Summary
In Block, the plaintiff sought to set aside certain portions of a divorce decree incorporating the terms of a contract of separation and property settlement between the plaintiff and her husband, on the theory that the alimony award was improperly made because of fraud on the part of her husband in obtaining her signature to the contract.
Summary of this case from Dumas v. Estate of DumasOpinion
No. 34338
Decided June 20, 1956.
Divorce and alimony — Judgment awarding alimony and compensation for property rights — Validity challenged — Restoration of benefits prerequisite — Settlement of alimony and property rights — Action to set aside for fraud — Essential elements which must be proved.
1. A party who has received and accepted the benefits of a judgment awarding him alimony and compensation for property rights in a divorce action will not be heard to challenge the validity of such judgment without first restoring or offering to restore such benefits to the adverse party.
2. In order to maintain an action to set aside a fully executed contract for the settlement of alimony and property rights between a husband and wife, pending a divorce action in which they are parties, on the ground that such contract was induced by the fraudulent representations of one of the parties thereto to the damage of the other, such other party must affirmatively show that there were made to him actual or implied representations of a matter of fact which related to the present or past and which were material to the transaction; that the representations were false; that the representations were made with knowledge of their falsity, or with such utter disregard and recklessness as to whether they were true or false that knowledge might be inferred; that such representations were made with the intent of misleading such other party into relying upon them; that such party was ignorant of the fact covered by the representations and relied upon them with a right to so rely; and that injury resulted as a consequence of such reliance.
APPEAL from the Court of Appeals for Hamilton County.
Plaintiff, Virginia S. Block, and defendant, Louis T. Block, appellant and appellee, respectively, herein, were married in Chicago, Illinois, on February 21, 1941. By 1945, friction had developed between them, which resulted in a written contract of separation and settlement of their property rights, under date of February 27, 1946, a few days after the initiation of a divorce action by Mrs. Block in the Superior Court of Cook County, Illinois.
The plaintiff claims that at the time this contract was entered into her husband and his attorneys represented to her that substantially all his holdings, amounting to about $970,000, had been placed in an irrevocable trust with a Cincinnati bank, as trustee, under date of October 18, 1945, with the trust income of $25,000 per annum payable to Block, and at his death the corpus to go to a charitable foundation founded by Block's father.
The contract of separation and property settlement recites that the parties were then living separate and apart; that a divorce action had been filed and was then pending; that "the parties hereto have been in controversy as to the amount of support that the party of the second part is entitled to receive from the party of the first part, and as to the amount of alimony that she will be entitled to receive after the divorce, if one is granted, and they desire to settle between themselves now and forever the rights, claims and demands of the party of the second part to alimony and support from the party of the first part, and all other controversies that might arise between the parties"; and that "the party of the second part has employed Benjamin B. Davis and Philip R. Toomin, of Chicago, Illinois, as her attorneys, and the party of the first part has employed Robert P. Goldman of the firm of Paxton Seasongood, of Cincinnati, Ohio, as his attorneys, and each party has had the benefit and advice of his or her attorneys, and the parties have had the benefit and counsel of their respective attorneys, and acknowledge that they have been fully informed of their respective rights in the premises, and that each has had a full disclosure made to him or her of the property and assets of the other."
The contract then provides in part that, "in consideration of the sum of ten dollars ($10) and other good and valuable considerations, each to the other in hand paid, including the mutual covenants and agreements herein contained, each to the other made, the receipt and sufficiency whereof are hereby acknowledged, and in the event either party obtains a decree of divorce upon the evidence presented in the Superior Court of Cook County, Illinois, in cause number 46 S 3509, or in any other court of competent jurisdiction, the parties hereto agree each with the other as follows:
"1. Party of the first part agrees to pay to the party of the second part in cash on the date of the entry of such decree of divorce, provided the court approves this agreement and embodies it or the substance of it in the decree of divorce, the sum of one hundred ten thousand dollars ($110,000).
