Opinion
March 4, 1966. —
April 12, 1966.
APPEAL from an order of the circuit court for Milwaukee county: MAX RASKIN, Circuit Judge. Reversed.
For the appellant there were briefs by Godfrey Kahn, attorneys, and Dudley J. Godfrey, Jr., James Ward Rector, Jr., and James Ward Rector of counsel, all of Milwaukee, and oral argument by James Ward Rector and James Ward Rector, Jr.
For the respondent there was a brief by Martin R. Paulsen and John F. Zimmermann, both of Milwaukee, attorneys, and Lee W. Meyer of New York, N. Y., of counsel, and oral argument by Mr. Meyer.
In 1918 the Patrick Cudahy Family Trust was created by members of that family contributing shares of stock in the Patrick Cudahy Family Company to the trust and by executing the appropriate trust indentures. Mrs. Hoyt, the testatrix of this estate, as did the other settlors of the trust, retained a life estate in the income from the property she contributed and, in addition, held a power to appoint by will one further life interest in the income. In the event the power was not exercised, the life income was to be paid to the issue of Mrs. Hoyt and, in the absence of issue, to the surviving trust subscribers or to their issue. The First Wisconsin Trust Company was named trustee.
In 1944 Mrs. Hoyt, on the advice of her attorney, executed a release of her general power of appointment. Counsel by letter dated January 19, 1944, advised that the Revenue Act of 1942 provided that there shall be included in the taxable estate of a decedent the value of any property with respect to which the decedent had a power of appointment, unless the power to appoint was limited to certain exempt persons. The letter suggested that the power be partially released and that the power retained be limited to the right to appoint only the exempt classes. The letter stated, "after such releases the property covered by such powers will not, under present law, be a part of the subscriber's estate for purposes of the federal estate tax." A footnote to the letter pointed out that the opinion did not cover the question of whether the estate could be taxed on the theory that the trust involved the reservation of a life estate for the donor. The footnote also pointed out that, in the event the commissioner of taxation relying on Helvering v. Hallock (1940), 309 U.S. 106, 60 Sup. Ct. 444, 84 L.Ed. 604, would attempt to tax the estate on that basis, an attempt to avoid such tax would be based upon the prior decisions of Helvering v. Helmholz (1935), 296 U.S. 93, 56 Sup. Ct. 68, 80 L.Ed. 76, and Hassett v. Welch (1938), 303 U.S. 303, 58 Sup. Ct. 559, 82 L.Ed. 858. It is conceded that it was on the basis of counsel's letter that Mrs. Hoyt on February 25, 1944, released her general power of appointment.
On April 1, 1960, Mrs. Hoyt executed her last will and testament, naming the First Wisconsin Trust Company as executor. By Article VI she expressly appointed the plaintiff herein as the person to receive the life income from Mrs. Hoyt's shares of the trust. Mrs. Hoyt died in 1961. The appellant, as executor of the will, probated it on December 5, 1961.
Following the probate of the will, the appellant, as trustee of the Patrick Cudahy Family Trust, commenced the payment of the life income to Mrs. Bischoff. However, appellant discovered the release of 1944 in its files and notified Mrs. Bischoff that it could no longer make payment because she was not within the class of appointees permitted after the execution of the partial release. The appellant then petitioned the probate court for instructions in regard to its inconsistent duties under the will and the earlier release. The probate court directed that the appointive income be paid to the "taker in default" of the exercise of the power. Mrs. Bischoff appealed that judgment to this court. We affirmed in In re Cudahy Family Trust (1963), 22 Wis.2d 198, 208, 125 N.W.2d 344, hereafter referred to as Cudahy, stating that, "The trial court correctly ruled that Mrs. Bischoff could not qualify as an appointee of the power under Mrs. Hoyt's will." A motion for rehearing was denied.
In a related case, Estate of Hoyt (1963), 22 Wis.2d 209, 216, 125 N.W.2d 350, we held that for her efforts in Cudahy Mrs. Bischoff could collect attorney's fees from the estate because she "on her own initiative discharged the executor's duty, under these circumstances, to defend the estate, and in effect assumed the executor's obligatory role . . . ." We pointed out that in the Cudahy Case the executor could not discharge its duty because of its dual capacity as trustee of the trust and, accordingly, was obliged to remain neutral.
In January of 1965 the executor's cause of action for rescission was assigned to Mrs. Bischoff, and she then brought the present action to rescind the release of 1944 on the ground that it had been executed as a result of a mistake of law or fact or of both — in effect claiming that the release was a nullity in that even after its execution the estate remained in tax jeopardy by virtue of the donor's retained life interest.
