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


Civ. 15292.

Decided: April 08, 1947

Henry T. Moore, of Los Angeles, for appellant. Oliver O. Clark and Robert A. Smith, both of Los Angeles, for respondent.

Defendant appeals from a judgment for the recovery of moneys paid to decedent for the joint use of herself and plaintiff during their lifetimes and for the sole use and benefit of the survivor after the death of either. The grounds of appeal are: (1) the pleadings do not support the judgment; (2) the findings that there was no fraud or undue influence on the part of respondent are not supported by the evidence; (3) the court erred in admitting into evidence a note for $77,511.48 and proof of the payments thereon; (4) it erred in excluding evidence offered by appellant.

Gladys Isabel Ferres departed this life August 11, 1943. She left a will and codicils under which appellant qualified as executor of her estate which was appraised at a sum in excess of $558,000. She had no descendants. She lived alone from her husband's death in 1931 to the date of her demise. During that period she was assisted in the care and management of her properties and affairs by respondent, for whom she developed a feeling if high regard and intimate friendship. She spent a large portion of her time visiting in his home. In July 1937 decedent established a bank account with the Security-First National Bank of Los Angeles in joint tenancy with respondent, and deposited therein the sum of $35,000. In May 1941 Pierce Brothers, a corporation hereinafter referred to as Pierce, executed its note in the sum of $30,000 in favor of decedent and respondent as joint tenants. Sixteen payments were made upon it to decedent aggregating $15,012.45. In May 1942 Pierce issued 1000 shares of its capital stock in favor of decedent and respondent as joint tenants. In October 1942 Pierce repurchased the corporate shares for the sum of $25,000. On the same day the $30,000 note was cancelled and Pierce issued its promissory note for the sum of $77,511.48 in favor of decedent and respondent as joint tenants, and contemporaneously executed a deed of trust upon certain real property as security for the last mentioned obligation. The constituent sums of such note were as follows: (1) a balance of $35,843.76 due decedent on a $45,000 note; (2) a balance of $16,666.72 unpaid by Pierce on the $30,000 obligation; (3) the $25,000 paid for the corporate shares. In addition to the sixteen payments made on the $30,000 note Pierce had made eleven payments aggregating $14,000 on the $77,511.48 trust deed note prior to decedent's passing. The checks for all such payments were delivered by respondent to decedent who deposited them in her savings account in which they remained until the executor of her estate qualified.

The complaint is in three counts. Count 1 demands the $15,012.45 while count 2 demands judgment for the $14,000 paid on account of the note for $77,511.48. Each of such counts alleges that the receipt of such sum by decedent was without any agreement with respondent that the joint tenancy character of the moneys would be altered. The charging paragraph of count 3 alleges that between May 19, 1941, and her death on August 11, 1943, decedent ‘received from Pierce Brothers, a corporation, various installments of money aggregating $29,012.45. Said sums were paid to and received by the said Gladys Isabel Ferres as trustee for the joint use of herself and this plaintiff during their lifetimes and for the sole use and the benefit of the survivor after the death of either.’ At the time of submitting the case plaintiff elected to stand upon the third count. The effect of such election was to remove completely from consideration of this appeal any matter set forth in counts 1 and 2 except those allegations in count 1 with reference to the corporate identity of appellant and of its qualification as executor of decedent's estate. Lord v. Garland, 27 Cal.2d 840, 850, 168 P.2d 5; Hopkins v. Contra Costa County, 106 Cal. 566, 570, 39 P. 933.

Inasmuch as the remaining third count bases the claim of respondent squarely upon an express trust his right to recovery must depend upon the presence in the record of the proof of an express trust. There is no probata corresponding to such allegata. An express trust must be established by proof of a definite agreement between the parties. It is result of a deliberate or intentional act of the settlor. Howard v. Foskett, 96 Or. 446, 189 P. 396, 398; Learned v. Tritch, 6 Colo. 432, 439. Not only did respondent fail to prove any agreement between himself and decedent with respect to her possession of the moneys, but he contented himself with a declaration before the trial court that ‘the trust arose when the moneys were received by her to which she did not have the absolute title, but in which Dr. Merle Fish had a fifty per cent interest as a joint tenant. The trust continued during her lifetime as long as the funds remained in her bank account, for the benefit of him, to the extent of his interest and upon her death immediately the trust attached to those funds for the entire fund because upon her death Dr. Fish as sole survivor became the owner of all of it.’

