No. 90-631
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
HAZEL HOWARD,
Plaintiff and Respondent,
v.
MARIE DALIO,
Defendant and Appellant
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
J. David Penwell, Bozeman, Montana
For Respondent:
Mark A. Bryan, Bryan & Atkins, Bozeman, Montana
submitted on Briefs: May 23, 1991
AUf.? 1 3 1 9
91 Decided: August 13, 1991
Filed:
Ed 3 m i t L
CLERKOFSUPREMECOURT ,
STATE OF MONTANA
Justice Terry N. Trieweiler delivered the opinion of the Court.
Marie Dalio appeals the determination of the District Court
of the Eighteenth Judicial District for Gallatin County, denying
Daliots motion to set aside judgment entered in favor of Cecelia
Prevost. We affirm the District Court.
The issue on appeal is whether the District Court had
jurisdiction to establish a constructive trust for the benefit of
Cecelia Prevost.
Hazel Howard, Cecelia Prevost, and Marie ~ a l i oare sisters.
Their oldest sister, May Ping Sellards, died on March 25, 1987.
Prior to her death, Sellards purchased six certificates of deposit,
on which all four sisters were named as joint depositors. In her
will, she also stated that her residual estate, which included the
majority of her assets, was to go to her sisters in equal shares.
Sellards became ill in 1984. In June 1985 Marie Dalio and
her husband moved to Montana to take care of Sellards and handle
many of her affairs. Between September 30, 1985, and February 17,
1987, Dalio cashed four of the six CDs created by Sellards. The
day following Sellardsts death, Dalio cashed the other two CDs.
While portions of the proceeds were put into Sellards and Daliots
joint account, a significant amount of the proceeds was put into
Daliots own account or was unaccounted for. None of the sisters
were informed of Daliots actions involving the CDs.
Hazel Howard spoke with bank officials after Sellardstsdeath
and discovered that all six of the CDs, totalling $121,861.66, had
been cashed. She then filed a complaint alleging fraud on the part
of Marie Dalio. Howard also alleged a constructive trust had been
created for the benefit of both Cecelia Prevost and herself, and
that Marie Dalio had breached her duty as trustee by her actions.
Cecelia Prevost was not joined as a plaintiff. However, the court
was asked in both the complaint and in the final pretrial order to
require that Dalio pay one-third of the trust corpus to plaintiff
and one-third to Cecelia Prevost. In fact, Dalio framed as one of
the issues:
2. Are the other two surviving sisters, i.e. Howard and
Prevost, entitled to any portion of the certificates of
deposit on which their name appears ... ?
Following a bench trial, the District Court concluded that a
constructive trust relating to the proceeds of the CDs was created
with Marie Dalio as its trustee. The court found that Dalio owed
one-third of the trust's proceeds, or $40,620.55, plus interest,
to Hazel Howard. The court then stated that It[t]he other third
shall be paid to the remaining sister, Cealia [sic] Prevost.It On
July 23, 1990, judgment was entered against Dalio in favor of
Cecelia Prevost in the amount of $40,620.55. Dalio thereafter
moved to set aside the judgment on grounds that Prevost had never
been a party to the action, and that the court therefore lacked
jurisdiction and could not enter judgment in her favor. The motion
was denied, and Dalio filed this appeal. Dalio does not here
contest the judgment entered against her in favor of Howard.
Dalio contends that the lower court erred by entering judgment
in favor of Prevost because she was never a party to the action
initiated by Howard. ~ a l i o asserts that there was never a
voluntary appearance by or legal service made upon Prevost. Dalio
cites Holt v. Sather, 81 Mont. 442, 264 P. 108 (1928), and Deich
v. ~ e i c h ,136 Mont. 566, 323 P.2d 35 (1958) for the proposition
that there must be either an appearance or legal service upon an
individual for the court to acquire jurisdiction of that person,
and that without jurisdiction there cannot be a valid judgment in
favor of that individual.
Both Holt and Deich relate to the absence of jurisdiction over
a defendant in an action in law. Neither case stands for the
proposition that a court may not impose a constructive trust in
equity without having all of the trust's beneficiaries before it.
section 72-33-219, MCA, states that I1[a] constructive trust
arises when a person holding title to property is subject to an
equitable duty to convey it to another on the ground that the
person holding title would be unjustly enriched if he were
permitted to retain it.'' This Court, in Eckart v. Hubbard, 184
Mont. 320, 602 P.2d 988 (1979), held that creation of a
constructive trust requires fraud, mistake, undue influence,
violation of trust, or other wrongful acts. The District Court
found Dalio guilty of fraud, undue influence and a breach of trust.
