Martin v. Martin

Plaintiff and defendant were married in 1940. Four children were issue of this marriage. In February, 1949, they agreed to live separate and apart and went to attorney Leslie to prepare an agreement settling their property rights and making provision for the support of plaintiff and their children. Such agreement was executed by the parties on March 24, 1949. It provided, among other things, for the payment of $1,000 a month for the support of the wife. In settlement of their property rights the husband agreed to pay her an additional $1,000' a month plus $60,000, $10,000 of which was paid upon the execution of the agreement and the balance of $50,000 was to be paid at the rate of $1,000 a year. All these installment payments, however, were to terminate upon either the death or remarriage of the wife. He also agreed to pay $1,000 a month for the support of the children until the youngest reached the age of 21. This agreement was amended by another which was executed on July 11th. By this amendment the monthly payments to the wife for her support were increased to $1,435; and the above figure of $60,000 was increased to $65,000 with the provision that $5,000 of that amount was

In his answer and amended cross-complaint defendant alleges that he and plaintiff agreed to enter into a written contract settling their property rights and providing for the support of plaintiff and their children; that such agreement would be fair, reasonable and just to each party; that for the purpose of negotiating and preparing such written agreement plaintiff and defendant consulted attorney Jacques Leslie; that the said attorney promised to prepare such an agreement^ that for the purpose of negotiating and formulating said agreement defendant disclosed to plaintiff and Leslie “the amount of the income, assets and liabilities of plaintiff and defendant”; that defendant reposed “trust and confidence” in plaintiff and Leslie and relied on them to prepare “an agreement that would be fair, reasonable and just” to him; that he believed they would not deceive, mislead or take unfair advantage of him; that they knew of the trust and confidence he reposed in them, and knew he

Defendant alleges he intended and understood that any such agreement would provide for payments to plaintiff of “amounts-that would be substantially less than one third of defendant’s earnings following payment of income taxes by defendant and plaintiff”; that the provisions of such agreement would permit him to decrease the debts and obligations of the community; that any such agreement would be subject to modification by any court of competent jurisdiction depending upon changes in his financial circumstances; that plaintiff would give to him valuable consideration in return for his undertakings in such agreement; that such agreement would be fair, just and reasonable as to plaintiff and defendant and their children; that plaintiff and Deslie were each apprised of defendant’s said intentions and understanding. Defendant further alleges that said agreement as amended had the effect of requiring that he “pay to plaintiff sums that would amount to from approximately 50 per cent to over 100 per cent of defendant’s available earnings after paying taxes by plaintiff and defendant”; that plaintiff and Leslie each knew said amended agreement had such effect; that said agreement and amendment were not subject to modification by the court depending on changes in his financial circumstances; that plaintiff and Leslie each knew they were not subject to modification; that in return for defendant’s promise to pay certain sums specified in said agree

Similar allegations are made to show that these parties deceived and misled defendant with respect to (1) the right to have the contract modified by a court upon a change of his financial situation, (2) the question of whether or not plaintiff and defendant had community property and therefore whether the payments defendant agreed to make on account thereof were without consideration, (3) whether the provisions of the agreement were so burdensome as to prevent him from decreasing the debts of the community, and (4) the fairness of the agreement as amended.

It is further alleged that in the month of July, 1949, proceedings for divorce were instituted against defendant in the state of Nevada; that no summons or copy of the complaint were served upon defendant; that plaintiff and Leslie, with the intention of preventing defendant from appearing in said divorce proceeding and attacking the validity and fairness of said agreement and the amendment thereto, presented to defendant for his signature a power of attorney prepared by them which authorized certain Nevada attorneys, unknown to defendant, to appear for him in said Nevada divorce proceedings; that plaintiff and Leslie, knowing of the trust and confidence reposed in them by defendant, and with the

From the foregoing it will be observed that defendant has alleged facts showing a relationship of trust and confidence in the plaintiff and Leslie. Regardless of the difficulty of proving such an issue, we must on demurrer accept it as a fact. “ Where. there exists a relationship of trust and confidence, it is the duty of one in whom the confidence is reposed to make full disclosure of all material facts within his knowledge relating to the transaction in question, and any concealment of material facts is a fraud.” (Daily v. Superior Court, 4 Cal.App.2d 127 , 131 [ 40 P.2d 936 ]; Estate of Shay, 196 Cal. 355 , 365 [ 237 P. 1079 ]; 12 Cal.Jur. 772.) It was therefore incumbent upon plaintiff and Leslie to reveal to defendant the effect of the documents which he signed. This, according to his allegations, they not only failed to do but they affirmatively and falsely represented to him that these documents were in accordance with his intentions and understanding. He clearly alleges they knew these documents did not truly reflect his understanding of the settlement he was making with his wife, yet because of his faith and confidence in her and Leslie they were able to and did induce him to rely on their representations and thus believe the papers were in compliance therewith. It is also

