BOGAN v. WILEY

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District Court of Appeal, First District, Division 2, California.

BOGAN v. WILEY.

Civ. 13416.

Decided: August 09, 1948

Courtney L. Moore, and Marcel E. Cerf, Robinson & Leland, all of San Francisco, for appellant Bogan. Sullivan, Roche, Johnson & Farraher and Frank M. Hultman, all of San Francisco, for appellant and respondent James Francis Wiley.

Plaintiff, as administrator of the estate of Zaida Bogan, deceased, appeals from an order granting defendant a new trial following a jury's verdict awarding plaintiff judgment and assessing damages in the sum of $24,000, and defendant Wiley cross-appeals (pursuant to rule 3(b), Rules on Appeal from the order granting a new trial and the orders denying defendant's motion for directed verdict and motion for judgment notwithstanding the verdict.

Plaintiff's action filed May 5, 1944, was based on an alleged loan of $12,000 made by plaintiff's wife Zaida in 1932 to the firm of J. H. Wiley, The Furniture Man, a partnership then consisting of plaintiff's mother-in-law, Mrs. Martha Wiley, and her son James F. Wiley, defendant herein. Plaintiff alleged that at the time of his wife's death her estate exclusive of this loan was not of sufficient value to require probate, and that defendant concealed from plaintiff, the fact of the loan which was discovered by plaintiff's attorneys after October, 1942. On the trial however plaintiff admitted that he knew at the time of the interest payments to his wife and believed that she had loaned the partnership money but explained his delay in proceeding to collect it by his reliance upon the promises of Martha Wiley hereafter detailed. Plaintiff asked double recovery under section 612 of the Probate Code dealing with embezzlement or concealment of property of a decedent. Plaintiff had married Zaida Wiley in 1914 and from about two and one-half years after their marriage, plaintiff and wife worked together in the Wiley furniture store till Zaida's death in 1938. Zaida collected their salaries, and gave her husband whatever spending money he needed. She took care of all family financial matters.

On August 3, 1932, Zaida withdrew $12,000 from a joint account of her mother and herself and deposited it in her individual account. On August 9, 1932, she withdrew $12,000 and $3,000 from her account and on the same day $15,000 was deposited in the partnership account and used by the partnership to repay a loan to Bank of California. Defendant Wiley testified that he could not remember whether the money used to repay the aforesaid loan had come from Zaida. In 1932 the firm paid Zaida $370.40 interest and thereafter 720 per year through 1937 (which plaintiff notes is 6% on $12,000) and $600 for 1938. She died in November of that year. The bookkeeper made the interest entires. Zaida's and plaintiff's joint returns and the partnership's income tax returns both showed the payment and receipt of interest as set forth above. Defendant testified that the interest was really bonuses paid his sister, and so disguised in order that other salesmen would not know, although he admitted the salesmen had no access to the books.

On November 23, 1938, the day of Zaida's death, defendant and his mother borrowed $12,000 from the Bank of America, depositing it in the firm account. On the same day $12,000 was also withdrawn from the firm account. Defendant testified that on the same day he had the bookkeeper draw a check to the order of his wife, Maud Wiley, for $12,000 in payment of a $12,000 loan made to the firm by her father Frank Johnson, in 1926. The check register showed that an erasure had been made at this entry and when restored the entry read ‘Zaida and Lewis E. Bogan’ in the bookkeeper's handwriting. Defendant testified that although he did not customarily go over the check register, in checking through it he had noted the mistake made by the bookkeeper in entering this check and had corrected it himself. The reason he paid off the loan to his wife on the day of his sister's death was because he thought some questions might be raised in settling his sister's estate inasmuch as the books showed interest payments to his sister and none to his wife, ‘and I thought if it was out of the book, it would be just as well.’

Defendants points out that the ‘Notes Payable Others' ledger at page 201 (the posting reference in the check register at the erasure) contains the names of Frank Johnson and Maud Wiley, while the names of Zaida and Lewis Bogan do not appear thereon. The accountant's entry on November 23, 1938, shows that loan of $12,000 repaid to Maud Wiley.

Plaintiff on February 3, 1943, had filed a complaint against Martha Wiley to enforce an alleged contract to make a will in his favor. In that case plaintiff testified that he did not probate Zaida's estate at the time of her death because he expected from his mother-in-law's assurances that he would receive a half interest in the firm's business when she died. This court held in Bogan v. Wiley, 72 Cal.App.2d 533, 164 P.2d 912, that plaintiff had no enforceable contract against Martha Wiley's estate on this alleged contract to make a will.

The court gave the following instruction at the plaintiff's request:

‘If you find that the defendant so used the right of the Estate of Zaida Bogan to collect the sum of $12,000, referred to in the complaint, in such a manner as to prevent said estate from successfully asserting its right thereto, thereby depriving the said Estate of said property, and that by so doing defendant fraudulently appropriated said property to his own use, without the assent of the said estate, and with the fraudulent intent to so appropriate it, then you may find that the defendant embezzled said property. If you do not find from the evidence then you may not find that the defendant was guilty of such embezzlement.’