"2. Party of the first part agrees to pay or discharge the obligation incurred by the party of the second part with Dr. Maxwell Gitelson, of Chicago, Illinois, for services heretofore rendered party of the second part by said Dr. Gitelson; and party of the first part agrees to indemnify and save harmless party of the second part of and from any liability by reason of such obligation.
"3. Party of the second part agrees to pay and discharge all of the bills and obligations other than the Gitelson obligation heretofore or hereafter incurred by her, whether on her own account or on account of party of the first part; and party of the second part agrees to indemnify and save harmless party of the first part of and from any liability by reason of any bills and obligations incurred by her.
"* * *
"6. Except as in this agreement otherwise provided, party of the second part does hereby as of this day forward forever relinquish, release, waive and forever quitclaim and grant to party of the first part, his heirs, executors, administrators and assigns, all rights of dower, homestead, inheritance, descent, distributive, election, community interest, and all other right, title, claim, interest and estate as wife, widow or otherwise, by reason of the marital relations existing between said parties under any present or future law * * * and * * * agrees that in the event any * * * suit shall be commenced, this release, when pleaded shall be and constitute a complete defense to any such claim or suit so instituted by said party of the second part * * *.
"* * *
"8. It is understood and agreed by the parties hereto that this agreement is and is intended to be a full, adequate, fair and just settlement and provision for the support and maintenance of party of the second part, past, present and future, and in lieu of alimony, and a total and complete release of each party by the other party of all matters and charges whatsoever * * *.
"9. In the event the Superior Court of Cook County in cause number 46 S 3509, or any other court of competent jurisdiction sees fit to award either party hereto a decree of divorce from the other party on the evidence presented, and embodies this agreement or the substance of it in a decree of divorce, then it is agreed that this agreement shall survive any judgment or decree entered in such cause, and shall thereafter be binding and conclusive on the parties."
On February 28, 1946, Block entered his appearance and filed an answer in the divorce action, and on March 12, 1946, a decree of divorce was entered, embodying the property settlement under the contract, and the terms of the agreement and decree were carried out by Block, including the payment of the sums of money therein named to be paid by him.
Thereafter, on January 24, 1950, Block filed his petition in the Common Pleas Court of Hamilton County against the trustee of the trust above referred to, alleging that said trust had been entered into because of the undue influence of his father and praying that the trust be held void. The court in that case found that there was undue influence on the part of Block's father and ordered a reconveyance of the trust funds by the trustee to Block. That suit was defended by the trustee and by the Attorney General of Ohio on behalf of the state of Ohio.
On April 13, 1951, upon discovery of the decree setting aside the trust, Mrs. Block filed her complaint in the nature of a bill of review in the divorce action in the Superior Court of Cook County, Illinois, attempting service by publication on Block and alleging that the trust in question had been created during their marriage solely for the purpose of creating a fictitious strained financial condition of Block, thus enabling him to obtain an unconscionable advantage in dealing with Mrs. Block in the property settlement negotiation; that Block knew of the undue influence and coercion of his father from the date he executed the trust and had been advised by his counsel that the trust could be set aside on that ground, yet had not advised Mrs. Block of this fact but on the contrary had represented to her that the trust was bona fide; and that, because of this fraud, the divorce decree should be reformed to provide her with her equitable rights as to alimony and maintenance from the corpus of the trust which had been reconveyed to Block.
At the instance of Block, that cause was removed to the United States District Court at Chicago, Illinois, because of diversity of citizenship, Block being a resident of Cincinnati, Ohio. That action was dismissed for want of jurisdiction of the person of Block, and the dismissal was affirmed by the United States Court of Appeals. Block v. Block, 196 F.2d 930.