Those acts were sufficient to create a constructive trust, and a
constructive trust is subject to the provisions of Montana's Trust
Code.
For that reason, the District Court had subject matter
jurisdiction over the corpus or assets of the trust. Section
72-35-101, MCA, provides that:
(1) The district court having jurisdiction over the
trust pursuant to chapters 33 through 36 has exclusive
jurisdiction of proceedings concerning the internal
affairs of trusts.
(2) The district court having jurisdiction over the
trust pursuant to chapters 33 through 36 has concurrent
jurisdiction of the following:
(a) actions and proceedings to determine the existence
of trusts;
(b) actions and proceedings by or against creditors or
debtors of trusts; and
(c) other actions and proceedings involving trustees and
third persons.
Dalio was properly served and subject to the jurisdiction of
the court, allowing the imposition of a constructive trust in favor
of all its beneficiaries. Jurisdiction over the person upon whom
the trust is imposed is pivotal, but all potential beneficiaries
need not be parties. Instructive on this issue is 76 Am.Jur. Trusts
§ 282. It states:
A court of equity in the exercise of its jurisdiction
and control of trusts and their administration may assume
jurisdiction of a particular trust and direct that
thereafter the trust is to be administered under its
direction, and in many instances may make appropriate
orders and decrees, without having all interested parties
before it, so long as they are not prejudiced in any
substantive rights.
~eceliaPrevost was certainly not prejudiced by her absence
as a party to this litigation. That is evident from the fact that
she has appeared to oppose her sister's appeal from the judgment
entered in her favor.
Neither was ~ a l i oprejudiced by her sister's absence as a
plaintiff in this action. She was aware from the complaint and
from the plaintiff's allegations in the pretrial order that
plaintiff sought to impose a constructive trust for the benefit of
both the plaintiff and Cecelia Prevost. She was aware that the
plaintiff sought to have the corpus of the trust divided equally
among the three surviving sisters. The same proof that established
the trust for the benefit of Howard established a trust for the
benefit of Prevost.
Dalio contends that she was denied the opportunity to prove
her defense that an action by Prevost would have been barred by the
statute of limitations. However, the plaintiff's first cause of
action was based upon fraud which did not accrue until the
aggrieved party discovered the facts constituting the fraud.
9 27-2-203, MCA. The District Court found, as a matter of fact,
that there was no evidence or testimony that Dalio ever informed
any of her sisters that she was cashing in the CDs. That evidence
could have been offered without Prevosttspresence. Furthermore,
plaintiff's second cause of action sought to create a constructive
trust. The statute of limitations applicable to that cause of
action was 5 27-2-202(3), MCA, which allows commencement of the
action within 3 years. The record in this case discloses that the
first CD was converted to her own use by Dalio on September 30,
1985, and that this action was commenced on May 12, 1988, which was
less than 3 years later. Therefore, we conclude that Daliols
ability to present her defense, based upon the statute of
limitations, was not impaired by the fact that Prevost was not
named as a plaintiff. Neither has there been any reason offered
by Dalio why Prevostls deposition could not have been taken, had
her testimony been necessary in order to support any of Daliols
affirmative defenses. In fact, through much of the proceedings
Prevost was listed by Dalio as a witness.
The Ninth Circuit has had opportunity to rule on a matter
similar to the instant case. In In re Allustiarte, 786 F.2d 910
(9th Cir. 1986), the court ruled that the failure to join spouses
of grantees of real property in an action to impose a constructive
trust was not fatal to the action, even though that trust would
have detracted from their interest in the property. The court
stated:
If the court determines that a judgment rendered in the
personls absence will be adequate to protect his
interests, the person is not indispensable. Joinder is
not required where the absent parties1 interests are
adequately protected by those who are present. The record
demonstrates that the interests of the absent spouses
were adequately protected by the Allustiartes who were
at trial. The absent spouses were not prejudiced by the
failure to join them as parties since their interests
were identical to their spouses who were named in the
action.
In re Allustiarte, 786 F.2d 910, 919 (9th Cir. 1986) (citations
omitted).
We conclude that Prevost's rights as a beneficiary were
identical to Howard's. Her interests were adequately protected,
and Dalio's interests were not adversely affected by the fact that
she was not personally named as a plaintiff.
Accordingly, we affirm the judgment of the District Court.
We Concur: / - I
A ,
,I
Chief Justice