Opinion
Page __
__ Cal.App.2d __256 P.2d 653OSBORNv.OSBORN et al.Civ. 19311.California Court of Appeals, Second District, Second DivisionMay 4, 1953Rehearing Denied May 21, 1953.
Hearing Granted July 2, 1953.
[256 P.2d 654] Guerin & Guerin, by John J. Guerin, Los Angeles, for appellant.
Louis Warren, Los Angeles, for respondent.
MOORE, Presiding Justice.
Appellant sued to quiet title to lot 97, Casa Verdugo Villa Tract, Los Angeles County, and in the alternative to establish a constructive trust. The bases of his claim are (1) an agreement settling a dispute whereby the title should be held by his father until death when it should vest in appellant; (2) a deed executed by the father conveying lot 97 to appellant delivered in escrow pursuant to the agreement.
In 1922 Chloie I. Osborn acquired lot 97 by grant deed from her brother. Her intestacy at death let her worldly possessions to her husband, Thomas D. Osborn, and their son, appellant herein. While her estate was in probate, a dispute arose between father and son in regard to their inheritance. It was settled, however, by a stipulation subsequently approved by the court, the material part of which is as follows:
'It is further stipulated and agreed by and between the parties hereto that upon the execution of the within Stipulation that Thomas D. Osborn will execute either by deed, contract or declaration of trust sufficient documents, conveyances or declarations so that the property known as Lot 97, Casa Verdugo Villa Tract, etc., will be retained in the name of Thomas D. Osborn during his lifetime and that the same should vest in his son Merinoeth R. Osborn at the time of the demise of the said Thomas D. Osborn.'
Subsequent to the distribution of the property to Thomas on July 7, 1939, he executed a grant deed with appellant named as grantee of lot 97 and delivered it to attorneys Harry A. Franklin and Caryl Warner with instructions to retain possession of the deed until his death, then to deliver it to appellant. The conveyance excepted and reserved to the grantor 'exclusive possession and the use and enjoyment in his own right of the rents, issues and profits of said property * * * for and during the term of his natural life.' Also, it declared that it was 'executed in accordance with the terms and conditions of that certain trust agreement of July 7th, 1939 * * * and is subject to all conditions, exceptions and reservations as in said trust agreement provided.'
By the terms of the trust agreement, inter alia, the grantor reserved 'the right to revoke the deed in the event second party [Merinoeth] wilfully harms grantor, and second party reserves the right to cancel this agreement if grantor wilfully harms second party' and that 'wilful failure or refusal on the party [sic] of either party hereto to carry out the terms and conditions of the within trust agreement, or the wilful failure or refusal of either party to comply with the obligations herein provided, on his part to be performed, shall permit either party to rescind this agreement.'
Thereafter, respondent Warner asserted appellant's indebtedness to him for legal services and on October 15, 1941, resigned as trustee with the announcement that he had found it necessary to enforce payment. He assigned his account to his secretary, Charlotte Champion, and prosecuted the action to a default judgment against appellant [256 P.2d 655] after having attached the latter's interest in lot 97. At the execution sale, appellant's interest was sold to Miss Champion for $366.37. On the request of Thomas, the certificate of sale was transferred to his second wife, respondent Louise Osborn, for $415. It will be borne in mind that at no time after Warner's judgment was entered did anyone give appellant notice of the pending sale or of the actual sale of his interest until the early part of 1946.
Anticipating a sale of his reversionary interest to his father on January 14, 1946, appellant executed a writing with his father purporting to cancel the trust agreement. Pursuant thereto, appellant and his wife executed quitclaim deeds conveying lot 97 to Thomas. By the terms of the writing Merinoeth was to receive $3,500 for his interest, less about $464 which Thomas had caused him to believe was still owing to Warner. Thomas agreed to pay such sum directly to the judgment creditor. It is clear that at the time of such arrangements for his sale to Thomas, Merinoeth did not know of the execution sale of his interest to Miss Champion or of the subsequent assignment of the certificate of sale to Louise.
But on March 7, 1946, Merinoeth rescinded the contract of January 14 and demanded the return of the quitclaim deeds. Seven days later Thomas' attorney, Franklin, communicated Thomas' acquiescence in the rescission, brought back the deeds intended for Thomas and returned to the latter the money and checks Thomas had deposited with Franklin for Merinoeth.
