IN RE: HARRIS' ESTATE.†

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District Court of Appeal, Fourth District, California.

IN RE: HARRIS' ESTATE.† HARRIS et al. v. LARTER et al.

Civ. 1663.

Decided: February 18, 1937

W. M. Greathouse and C. E. McDowell, both of Los Angeles, and Head, Wellington & Jacobs and Otto A. Jacobs, all of Santa Ana, for appellants. R. Y. Williams and Charles D. Swanner, both of Santa Ana, for respondents.

R. T. Harris died in 1911, leaving no issue surviving. In a controversy over whether certain property held by his widow, Maria L. Harris, should have been included in his estate the Supreme Court, after stating that the parties had established a joint bank account with the right of survivorship in pursuance of an agreement made between them during the early years of their marriage, which provided in effect that all property owned or acquired by either or both of them should be held together in joint ownership as joint tenants and that all of the property there in controversy was acquired with money from this joint account, held that the property thus acquired retained the character of joint property, in the absence of an agreement between the parties changing its character, and belonged to the widow as the survivor. In re Estate of Harris, 169 Cal. 725, 147 P. 967.

The widow, Maria L. Harris, died on July 2, 1933, leaving no issue. The present controversy is between the brothers and sister of Maria L. Harris and the brothers, sisters, nephews, and nieces of her predeceased husband, R. T. Harris, the latter claiming that all or part of the property in her estate came to her as a gift from her husband or as community property, and that they are entitled to the same either in whole or in part under section 229 or section 228 of the Probate Code.

The court, in its decree of distribution, found that “the whole of said estate was the separate property of said Maria L. Harris, deceased, and did not come to her by gift from R. T. Harris, her deceased husband, but said decedent became the owner of the whole of said property by right of survivorship, under an agreement entered into between said decedent and R. T. Harris, her deceased husband, in the early years of their married life, whereby it was agreed that all property which either owned as separate property, or which they had or might acquire during their married life, as community property, should be held in joint tenancy with the right of survivorship to the one surviving. That the said R. T. Harris predeceased said Maria L. Harris, and all his interest in said property so held in joint tenancy under said agreement terminated, and Maria L. Harris became the sole owner by said right of survivorship.” The court also found that eight described parcels of real property were acquired by Maria L. Harris after the death of R. T. Harris by purchase with funds from the sale of the stocks acquired by her through right of survivorship under the joint tenancy agreement referred to. This finding is not attacked and is conclusive as to those parcels under the decision in Re Estate of Harris, supra. However, the heirs of R. T. Harris appeal from the final decree distributing the entire balance of this estate to the heirs of Maria L. Harris, contending that certain parcels of real property are subject to the provisions of section 228 and section 229 of the Probate Code. It is conceded that these sections are applicable unless all of the property in question came to Maria L. Harris by right of survivorship with respect to property held in joint tenancy by herself and her husband.

The appellants attack the decree in so far as it affects parcels 9, 10, and 11, as described in the inventory and appraisement herein. These three parcels of real property were purchased by R. T. Harris with funds taken by him from the joint bank account of himself and his wife. Before his death he executed deeds conveying these properties to his wife, and these were recorded about a month after his death. There is no evidence that Mrs. Harris knew that the joint funds had been withdrawn by her husband, that the properties had been purchased by him, that the titles had been taken in his name, or that she consented thereto, and no evidence of any agreement or understanding between them at the time of the purchases as to how the titles should be taken.

The appellants argue that since these properties were conveyed to R. T. Harris alone they could not constitute an estate in joint tenancy, and, therefore, became his separate property and that having been voluntarily conveyed by him to his wife, they must be considered as a gift within the meaning of section 229 of the Probate Code. The respondents argue that the finding of the court, in connection with the estate of R. T. Harris, that there was no other property belonging to that estate which had not been accounted for, is binding upon all of the heirs of R. T. Harris; that the decision on appeal in that matter (In re Estate of Harris, supra) established that all properties owned by this husband and wife at the time of his death were held in joint tenancy, and is decisive of this case; that the real property here in question, having been purchased with funds taken from the joint bank account, retained its character as joint tenancy property regardless of in whose name the title was taken; and that, therefore, this property became the separate property of Maria L. Harris by right of survivorship.

