Mcle Self-study Article Extrinsic Fraud: Will the Real Slim Fraudster Please Stand Up?

• Publication year: 2022

MCLE SELF-STUDY ARTICLE EXTRINSIC FRAUD: WILL THE REAL SLIM FRAUDSTER PLEASE STAND UP?

Written by Ellen McKissock, Esq. and Allonn E. Levy, Esq.^*

I. SETTING THE STAGE

Notwithstanding Mr. Marshall's¹ passionate calls for transparency, determining who the real "slim shady"² is in a court of law can be challenging. That challenge becomes exceptionally important in probate cases, because the legislature has determined that orders for probate become final in a very short period of time.³ It is a reality that is ripe for mischief. After all, probate orders can forever include or exclude family members and decide the fate of millions of dollars in property and assets.

Understandably then, both the Probate Code and common law have ameliorated the otherwise harsh result of finality by recognizing the equitable powers of courts to set aside final orders of probate on the basis of extrinsic fraud. The concept is a simple one—if a court determines that fraud external to the proceedings themselves has been practiced, it may elect to void an otherwise final order, restoring justice.

In practice, though, it can be difficult to ferret out "the real Slim Shady."⁴ Is it the Administrator that failed to comply with a formality? Or is it a duplicitous beneficiary seeking to introduce disruption into the process in an effort to extract some undeserved assets? Courts must ultimately determine when an order of probate is truly final, when it remains open to attack, and when it might be entirely void. It is a process fraught with pitfalls. As explained here, the answer will commonly turn on a court's fact determination of which participant has played the part of wrongdoer - in other words, who is "the real Slim Shady?"

While there can be many attacks on an otherwise final judgment, we focus on one of the more common ones - a claimed challenge to notice.

II. PROBATE COURT JURISDICTION: IT ISN'T AS SIMPLE AS YOU THINK

It hardly seems worthy of citation to note that a court lacking jurisdiction has no power to act.⁵ But jurisdiction is a somewhat amorphous concept; particularly in American jurisprudence where the concept is closely tied to constitutional due process guarantees.⁶ Jurisdiction in its purest form is best thought of as "power," conferred by an authority (usually the Constitution).⁷ But closely connected to pure jurisdiction is the requirement that some level of "notice" be provided—while the two concepts are often intertwined, the "notice" requirement stems from fundamental fairness concepts embodied in due process; it is a limitation on the exercise of power rather than a source of it.⁸

A firm understanding of jurisdiction and notice is particularly important in probate cases. The Probate Code has many statutes that require providing notice to heirs, beneficiaries and creditors.⁹ Practitioners often refer to these processes colloquially as "service of process." But that term has a specialized meaning when it comes to jurisdictional analysis, owing to the more common type of jurisdiction in civil cases—in personam jurisdiction.¹⁰ In cases where the court obtains its power to adjudicate a case by asserting power over the person, "service of process" is the mechanism employed.¹¹ Specifically, a court of law exercising in personam jurisdiction over actions seeking to impose liability against a person, requires personal service of a summons.¹² Serving that summons may be difficult and the requirements exacting, but once achieved, the court has jurisdiction over that person and from that flows its power over the parties' dispute. In most instances, however, probate cases rely on a different jurisdictional basis.

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Commonly, the probate court obtains its power by asserting jurisdiction over the res (property or rights to property)¹³of a particular estate.¹⁴ The court is exercising in rem jurisdiction over property, meaning it has the power to adjudicate interests of any person in that property, even if particular parties are not before the court.¹⁵ Parties will be bound by the court's determination so long as they received notice.¹⁶ This is the reason that service on interested persons is usually easier in probate court, as compared to a civil action. For example, with respect to a petition for administration of a decedent's estate, Probate Code sections 1215 and 8110 require that a petitioner "deliver" notice of the hearing on the petition to each heir, fifteen days in advance of the hearing. But the more formal "service of process" via personal delivery of a summons is not required. Delivery can be by mail or personal delivery. Section 1215 states that the notice that is mailed "shall be addressed to the person at the person's place of business or place of residence." Delivery by mail is complete when the notice is mailed.¹⁷ The petition may be personally delivered to the heir and "personal delivery is complete when the paper is delivered personally to the person who is to receive it."¹⁸ The code sections do not mandate a location for personal "delivery."¹⁹ In addition, the personal representative must give constructive notice to the public at large by publishing the notice of hearing.²⁰ By "giving the notice prescribed by the statute, the entire world is called before the court, and the court acquires jurisdiction over all persons for the purpose of determining their rights to any portion of the estate."²¹ Even where "one lives in another state, or in a foreign country, and never in fact received any notice, he [or she] is still bound if the statutory notice was given."²² For example,

