of November,

1890, to date, at the rate of seven per cent

per annum...............................1,814.00

“Total.............................. $3,505.00”

Defendant demurred to the complaint on several grounds: 1. That the court was without jurisdiction because it does not appear that defendant, as a trustee, has possession of the property; 2. That there is a defect of parties defendant in this, that Michael Shiels, died testate and his heirs are not made parties defendant; 3. That sufficient facts are not alleged to constitute a cause of action; 4. That the complaint is uncertain, unintelligible and ambiguous in this, that no copy of the claim, in form or substance, as required by section 1494, Code of Civil Procedure, is attached to the complaint; 5. That no facts are set forth in support of the averment that certain real estate was transferred “with the fraudulent purpose to hinder and defraud,” etc. The complaint is demurred to also as barred by certain sections of the Code of Civil Procedure. The demurrer was overruled, properly

A defense is pleaded on the ground that plaintiff, prior to the commencement of the action, conveyed an interest in the property described in the complaint to Messrs. Hinkson & Elliott (who are her attorneys), and that they are necessary parties to the action. This is not urged in appellant’s brief and may be dismissed from consideration.

A defense is also pleaded that plaintiff knew, about the time of its execution, of the execution of the deed from Bernard to Michael, mentioned in the complaint, and is guilty of laches and should therefore not be permitted to maintain the action and is estopped thereby. The answer also pleads laches in that the complaint fails to show that plaintiff made any effort to recover said money or property until October 13, 1906, when the complaint was filed, being more than five years after Bernard bought the land in question. But the statute of limitations began to run from the date of the discovery of the fraud, which was in 1903.

The court found the averments of the complaint to be true, except that the amount of money on deposit in the Sacramento Bank was $1727.78 at the time claimed, to wit, December 26, 1902, and except also that the evidence did not show that Michael removed the money from this jurisdiction, but that Bernard did, on December 26, 1902, transfer said money to Michael and he caused the same to be transferred to his credit and on January 3, 1903, be removed the same from said bank and closed his account; that the conveyance' to Michael by Bernard was voluntary

Defendant gave notice that he would, on April 17, 1908, move to vacate the judgment on the ground that it was rendered through mistake, inadvertence, surprise and excusable neglect. The motion was denied and as the appeal from that order is not now pressed, it will not be considered.

Defendant also moved for a new trial on most of the statutory grounds, which motion was denied. He appeals from the judgment, from the order refusing to vacate the judgment and from the order denying his motion for a new trial.

When the. cause was called for trial the court asked counsel for plaintiff, after he had read the complaint, whether the allegations of plaintiff were denied by defendant. He replied: “We admit that defendant has attempted to deny all the allegations of our complaint, except paragraphs one and two thereof, which are admitted; but we do not concede that the denials of defendant are sufficient.”

Over defendant’s objection, plaintiff submitted evidence showing: That the court had approved and allowed the claim as set forth in the complaint; the will of Bernard by which he devised all his property to his brother Michael, to show an intention, at the time he made the deed, to exclude plaintiff from sharing in his estate; petition of Michael, as executor of Bernard’s estate, asking his discharge and to show that he therein reported to the court that he was unable to discover any property belonging to Bernard and for that reason asked his discharge; the order of discharge showing

Defendant offered no evidence. He pleaded the deed from Bernard to Michael and the settlement contract between Bernard and his wife, which, not being denied, are deemed admitted.

Appellant urges many points in support of his contentions—that the demurrer should have been sustained; that his motion for nonsuit should have been granted and that the evidence does not support the findings. The questions in controversy are more or less involved in all these contentions and may be considered without special reference to either one in particular.

