Title Ins. & Tr. Co. v. Ingersoll

J.—The record before us presents appeals in two different cases bearing the same title. One is a case in the superior court of Los Angeles County numbered, in that court, 42,663. The other is a case, numbered, in that court, 48,027, which was begun during the pendency of the case first mentioned. The first mentioned case was before this court upon former appeals by the plaintiff from a judgment in favor of the defendant and from an order denying plaintiff’s motion for a new trial. That judgment and order were reversed because of the erroneous admission of evidence of the good character of the defendant (Title etc. Co. v. Ingersoll, 153 Cal. 1 , [ 94 Pac. 94 ].)

The first case involved the question of the investment by the defendant of certain moneys belonging to the separate estate of the deceased, who was his wife, and its principal objects appear to have been to impress a trust in her favor upon the property in which her money was invested, so far as it could be traced; to obtain an accounting from the defendant, as trustee, as to the disposition of the trust money, and the income and profits thereof; and a judgment for the amount of money intrusted to him and not identified and traced to specific property. In the course of the trial it was discovered that a certain part of the separate estate of the wife had been used to purchase a parcel of real estate, not described in the complaint, and thereupon the second suit was begun to establish a trust in behalf of the deceased as to an interest in that lot equal to the proportion which her part of the purchase money bore to the whole price thereof.

The two cases were consolidated and tried together. The judgment in each case was in favor of the plaintiff, and a new trial was denied. The defendant has appealed in each

The first action was begun on October 16, 1903, by Rosetta S. Ingersoll in her lifetime. On her death, the present plaintiff was substituted in her place. The defendant and the deceased were married in the year 1875, and continued in the relation of husband and wife until her death, which occurred on November 6, 1903. They never had any children. The complaint avers that during the marriage Rosetta S. Ingersoll received sums of money belonging to her separate estate, aggregating about thirty thousand dollars, all of which, with the consent and acquiescence of the said wife, was received by the husband and invested by him, in his own name, in trust for her use and benefit, in pursuance of an agreement and understanding between them that he should receive and hold said money and all property in which it might be invested, if invested in his name, in trust for her use and benefit. It was alleged that part of said money was invested by him in certain described real property, the title to which, in accordance with said agreement, was taken and still remains in his name, that other parts thereof have been invested by him in other property, the character and description of which is unknown to plaintiff, that he has received large sums as rents, issues, and profits of said separate estate in his control, that he has never rendered an account to plaintiff, and that a large amount of money is due her from him, arising out of her said funds. The judgment was that the plaintiff recover of the defendant the sums of money of the wife’s separate estate found to have been received by him in trust for her and not traced into any specific property, with compound interest at six per cent per annum thereon, amounting in the aggregate to $40,764.76, and costs of suit, and that he holds certain described bank stock in trust for her estate, that he account to the estate for the dividends received thereon and transfer •the stock to the plaintiff as executor thereof.

The defendant claims that the facts stated in the complaint do not authorize a personal judgment against the defendant. The complaint alleged that a large amount of money was due the plaintiff from the defendant. No point being made to the effect that a matured claim was not stated, this allegation, in connection with the other averments above given is sufficient

It is not a case where the plaintiff is required to elect between a suit in equity to trace trust property and recover it in specie, and an action to recover a personal judgment for' the amount of trust funds converted by a trustee. In cases against an estate of a decedent in course of administration this necessity sometimes arises, because an action to declare certain property, held by the decedent in his own name, the property of the plaintiff, as beneficiary of a trust imposed on the decedent, is not, technically considered, an action upon a claim

The defendant contends that the evidence is insufficient to establish the finding that the money of his wife’s separate estate was received by him in pursuance of an agreement or understanding that he was to hold and invest it for her use.