It seems to be well settled that personal property acquired through funds held in joint tenancy retains the same character in the absence of any agreement to terminate the joint tenancy. In re Estate of Harris, supra; In re Estate of McCoin, 9 Cal.App.(2d) 480, 50 P.(2d) 114; Lagar v. Erickson, 13 Cal.App.(2d) 365, 56 P.(2d) 1287. A difficulty arises in applying the same rule to real property purchased with joint funds where title is taken in the name of one of the joint tenants because of the provision of section 683 of the Civil Code, as it then read, requiring an express declaration in a transfer in order to create a joint tenancy.

The precise question here presented seems to be one of first impression in California. Personal property only was involved in the appeal in Re Estate of Harris, supra, and nothing said in the opinion therein is controlling here. Dalton v. Keers, 213 Cal. 204, while helpful, does not solve the problem. There the real property was purchased with joint funds, but both cotenants participated in the purchase of the other property, the instrument of purchase failed to declare an intention to create a joint tenancy, and there was other evidence justifying an inference that the parties intended to take as tenants in common.

Stated baldly, the evidence in the instant case which must be construed most strongly in support of the judgment, justifies the conclusion that Mr. Harris, without his wife's knowledge or consent, withdrew funds from the joint account with which he purchased three parcels of real property placing the record titles in his own name. Thus there is presented a situation where a husband, without the knowledge or consent of his wife, used their joint tenancy funds to purchase real property, the title to which he took in his own name. Because of the confidential relation existing between a husband and a wife, such transactions are always scrutinized most carefully and will be regarded as fraudulent unless it is proved that the husband acted in the transactions according “to the general rules which control the actions of persons occupying the confidential relations with each other, as defined by the title on trusts.” (Section 158, Civ.Code; 13 Cal.Jur. 860, and cases cited.)

In 13 California Jurisprudence 869 it is said:

“If a husband fraudulently obtains money of his wife and applies it to the purchase of property, he becomes an involuntary trustee and holds the legal title for her benefit. So also a husband becomes a trustee for the wife where, by a void contract between them, he receives her money, or when he converts funds of his wife in his possession as bailee, or where the wife mortgages her property to secure his debt, and he purchases the property at the foreclosure sale.

“Where by means of an oral promise made without any intention of performing it, a husband or wife obtains a deed of property from the other without giving any consideration therefor, it is a case of actual fraud and a trust for the grantor arises. So also if one spouse, without consideration other than a parol promise to convey or to hold land for the purpose of carrying out a trust in favor of the grantor, obtains an absolute deed from the other, the breach of promise is constructive fraud, and makes the grantee an involuntary trustee for the grantor, although at the time there was no intention not to perform. The law, from considerations of public policy, presumes such transactions to have been induced by indue influence. The betrayal of the confidence is constructively fraudulent and gives rise to a constructive trust.”

Trusts may be either voluntary or involuntary. Section 2215, Civ.Code. “One who wrongfully detains a thing is an involuntary trustee thereof, for the benefit of the owner.” Section 2223, Civ.Code. Section 2224 of the Civil Code provides as follows: “One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it.” An involuntary trust is generally referred to by law writers as a constructive trust.

Two or more persons may hold the beneficial estate in a trust as joint tenants. Greer v. Blanchar, 40 Cal. 194; Restatement of the Law, Trusts, § 113; 25 Cal.Jur. 315. “Although one of several beneficiaries of a trust becomes the sole trustee of the trust, or the sole trustee becomes one of several beneficiaries, the trust is not terminated.” Restatement of the Law, Trusts, p. 1050.

An estate in joint tenancy is an ownership recognized by our law. Section 682, Civ.Code. It is an estate complete in itself and is “separate and distinct and not in any wise interdependent” upon any other estate. Siberell v. Siberell, 214 Cal. 767, 7 P.(2d) 1003, 1004. When and while it exists it excludes the possibility of the existence of any other estate.