1. It is claimed that the appointment of Mrs. Shiels as administratrix of Bernard’s estate was without jurisdiction for the reason that the executor (Michael) of that estate was discharged and jurisdiction over the executor and over the property of the estate was terminated. The only ground for asking the discharge or for making the order, so far as appears, was the averment in the petition, found as fact in the order, that the executor was unable to discover' any property belonging to the estate. The contention is that by the discharge the court lost jurisdiction which could only be regained by setting aside the order on some sufficient ground made to appear, and, as no such step was taken, the court could not appoint an administratrix with the will annexed. Section 1698, Code of Civil Procedure, provides that the final settlement of an estate shall not prevent a subsequent issue of letters, “if other property be discovered, or if it become necessary or proper for any cause that letters should be

2. The other questions are directly or remotely connected with the approved claim of Mrs. Shiels. It therefore becomes of the first importance to determine its status and the extent to which its approval and allowance figure in the case, since it is conceded that it was necessary for plaintiff to show that she was a creditor of the estate of Bernard, which appeared only through her approved claim.

Section 1497, Code of Civil Procedure, reads: “Every claim allowed by the executor or administrator, and approved by a judge of the superior court, or a copy thereof, as hereinafter provided, must, within thirty days thereafter, be filed in the court, and be ranked among the acknowledged debts of the estate, to be paid in due course of administration. ’ ’

Section 1510, Code of Civil Procedure, provides: “If the executor or administrator is a creditor of the decedent (the case here), his claim, duly authenticated by affidavit, must be presented for allowance or rejection to a judge of the superior court, and its allowance by the judge is sufficient evidence of its correctness, and must be paid as other claims in due course of administration.”

It was held in Estate of More, 121 Cal. 635 , [ 54 Pac. 148 ], that the judgment of a court and the approval of a claim by the judge are of equal force. (See, also, Hall v. Cayot, 141 Cal. 13 , [ 74 Pac. 299 ].) Section 1504, Code of Civil Procedure, practically so declares. Speaking of the judgment of the court, the court, in Estate of More, 121 Cal. 635 , [ 54 Pac. 148 ], said: “It did, however, establish the claim in the same manner as if it had been allowed by the judge, and was prima facie evidence of its correctness. The judg

Appellant contends that the allowance of Mrs. Shiels ’ claim cannot affect him, as he was a stranger to the estate and was not a party or privy thereto. (Citing Shay v. McNamara, 54 Cal. 169 .) It is true that a judgment is an estoppel only as to parties and privies. But subject, however, to the right of an interested party to have the allowance of a claim set aside for cause, all the world are parties to the probate proceedings relating thereto and are bound thereby, where the probate proceedings have been regularly pursued. Let us, then, consider the attack made upon the claim of Mrs. Shiels.

3. It is claimed that the action is barred in three :-ears by subdivision 4, section 338, Code of Civil Procedure, if it is for relief from fraud or mistake; that it is barred in two years by subdivision 1, section 339, Code of Civil Procedure,

It seems to us that the claim is based upon the contract entered into between Bernard Shiels and his wife as set forth in the statement of facts therewith made. We must presume that before or at the time the judge approved the claim, he heard evidence in support of the facts averred in the claim and found them to be true. Briefly, that Bernard, at the time the agreement of separation was entered into had a deposit in the Sacramento Bank of $3382, belonging to the community, which he purposely and fraudulently concealed from his wife and of which he made no account in returning to her, and to the two men chosen to divide the property, a memorandum of the community property in his possession, to one-half of which, $1691, she was entitled by the agreement, with interest to March 7, 1906, the date of filing the claim, amounting to $1814; that by the agreement each was to make a full, true and correct statement and memorandum of all the community property in possession or control of each; that claimant had full confidence in her husband and in his statement and his assurance then made to her that it contained a true and correct return of all his said property, and that in making said settlement she “believed and acted solely upon said representations and memorandum of the said Bernard' Shiels,” as also did'the said two men chosen to make said division of the property; that she had no means of ascertaining the facts and did not discover said money so deposited until shortly after letters were issued to her, to wit, November 28, 1903, and then for the first time was informed by the officers of said bank that Bernard had money on deposit (the amount set out in the claim), at the date of the separation. The claim was admitted in evidence as presented to and allowed by the judge. Defendant offered no evidence tending to dispute any of the facts presumably determined by its approval, and the only defense now made to it is the statute of limitation and laches in failing to make due inquiry. The discovery of the fraud was made November 28, 1903, and the action was

