HUBER v. HUBER (1945)

The judgment appealed from awarded plaintiff a divorce and $3,000 as alimony, payable at the rate of $75 per month; it also declared that four parcels of residential property which stood in joint tenancy and a fifth which had been sold by the parties were the separate property of defendant. Plaintiff has appealed from that part of the judgment which denied her the interest of a joint tenant in the property. She changes the sufficient of the evidence to support the findings upon that issue.

Plaintiffs alleged that the five properties were owned by the parties as joint tenants and that the rents, issues, and profits therefrom were community property, as well as certain personal property and cash in bank. Defendant in his answer alleged ‘that the properties were placed in the joint name of plaintiff and defendant in order to facilitate administration of his estate in the event that the defendant should die and for no other reason whatsoever.’ He filed a cross-complaint praying for a divorce and a judgment that the properties were his separate property, and he alleged ‘That following the marriage of the parties hereto and for the purpose of protecting the cross-defendant herein in the event of the death of cross-complaint and for no other reason, there was placed in joint tenancy certain property purchased out of the separate funds of the cross-complainant’ (describing the five properties).

No facts were alleged which would justify a reformation of the joint tenancy deeds, and defendant did not allege any agreement that the properties were to the held for his use and benefit or as his separate property. Plaintiff did not allege that community funds had been used to purchase them; in her answer to the cross-complaint she did not deny that the properties had been purchased from the separate funds of defendant, but the action was tried as if there were an issue as to whether community funds also had been used. No objection was made to the sufficiency of the pleadings and they appear to have been regarded as adequate to put in issue all matters in controversy between the parties and to support any judgment which the facts might justify. Plaintiff's notice of appeal also should be regarded as sufficient to call for a review of the determination that there had been no accumulation of community property. The judgment did not declare that there was no community property, but a provision to that effect must be read into the judgment when it is considered with the finding that there was no community property. The evidence as to the existence of community property is inextricably involved in a consideration of the evidence as to the source of the funds which went into the real property. The finding that there was no community property and the finding that the real property was purchased with the separate property of the husband must stand or fall together.

The parties married December 31, 1937, and lived together a little more than five years. The properties were acquired at different times within that period and required an initial outlay of $20,852.75. The court found (1) that they were purchased with defendant's separate funds, and (2) that ‘while defendant caused said properties to be conveyed to the plaintiff and the defendant as joint tenants, he did so as a mere matter of convenience to himself and in order that title would, as he believed, pass to plaintiff one-half of said properties upon his death if he did not otherwise direct in his lifetime * * * that defendant did not intent to vest any present interest in said properties in the plaintiff and that she was fully conversant with that fact,’ and (3) that there was no community property ‘except of a most nominal value.’

The primary question is whether there was evidence to support the finding that there was no community property. If there was community property at the time of the trial, plaintiff was entitled to not less than one-half of it; if the parties had accumulated community property it would have been necessary for defendant to prove that none of it was used in the purchase of the real estate. We are satisfied that there was not sufficient evidence to sustain the finding that there was no community property. Furthermore, as we shall point out, the undisputed evidence that a substantial amount of community funds came into the hands of defendant and the complete failure of defendant to account for more than a small part of them render it impossible for us to uphold the finding that all of the real property was purchased with defendant's separate funds.

Defendant's theory of the case was that he caused the property to be placed in joint tenancy as the result of a mistake as to the effect of the deeds. His testimony will be referred to later. It is sufficient to say here that he did not allege or testify to, nor did not the court find, that there was a mutual mistake of plaintiff and defendant as to the effect of the deeds. Plaintiff contends that the deeds could not be reformed, and that no other relief could be granted defendant which would affect her title as a joint tenant, except upon evidence of a mutual mistaken (Civil Code, sec. 3399), or evidence of an agreement between the parties that, while the title stood in joint tenancy, the interests of the parties would be other than those of joint tenants. See Tomaier v. Tomaier, 1944, 23 Cal.2d 754, 146 P.2d 905. She contends that there was no evidence of a mutual mistake and no evidence of an agreement, and with this we agree. Her argument assumes that a large amount of community funds went into the real property. If this were true, plaintiff's title as a joint tenant would be good, in the absence of proof of a mutual mistake or an agreement giving some other meaning and effect to the deeds. Defendant could not convert community funds into his separate property except by agreement with his wife.

