Berniker v. Berniker

By her original complaint, plaintiff sought separate maintenance from her husband, Barnett Berniker, and a diyision of the community property. In pursuance of this latter purpose, plaintiff joined her father-in-law, Nathan Berniker, as a defendant upon allegations that he held such property in his name and that her husband had so placed it

An interlocutory decree of divorce was granted to plaintiff, awarding to her one-half of the community property and directing Nathan Berniker to transfer and assign to her an undivided one-half interest in the specified “ladies’ ready-to-wear business,” “the lease,” and “the bank account.” The propriety of this adjudication is challenged only by defendant Nathan Berniker, who has appealed from the entire judgment except that portion granting a divorce to plaintiff.

As grounds for reversal appellant contends: (1) that the evidence was not sufficient to sustain the findings as to community property; (2) that the trial court erred in establishing a trust in favor of respondent; (3) that respondent’s claim was barred by the statute of limitations and by laches; and (4) that appellant in any event should be allowed credit for money invested by him in the business. The record does not support appellant on any of these points.

Respondent and defendant Barnett Berniker were married in 1927. For some years after the marriage he worked in Los

There is a sharp conflict in the evidence as to whether appellant purchased the Santa Monica store with his own funds or with money furnished by Barnett Berniker. Appellant is a retired building contractor without knowledge of or experience in retail merchandising of wearing apparel. He and Barnett Berniker testified that the business was bought with appellant’s personal funds, and that following the purchase, Barnett Berniker was placed in charge of the store as manager for appellant. On the other hand, respondent testified that she saw her husband, Barnett Berniker, give appellant the purchase money as part of the arrangement for appellant “to bid in” the store at the public sale, and that after the store was so acquired, her husband conducted it as his own personal business. While respondent added that the purchase money so given appellant by her husband represented part of the proceeds of the sale of the Hollywood store, this statement conflicts with the testimony of the attorney acting as the escrow holder upon such sale that “all” the proceeds thereof were used to pay creditors of the corporation. The parties to this appeal have since stipulated concerning this discrepancy, which stipulation is in accord with the testimony of the attorney, who was called as a witness for the defense. But this same attorney also acted as “ attorney for the assignee of

The finances of the business were handled through the bank account which is in controversy here. During the years following appellant’s purchase of the Santa Monica store, the enterprise proved to be a successful one, with a gross annual business for the years 1943 and 1944, ranging from $75,000 to $100,000 and net profits for the respective years fixed at $5,900 and $6,900. Appellant testified that he gave the net profits to Barnett Berniker. Appellant knew nothing about the operation of the store; he did not know the amount of the sales made for cash and the amount on credit. Barnett Berniker hired and discharged the employees and paid bills for gas, electricity and other expenses of the business. Not until after the commencement of this action was any social security, withholding tax or unemployment insurance withheld on account of Barnett Berniker.

Appellant argues that by reason of discrepancies found in respondent’s statements and by reason of testimony adduced

Nor is there merit to the claim that considerations of fraud vitiate the propriety of the trial court’s establishment of a trust in favor of respondent' with respect to the community property. In her original complaint for separate maintenance, respondent charged that her husband, Barnett Berniker, had placed the community property in the name of his father, Nathan Berniker, “in order to defeat the claims of judgment creditors.” Relative to that allegation, respondent testified that when her husband gave to his father the money with which to purchase the Santa Monica store, he stated to the latter in her presence that he could not have “the business in [his] name on account of the bankruptcy and on account of the creditors.” Both appellant and Barnett Berniker, in their joint answer and at the trial, denied that the property holding in question was in any way related to an attempt to “defraud creditors.” Then respondent filed at the conclusion of the trial an amended complaint for divorce, wherein she merely alleged that the community property stood in the name of appellant, Nathan Berniker, but that he “has no right, title, or interest therein other than and except the naked legal title as trustee for” respondent and her husband, Barnett Berniker. Of significance in the amended complaint is the absence of any reference to the reason or purpose motivating appellant’s alleged trusteeship. The amended pleading superseded the original complaint; it was expressly filed “to conform to the proof”; the trial court made its findings in response thereto and declared a trust in respondent’s favor as to an “undivided one-half interest” in the community property. However, despite this agreement of the parties, through their pleadings, that no element of fraud entered into the transaction in question and the consequent elimination of that issue in the determination of this case, appellant now argues that respondent is not entitled to relief because she does not come into court with clean hands. He cites respondent’s above-mentioned testimony as establishing her as a party to a fraudulent property arrangement, and he invokes the rule stated in 12 California Jurisprudence 1026 that “One who has transferred his property