Subsequently, on November 12, 1952, Mrs. Block instituted the instant action in equity in the Common Pleas Court of Hamilton County. In her amended petition she recites first the facts of her marriage to Block and her procurement of a divorce from him and a decree awarding alimony to her in accordance with the contract of separation between herself and Block. She then alleges that, during the period of the marriage, defendant was the owner of some 1,550 shares of Country Distillers Products, Inc., a Kentucky corporation, of which his father was the dominating force; that on or about April 25, 1943, defendant advised plaintiff that said shares were about to be sold in a transaction, involving substantially all the other shares of said company, which would result in receipt by defendant of approximately $1,600,000; that in the summer of 1943 defendant advised plaintiff that said shares had been sold; that during the period of the estrangement of plaintiff and defendant defendant concerted with his father as to the best plan to be followed by him of relieving himself and his property from the just claims of plaintiff for maintenance and support; that the plan so developed contemplated placing substantially all defendant's assets in an irrevocable trust with The First National Bank of Cincinnati, Ohio, a national banking association, as trustee, under which plan defendant would be the sole beneficiary during his lifetime, with the principal to be distributed upon his death to a charitable foundation theretofore founded by his father, known as The Robert L. Block Family Foundation of Cincinnati, an Ohio corporation; and that, pursuant to said plan, on or about October 18, 1945, defendant executed the trust agreement with said bank and caused to be delivered to it, as trustee, the sales proceeds of said Country Distillers Products, Inc. stock.
The amended petition then recites the facts relating to the suit brought by Block to set aside the trust; alleges that such trust is a fiction to defraud her of her just rights; and prays as follows:
"(a) That this court set aside those portions of the decree entered by the Superior Court of Cook County, Illinois, on March 12, 1946 * * * as purport to approve the purported settlement agreement of February 27, 1946, and the provisions therein contained touching upon the waiver of all rights, claims and demands of plaintiff against defendant, and more particularly purporting to waive plaintiff's right to alimony, support money and attorneys' fees;
"(b) That this court find said purported settlement agreement of February 27, 1946, to have been induced by fraud and, therefore, to be null and void;
"(c) That this court determine and allow to plaintiff such sum as should have been allowed, taking into account the property and true worth of said defendant at the time of the entering into of said settlement agreement * * *."
The defendant filed an answer to plaintiff's amended petition in which he denies that he concerted with his father in any plan to divest himself of his property to defeat the rights of the plaintiff, alleges that the plaintiff and her attorneys were fully aware of the trust that had been created with defendant's property, and denies any purpose or intent to defraud the plaintiff.
For a second defense the defendant sets up the history of the divorce proceeding in the Illinois court and the judgment awarded therein in accordance with the terms of the separation agreement and alleges that such judgment constitutes res judicata and, therefore, is a complete defense to the present action.
For a third defense the defendant pleads estoppel by reason of change of circumstances.
For a fourth defense the defendant pleads that this court is without jurisdiction to set aside or modify the judgment of a court of another state which had jurisdiction of the parties and subject matter.
For a sixth defense the defendant pleads a lack of tender back of the sum of $110,000 and other sums paid to the plaintiff pursuant to the terms of the settlement contract, and for seventh and eighth defenses he pleads release and the statute of limitations.
A reply was filed by the plaintiff generally denying the defenses set up in the answer and alleging that the court had jurisdiction of the action notwithstanding the divorce decree, and that she was not required to tender back any money received from the defendant pursuant to said agreement.
On hearing, and on motion of the defendant for judgment on the pleadings and on the opening statement of counsel, the Common Pleas Court found "that in the judgment entered in the Superior Court of Cook County, Illinois * * * on or about March 12, 1946, in a suit instituted by the plaintiff against defendant, said court had jurisdiction over the parties and the subject matter of said action, and therefore is entitled to full faith and credit in the courts of this state under the provisions of Article IV, Section 1 of the Constitution of the United States, and Title 28, U.S.C.A., Section 1738, the act of Congress implementing said article and section, and that this court is without power to grant the relief for which the amended petition prayed, and on that ground said motion is sustained"; and "that the other grounds of said motion for judgment on the pleadings and on the opening statement are not well taken."
A motion for new trial was overruled. An appeal on questions of law was taken to the Court of Appeals, which court affirmed the judgment of the trial court. In connection with that appeal by the plaintiff, the defendant filed an assignment of errors in the Court of Appeals as follows:
"While the judgment of the Common Pleas Court in this cause was in favor of the defendant-appellee, he, nevertheless, assigns as errors of the court in rendering said judgment the failure of said court to find for the defendant-appellee on the following grounds:
"1. That the plaintiff-appellant cannot maintain the action in this cause because she has not paid or tendered back to the defendant-appellee the consideration received for the settlement agreement which she is attempting to set aside.