It was on the ground that the giving of this instruction was prejudicial error that the court granted defendant's motion for new trial. It is the plaintiff's theory that by the manipulations above recited defendant violated the provisions of Probate Code, section 612, reading as follows:

‘If any person embezzles, conceals, smuggles or fraudulently disposes of any property of a decedent, he is chargeable therewith, and liable to an action by the executor or administrator of the estate for double the value of the property, to be recovered for the benefit of the estate.’

Even if the word ‘embezzles' as used in this section is not used in the technical sense of the criminal law, but means ‘to fraudulently appropriate to one's own use, or conceal the effects of the estate which such person has in his possession’, as suggested in the early case of Jahns v. Nolting, 29 Cal. 507, 511, the question still presents itself: What property of the estate of Zaida Bogan which defendant had in his possession did he ‘fraudulently appropriate to his own use or conceal’?

Plaintiff suggests that it may have been either the check drawn to Zaida and Lewis Bogan or the debt owed to Zaida Bogan by the partnership. We shall examine each of these suggestions in turn.

The check never became the property of Zaida Bogan or of her estate. No rule is better settled than the one that the payee gets no property in a negotiable 3097; 19 Cal.Jur. 826. It is perfectly clear that there was never under plaintiff's own theory any intention to vest title to this check in Zaida Bogan or her estate. It is plaintiff's theory that defendant as managing partner caused the check to be drawn to Zaida and Lewis Bogan for his own purposes with intent to use it for his own ends. Even if the partnership be considered as a separate entity and may be conceived of as having delivered the check to defendant the intention with which it was delivered was the intention in defendant's mind for he was the one who caused it to be executed; and he had no intention (on plaintiffs own theory) of transferring or delivering the check to the payees or either of them. No theory of trust or analogy to the doctrine of executor de son tort can avail plaintiff under the circumstances. Since title to the check was neither vested in, nor held by defendant for, Zaida Bogan or her estate it never became her property or that of her estate. If it was not property of Zaida Bogan or her estate it could not be embezzled, concealed, smuggled or fraudulently disposed of within the meaning of Probate Code sec. 612 since by its terms that section applies only to ‘any property of a decedent.’

Turning to the debt or chose in action, the manipulations of defendant did not affect the partnership's obligation to Zaida Bogan. If the partnership owed her or her estate $12,000 before the check was drawn and its proceeds appropriated by defendant, it continued to owe her $12,000 afterwards. The debt had not been paid and it could not be cancelled by any such legerdemain. Under no justifiable definition of the word can the defendant be said to have embezzled the debt or chose in action. We are satisfied that the instruction complained of was prejudicially erroneous when applied to the facts of this case and the motion for new trial was properly granted on that ground.

Plaintiff argues that the instruction on embezzlement even though erroneous was not prejudicial on the theory that even if defendant did not embezzle property of the decedent he did fraudulently conceal it within the meaning of Probate Code sec. 612. This can only be true if any debtor of a decedent who attempts to conceal the fact of his owing the debt violates the provisions of Probate Code sec. 612 and thereby renders himself liable to the estate in double the amount of debt. Probate Code sec. 612 cannot reasonably bear this construction.

The word ‘property’ in its most general sense is broad enough to cover everything, tangible and intangible, which may be the subject of ownership (21 Cal.Jur. 639, 640) but ‘The meaning of the term may be restricted by the context of a particular statute or writing in which it is used’ (21 Cal.Jur. 640) and it has been construed by our courts in certain contexts not to include choses in action. People v. Hibernia Savings & Loan Soc., 51 Cal 243, 21 Am.Rep. 704; Franklin v. Franklin, 67 Cal.App.2d 717, 155 P.2d 637. In the latter case the court says in 67 Cal.App.2d at page 727, 155 P.2d at page 641:

‘But the meaning to be given to the word depends upon the sense in which it is used, as gathered from the context and the nature of the things which it was intended to refer to and include.’

A consideration of the language of Probate Code sec. 612 indicates that the ‘property of a decedent’ therein referred to does not include naked choses in action but is limited in its sense to tangible property. No person can embezzle, smuggle or fraudulently dispose of another's right of action to recover a debt, and yet all those verbs are used in section 612 with relation to the property there spoken of. Further more, we may properly examine other sections of the Probate Code to determine the sense in which the legislature intended to use ‘property’ in section 612. McPike v. Superior Court, 220 Cal. 254, 258, 259, 30 P.2d 17. The very next section makes a distinction between the word property and choses in action. In Probate Code sec. 613 it is provided:

‘Upon complaint made under oath by an executor, administrator, or other person interested in the estate of a decedent, that any person is suspected of having embezzled, concealed, smuggled or fraudulently disposed of any property of the decedent, or has in his possession or has knowledge of any deed, conveyance, bond, contract or other writing, which contains evidence of or tends to disclose the right, title, interest or claim of the decedent to any real or personal property, or any claim or demand, or any lost will, the court or judge may cite the suspected person to appear before the court, and may examine him on oath upon the matter of such complaint.’