It must be remembered here that the transfer in question concerned “community personal property” as to which respondent’s husband had “the management and control,” with “absolute power of disposition,” provided that he did not make a gift thereof nor dispose of it without a valuable consideration. (Civ. Code, § 172.) Within the purport of this statutory provision, respondent was in no position to interfere with or prevent her husband’s use of community funds to effect a property holding in appellant’s name though such arrangement stemmed from a plan to “defraud creditors” and she had knowledge of such fraudulent purpose. Wholly distinguishable from such situation are eases cited by appellant on the proposition that a transferor will be denied relief in equity against his own conveyance in fraud of creditors. (Tognazzi v. Wilhelm, 6 Cal.2d 123 , 125 [ 56 P.2d 1227 ]; Withrow v. National Surety Co., 122 Cal.App. 242 , 245 [ 10 P.2d 83 ]; Morrison v. Willhoit, supra, 62 Cal.App.2d 830 , 837; Taylor v. Bank of America, 67 Cal.App.2d 59 , 67 [ 153 P.2d 617 ]; see, also, Allstead v. Laumeister, 16 Cal.App. 59 , 65-66 [ 116 P. 296 ].) Nor does the case of Saint v. Saint, 120 Cal.App. 15 [ 7 P.2d 374 ], appear “so similar in its fundamental facts” as to fortify appellant’s argument. There the wife, after her husband’s death, sought a reconveyance of his interest in his father’s estate which he had transferred to certain members of his family “for the purpose and with the intent of putting whatever property he might inherit . . . beyond the reach of his creditors. ’ ’ In denying her relief the court said at page 22: “ She could no more assert title to the property than could he [her husband], regardless of whether or not she knew of the fraud. The original transaction, being fraudulent, remains tainted not only to the parties to the transaction, but as to all persons claiming under them. ...” But here respondent is not asserting a claim to her husband’s separate property so that she would be bound by his fraudulent acts; rather, she is seeking to establish a trust in connection with “community property,” in which “the respective interests of the husband and wife . . . during continuance of the marriage relation are present, existing and equal. ...” (Civ. Code, § 161a.) Her lawful interest in the

Likewise without force is appellant’s assertion that respondent’s recovery is barred by the “statute of limitations” and by “laches.” The Santa Monica store was purchased in the name of appellant in “July or the early part of August, 1938.” This action was commenced in January, 1945. In his amended answer appellant pleaded the 3-year statute of limitations. (Code Civ. Proc., § 338, subds. 3 and 4.) The trial court resolved the conflict between the parties in accordance with respondent’s claim that her husband gave to appellant community funds which the latter was to use, and did use, in purchasing the Santa Monica business. While the trial court did not classify the trust thereupon found to exist in respondent’s favor, the accredited evidence clearly stamps it as a voluntary resulting trust, continuing in nature as reflecting the intention of the parties at the time of its creation. (Bainbridge v. Stoner, 16 Cal.2d 423 , 428 [ 106 P.2d 423 ].) Speaking to this point, the court said in Lezinsky v. Mason Malt W. D. Co., 185 Cal. 240 , at page 251 [ 196 P. 884 ] : “A resulting trust is not founded on the simple fact that money or property of one has been used by another to purchase property. It is founded on a relationship between the two, on the fact that as between them, consciously and intentionally, one has advanced the consideration wherewith to make a purchase in the name of the other. The trust arises because it is the natural presumption in such a case that it was their intention that the ostensible purchaser should acquire and hold the property for the one with whose means it was acquired.” In the absence of a repudiation by the

The record shows that prior to the commencement of this action there never had been a demand upon appellant to account for or to convey .the property to the rightful owners and he had never repudiated his trust until he filed his answer herein. On the contrary, as the evidence is above reviewed, appellant acknowledged upon various occasions that he did not want the Santa Monica business in his name, that it did not belong to him but to his son, Barnett Berniker. Moreover, appellant was never in possession of the store. Rather, Barnett Berniker was in possession and conducted the business in the same manner as if he had always owned it. No one else ever had charge of it. The statute of limitations never runs in favor of a trustee as against the beneficiary while the latter is in possession of the property. (Gilbert v. Sleeper, 71 Cal. 290 , 294 [ 12 P. 172 ] ; McClure v. Colyear, 80 Cal. 378 , 380-381 [ 22 P. 175 ]; Peixouto v. Peixouto, 40 Cal.App. 782 , 786 [ 181 P. 830 ].) Material in this connection is the fact that inasmuch as her husband was in possession and had sole charge of the Santa Monica business, there appears to have been no reason for a demand by respondent that appellant transfer the legal title of the property to her and her husband. The occasion for such demand did not arise until conditions caused respondent to institute this action and to advance her claim for a share in the community property.