In the foregoing declaration of respondent's counsel it is to be observed that he takes it for granted that respondent's fifty percent interest in the notes is already established. But such is not the fact. The primary issue in the case is the validity of the two joint tenancy notes. The foundation of respondent's contention arises out of the fact that he voluntarily delivered the checks from Pierce to her and that the funds represented by the checks were kept in such a bank account as made it possible to trace them. While there is no evidence that the checks were delivered to decedent under an agreement that she was to hold the funds in trust for herself and respondent, yet from the fact that respondent himself made the delivery of the checks it is just as reasonable to infer (1) that they both agreed that the money should be hers or (2) that respondent knew that she thought that the moneys belonged to her. Even if the checks had been made payable to both jointly an express trust could not be inferred from the mere fact of his delivery of them to her. Or if they had been made payable to respondent alone an express trust in decedent could not be inferred from the mere delivery of the checks to her. But before it can be determined that there was an express trust created at the time of the delivery of the checks to decedent it must be made clearly to appear that both parties intended to create a trust, and such intention must have been manifested at the time with reasonable certainty. (54 Am.Jur., Trusts, § 33.) Moreover, respondent's delivery of the checks to decedent might reasonably justify the inference that all payments made upon the notes during her lifetime were to be her sole property without any claim of respondent against them. The record teems with evidence that a number of stock certificates had been issued to decedent and respondent and to decedent and one Stella Pettigrew as joint tenants. In each instance, however, the dividends were consistently paid to decedent only.

Respondent urges with an ardent zeal that joint tenancy moneys retain their character. Of this there can be no doubt. In re Kessler, 217 Cal. 32, 34, 17 P.2d 117; Siberell v. Siberell, 214 Cal. 767, 773, 7 P.2d 1003; Estate of Harris, 169 Cal. 725, 726, 147 P. 967; Wallace v. Riley, 23 Cal.App.2d 654, 665, 74 P.2d 807. But the question of the permanency of the character of an estate in joint tenancy does not improve the argument of respondent any more than to proclaim that an estate in fee simple continues to be an estate in fee simple until it is terminated by an alienation of the property so held.

The finding, therefore, that decedent held the moneys under an express trust is without evidential support.

As to the claim that there was a resulting trust, if it was not an express trust, respondent is equally unfortunate. There is neither direct testimony to support the claim of a resulting trust nor is there any circumstance given in testimony that would justify a court in holding that there was a resulting trust. In making his claim that the funds paid to decedent by means of the Pierce checks constituted payments upon the joint tenancy notes, respondent again assumes that the right of respondent as a joint tenant with decedent had already been established by his mere ipse dixit. But such conclusion cannot be assumed, and if it could be the evidence is uncontradicted that the payments were made by Pierce to decedent with respondent's knowledge and consent, were made in her name alone, and the checks were actually delivered in person by respondent to decedent. The delivery of the checks to decedent without any express agreement warrants the presumption that the funds so delivered became her sole property. Code Civ.Proc. § 1963, subds. 8 and 12. Such presumption finds support in the facts that she kept the moneys, that she deposited them in her separate accounts, that during the three years that she held them respondent laid no claim thereto, and, finally, that he made no objection notwithstanding the fact that he and decedent had a bank account in joint tenancy.

It follows that inasmuch as the pleadings and the findings would support no conclusion other than that decedent held the moneys under an express trust, and since neither an express trust nor a resulting trust was proved, the judgment is wholly without support.

Notwithstanding the failure of respondent to establish an express trust as alleged we are not disposed to adjudicate the rights of the parties upon this technicality but now proceed to demonstrate that the finding that there was no fraud or undue influence on the part of respondent is not supported by the evidence.

That a relation of personal confidence obtained between decedent and respondent over a period of 12 years there is no doubt. In his complaint the latter alleged that ‘she had no children or descendants and lived alone during the greater portion of the time from 1931 to the date of her death in 1943; during such period said Gladys Isabel Ferres required assistance in the care and management of her property and affairs and also the companionship of others in relief from loneliness; that a feeling of high regard and great friendship arose between the said Glayds * * * on the one hand and this plaintiff and the members of his family on the other, and from about the year 1931 up to the date of her death this plaintiff constantly advised with and assisted said Gladys * * * in the care and management of her property and affairs. In addition thereto, said Gladys spent a large portion of her time visiting in the home of plaintiff; innumerable automobile trips were taken by her in company with plaintiff and members of his family, and said Gladys * * * was contacted almost daily by plaintiff or some member of his family in the performance of some service or other friendly act * * * from about the year 1931 up to the date of the death. * * *’

In its answer appellant alleged ‘that over a course of several years immediately prior to the death of decedent, plaintiff undertook to advise, and did advise decedent upon worldly as well as spiritual matters and particularly with respect to the use, management and disposition of her property and with respect to business transactions; and that as a result thereof a relation of personal confidence arose between plaintiff and decedent in fact and in law and such confidential relationship existed between them at all of the times referred to herein.’ The court found such allegation to be true.