We have italicized the words ‘claim or demand’ which are there treated as distinct from and additional to the words ‘real or personal property,’ which they immediately follow.

See also Probate Code sec. 571, which authorizes the executor or administrator to ‘take into his possession all the estate of the decedent, real and personal, and collect all debts * * *’; Probate Code sec. 573, which authorizes executors and administrators to maintain ‘actions for the recovery of any property, real or personal * * * and all actions founded upon contracts * * *’; and Probate Code sec. 574, where the word ‘property’ can only be used in the sense of tangible property capable of being ‘wasted, destroyed, taken, or carried away, or converted * * *’

We conclude that a naked chose in action is not included within the meaning of ‘any property of a decedent’ as those words are used in Probate Code sec. 612. This being so plaintiff did not make out a case falling under that section.

It does not follow however that defendant's motion for a directed verdict or his motion for judgment notwithstanding the verdict should have been granted. If under the pleadings and evidence plaintiff was entitled to any recover, giving the evidence the interpretation most favorable to him, those motions were properly denied. Gish v. Los Angeles R. Corporation, 13 Cal.2d 570, 572–573, 90 P.2d 792; Card v. Boms, 210 Cal. 200, 291 P. 190.

The complaint and the evidence most favorable to plaintiff would support a recovery by plaintiff of $12,000 from defendant as surviving partner on account of a partnership debt owing to Zaida Bogan for money lent by her to the partnership. The complaint alleged the fact of partnership, that the partnership was indebted to Zaida Bogan in the sum of $12,000 for money loaned by her to the partnership, that said $12,000 is unpaid, the death of Zaida Bogan, the death of her mother and defendant's sole partner, Martha Wiley, and the appointment of plaintiff as administrator of his wife's estate. ‘A surviving partner may sue and be sued alone, upon claims of or against the firm, without joining the personal representatives of the deceased members.’ 20 Cal.Jur. 766 and cases cited in note 11.

The evidence, with the inferences reasonably to be drawn therefrom, was sufficient to support the finding that the partnership owed Zaida Bogan $12,000 for money loaned to it by her and the jury in bringing in its verdict for double that amount impliedly so found. While the verdict of $24,000 was not justified by the evidence a verdict of $12,000 with accrued interest against defendant as suriving partner on the partnership obligation so found by the jury would have been supported. That plaintiff misconceived his remedy should not deprive him of the right to the recovery to which the pleadings and proof entitle him.

The only remaining question is the statute of limitations. Martha Wiley died on September 9, 1942. This action was commenced on May 5, 1944, less than two years after Martha Wiley's death. The applicable statute to the cause of action on the loan (assuming that it was not evidenced by a writing) is Code Civ.Proc. sec. 339, subd. 1, under which the action must be brought within two years. Plaintiff testified that before his wife's death Martha Wiley had promised to leave to them her interest in the partnership upon her death, that after Zaida's death Martha Wiley said, ‘Well, you do not have to wory, Lewis, everything will be taken care of’ and that ‘whatever Zaida had coming to her, she (Martha Wiley) would take care of’; that he understood from this that Martha Wiley would properly provide for him on her death and that relying on this assurance he did nothing about collecting the debt from the estate. The relations between plaintiff and Martha were extremely close, he continuing to live with her after his wife's death until shortly before his remarriage, and the jury could well find that a confidential relation existed between them. These facts would support a finding of estoppel to plead the statute of limitations up to the time of Martha's death if the jury chose to make such finding. Such estoppel may arise when a debtor induces a creditor not to sue by representations designed to lull him into a sense of security. Benner v. Industrial Accident Commission, 26 Cal.2d 346, 349, 350, 159 P.2d 24, and cases there cited. Since Martha Wiley was a general partner this estoppel would be binding on the partnership.

It is true that these facts were not pleaded but the evidence went in without objection and any variance would thereby be cured. 2 Cal.Jur. 279. Prior to another trial the complaint may be amended to plead these facts by way of estoppel.

Defendant suggests that plaintiff accepted this promise of Martha Wiley in exchange for the obligation of the partnership to pay its debt to his wife's estate and thereby waived the debt. This does not follow. The case is not as strong as the acceptance of a new note for an antecedent debt which does not constitute payment unless the debtor expressly so agrees. 20 Cal.Jur. 920–925. Upon discovery after her death that Martha Wiley had not ‘taken care of him’ plaintiff would be entitled to sue on the obligation of the partnership to his wife's estate.

The orders appealed from are, and each of them is, affirmed with directions to the trial court to permit such amendments to the pleadings consistent with this opinion as the parties may request, each party to bear his own costs on appeal.

DOOLING, Justice.

NOURSE, P. J., and GOODELL, J., concur.