Plaintiff contends that the misrepresentations charged against her and Leslie by defendant cannot constitute grounds for equitable relief because they were mere speculative opinions on matters upon which defendant was the best able to speculate and the only person in complete possession of all the facts. This position is not sound. The income tax problem in contracts for the support of a wife and children and in settling the property rights between a husband and wife are complex and technical and often a matter of major importance requiring skill and experience in dealing with them. The magnitude of the payments involved in this case would indicate the tax situation was of considerable importance. As a lawyer Leslie has no doubt had wide experience in preparation of support and property settlement agreements, and has found it necessary to familiarize himself, with the effect of income tax laws on the various phases of such agreements. In that respect he was undoubtedly in a position superior to defendant. Under such circumstances his statements take on added significance particularly since defendant alleges a relationship of trust and confidence in him. In this connection it is said in 37 Corpus Juris Secundum 230, that “Where the speaker has superior knowledge or means of knowledge and a relation of confidence exists, such that the speaker knows the hearer relies on his statements as true, the speaker’s expression of an opinion intended to deceive constitutes remediable fraud.” Actually, the determination as to whether a particular statement is an expression of opinion or an affirmation of a fact is often difficult, and frequently is dependent upon the facts and circumstances existing at the time the statement is made. (Willson v. Municipal Bond Co., 7 Cal.2d 144 , 150 [ 59 P.2d 974 ]; Laraway v. First Nat. Bank of La Verne, 39 Cal.App.2d 718 , 730 [ 104 P.2d 95 ]; White v. Financial Guarantee Corp., 13 Cal.App.2d 93 , 97 [ 56 P.2d 550 ].) Moreover, as was said in Zwart v. Landfield, 93 Cal.App. 328 , at 333 [ 269 P. 740 ], “the expres

Plaintiff argues defendant cannot rescind their support and property settlement agreement since he is unable to restore her to status quo because she has since secured a final decree of divorce. It is not necessary for us to determine on this appeal the relief to which defendant is entitled. We merely hold that under his pleadings defendant is entitled to have the ease heard on its merits. The relief, if any, to which he is entitled will necessarily depend on the evidence and applicable legal and equitable principles. The prayer of defendant’s cross-complaint is sufficiently broad to enable the court to grant whatever relief, if any, the facts justify. He seeks not alone a rescission of the agreement and amendment but, in the alternative, a reformation of the contract in line with what he claims he intended and understood its terms would be.

As a basis for defeating defendant’s charge that he was induced to sign the agreement and amendment through fraud plaintiff relies on the fact the Nevada court approved the property settlement agreement as amended as to its validity and fairness. It will be recalled, however, that defendant alleges plaintiff and Leslie induced him not to appear in the Nevada divorce case and that, pursuant to a power of attorney which they had persuaded him to sign, they arranged for counsel to appear for him who would act for the interests of plaintiff. According to his allegations, defendant was thus prevented by plaintiff and Leslie from having his day in court to contest the validity and fairness of the agreement. When equitable relief from a final judgment is sought it is important to determine whether the fraud or mistake is intrinsic or extrinsic to the issues involved in the case in which the judgment was entered. The reason for this is stated by the Supreme Court in Jorgensen v. Jorgensen, 32 Cal.2d 13 , at page 18 [ 193 P.2d 728 ], as follows: “The public policy underlying the principle of res judicata

Defendant’s pleadings make out a case of extrinsic fraud and bring it squarely within the principle stated in United States v. Throckmorton, 98 U.S. 61 , 65 [ 25 L.Ed. 93 ], as follows: “Where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced upon him by his opponent ... or where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; . . . these, and similar cases which show that there never has been a real contest at the trial or hearing of the case, are reasons for which a new suit may be sustained to set aside the former judgment or decree and open the ease for a new and fair hearing.” A recent application of this principle is found in Wellman v. Security-First Natl. Bank, 108 Cal.App.2d 254 , 266, 267 [ 238 P.2d 679 ].

Plaintiff, however, argues that defendant is not entitled to relief because of laches. There is no support for the application of that principle on the record before us. According to his allegations defendant gave notice of rescission immediately upon being advised of the effect of the documents which he had signed and particularly with relation to his income tax situation. Whether or not he should have sought advice on these matters at an earlier date is a question of fact. Certainly laches do not appear as a matter of law from the face of defendant’s pleadings.

The judgment is reversed with directions to overrule the demurrer to defendant’s affirmative defenses and to his amended cross-complaint.

Moore, P. J., and McComb, J., concurred.