When we apply the foregoing rules to the facts of the case before us there is but one conclusion that follows, namely, that when Mr. Harris took the joint funds belonging to himself and his wife and invested them in real estate, taking title in his own name to the apparent exclusion of her interest, the law will presume that act a fraud on the wife. As he gained title to the property by a wrongful act with the money of the joint tenancy, the law will impress an involuntary trust upon him and the property purchased by him. Unless an involuntary trust be declared and imposed, such a transaction would result in one joint owner of a bank account being able to defraud the other by resorting to the simple expedient of withdrawing the joint funds and investing them in real estate, taking title in his own name to the exclusion of the other. While in the instant case the fraud of Mr. Harris is only presumed by the law, still if it should be held that his taking title to the real property purchased with the joint funds vested the entire title in him, it would open the way for actual fraud on the part of designing and unscrupulous joint tenants.

It is true that it is the established law in California that one joint tenant may terminate the joint tenancy without the consent of his cotenant by conveying his interest to another. His grantee and the other cotenant would then own the property as tenants in common with an undivided one–half interest vested in each. Swartzbaugh v. Sampson, 11 Cal.App.(2d) 451, 54 P.(2d) 73. It should be equally true that where one joint tenant of real property conveys to the other the joint tenancy is terminated and the entire title is vested in the grantee. It might be argued that where a joint tenant, without the knowledge or consent of his cotenant, withdraws funds from a joint account and purchases real estate, taking title in his own name, the joint tenancy is terminated and a tenancy in common results with an involuntary trust imposed on a half interest in the property in favor of the nonconsenting joint tenant. As opposed to this conclusion, we have the firmly established rule which has been consistently followed since the decisions of Kennedy v. McMurray, 169 Cal. 287, 146 P. 647, Ann.Cas.1916D, 515, and In re Estate of Harris, 169 Cal. 725, 147 P. 967, that where personal property is purchased by one joint tenant with joint tenancy funds the joint tenancy will be impressed upon the personal property even though title be taken in the name of the purchasing cotenant. The mental processes and physical acts involved in the purchase of real estate do not necessarily differ from those involved in the purchase of personal property. Both may involve the withdrawal of joint tenancy funds by one cotenant and the purchase of the property without the knowledge or consent of the other cotenant. Where similar acts are involved, a similar result should follow where reasonably possible. While in many cases it may not be possible to accomplish this result, because of section 683 of the Civil Code, we are here concerned with the proper execution of a trust.

The very purpose of recognizing a constructive trust is to preserve the rights of the parties, which have been interfered with by some wrongful act. Where real property was held by a third party, under a constructive trust, for the benefit of parties whose real interest was that of joint tenants, we see no reason why a court, in returning the property to the rightful owner, could not preserve their rights by returning it as it actually was, joint tenancy property. As one may be both a trustee and one of the beneficiaries of the trust, and as the beneficial estate may be held in joint tenancy, it would seem to follow that the same result should obtain where the trustee was one of the beneficiaries and cotenants. Since the real property thus purchased by Mr. Harris was impressed with an involuntary trust for the benefit of himself and his wife, whose real interests were those of joint tenants, a full compliance with the trust requires that the property be returned to them as such joint tenants, and not merely as individuals with unrelated and separate rights. We therefore hold that Mr. Harris took title to parcels 9, 10, and 11 as trustee of an involuntary trust for the benefit of himself and wife as joint tenants.

Nor do we think that the conclusions here reached conflict with the provisions of section 683 of the Civil Code. While the legal title to the properties in question was conveyed to Mr. Harris alone, the actual ownership thereof is controlled by the trust. An involuntary or constructive trust is not created by deed, will, or other writing but is imposed upon property by the law so that justice and equity may be done. As an involuntary trust cannot be created by a writing, it is unreasonable to suppose that the provisions of section 683 of the Civil Code were intended to apply to such trusts. To so apply them would mean that the other sections of the Civil Code which concern themselves with involuntary trusts are inoperative with respect to a joint beneficial estate. Section 683 of the Civil Code was enacted in its original form on March 21, 1872, as were sections 2215, 2223 and 2224 of the same code. It would be unreasonable for us to conclude that the Legislature intended to provide for involuntary trusts where the beneficiaries held as joint tenants and at the same time to make impossible the existence of such trusts.

