Bates v. Bates

Citations: 400 P.2d 593; 1 Ariz. App. 165Docket: 1 CA-CIV 14

Court: Court of Appeals of Arizona; April 8, 1965; Arizona; State Appellate Court

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Eva L. Bates filed an appeal against her former husband, Wells Bates, after the trial court dismissed her complaint seeking a share of the value of real property allegedly purchased with community funds and concealed by Wells under a third party's name during their divorce. Eva claims that during their divorce in 1950, she was unaware of the existence or value of this community property, which included a secret interest in "Dendora Ranch." She asserts that she only discovered this interest within thirty days prior to filing her lawsuit. Eva's complaint requests an accounting of the property and the establishment of a trust for her share of the proceeds from the ranch's sale, which amounted to $184,456.33.

The background reveals that Eva and Wells married in 1924 and had two children. During the divorce proceedings, a property settlement agreement was signed, giving custody of their minor child to Eva and specifying alimony and child support. The agreement transferred all community property to Wells, but no specific properties were identified in either the agreement or the divorce decree. Additionally, the record shows discrepancies regarding the service of the amended complaint and the defendant's default status, which may affect the validity of the divorce judgment and, consequently, Eva's legal claims. These factors are crucial as they could substantiate her argument for reopening the case based on potential fraud.

The lower court dismissed the plaintiff's complaint, ruling that any potential cause of action would constitute a collateral attack on a prior judgment. The plaintiff argues that this ruling was erroneous because it was based on a finding that the property in dispute was awarded to the defendant in a previous decree, which contradicts the facts. Specifically, the plaintiff contends that the defendant concealed the property, which was acquired during their marriage using community funds, and that the property was not part of the original decree. The plaintiff asserts that the complaint alleges extrinsic fraud in the procurement of the decree, as she was unaware of the property until shortly before filing her complaint. 

The court must evaluate whether the complaint, viewed favorably to the plaintiff, states a valid claim. If the decree was indeed procured through extrinsic fraud, equity may intervene to prevent injustice, asserting that the defendant holds the property in constructive trust for the plaintiff. A constructive trust arises by law due to fraud, either actual or constructive, and is utilized to prevent inequitable retention of property. The principles established by case law indicate that a constructive trust can be imposed whenever the legal title holder's retention of property is deemed inequitable under the circumstances, emphasizing the necessity of a fraudulent element in such cases.

Extrinsic fraud encompasses deception by a prevailing party that keeps the opposing party uninformed. Such fraud can lead to the establishment of a constructive trust, allowing for an independent action for equitable relief without challenging the finality of a divorce decree. If the decree is void, a plaintiff can assert ownership of property; if valid, they may seek to contest it based on extrinsic fraud related to real estate, potentially invoking a constructive trust or claims of undistributed community property under applicable law.

Equitable relief against a judgment requires proof of extrinsic or collateral fraud, which must have prevented a fair resolution of the case. The established rule asserts that a judgment remains final unless it can be shown that the court's jurisdiction was improperly exercised or that extrinsic fraud occurred. The nature of fraud necessary for equitable relief must be extrinsic to the trial matter, meaning it occurred during the judgment's procurement rather than in the underlying issues of the case. This principle seeks to limit interminable litigation by preventing the retrial of matters already adjudicated. Extrinsic fraud is characterized by intentional deceit aimed at gaining an unfair advantage over another party.

Fraud is categorized as extrinsic or collateral when it prevents a party from having a trial or presenting their case, affecting the manner in which a judgment is procured rather than the judgment itself. The ruling on the motion to dismiss raises issues about the potential lack of service of the amended complaint and whether the defendant appeared in the case. Valid judgments require jurisdiction over the subject matter, persons, and the authority to render the specific judgment. In equity, relief for fraud, particularly based on concealment, may necessitate that the plaintiff was kept ignorant by the fraudulent party's actions, making the defendant's involvement in the divorce action relevant.

The allegations in the complaint sufficiently assert fraud, encompassing all acts, omissions, or concealments breaching legal or equitable duties, injuring another, or resulting in an undue advantage. If the complaint is substantiated, it could demonstrate extrinsic fraud, warranting a declaration that the defendant holds property in trust for the plaintiff. The legal complexities involved prevent the court from determining the plaintiff's course of action or the merits of the case without evidence.

The complaint is deemed to state a valid cause of action, and the former decree does not prevent a direct attack for extrinsic fraud. The plaintiff is not estopped from pursuing this action, nor is it barred by res judicata. The court reverses the judgment, remanding the case with instructions to deny the defendant's motion to dismiss and allow the plaintiff to amend her complaint and proceed as required by law. The decision is supported by judges Cameron and Shelley, with particular note of Judge Shelley filling in for Chief Judge Stevens. The appeal was filed with the Arizona Supreme Court under Number 7466 and referred to this court.