A study of the transcript and an analysis of the exhibits has failed to disclose evidence to support the finding that the parties had no community property except of nominal value. The testimony upon the property issue was given by defendant and his accountant. The deductions which we make from the evidence with reference to the community income from defendant's business are based upon the testimony of the accountant and an explanatory analysis filed as an exhibit. Defendant, who was a customs broker with an established business, drew a salary, for four years following the marriage, of $300 a month, or a total of $14,400. He testified that he spent some $80 to $90 a month to maintain the household and that he paid $500 for an automobile for plaintiff, and plaintiff testified that defendant had bought her clothes to the amount of $36. Defendant did not otherwise account for the salary which he had drawn. He did not testify to the expenditure of more than $6,000 for the benefit of the community nor attempt to explain what became of the rest of his salary. Plaintiff contends that the balance of some $8,000 must have gone into the purchase of the real estate, but there was no evidence that it was used for this purpose, although we think there was no sufficient evidence to prove that none of it was so used. If we take the account's figures of defendant's over-all worth at the time of the marriage and at a time shortly before the time of trial, we find that they summarize as follows; at the time of the marriage defendant had cash in his business of approximately $15,000. He also had one savings account of $13,531.53 and another savings account of $522.58. The net profits of the business for the five-year period were $15.933.94. (The accountant arrived at this amount of net profits after allowing defendant 4 per cent interest upon his capital invested on the business.) Upon the record before us, the earnings that remained must be considered to be the value of defendant's services to the business, since he ran a strictly one-man business; they would therefore be community property. Witascheck v. Witascheck, 1942, 56 Cal.App.2d 277, 132 P.2d 600. There was prima facie proof of these facts as to earnings. They were shown on the accountant's summary, and as there was no evidence to the contrary, they constituted the only evidence as to the net income from the business. In computing the net income the accountant had charged to expense only $150 per month as defendant's salary, the remainer of $150 per month was reflected in his figures as earnings. Therefore, $7,200 should be added to the accountant's figure of net earnings, which gives an amount of community earnings, including salary, of $23,133.94 for the five-year period. These several figures total $52,188.05 as the amount of defendant's separate property and the community funds which he received. (We assume that the net profits from the five parcels of real estate were included in the earnings of the business, since the real estate was carried as a fixed asset of the business. These, however, amounted to only $3,925.28, according to the accountant, and if this amount should be deducted from $23,133.94, the earnings which, prima facie, belonged to the community, they would be reduced to $19,208.66, and the total figure to $48,262.77.) Defendant testified that he paid $20,852.75 for the real estate and that he expended some $6,000 for the benefit of the community and approximately $1,868.83 in repairs and improvements on the real property; he had in bank in May of 1943 $8,769.45. These figures total $37,491.03. This amount, deducted from $48,262.77, leaves $10,771.74. The record does not contain evidence from which it is possible to reconcile these two figures, namely, the total amount of defendant's total assets, separate and community, as stated, and the amount of $37,491.03 for which he accounted. We have examined the evidence from another viewpoint but without any better results. According to the figures of the accountant, the net worth of defendant's business on December 31, 1937, was $15,420.92, and in July of 1943 was shown to be only $27,728.84, inclusive of the real estate, and it is impossible from the evidence to reconcile the latter figure with defendant's worth at the time of his marriage plus the unexplended amount of his earnings during marriage. We quote the above figures and those which follow to show the inadequacy of the evidence, from any standpoint, to support the findings upon the property issues. A study of the analysis which the accountant made of defendant's business does not furnish an answer as to the secure of the funds which which the real property was purchased. It appears therefrom that it defendant had used capital from his business, as well as other separate funds, for the purchase of the property, the cash capital of the business would have been reduced to $8,860.02. The summary was purely theoretical and not evidence of any fact in issue. The transcripts of defendant's savings accounts, which were his separate property, were in evidence; they showed the state of the account during the period in which the property was purchased but nothing as to the sources of the funds that were added from time to time after marriage, or the uses that were made of the money. There was uncontradicted evidence that defendant had separate property in his business and in his savings accounts amounting to $8,000 or $9,000 more than the cost of the properties. He testified that all of the money that went into the real estate was his separate property. He checked out all of the money in the savings accounts but he did not explain how it was expended. His total withdrawals from the Farmers and Merchants' account amounted to $18,029.57, which was less than the cost of the property. Such withdrawals also exceeded the original savings accounts by $4,498.04, which had been added to the accounts, after marriage, in 21 separate deposits. It was not shown where this money came from and there was no evidence that any part of it represented income from the real property. The cost of the properties exceeded by $6,799.64 the savings accounts which defendant had at the time of his marriage. Other than the original savings accounts, defendant kept no separate account of his separate or community funds. His salary and the rentals from the property went into a single account in the Beverly Hills bank. The $4,498.04 that was added to the Farmers and Merchants' account necessarily came from an account in which separate and community funds were commingled, since it was not shown that defendant had any other account. If there had been evidence that all the community funds had been expended for the benefit of the community, it would necessarily have followed that the real estate had been purchased with defendant's separate funds. But when there was such a great discrepancy between the amount of community funds which defendant received and those which he accounted for, he was not entitled to a finding that the real estate had been purchased with his separate funds. Such a finding cannot stand except upon clear and convincing proof that such was the fact. It was not incumbent upon plaintiff to prove that community funds were used in the purchase of the real estate. She held title as a joint tenant and defendant was attacking the deeds. He had two burdens to carry: one was to account for the community funds which had come into his hands, and the other was to prove by clear and convincing evidence every fact which was essential to justify a reformation of the deeds. Since he did not allege or prove a mutual mistake or an agreement with plaintiff, it was necessary, in order to establish his own theory of the case, for him to prove that the deeds were made under a mistake upon his part which would justify their reformation, and further that his separate property alone had been used in purchasing the real estate. As will appear hereinafter, there was a material variance between the proof and the finding upon the question of mistake and we are therefore not considering the sufficiency of the evidence to prove a mistake justifying equitable relief. We have shown the insufficiency of the evidence to support the finding that the funds used in the purchase of the property were the separate property of defendant. The law requires exact proof to support a claim that a deed was not intended to convey the title which it purports to convey. The proof that will justify reformation of a deed ‘must be clear and convincing, and not loose, equivocal, or contradictory, having the mistake open to doubt.’ Burt v. Los Angeles Olive Growers' Ass'n, 1917, 175 Cal. 668, at page 675, 166 P. 993, 996. Defendant produced no checks which were used in the purchase of the property nor did he give any satisfactory explanation as to the source of all of the funds that were used therein. Even if the original amounts in his savings accounts were used for that purpose, there was still an additional $4,498.04 that may have come from community funds. Defendant had knowledge as to the source of the funds that were added to his principal savings account and was under a duty to account for the community funds. Something more was required of him than his mere unsupported statement that the money used was his separate property. The issues were difficult ones to try and the court was entitled to the most complete and explicit proof which was available.