The finding of the existence of such confidential relationship between decedent and respondent makes applicable the time-worn presumption (Civ.Code, sec. 2235) that if A, in whom confidence is reposed by B, actively participated in a transaction with B and gained some advantage such transaction is constructively fraudulent and is to be upheld only upon a showing of special circumstances. Even if there is only a possible benefit equity raises a presumption against its validity and casts upon the superior party the burden of proving affirmatively his compliance with equitable requisites and of thereby overcoming the presumption that the transaction was without sufficient consideration and under undue influence. Odell v. Moss, 130 Cal. 352, 357, 62 P. 555; Estate of Cover, 188 Cal. 133, 143, 204 P. 583. When a constructive trustee has actively participated in procuring the transfer to himself by one who has reposed confidence in him the burden is upon him to show that such transfer was not induced by his influence. Estate of Lances, 216 Cal. 397, 404, 14 P.2d 768; Allen v. Meyers, 5 Cal.2d 311, 314, 54 P.2d 450. Such transactions are constructively fraudulent, the burden is cast upon the superior party ‘to show fairness and good faith in all respects,’ and in order to sustain such transfer to himself he must allege and prove the fairness of the transaction. Johnson v. Clark, 7 Cal.2d 529, 535, 61 P.2d 767. A total lack or a gross inadequacy of consideration for a conveyance by one who has reposed confidence in the transferee is evidence of dishonesty in the transaction and should be considered under the ‘more modern and common sense concept of fair and honest dealing.’ Herbert v. Lankershim, 9 Cal.2d 409, 476, 71 P.2d 220, 253. The presumption of fraud and undue influence in such a transaction continues until it is dispelled by evidence produced by the trustee. Andrew v. Andrew, 51 Cal.App.2d 451, 455, 125 P.2d 47.

In the case at bar respondent did not assume the burden thus cast upon him to show that he paid anything for an interest in the Pierce stock, the $30,000 note or the $77,511 note. Neither did he show that he explained to Mrs. Ferres that she was making gifts to him or that she was under no obligation to him to make such gifts. No evidence was offered to prove that the influence of respondent was not used to obtain the interest. Not only did respondent decline to offer himself to make proof of his good faith but, so far as the record goes, during the years decedent visited in his home not a word was said by her to indicate her desire to compensate respondent for his kindnesses nor did he ever explain that such gifts would be gratuities. He made no attempt to explain that the transactions were fair or just or reasonable. Not only is the presumption conclusive evidence of the fraud and undue influence of respondent in the absence of proof to overcome it, but his failure to present any witness to rebut the presumption can mean nothing less than that whatever evidence was available to him would have been ‘adverse if produced.’ Code Civ.Proc. § 1963, subd. 5.

Also, there was no testimony that decedent heard the conversations in the Pierce office when respondent and Mr. Mark Pierce prepared the notes. She was deaf, wore a hearing aid and her auricular disability had grown progressively worse. In a long conversation she became ‘flustered, would get red in the face and seem to be incapable of taking in’ what was said. When the note for $77,511.48 was prepared the terms of the note were discussed only by Mr. Pierce and respondent; Mrs. Ferres said nothing. And it is not shown that she ever read either such note or the one for $30,000. Neither is there proof that she knew that they created estates in joint tenancy with respondent. No one told her so. In fact her name alone first appeared as payee in the larger note but was erased and both her name and respondent's as joint tenants were substituted. No proof was offered in explanation of such irregularity. Instead respondent urges that the presumptions of undue influence and failure of consideration (Civ.Code § 2235) must yield to the ‘countervailing presumptions' of a ‘good and sufficient transaction * * * private considerations have been fair and regular * * * a person intends the ordinary consequences of his voluntary act * * * the ordinary course of business has been followed’, citing Donovan v. Security-First National Bank, 67 Cal.App.2d 845, 853, 155 P.2d 856; Dimond v. Sanderson, 103 Cal. 97, 101, 37 P. 189.