"2. That the plaintiff-appellant has not set forth in her petition and her counsel has not stated in his opening statement facts sufficient to constitute fraud as a basis for recovery.
"* * *
"4. Other errors apparent upon the record.
"Wherefore, defendant-appellee prays the court to affirm the judgment and order of the Court of Common Pleas on the above grounds, as well as on the grounds set forth in the judgment of said court."
The judgment of affirmance of the Court of Appeals is as follows:
"This cause came on for hearing * * * on consideration whereof the court find there is no error apparent on the record in said proceedings and judgment prejudicial to the appellant."
An examination of the briefs filed in the Court of Appeals shows that the grounds of defense of no tender and no fraud were argued in the Court of Appeals on behalf of the defendant, and in sections II and IV of plaintiff's brief the questions of tender and fraud were fully argued.
A motion to certify and notice of appeal as of right were filed in this court by the plaintiff. The motion to certify was overruled, and the appeal as of right was, on motion, dismissed "for the reason that no debatable constitutional question is involved." See Block v. Block, 163 Ohio St. 230, 126 N.E.2d 331.
The judgment of this court dismissing the appeal as of right was vacated by the Supreme Court of the United States, and the cause was remanded to this court for clarification on the issue as to whether the ground of dismissal meant that our judgment rested on state or federal constitutional grounds. Upon remand, this court overruled defendant's motion to dismiss the appeal as of right and granted the motion to certify, thus taking jurisdiction on appeal as to all matters.
Plaintiff now claims that at no time in this cause have nonconstitutional grounds for judgment on the pleadings and on the opening statement been properly before the courts, nor were such grounds adequate or sufficient even if they had been properly an issue in this cause; and that the constitutional question of full faith and credit is now the only issue before this court.
Messrs. Harman, Colston, Goldsmith Hoadly, Mr. Henry B. Street, Mr. Douglas G. Cole and Mr. George H. Palmer, for appellant.
Messrs. Paxton Seasongood, Mr. Robert P. Goldman and Mr. Reuven J. Katz, for appellee.
Upon consideration of the record in this cause, this court is of the opinion that an appeal on questions of law has been perfected to this court for all purposes, and that both constitutional and nonconstitutional issues are now presented.
In this action the plaintiff seeks to have a decree for alimony awarded her in an Illinois divorce action, which decree incorporated a separation agreement between the parties, set aside and redetermined by the trial court for the reason, as she claims, that the alimony award was improperly made because of fraud on the part of the defendant in procuring the contract of separation between them.
The defendant makes the defense that the plaintiff can not maintain this action until she tenders back the sum of $110,000 and other sums named in the contract paid to her by the defendant. The plaintiff's amended petition admits the payment of these sums of money and that she has made no tender back but asserts that she is willing to allow the money she received as a credit on any new allowance of alimony, if she is granted more than she agreed to accept in the settlement contract. In her reply to defendant's sixth defense, covering lack of tender, she "denies that she is required to tender back to defendant any monies received from him pursuant to said alimony agreement, but avers that this court has jurisdiction to render all equitable relief to which plaintiff may be entitled."
The prayer of her amended petition is that the settlement agreement and that portion of the decree of the Superior Court of Cook County, Illinois, incorporating the agreement, be set aside as induced by fraud, and that the Common Pleas Court of Hamilton County, Ohio, determine and allow to plaintiff such sum as should have been allowed in the original action, taking into account the true worth of defendant at the time said settlement contract was consummated.
The plaintiff maintains that she, in attempting to rescind the transaction on the ground of fraud, is not bound to restore that which she has received, since, in any event, she is entitled to retain it as her own, whatever may be the fate of her effort to rescind the transaction. She cites in support of this claim the cases of Galusha v. Galusha, 138 N.Y. 272, 33 N.E. 1062; Locke-Paddon v. Locke-Paddon, 194 Cal. 73, 227 P. 715.