Such was the status of the father and son transactions when Thomas died intestate on December 31, 1946. Merinoeth thereupon filed this action to quiet the title of lot 97 in himself. Subsequently, he amended his complaint whereby he sought to impose a constructive trust as alternative relief. In response thereto, Louise filed her cross-complaint for a judgment quieting title in herself. The trial court refused relief to both parties, holding that the trust agreement had 'created only an escrow' which was 'not irrevocable'; that title had not 'passed to [Merinoeth] on the death of the grantor'; that since appellant had no interest himself, neither Miss Champion nor Louise obtained anything by virtue of the certificate of sale. Merinoeth has appealed from the judgment and from the order denying a new and different judgment.
The questions for decision, therefore, are: (1) whether the deposit of a deed with third parties by the father, conveying the property to appellant in settlement of a dispute over the estate in which each claimed an interest, created any legal or equitable rights in appellant, and (2) whether respondent acquired any interest by virtue of the execution sale of lot 97.
Effect of the Stipulation and Trust Agreement
Appellant contends that the trial court confused the effect of (1) gift by deed where possession is retained by an escrow holder until the grantor's death and then delivered to the grantee and (2) compliance with the terms of a specifically enforceable contract where the escrow holder retains possession of the deed until certain contingencies occur, then delivers it to the grantee. The record clearly establishes that an enforceable agreement was executed by Thomas and Merinoeth, and that Thomas pursuant thereto delivered his deed to escrow holders who were to hold possession until the decease of Thomas, and then deliver the deed to the son.
It is often asserted that there must be a binding contract to support an escrow. Thomas v. Birch, 178 Cal. 483, 489, 173 P. 1102; Security-First National Bank v. Clark, 8 Cal.App.2d 709, 712, 48 P.2d 167; Elliott v. Title Ins. & Trust Company, 64 Cal.App. 508, 511, 222 P. 175. Nevertheless, the term 'escrow' in this state is not used exclusively in the above sense; it is applied to situations where there is no underlying contract, but merely a gift. Whitney v. Sherman, 178 Cal. 435, 438, 173 P. 931; Hunt v. Wicht, 174 Cal. 205, 208, 162 P. 639, L.R.A.1917C, 961; Williams v. Kidd, 170 Cal. 631, 637, 151 P. 1. The escrow holder is considered the agent of both parties prior to performance of the designated conditions. Shreeves v. Pearson, 194 Cal. 699, 707, 230 P. 448; People v. Hess, 104 Cal.App.2d 642, 681, [256 P.2d 656] 234 P.2d 65; appeal dismissed, 342 U.S. 880, 72 S.Ct. 177, 96 L.Ed. 661; Sousa v. First California Company, 101 Cal.App.2d 533, 539, 225 P.2d 955; Lenchner v. Chase, 98 Cal.App.2d 794, 805, 220 P.2d 921; Majors v. Butler, 99 Cal.App.2d 370, 374, 221 P.2d 994. Title remains in the grantor until the performance of the specified conditions or until the designated events have occurred, at which time it vests in the grantee. This rule is subject to one important exception: 'where the condition upon which the deed is to be delivered is one which is certain to occur, regardless of any act of the parties, such, for example, as the death of the grantor * * * the title to the property passes to the grantee at the time of the deposit of the deed in escrow, subject, however, to a life estate in the property in the grantor.' Whitney v. Sherman, 178 Cal. 435, 438, 173 P. 931, 932.
There can be no doubt, in the instant case, that the trust agreement and grant deed from Thomas to Merinoeth were executed in pursuit of the court-approved stipulation as the compromise of a disputed claim. It is equally certain that the consideration moving to Thomas was entirely adequate. The contract underlying the escrow arrangement was clearly of an enforceable nature under the most rudimentary principles of equity. The contingency whose occurrence required manual delivery of the deed to Merinoeth was his father's death, which was 'certain to occur regardless of any act of the parties.' Hence by virtue of Thomas' solemn covenant and deed, title of the property passed immediately to Merinoeth, subject to a life estate in Thomas Osborn. That such was the intention of the parties as well as the legal effect of the arrangement is borne out by the express provisions of the grant deed and trust arrangement, as well as by the stipulation. And even though the legal title had not passed to Merinoeth by virtue of such instruments, it is beyond cavil that, at the very worst, equitable title passed to him, since by execution of the stipulation with his father, Merinoeth gained the right to specific performance of the agreement.