The trustee contends that the issue raised by Mrs. Bischoff was adjudicated in the Cudahy Case and that the cause is now moot and barred by the doctrine of res judicata. The trial court held that there were issues of fact to be tried and denied the defendant's motion for summary judgment and the companion motion to dismiss the complaint. From that order the First Wisconsin Trust Company appeals. Additional facts will be set forth in the opinion.
Does the judgment in the Cudahy Case bar the plaintiff's claim in this action?
We conclude that the issues that the plaintiff herein seeks to have adjudicated were argued, considered, and determined in the Cudahy Case, and are now barred by the doctrine of res judicata as the result of the earlier judgment.
The first case was brought by the trustee to determine whether the appointment of Helen Bischoff was legally effective in view of the partial release previously executed by Mrs. Hoyt. This was a request for a declaration of the rights of the parties concerned and for a delineation of the powers and duties of the trustee. It was in effect a request for a declaratory judgment (see Restatement, 1 Trusts, p. 806, sec. 259). We consider that the matters determined in a probate or trust proceedings are binding upon the parties provided that the issues between the parties are raised, litigated, and decided. Since pleadings subsequent to the petition are not required in the sense employed in legal actions, it is more difficult to determine at the outset of the proceedings the exact points at issue.
We conclude, however, that these points may be determined by the affidavits, briefs, and statements of the parties. Using those documents of the record in Cudahy, we conclude that the trustee has sustained the burden of showing that the issue now raised, rescission by reason of mistake of law or fact, has been presented and decided before. McCourt v. Algiers (1958), 4 Wis.2d 607, 611, 91 N.W.2d 194; Lingott v. Bihlmire (1964), 24 Wis.2d 182, 189, 128 N.W.2d 625, 129 N.W.2d 329. A review of the record shows an identity of parties, subject matter, and cause of action. Wentworth Racine County (1898), 99 Wis. 26, 31, 74 N.W. 551; Gohr v. Beranek (1954), 266 Wis. 605, 609, 64 N.W.2d 246.
In the probate court action, in response to the trustee's application, counsel for Mrs. Bischoff, in addition to claiming the revocation of the release by the will, alleged: That the inducement for the signing of the release was the erroneous legal opinion of January 19, 1944, that incorrectly and ineffectually promised tax avoidance; that the controlling case was Stone v. Stone (1947), 319 Mich. 194, 29 N.W.2d 271; and that that case was a complete answer to the ultimate issue before the court. The right of rescission was the central issue in Stone. In that case the owner of a business mistakenly thought that by conveying a portion of his ownership interest to his wife and children, he would be able to reduce taxes. Upon a determination that he had mistaken his antecedent legal rights, the court permitted a rescission of the earlier conveyance.
The plaintiff by relying on Stone was pointing out that her remedy and the ultimate issue "before" the court was that of rescission for mistake. Significantly in the same document plaintiff's counsel assured the county court:
". . . it is not necessary to commence an independent suit in equity to have the 1944 release declared null and void . . . This court has the jurisdiction to give both legal and equitable relief . . . the release can be impeached without an independent proceeding in equity to set it aside."
It is obvious that plaintiff was not then asserting merely the revocation of the release by the subsequent attempt to exercise the power of appointment. She was clearly asserting the alternative equitable remedy of rescission.
Mrs. Bischoff's reply brief in the probate court again referred to the doctrine of Stone v. Stone, supra, as "dispositive" of the proceedings. It is apparent that Mrs. Bischoff's counsel not only considered and asserted the position that the release should be rescinded for mistake, he in addition argued that it was the conclusive issue of that proceeding. There is no doubt, to quote counsel's own words, that what was being urged was that "within the meaning of Stone v. Stone . . . a court of equity may rescind the otherwise irrevocable transfer."
At the probate court level, her counsel filed a request for adjudication for the purpose of showing the "issues that were raised and presented for adjudication." A perusal of that document shows that 15 paragraphs are devoted to directing the attention of the court to the factual and legal issues that arose out of the alleged mistake of law or fact that induced the signing of the release.
In October of 1962 Judge MUDROCH, the probate judge in Cudahy, issued an opinion stating that he had considered Stone v. Stone and found it inapplicable because it referred to an income-tax situation. The Stone Case was cited by the plaintiff and could have been considered by the court only for its relevancy to the equitable doctrine of rescission on the ground of a mistake of fact and law.