Those cases proceeded on the theory that the compensation received by way of alimony is the equivalent of the support which it is claimed the husband is legally bound to provide for the wife while the marriage relation continues, and which the husband is equitably bound to furnish when the relation is dissolved.
In the instant case, there was a complete settlement of property rights carried into the contract and, in turn, carried into the decree of the Illinois divorce action. The contract excludes the rights of each party in the property of the other, and was made without reference to the fault or default of either party. It is clear from the record in the instant case that the divorce decree may not be modified or set aside and the award increased without a rescission of the contract of settlement.
The rule in Ohio, as stated in 23 Ohio Jurisprudence, 1120, Section 963, is as follows:
"A party who has received and accepted the benefits of a judgment in his favor will not be heard to challenge the validity of such judgment without first restoring or offering to restore such benefits to the adverse party."
A leading case on this subject in Ohio is that of State, ex rel. Barner, v. Marsh, Clerk, 121 Ohio St. 321, 168 N.E. 473, involving a decree in a divorce and alimony action. The sixth paragraph of the syllabus in that case reads as follows:
"Where a party has received and accepted the fruits and benefits of a judgment in his favor, he will not be heard to challenge the validity of such judgment without first restoring or offering to restore such fruits and benefits to the adverse party."
Speaking for the court in that case, Chief Justice Marshall said:
"It was admitted by relatrix that she has received the full amount of the $10,000 award of alimony, and has received certain monthly payments in addition thereto. Having accepted the fruits of that judgment in her favor, and the award of alimony being inseparably connected with the decree of divorce in favor of George T. Barner, and the entire decree being based upon the same evidence, relatrix could not, upon well-settled equitable principle, ask to have the judgment vacated, even though she might have other equitable grounds for its vacation, without first restoring to the adverse party the amount which she has received on account of the decree. Saxton v. Seiberling, 48 Ohio St. 554, 29 N.E. 179; Manhattan Life Ins. Co. v. Burke, 69 Ohio St. 294, 70 N.E. 74, 100 Am. St. Rep., 666."
The case of Picklesimer v. Baltimore Ohio Rd. Co., 151 Ohio St. 1, 84 N.E.2d 214, cited in In re Estate of Gray, 162 Ohio St. 384, 391, 123 N.E.2d 408, was an action brought for claimed fraud in inducing plaintiff to settle a tort claim for $900 on the misrepresentation by the railroad company's physician that plaintiff's injuries were not permanent, whereas they were claimed to be permanent. This court held that, although the suit was on a claim for damages for the alleged fraud, the real basis for the suit was the alleged negligence of the defendant; that the fraud could only be the basis for setting aside the settlement; and that, since there had been no tender back of the consideration received, no suit could be maintained.
Likewise, the basis of the instant action is the claim that plaintiff is entitled to more money than she received in the settlement, and the claim of fraud is made to secure the setting aside of the judgment which stands in the way of a claim for more money. That claim, if considered, must call for a reconsideration of the facts involved in the adjustment of all property rights existing between the parties, and the plaintiff cannot have the judgment set aside without repaying or tendering the consideration received.
An earlier Illinois case, Babcock v. Farwell, 245 Ill. 14, 91 N.E. 683, is in point. The fourth paragraph of the N.E. headnotes reads:
"The inability of the party to restore the consideration for a contract which he seeks to rescind will not relieve him from the necessity of doing so, and it is not sufficient to offer to set off the amount against what is claimed from the other party."
The seventh paragraph of the headnotes reads:
"A release procured by fraud as to the consideration is binding until set aside in equity, and the party executing it cannot be relieved from it without returning the consideration."
We are of the opinion that the plaintiff, not having tendered back the consideration which she received as a result of the contract and the Illinois decree, cannot maintain this action to set aside that decree.
Another nonconstitutional issue relates to the claim of fraud because of misrepresentation on the part of the defendant as to his financial situation at the time the contract of separation was executed. The chronological sequence of relevant facts is important. The parties lived together as husband and wife until July 31, 1945. On February 19, 1946, plaintiff filed her complaint for divorce. On February 27, 1946, the parties entered into a contract embodying an alimony and property settlement. On February 28, 1946, the defendant filed his answer in the divorce action, and on March 12, 1946, a decree of divorce was entered embodying the property settlement.