Nor is the defense of laches available here, for it is plain that no legal prejudice was caused to appellant by reason of the delay in making a demand nor by reason of the non-enforcement of the trust. (Title Insurance & Trust Co. v. Ingersoll, 158 Cal. 474 , 486 [ 111 P. 360 ].) Moreover, the facts and circumstances of this case suggest other grounds for the rejection of the doctrine of laches: It is not applied strictly between near, relatives (Butler v. Hyland, 89 Cal. 575 ,

Finally, to be considered is appellant’s claim of a “right to reimbursement” as a trustee who has expended moneys in the management of a trust estate. (Perry on Trusts and Trustees, 7th ed., vol. II, § 913.) Appellant argues that he advanced several thousand dollars of his personal funds for improvements in the Santa Monica store and for the purchase of merchandise, for which investments he seeks credit before a division of the trust property is made between respondent and her husband, Barnett Berniker. This matter of accounting was first raised by appellant in his opening brief and was not answered by respondent. But the mere fact that respondent did not discuss such belated demand by appellant is no reason for allowing it nor for holding that respondent has thereby confessed the point, and the cases cited by appellant do not so hold. Thus, Campbell v. Ingram, 37 Cal.App. 728 , 731 [ 174 P. 366 ], merely states the recognized rule that a finding is not required upon facts that are admitted in the pleadings. And Atwood v. Hammond, 4 Cal.2d 31 , 46 [ 48 P.2d 20 ], refers to a statement of fact made in the brief of one party and not contradicted by the other, and the reviewing court accepted such statement as true. But the decision does not hold that a point of law advanced by one litigant and unanswered by the other must be adopted by the court as correct.

Appellant in his original answer did not plead that he had made any advancements on account of the Santa Monica store but restricted himself to a simple denial of the allegations contained in the complaint. At the trial appellant testified as to certain investments that he had made in the business: $3,000 in 1938 for the purchase of merchandise; $1,740 in 1940 for the repairs of the store front; and $12,000 in 1944 for improvements. These amounts were not correlated with any business records or itemization accounts at

Nor do the cases cited by appellant sustain his belated demand for reimbursement under an entirely different theory, in the absence of a pleading that would have afforded respondent an opportunity to controvert his claim as raised in issue. In Woodward v. Wright, 82 Cal. 202 [ 22 P. 1118 ], the defendant admitted “the trust for the benefit of the plaintiff’’ and pleaded in his answer the amount he had expended on the property while under his control. In Stromerson v. Averill, 22 Cal.2d 808 [ 141 P.2d 732 ], the opinion reveals that the parties involved had conducted extensive joint farming operations over _ a period of years in various relationships: partners, associates, employer and employee, and as a cooperative. In that situation the court at page 816 refers to the “conflicting claims of the parties connected with the acquisition, operation, and development of the property,’’ the trustee’s assumption of “personal liability under the contract of purchase from which he should be relieved’’ and “outstanding obligations’’ and “expenditures made, by one party for the benefit of the other, in relation to” their joint enterprise. With this factual background, the necessity of an accounting between the parties was before the court as a matter of pleading their respective positions and for the complete adjudication of their rights and responsibilities as so involved.

The remaining case cited by appellant on this point is Wright v. Ghilcott, 61 Ore. 561 [ 121 P. 895 , 122 P. 765 ], an Oregon decision, wherein, upon special petition, the original decree was modified to permit the trustee to file a supplemental answer showing the value of the permanent improvements that he had placed on the property. Although “no claim for these items was set up in the court below,” such claim was wholly reconcilable with the pleadings and with the respective positions of the parties at the time of their original litigation. Thus, plaintiff sought a declaration of trust in certain lands and defendant did not deny the transaction, but urged that because the agreement between the parties involved the doing of certain executory acts which could not be enforced in equity, it was void and defendant should be allowed to retain the property as absolute owner. The parties’ agreement was introduced in evidence by plaintiff, and it showed various advancements to be made by defendant and

The judgment is affirmed.

Gibson, C. J., Shenk, J., Edmonds, J., Carter, J., Traynor, J., and Schauer, J., concurred.