Upon this point, in the decision upon the former appeal, it was said that the mere acquirement of the possession of the wife’s separate property by the husband and his subsequent management and control of the same, all with her consent, do not necessarily show an intent on her part to make a gift thereof to the husband, or to change its status to community property, but that the effect of these facts, without explanation, was to raise a presumption that it continues to be her separate property and that the husband takes it in trust for her; that it devolves on the husband who claims that it is a gift or loan, to prove the fact, but that this may be done by a showing of the nature of the transaction and the circumstances as well as by proof of an express agreement. ( 153

It is insisted by the appellant, however, that the cases cited in the former opinion all relate to involuntary trusts, that the principle of evidence established thereby has no application to express trusts, that the only trust claimed to exist in the ease at bar is an express trust, since if an involuntary trust, only, is shown, the plaintiff’s action is clearly barred by the statute of limitations. We cannot agree with' this contention. Where a wife commits money of her separate estate to the custody and control of her husband, upon his agreement that he will keep it for her and invest it for her use in his own name, the trust established by the transaction is an express trust. The substance of the rule stated in the former opinion is that when proof is made of the circumstances stated, namely, that she committed her money to his keeping and control and that he subsequently managed and controlled it, all with her consent, these circumstances unexplained, raise an inference that there was an agreement between the two that he should take care of it for her and

The finding of the court implies that the defendant did not succeed in showing that the money of his wife was received by him as a gift or loan from her to him, or as a contribution from her to the community estate; that the evidence in his behalf did not rebut the aforesaid presumption. We cannot say that the evidence was of such a character as to compel the conclusion that such a gift, loan, or contribution was made by her. Aside from his express denials, it is much more consistent with the inference made by the court that there was an agreement by him to hold it in trust for her. In his own testimony, which was extended to great length and occupied many days’ time in the giving, he does not mention any word or act of his wife indicating any intention on her part to make a loan to him, or a gift either to him or to the community estate. In the absence of such intent the law would make him her custodian or trustee and the equitable title to the (property would remain in her. The relations of the parties and their conduct with respect to her money justified the court in preferring the inference that the understanding was that he was to act as trustee for her in the management and disposition of it. He expressly denied that there ever was any such understanding or agreement between them. But his conduct as a witness, so far as we can judge from the record, was such that the court may have discredited him on all points wherein his testimony was in his own favor if the conditions were such that contradictory evidence could not be produced. The court was so impressed by this conduct that it made a finding stating that upon the trial he had “willfully and knowingly given false testimony concerning matters material to the issue.” There was some evidence in support of this statement, and, although it is not a material finding, it; shows that the court applied the doctrine that “a witness-false in one part of his testimony is to be distrusted in others.” (Code Civ. Proc., sec. 2061.) Our conclusion is

Appellant contends that even if the evidence would have been sufficient in an ordinary case, it is not of the clear and convincing character necessary to establish a parol trust, or to overcome the presumption that the property was community property. The proof that the money, when received, was her separate estate, was positive and indisputable. With respect to the trust it was not so strong. But upon a case of this kind, as in others, the question whether the proof is sufficiently strong and convincing is primarily addressed to the trial court, “and this court must accept the determination of the trial court thereon as conclusive.” (Brison v. Brison, 90 Cal. 334 , [ 27 Pac. 186 ] ; Couts v. Winston, 153 Cal. 688 , [ 96 Pac. 357 ] ; Wadleigh v. Phelps, 149 Cal. 637 , [ 87 Pac. 93 ].) The rule “does not mean that the evidence in the record must be entirely plain and convincing to an appellate court. ... It will not disturb the finding of the trial court . . . where there is substantial evidence warranting a clear and satisfactory conviction to that effect.” (Wadleigh v. Phelps, 149 Cal. 637 , [ 87 Pac. 93 ].) We cannot here give a statement of all the evidence upon which the trial court gave its decision. It was doubtless based in part on the demeanor of the defendant as a witness on the trial. It is sufficient to say that we cannot say that the trial court disregarded this rule in making its findings, (Mahoney v. Bostwick, 96 Cal. 58 , [ 31 Am. St. Rep. 175 , 30 Pac. 1020 ]), and that, considering the obligations of the husband to the wife, the decision does not appear to be unjust.