In April 1943, while the parties were still living together as husband and wife, the distillery stock was sold for approximately $1,600,000. On October 18, 1945, less than three months after the separation of the parties but more than four months before the contract was consummated, the defendant executed the irrevocable trust above referred to, whereby he placed $970,000 (the net received from the stock after taxes and expenses) in trust, reserving a life interest in the income from the trust fund, amounting to approximately $25,000 per annum, the corpus to be distributed upon his death to The Robert L. Block Family Foundation.
The plaintiff and her then attorneys during the property settlement negotiations between the parties in January and February 1946 had full and complete knowledge of all the foregoing facts at the time they took place, and the contract so recites. The plaintiff claims that the attorney for the defendant at that time, who is also his attorney in the present action, represented that the trust then fully executed was valid and had been entered into bona fide for the purpose of insuring the defendant an income without the care and responsibility of investment of the principal. As a matter of fact, there is nothing in the record which disproves the facts so represented. At best, the representation was but an expression of an opinion of law on the part of defendant's counsel and not a representation of fact. Such expressions cannot form the basis for an action based on fraud.
The essential elements of fraud which must be proved by the plaintiff in order to prevail are set out in 19 Ohio Jurisprudence, 335, Section 24, as follows:
"In order to maintain an action for damages for deceit, certain elements must be present. First of all, there must be actual or implied representations or concealment of a matter of fact which relates to the present or past, and which is material to the transaction; secondly, the representation must be false; thirdly, the representation must be made with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred; fourthly, it must be made with the intent of misleading another into relying upon it; fifthly, this other person must have relied upon it with a right to so rely; and lastly, injury must have resulted as the consequence of such reliance. All of these ingredients must be found to exist, and the absence of any of them is fatal to a recovery."
Furthermore, if the plaintiff was injured by the transfer of the property to the trust, she had that information as well as the right and duty to have the trust set aside prior to her execution of the settlement agreement. A wife separated from her husband is in the position of a creditor and may set aside a voluntary conveyance by him without consideration. The applicable rule is stated in 21 Ohio Jurisprudence, 376, Section 50, as follows:
"The property of the husband is subject to the support of his wife, except where the rights of bona fide creditors intervene, and she cannot be lawfully deprived of this interest in his property. To this extent, she is his creditor. She is just as much a creditor before a judgment for alimony is entered, and entitled to the benefit of his property for her support, as she is afterwards, when she is entitled to subject his property to the payment of alimony." See, also, Ward v. Ward, 63 Ohio St. 125, 57 N.E. 1095, 81 Am. St. Rep., 621, 51 L.R.A., 858; Rose v. Rose, 34 Ohio App. 89, 170 N.E. 181; Iddings v. Whitacre, 1 Ohio App. 223; 19 Ohio Jurisprudence, 757, Section 81; Franceschi v. Franceschi, 326 Ill. App. 494, 62 N.E.2d 1.
The alleged representations of the defendant through his counsel as to the legal effect of the trust were irrelevant since as a matter of law plaintiff already had sufficient information to set the transfer aside if it was a fraud against her, but she cannot do so after entering into a contract of settlement with the defendant with full knowledge of the situation.
It will be unnecessary to pass upon the constitutional issue raised in this case. The court will not consider constitutional questions if the cause can be disposed of on any other ground. State, ex rel. Lieux, v. Village of Westlake, 154 Ohio St. 412, 96 N.E.2d 414; State v. Western Union Telegraph Co., 154 Ohio St. 511, 97 N.E.2d 2. See Peters v. Hobby, 349 U.S. 331, 99 L. Ed., 1129, 75 S. Ct., 790.
The judgment of the Court of Appeals is affirmed.
Judgment affirmed.
WEYGANDT, C.J., MATTHIAS, ZIMMERMAN, STEWART, BELL and TAFT, JJ., concur.