4. It is true that many years passed before the discovery was made by Mrs. Shiels, and it is urged that she ought to have shown that she made some effort to ascertain the facts; that available means of knowledge amount to knowledge and that there is an utter failure to show any sort of diligence in making the discovery from 1890 until 1903. The answer is that the relation of husband and wife is one of the highest degree of confidence and trust, and although in this case they had “differences,” not explained, which led to their separation, the claim stated and the judge presumably found as fact, that the wife had confidence in her husband and trusted him in making return of his property. Differences might have existed without destroying confidence in each other’s honesty and integrity. The husband is entitled to the exclusive possession and control of the community property and presumably knows all about it, while no such presumption attaches to the wife. Accepting the settlement upon the belief that her husband had returned all the community property she had a right to rest in that belief and was not called upon to pursue an independent search for other property; to have done so would have implied want of confidence in her husband’s honesty in making return of the property, whereas her belief in and reliance upon his honesty was the ground on which she accepted the settlement. We do not know, except from the facts stated in the claim, when or how her suspicions were aroused, or when or how she came to make inquiry as to the facts; they were inquired into by the judge who allowed the claim. There is no evidence

5. It is argued, as evidence of her unfairness and laches, that although she learned of the fraud in November, 1903, she delayed the presentation of her claim until after the death of her husband’s brother, Michael, to whom the property in question had been conveyed by Bernard; that by his death she could not be confronted with his testimony in explanation of the conveyance. The deed shows that it was without consideration other than love and affection. Besides, it cannot be assumed, and it did not appear, that Michael knew anything about the facts existing at the time of the separation. The defense of laches is sometimes sustained although the period of delay is less than that provided by the statute of limitation. Mere lapse of time less than the statutory period of limitation will not bar action for equitable relief, unless the delay, under the circumstances, has been such as to justify the presumption that the defendant may have been prejudiced thereby. (Ex-Mission Land Co. v. Flash, 97 Cal. 610 , [ 32 Pac. 600 ]; Cahill v. Superior Court, 145 Cal. 47 , [ 78 Pac. 467 ]; Cook v, Ceos, 147 Cal. 614 , [ 82 Pac. 370 ].) There is nothing in the record tending in the slightest degree to show that the heirs of Michael or any creditors interested in his estate have suffered or will suffer prejudice by the delay in presenting the claim.

6. It is urged that there was no evidence of actual fraudulent intent in conveying the property to Michael. The claim presented to and allowed by the judge raised no issue as to the land in question or its transfer to Michael. Only such facts or issues as were then raised are to be deemed adjudged by the allowance. The complaint avers that Mary Shiels was a creditor of Bernard at and before the date of the transfer; that “he, without any valuable or adequate consideration therefor,” conveyed to Michael the land and the money on deposit, and thenceforward to the date of his death, “he had no other property out of which said debt could be paid, and he thereby rendered himself insolvent,” and so continued ■ until he died. It has been held that un

There was evidence tending to establish the requirements mentioned in the case cited. It was, however, necessary to show further that the conveyance was with fraudulent intent. It was held, in Emmons v. Barton, 109 Cal. 662 , [ 42 Pac. 302 ], that where the consideration was love and affection alone, it was not sufficient unless made with intent to defraud the creditors; that the intent is a question of fact and that a voluntary conveyance is not prima facie fraudulent, and fraudulent intent is not to be arrived at as a presumption of law. It was further held in that case: “Pronounced insolvency at the time of the grant would, no doubt, be a strong circumstance tending to show fraudulent intent, and, in the absence of other controlling facts, it would be sufficient to justify a finding of such intent.”