The fact that the trust money was in part commingled with the community property so as to destroy its specific identity does not necessarily destroy the trust as to that part, nor prevent its enforcement. It prevents the court from tracing it and declaring any specific parcel of property to be trust property, but the trust may still be enforced by a personal judgment against the husband for the amount of money not traceable into specific parcels. (Lathrop v. Bampton, 31 Cal. 23 , [ 89 Am. Dec. 141 ].) The cases cited by the appellant, Dimmick v. Dimmick, 95 Cal. 323 , [ 30 Pac. 547 ] ; Reid v. Reid, 112 Cal. 278 , [ 44 Pac. 564 ] ; Estate of Boody, 113 Cal. 686 , [ 45 Pac. 858 ] ; Davis v. Green, 122 Cal. 366 , [ 55 Pac. 9 ] ;

We do not find anything in the decision in Elmore v. Elmore, 114 Cal. 516 , [ 46 Pac. 458 ], that is inconsistent with our conclusions here. In that case the facts found showed that there was no trust relation, as alleged, and the decision merely holds that a personal judgment as for money had and received, in a case based on a complaint to enforce a trust, was a judgment upon a cause of action not alleged. - The question of the proper form of judgment and the relief to be given in an action for an accounting was not discussed.

The defense of the statute of limitations is made and it is also claimed that the action is barred by laches. These defenses are necessarily based on the proposition that the trust alleged and found was an involuntary trust, and that, consequently, the statute of limitations began to run as soon as the trust arose. But it is apparent from the allegations, the findings and the evidence, that if there was any trust at all in favor of the wife, it was an express trust. The husband was to take her money, keep it for her, invest it for her, and apply

We have discussed and decided the preceding propositions arising in the original case, because they are either necessary to the present disposition of it, or will probably again arise upon a new trial in the court below. We now come to an objection which makes it necessary to reverse the judgment in part.

The court found that the defendant had received, of his wife’s money, in trust, the sum of $20,972.44. Of this $1,590 was accounted for by showing that it was used to buy certain specific property as to which the court declared a trust in her favor. The balance of $19,382.44 remained, and there is no finding that any of it was used to buy any specific parcel of property held by the defendant. Upon this balance the court computed and charged to the defendant compound interest at six per cent per annum upon each sum received from the date it was received to July 31, 1909, the date of the judgment. This interest amounted to $21,382.32, and together

The only reasonable deduction from these facts is that his-separate estate and the community earnings must have contributed at least as much to the accumulation of the property held by him and in his name at the time the action was begun as did the money received by him from his wife. But the court further finds that, at the time the suit was begun, the only property of any character held by the defendant, or in which he had any interest, consisted of seven parcels of real estate, nine certificates of stock in various banks and $226.79 in money, and that for the real estate and stocks he had paid prices amounting in the aggregate to $36,620. In this list of

There is no finding nor evidence that the property in which it was found to be invested had increased in value after it was purchased. There is no averment or claim that the defendant had been guilty of any fraud or wrongdoing, or that he had mismanaged, misused, or squandered any of the money, either his own or that of his wife. The evidence shows that in addition to the six hundred dollars a year for living expenses there were other expenses, such as traveling expenses of the wife upon trips to the east and in California, and expenses of carrying on his farms and business, all of which were paid out of his income, but in the above estimate of net community contributions to the capital we have made ample allowances and deductions for these additional expenses.

The necessary conclusion is that the defendant did not obtain from his investments of the wife’s money a profit equal to six per cent per annum compound interest. The case made by the record does not authorize such a charge. A charge of compound interest, or simple interest, is authorized where the transactions are of such a nature that it is extremely difficult or impracticable to ascertain with any degree of certainty what profit was realized from the trust fund. (Estate of Clark, 53 Cal. 359 .) It is not made for the purpose of punishing the trustee, but to enforce the principle of equity that the trustee shall not be permitted to make any profit from