Having reached the conclusion that Mr. Harris held the legal title to the three parcels of real property as trustee for the benefit of himself and his wife as joint tenants, the only remaining problem under this phase of the case is the respective interests of the heirs of Mr. Harris and Mrs. Harris in these real properties. There is not sufficient evidence before us to determine this question as we do not know when the deeds conveying these properties were delivered to Mrs. Harris. If they were not delivered until after the death of Mr. Harris they may be considered as an execution of the duties of his trust, as his interest as joint beneficiary was terminated by his death, and Mrs. Harris would succeed to the entire beneficial estate at that time. If they were delivered prior to his death, thus terminating the joint tenancy, the conveyance of his half interest must be considered a gift and subject to the provisions of section 229 of the Probate Code.

Another parcel of real estate came to Mrs. Harris under the same circumstances as the three parcels above referred to, but this parcel was sold by her in 1919. The appellants claim an interest in the proceeds therefrom. If it be assumed that a one–half interest in this property came to Mrs. Harris as a gift from her husband it was hers to do with as she pleased, and section 229 of the Probate Code would apply only in the event some or all of the proceeds of that particular property remained in her hands at the time of her death and became a part of her estate. It appears that Mrs. Harris gave large sums to churches and other institutions during the later years of her life. In our opinion, the appellants cannot recover any part of the proceeds of this piece of real property unless they can trace those funds and show that part or all of them are now a part of her estate.

The appellants claim an interest in parcel 4, as set forth in the inventory and appraisement in this estate. The trial court found that an undivided one–half interest in a part of this property was purchased by Maria L. Harris after the death of her husband with funds from the sale of stocks which she had acquired by right of survivorship under the joint tenancy agreement. This finding is not attacked. We are unable to tell from the record how the remaining portions of this parcel came into the hands of Mrs. Harris. The appellants state in their brief that all of parcel 4 was purchased by R. T. Harris prior to the creation of the joint tenancy account, but point to no evidence to sustain this statement. If the remainder of this property was the separate property of R. T. Harris and was conveyed by him to Mrs. Harris it must be considered a gift and is subject to the provisions of section 229 of the Probate Code. If it was purchased by him with joint tenancy funds the same rules would apply as in the case of parcels 9, 10, and 11. If it was, in fact, the community property of the parties its disposition would be subject to section 228 of the Probate Code. A new trial will be required to determine the facts with respect thereto.

Another question is raised by the appellants with respect to parcel 5, as described in the inventory and appraisement herein. This piece of real property was included in the estate of R. T. Harris and during those probate proceedings was sold more than twenty years ago to one Crookshank. The sale was confirmed by the court and Mrs. Harris, as administratrix of that estate, accounted for the proceeds showing that she had used all thereof in paying the debts of the decedent. It appears that some three years after this probate sale the said Crookshank conveyed the property to Mrs. Harris. On the hearing of the contest involved on this appeal the appellants offered to prove that Crookshank did not, in fact, purchase this property, that Mrs. Harris purchased it herself, using his name as a matter of convenience, and that after the close of the probate proceedings he transferred the property back to her without consideration. The evidence thus offered was excluded by the court. The appellants cite cases to the effect that where an administrator purchases property of an estate through a third person he holds the property in trust for the heirs of the intestate, and argue that this property should now be distributed “as any other community property.” We think this probate sale cannot now be thus collaterally attacked. Burris v. Kennedy, 108 Cal. 331, 41 P. 458; In re Davis' Estate, 151 Cal. 318, 86 P. 183, 90 P. 711, 121 Am.St.Rep. 105.

The appellants offered evidence of an oral agreement made in 1904 between R. T. Harris and his wife, whereby he agreed to give all of his property to her and she agreed to divide, upon her death, the unconsumed assets so received equally among his relatives and hers. This evidence was excluded, and the same is assigned as error. It would be impossible to show that this agreement was executed in view of the joint tenancy agreement established by In re Estate of Harris, supra, which was undoubtedly in force for many years after 1904. Under the circumstances shown by the record this evidence was properly excluded.

The judgment is reversed and the cause remanded for further proceedings not inconsistent with the views herein expressed.

BARNARD, Presiding Justice.

We concur: MARKS, J.; JENNINGS, J.