But no presumption of validity arises from a written instrument which has been altered and whose execution is denied. Neither does such presumption arise if the writing is attacked. In the Donovan case the presumption of validity was applicable because the genuineness and due execution of the writing were admitted. In the case at bar the creation of a joint tenancy estate was denied. Moreover, the asserted ‘countervailing presumptions' apply only to the obligors and the obligees of a contract. There is nothing in any of them to overcome the rule of section 2235; nothing in them to show that respondent's influence over decedent was not used to gain the inclusion of his name as a joint tenant his any note or in the stock certificate. See Dimond v. Sanderson, supra. In the Donovan case the writings were signed by the parties against whom the presumption was invoked by the other party to the writing. But in the instant case Pierce, the maker of the notes in question, is not a party. In the absence of rebutting evidence the transfer of property to one in whom confidence is reposed is presumed to have been without consideration, and such presumption is paramount. McKay v. McKay, 184 Cal. 742, 195 P. 385.

In respondent's attempt to overcome the lack of evidence he argues that his confiding friend had knowledge of the joint tenancy phrase from her presumed possession of the trust deed which included a copy of the note. While the county recorder was instructed to mail to decedent the trust deed there was no offer to prove that such instruction had been followed. Such proof was as a matter of custom and procedure in the keeping of the county official and was of course available for the trial. But, at its best, argument does not suffice for evidence which is essential to overcome the presumption of undue influence. The mutual treatment by decedent and respondent of the payments made on the notes indicates that she was sole payee in both of them. Respondent received and conveyed the checks from Pierce, payable to Mrs. Ferres only, to be applied on the notes. He delivered them to her without a word of protest or of reservation of a right to any payment or of an interest in any payment. She said nothing about his having an interest in the checks but deposited them in her own bank account, notwithstanding there was extant a bank account in joint tenancy between them. That the checks for all payments were payable to her; that respondent in person made delivery thereof to her; that he failed to show that any part of the interest was received as his income or that only one half of it was applied to the income of respondent—these facts should have been proved by respondent to entitle him to recover. Such evidence wanting, it was incumbent upon the latter to explain its unavailability. In the absence of such proof it must be presumed that the evidence in the possession of respondent could not be reconciled with a joint tenancy.

Respondent never asserted his claim of joint tenancy in decedent's lifetime. In fact he did not advise Mr. Hibbard, decedent's counsel, until two days following her demise that the two notes were in joint tenancy. At that time he merely stated that he should receive the unpaid balance of the notes. His secrecy in such matter is itself a circumstance deserving of consideration as a further support of the presumption of fraud and undue influence in obtaining the notes to be made in joint tenancy. Longmire v. Kruger, 80 Cal.App. 230, 241, 251 P. 692. If he was her business manager and was rendering compensable services would it not have been the most likely occurrence for him to tell a friend or a member of his family? Such event would have been admissible to overcome the implications arising from his continuous silence prior to August 11, 1943. If she had intended him to take the total of the $77,511 and the prior payments on the $30,000 note at her death for his services, is it not a remarkable oversight, exuding grave inferences, that she did not nominate him as her executor whereby he might have supplemented his gifts with another $5,000 or more? He saw the opportunity and sought to take advantage of it by asking her attorney to change her will by naming him as executor. This inspired dream evidently gained no favorable reaction in the heart of Mrs. Ferres.

Finally, the zeal of respondent to profit from his association with the good lady and to gain advantage by her passing would have been proved by a more judicious ruling of the court. The executor offered to prove that on the afternoon of the very day of her death after he had accompanied her to the hospital respondent called at the bank at which the joint tenancy account was carried, withdrew the funds and made a deposit of the same moneys to the joint account of himself and his wife. The offer of proof included respondent's statement that Mrs. Ferres was then seriously ill in a hospital; that if she recovered he would restore the fund to the same account, and that he desired to withdraw the money to avoid difficulty. Such evidence was relevant to the issue of respondent's obligation to attempt to clear himself of fraud and undue influence, but was erroneously excluded. That in the final terrestrial hour of his benefactress he as her minister would leave her for the purpose of transferring money from an account which had previously been controlled and used by decedent only supports the statutory presumption (Civ.Code, § 2235) that he had unduly exercised his influence over her to gain the execution of the memorials of the joint tenancy.

In view of the sentiments above expressed discussion of the other assignments would be superfluous.

Since the finding of respondent's freedom from the exercise of fraud and undue influence and his claim of an express trust are without evidential support, the judgment is reversed with instructions to enter judgment in favor of appellant.

MOORE, Presiding Justice.

McCOMB and WILSON, JJ., concur.

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