It appeared from the evidence that Bernard was mortally ill and in hospital when he made the conveyance and died five days thereafter; that he declared that it was his intention to convey all the property he possessed and, so far as known, he did so; that his brother Michael served for a time as executor of Bernard’s estate and could find no property belonging to him and for that reason asked to be and was discharged. We think the evidence was sufficient to justify the finding that by the conveyance he rendered himself insolvent. Strictly, he was not insolvent when he made

"Whether section 1589, Code of Civil Procedure, is to be given the same effect as section 3442 of the Civil Code, need not be decided, for, if so, by the terms of the latter section any transfer made “voluntarily, or without valuable consideration, by a party while insolvent or in contemplation of insolvency, shall be fraudulent, and void as to existing creditors.”

In Gray v. Brunold, 140 Cal. 615 , [ 74 Pac. 303 ], it was said that an allegation of intent to defraud is no longer required under section 3442, where insolvency is alleged, but in Estate of Vance, 141 Cal. 624 , [ 75 Pac. 323 ], the court said that intent to defraud must be alleged and that the proviso in the section is a rule of evidence and not of pleading. Nevertheless, proof of insolvency establishes the intent. Here there were sufficient allegations and proof. Conceding the rule, appellant says the section does not apply here because there is “but one creditor and that creditor created by the fraud itself.” This rather singular contention is based on the fact that “it was necessary to prove the fraud in the first place, before any advantage can be taken of any special presumption of fraud, in order to establish the status of the plaintiff as a creditor, so that it could be claimed that the transfer was made by an insolvent. ’ ’ We fail to see any force in this point. If she was a creditor, it is immaterial how she became such creditor.

7. It is urged that the judgment is erroneous because it does not conform to the provisions of the code authorizing it.

Section 1589, Code of Civil Procedure, provides that the administrator “may recover for the benefit of the creditors all such real estate so fraudulently conveyed,” etc. Section 1591 provides: “All real estate so recovered must be .sold for the payment of debts, in the same manner as if the decedent had died seised thereof, upon obtaining an order therefor from the court; and the proceeds, . . . must be ap

In Emmons v. Barton, 109 Cal. 662 , 668, [ 42 Pac. 302 , 304], it was held that in a case like this, “the judgment should be that the property fraudulently conveyed, or so much thereof as is necessary, be applied to the satisfaction of the debts, and that the residue, if any, go to the grantee. It is not to go into the assets of the estate for any purpose other than the payment of the debts. The residue does not go to the heir; for he stands in the shoes of the fraudulent grantor.” (See Tully v. Tully, 137 Cal. 60 , 66, [ 68 Pac. 700 ].) In Estate of Page, 57 Cal. 238 , 241, it is said: “But the property, when recovered, must be inventoried as assets of the estate, and sold for the payment of debts, in the same manner as if the decedent had died seised thereof.” (Citing Code Civ. Proc., secs. 1589; 1591.)

As the conveyance by Bernard Shiels was void, the statute authorized the recovery of the property and its sale for the benefit of the creditors of Bernard, and to make a sale the title would have to be vested in the administratrix. The judgment vested the title in the administratrix for the benefit of creditors, which was proper, but it also declared it to be “free and clear of all claims of the said defendant as administrator of the estate of Michael Shiels, deceased, or any other person, or persons, claiming by, through, or under said estate of Michael, deceased, or of the defendant as such administrator.” This was unauthorized. The heirs of Michael are entitled to the surplus, if any, after the property is sold, and the decree should so provide.

The order denying defendant’s motion to vacate the judgment and the order denying his motion for a new trial are affirmed. The judgment is modified by striking out the portion last above quoted and in lieu thereof inserting the following : “and upon the sale of said premises the proceeds thereof shall be applied to the payment of the claims of the creditors of the said Bernard Shiels, which have been or shall be duly allowed, and the residue of such proceeds shall

Hart, J., and Burnett, J., concurred.

A petition for a rehearing of this cause was denied by the district court of appeal on March 9, 1910, and a petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on April 7, 1910.