In addition to questions of law submitted by plaintiff's counsel to Judge MUDROCH, which together with the court's answers were made a part of the record, counsel asked, "Did Mrs. Hoyt have the power to cancel the 1944 release by an appointment in her will after the sole purpose for which she executed the release had failed?" It is apparent considering the record as a whole, and the context in which framed, that the question referred to Mrs. Hoyt's right of rescission subsequent to the execution of the release as the result of the alleged erroneous legal advice. The court specifically answered that question, "Mrs. Hoyt did not have the power to cancel the 1944 release . . . ."
Subsequently Judge MUDROCH entered judgment to the same effect. The plaintiff then appealed to this court. A review of the briefs and records filed in that case, In re Cudahy Family Trust (1963), 22 Wis.2d 198, 125 N.W.2d 344, show that plaintiff, on appeal, continued to urge the doctrine of equitable rescission and again relied on Stone.
We could continue to itemize ad nauseam the plaintiff's contentions in Cudahy that equity should give relief where the release was executed upon a mistake of antecedent legal rights. Suffice it to say that the briefs submitted therein are replete with arguments and authority bearing on equitable rescission. Clearly, plaintiff argued not only legal revocation, but equitable rescission. Both points were presented to this court, and both of them were considered and adjudicated.
If any doubt remained, it would be dispelled by plaintiff's motion for rehearing and our denial of it. In its brief on motion for rehearing, plaintiff specifically asked that "this court should afford such relief [rescission] now so as to avoid the injustice . . . ." The rehearing argument was almost exclusively on the question of rescission for mistake of antecedent legal rights. We note that some of the language of the briefs submitted then is almost identical with that of the briefs now submitted that concededly urge rescission. We find it difficult to follow plaintiff's argument that the question of mistake and rescission has not been dealt with in the earlier case.
The issue of mistake and rescission was clearly presented to this court on the entire record in the Cudahy Case and was determined by the mandate. On rehearing, the question of mistake and rescission was raised independently and for a second time. Rehearing was denied because the points urged then had been raised by the plaintiff in the case itself and were disposed of by the judgment. Our refusal to direct further trial on the question of mistake was grounded upon the fact that that issue was presented to the court, considered, and found to be without merit.
We call to mind the statement of Gen. Nathan Bedford Forrest, that semi-literate cavalry genius of the Confederate States of America, who, after twice refusing a private's request for furlough, scribbled on the back of the form, "I told you twicest Godamnit know." Andrew Lytle, Bedford Forrest and His Critter Company (rev. ed. 1960), p. 372.
Additionally, plaintiff takes the position that it cannot now be bound by the earlier judgment, because no one in the earlier action had legal standing to raise the question. Plaintiff's argument is that the right to rescind was a right personal to Mrs. Hoyt and that upon her death only her personal representative could assert her cause of action, and that only in this action, subsequent to the assignment of the executor's rights to her, was this cause of action before the court.
In the Cudahy Case, the First Wisconsin Trust Company, by virtue of its dual capacity as trustee and executor, was impotent itself to assert the equitable affirmative defense of rescission for mistake. However, as pointed out above, this issue was raised and litigated by the plaintiff. We, in Estate of Hoyt, supra, recognized the right of a beneficiary of an estate to defend the plan of estate distribution when the executor, through no fault of his own, finds it impossible to act. The duty of the executor to defend the rights of a beneficiary extends also to the assertion of affirmative defenses. The conduct of Mrs. Bischoff in the Cudahy Case in asserting the affirmative defense of rescission was within the purview of the executor's authority and was a cause of action that the beneficiary, Mrs. Bischoff, could and did assert not only on her own behalf, but also on behalf of the estate of Mrs. Hoyt, when it was apparent that the executor could not raise the point. The executor's right to assert the equitable cause for rescission was vicariously exhausted in the earlier action. The cause of action, that purportedly was assigned in the probate court in this case, was for a cause already moot.
The points now raised were presented and decided before in a proceeding involving the same issue, the same parties, and the same cause of action. The action herein is barred by the previous judgment. The point is res judicata.
The plaintiff has based its cause primarily upon this court's previous expression of sympathy for one who by circumstances was powerless to enforce the obvious wishes of the testator that she (Mrs. Bischoff) be the recipient of the life income. To say that the equities "are strikingly in favor of Mrs. Bischoff" was merely an expression of that sympathy and of our regret that we were powerless to change the course of irrevocable and irrescindable circumstances.
We conclude therefore that no questions remain unlitigated. The order should be reversed and judgment granted to the defendant dismissing plaintiff's complaint.
By the Court. — Order reversed.