In another view of the case, the finding that the real estate was the separate property of defendant cannot be sustained. This finding of ultimate fact was based upon the finding of a particular mistake on the part of defendant as to the effect of the joint tenancy deeds, which, as we shall point out, was not sustained by the evidence.

By his cross-complaint defendant alleged that he knowingly and intentionally caused the property to be placed in joint tenancy. The fact that his alleged purpose was to facilitate the administration of his estate and to protect plaintiff in the event of his death did not militate against the effectiveness of the deeds. He alleged no mistake as to the effect of the deeds or other facts which would give him the right to recall or limit any interest which they vested in plaintiff. In other words, his cross-complaint stated no cause of action for annulment or reformation of the deeds, or for the declaration of a trust. He testified that he did not intend that plaintiff should have any present interest in the properties and that he believed that under the deeds she would take only a half interest in the event that he was married to her at the time of his death. (We note that he was not questioned as to what he believed his interest would be if he survived plaintiff.) He also testified that after he had paid the money in the first purchase, he told plaintiff that he had arranted it so that she would get a half interest in the property if they remained married at the time of his death, and that he had made no statement to her in connection with any of the other purchases. He did not testify that plaintiff made any reply to his alleged remark and plaintiff was not questioned about it. There was no evidence that plaintiff believed or understood that she was acquiring no present interest in the property. The finding was that defendant intended for plaintiff to have a half interest in the event of his death if he did not during his lifetime direct otherwise. Defendant's testimony with respect to his intentions did not conform to the allegations of his cross-complaint, but was received without objection. The finding as to his intentions did not conform to and was not supported by his testimony. Evidently he intended plaintiff to have some interest in the properties. His testimony was that it was a future interest, conditional upon the existence of the marriage to the time of his death, but the finding was that he had a different intention. There was no evidence to support the finding that defendant caused the property to be placed in joint tenancy with the mental reservation that plaintiff's interest would terminate altogether if he should, during his lifetime, ‘direct otherwise.’ There was no evidence that he had that understanding as to the effect of the joint tenancy deeds. There is a patent and serious uncertainty in the finding as to the nature of defendant's act which would terminate plaintiff's interest, but we need not discuss that point.

The effect of the judgment was to declare the deeds valid as to defendant but void as to any interest of the plaintiff. But the deeds were not void. Defendant knowingly caused the properties to be placed in joint tenancy and the deeds were valid even if subject to reformation as between the grantees.

The finding that there was no community property except of nominal value, and the finding as to defendant's intention and his understanding of the effect of the deeds, are not supported by the evidence. The judgment must be reversed for the reasons stated. No question has been raised on the appeal as to the sufficiency of the findings to support the judgment and we therefore express no opinion on that point.

The judgment is reversed, except as to the provision which awards plaintiff a divorce, attorney's fees and costs.

SHINN, Justice.

DESMOND, P. J., and PARKER WOOD, J., concur.