In conformity with appellant's contentions, it is clear that the so-called conditions in the trust agreement were nothing more than restatements of the legal rights of the parties. See Deming v. Smith, 19 Cal.App.2d 683, 687, 66 P.2d 454. They provide merely for restoration of the status quo in the event of a failure of consideration or a breach of a condition of cooperation. In any event, the subsequent conduct of Thomas and his wife: their failure to notify Merinoeth of the impending sale of his remainder, their purchase of Miss Champion's interest after the execution sale and their offer of $3,500 to Merinoeth for his remainder, less the sum allegedly due to Caryl Warner--indicates that Thomas considered the interest of Merinoeth vested and valid. Even had the delivery of the deed to Franklin and Warner been technically imperfect, Thomas' subsequent conduct was convincing evidence of his definite understanding and true intention that the remainder belonged to his son and that he purposed by the deed he placed in Franklin's hands to effect a valid transfer of title at his own death. See Moore v. Trott, 162 Cal. 268, 274, 275, 122 P. 462, 465. 'The delivery of an instrument is a question of intent * * *. 'The main thing which the law looks at is whether the grantor indicates his will that the instrument should pass into the possession of the grantee, and, if that will is manifest, then the conveyance inures as a valid grant, although * * * the deed never comes into the hands of the grantee.'' Ibidem.
Effect of the Execution Sale
Since Merinoeth had actually a vested remainder in the property, his interest was subject to execution, Code Civ.Proc. sec. 688, and if the execution was legally effective, that interest passed to Miss Champion and thence to Louise. Although the trial court made no findings on the propriety of the execution, it will be assumed that the statutory requirements, Code Civ.Proc., secs. 542, 674, 682, 688, were followed. Moreover, it is unnecessary to a decision of this case to determine whether or not the delivery of the deed to Warner and Franklin created a trust, as well as an escrow; and, if so, whether Warner could relieve himself from his fiduciary duties by the simple expedient of tendering his resignation [256 P.2d 657] to the beneficiary of the trust, and could properly cause an action to be prosecuted against the latter. Those questions are now moot. Further pursuit of such inquiries could not effect a different result.
Although Thomas Osborn and respondent Louise had knowledge of Warner's judgment against appellant, the court found that neither of them gave appellant any information with reference thereto, or advised him of the peril of allowing a judgment against him to remain unsatisfied, nor did either of them advise appellant of the prospective sale of the latter's interest in lot 97. While the pertinent statute does not require notice to the remainderman of a contemplated execution on his interest in real property, Code Civ.Proc., sec. 542, subd. 2, nevertheless Thomas was morally and legally obligated to give appellant notice of the future sale for two unassailable reasons:
(1) As life tenant he was under a duty to do no act to the injury of the remainderman. This has been characterized as a 'quasi trust' relationship, see Civ.Code, sec. 818; Hardy v. Mayhew, 158 Cal. 95, 104, 110 P. 113; Bliss v. Security-First National Bank, 81 Cal.App.2d 50, 54-55, 183 P.2d 312, and imposes upon the life tenant, at least, a duty to report to the remainderman any attempt to divest the latter of his title.
(2) As Merinoeth's father, he owed him the general fiduciary duty not to seize or assert an undue advantage by reason of a superior knowledge of facts likely to affect the title of their common estate.
The finding was that Miss Champion 'transferred the Certificate of Sale to Louise L. Osborn, at the instance of Thomas D. Osborn, who attended the sale.' [Italics added.] Despite the finding of the absence of actual fraud, under no circumstances can Louise be regarded a bona fide purchaser of the remainder. The gross inadequacy of the price paid (about $450) in proportion to the actual value of the remainder, not less than $3,500; the failure to notify Merinoeth; Thomas' position as life tenant; the fiduciary father-son relationship; Louise's position as Thomas' alter ego--all these factors charged Louise with scienter and a duty to speak into the ears of appellant. Coupled with the above facts is a damning admission of guilty knowledge, evidenced by the conduct of Thomas and Louise when they sought to 'purchase' Merinoeth's interest from him three and a half years after execution had been levied and sale made, still concealing from him the assignment of Warner's claim to Miss Champion and the subsequent chain of facts.