in Mannheim v. Superior Court,²³ the California Supreme Court applied these principles to escheat proceedings, stating that when statutory escheat procedures are followed, '[u]nknown heirs who fail to come forward . . . cannot later complain of the distribution to other known heirs after it has become final . . .'[Citations omitted.].²⁴

To analyze the issue, it is important to understand the interplay between notice and jurisdiction in probate actions. It would be incorrect to view the notice requirement as merely statutory. As explained in the landmark United States Supreme Court decision of Tulsa Professional Collection Services, Inc. v. Pope,²⁵ due process requires that in probate actions all known or reasonably ascertainable heirs and creditors be given notice of the proceedings.²⁶ But the quantum of notice is not as exacting as one might think. Tulsa, in explaining the sufficiency of such notice defines it as: "notice reasonably calculated, under the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."²⁷ Plainly, this backstop of required "notice" is not the same as the stricter "service of process" standard commonly employed in civil cases relying on in personam jurisdiction. The United States Supreme Court confirmed there is no intent to require "impracticable and extended searches. . . in the name of due process". . . but all that the executor need to do is make "reasonably diligent efforts."²⁸

Notice of a probate may thus be accomplished by simply licking a stamp and placing it on an envelope.²⁹ But what happens if the address is outdated or wrong? What happens if the person served by mail claims he or she never received the document? What if the beneficiary is unknown? What if the family is estranged? What if the notice is purposefully sent to a location known to have been vacated by the beneficiary? What if notice is sent to the beneficiary's business but that business is a bar where the recipient is only a part-time bartender? What if proper notice is provided but an administrator lies about the proceedings, or knows the beneficiary is laboring under a disability that prevents her receipt or understanding of the notice? The permutations are endless, but the real question becomes did the court have power to adjudicate in instances where the notice provided was imperfect?

As practitioners, we may be led astray by assuming that "notice" analysis necessarily mirrors that of jurisdiction, or that the "service of process" requirement for in personam jurisdiction is the same as the notice requirement for probate actions in rem. Tulsa acknowledged the State has an "interest in facilitating the administration and expeditious closing of estates."³⁰ Similarly, courts have an interest in the finality of their orders. Indeed, it is that finality that takes the jurisdictional question from esoteric subject of a delightful article to practical importance in court.

III. FINALITY AND CONCLUSIVENESS OF PROBATE ORDERS

Like all final judgments, the doctrine of res judicata³¹applies to probate proceedings and prevents a party from re-litigating issues that have been finally determined in a prior proceeding.³² An order for probate is final just a short four months after issuance.³³ The res judicata effect of a final probate order extends to its express and implied jurisdictional findings.³⁴ A probate court must make jurisdictional fact findings within its order. Those individual findings, appearing on the face of the judgment or order, also become final when finality of the order is attained.³⁵Because each of the court's jurisdictional findings (even if incorrect) is itself presumptively final, unless an order or judgment is void on its face,³⁶ a court has no power to set aside or vacate that order, absent a motion complying with strict requirements.³⁷

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Where a party challenges an order as void on its face, the aggrieved party cannot submit any evidence; the court's review is limited to the face of the record.³⁸ Particularly in light of modern uses of judicial council form probate orders, it is exceedingly rare for a probate order truly to be facially void. An example in the context of service might be an order that states "no service or publication was accomplished." With the exception of a judge being overtaken by his or her own Slim Shady alter-ego, it is hard to...