Prom these statements of the underlying reasons of the rule allowing interest in such cases it is plain that where the trustee has, in fact, prudently invested and managed the trust funds, although mingled and confused with his own money, the rule that he is to be charged with interest thereon upon an accounting rests principally, if not entirely, on his neglect in failing to keep accurate accounts and on the fact that by his neglect the actual profits realized have been made difficult to ascertain. When the trustee, notwithstanding his failure to keep the trust funds separate from his own, is able to show that the mingled fund was well managed and wisely invested and what the profits are, or that the profits actually made do not exceed a certain amount, all the reasons for imposing a charge of interest exceeding such profits are wanting, and justice requires that the charge be limited to the equivalent of the gains actually made. It is conceded in this case that the defendant was economical, prudent, energetic and thrifty in the management and investment of these funds and his own in common. As he has shown to the satisfaction of the court that the investments did not produce the interest charged, it follows that the charge was excessive and should not have been made.

In this connection and as a further reason for rejecting the charge of interest in excess of the actual profits shown, it is to be observed that the defendant, in thus mixing his wife’s money with his own, did not violate the trust proven. She gave the money to him for the very purpose of having him deposit it with his own in the bank account kept in his name or in the names of both of them, and with the intention that

In addition to the findings in the first case showing the receipt of his wife’s moneys which the court was unable to trace into any specific parcel of property, and on account of which

The matter involved in the second case, numbered 48,027 in the superior court, was the purchase by the defendant of a certain lot on Maple Avenue in the city of Los Angeles. It was clearly proven that the price was one thousand seven hundred and fifty dollars and that eight hundred and forty dollars of the identical money out of which the price was paid had just been received by the defendant from money belonging to her separate estate, and that it was received upon the same terms and understanding as the other moneys received by him from that source. The court found and adjudged that her estate was the equitable owner of twelve twenty-fifths of this lot and directed a conveyance thereof to the plaintiff as executor of the estate. This finding and judgment was clearly correct. Payment of a part of the price by him with her money held in trust by him, was the same, in legal effect, as between the parties, as a payment by her. It created a resulting trust in her favor for an interest which equaled her proportion of the price. (Moultrie v. Wright, 154 Cal. 523 , [ 98 Pac. 257 ], and cases there cited.)

Our conclusion on the respective appeals is that the judgment in the first action, in so far as it declares and enforces a trust in respect to the ten shares of stock in the First National Bank of Monrovia, purchased by defendant on December 18, 1891, should be affirmed; that the judgment and order appealed from in the case numbered 48,027 in the superior court of Los Angeles County should be affirmed; that the personal judgment in the first action should be reversed and that a new trial should be granted as to a part of the issues relating thereto, but not as to all. The case has been

Inasmuch as the question may arise upon the trial of these issues, it is necessary to say something upon the subject of the liability of a husband for the maintenance of his wife. The law imposes on him the duty to maintain his wife. (Chaffee v. Browne, 109 Cal. 219 , [ 41 Pac. 1028 ] ; Bashore v. Parker, 145 Cal. 530 , [ 80 Pac. 707 ].) This means that it is his duty to furnish her money to pay such of the living expenses as he leaves it to her to look after, or to pay them himself. In the absence of evidence showing the fund from which he paid these expenses, it will be presumed to be of community funds,

The judgment and order appealed from in case numbered 48,027, in the superior court, being case L. A. No. 2660 in this court, are affirmed. The judgment and order in the other case, so far as they relate to the aforesaid ten shares of stock in the First National Bank of Monrovia, are affirmed. The personal judgment for $40,764.76 is reversed and the order denying a new trial is reversed as to a part of the issues only as hereinbefore indicated, and otherwise it is affirmed. The cause is remanded and the superior court is directed to try the issues only so far as may be necessary to determine how much should be allowed to the plaintiff in lieu of profits received by defendant in the investment and use of her money in his own name, or .her just proportion or interest in the property on hand at the time the action was begun, or its subsequent transmutations, if that method shall be deemed more just, advisable, and convenient.

The appellant shall recover only one half the costs of appeal.

Angellotti, J., and Sloss, J., concurred.

Hearing in Bank denied.