It is the conclusion of this court that appellant is the owner of lot 97 and that title should be quieted in him; that whatever title or interest respondent may have, she holds as constructive trustee for appellant.
Judgment is reversed with instructions to enter judgment (1) quieting the title of lot 97, Casa Verdugo Villa Tract, in Merinoeth Osborn and for costs; (2) decreeing that Louise Osborn has no interest in the property.
The appeal from the order denying appellant's motion for a new trial is dismissed.
FOX, J., concurs.
McCOMB, Justice.
I dissent. From a judgment in favor of defendants after trial before the court without a jury in an action to quiet title or establish a constructive trust, in a parcel of real property, plaintiff appeals. There is also a purported appeal from the order denying a motion for a new trial.
Undisputed facts: April 21, 1922, Chloie I. Osborn, mother of plaintiff, acquired the real property which is the subject of this litigation by grant deed from her brother. Thereafter she died leaving as her sole heirs her husband, Thomas D. Osborn and plaintiff, her son. A dispute arose between plaintiff and his father relative to the real property which was finally resolved by the parties' entering into a stipulation subsequently approved by the probate court, the material part of which reads:
'It is further stipulated and agreed by and between the parties hereto that upon execution of the within Stipulation that Thomas D. Osborn will execute either by deed, contract or declaration of trust, sufficient [256 P.2d 658] documents, conveyances or declarations so that the property known as Lot 97, Casa Verdugo Tract, etc., will be retained in the name of Thomas D. Osborn during his lifetime and that same should vest in his son, Merinoeth R. Osborn, at the time of the demise of said Thomas D. Osborn.'
Subsequently the probate court distributed the property to Thomas D. Osborn as his separate property. Thereafter Mr. Osborn executed a deed purporting to convey the real property to plaintiff and delivered the same to defendants Harry A. Finkenstein and Caryl Warner with instructions to retain possession of the deed until his death and then deliver it to plaintiff. The agreement provided the wilful failure or refusal of either party to carry out the terms and conditions would permit either party to rescind and permit the grantor to cancel the deed delivered to defendants Finkenstein and Warner.
Defendant Warner resigned as a trustee and on January 3, 1947, Mr. Osborn's attorney, H. W. Hess, instructed defendant Finkenstein not to deliver the deed to plaintiff.
December 31, 1946, Mr. Osborn died without leaving a will and there has been no probate of his estate instituted. After the trial of the present action the court found that neither plaintiff nor defendants are the owners of the real property in question.
Questions: First: Did the trial court properly decline to quiet title in the parcel of land in question in plaintiff?
Yes. The following rules are here pertinent:
(1) An escrow is a written instrument or personal property which is delivered to a third party by the grantor, maker, promisor or obligor to be held by the depositary until the happening of a designated event or the performance of a designated condition and then to be delivered to the grantee, promisee or obligee. (Civil Code, sec. 1057. See also cited cases in 10 Cal.Jur. [1923] Escrows, section 1, note 2, page 576.)
(2) When a deed is deposited by a grantor with a third person to be handed to the grantee on the death of the grantor, there is no delivery unless accompanied by an intention of the grantor that title shall immediately pass to the grantee. Where the deed is handed to the third person without any intention of a present transfer of title, but on the contrary, with the intention of the grantor to reserve the right of dominion over the deed and the right to revoke or recall it there is no effective delivery. Where the grantor when depositing the deed intends that it shall be delivered to the grantee only after the death of the grantor and that title shall vest only on delivery to the grantee, the deed upon the death of the grantor is inoperative, there having been no valid delivery of the deed. (Williams v. Kidd, 170 Cal. 631, 637 et seq., 151 P. 1.)
(3) Plaintiff in a quiet title action must depend on the strength of his own title and not on the weakness of that of defendant. Thus, if he fails to prove title in himself, he is not entitled to recover. (Alspach v. Landrum, 82 Cal.App.2d 901, 903[1], 187 P.2d 130; Tanner v. Title Ins. & Trust Co., 20 Cal.2d 814, 825[13], 129 P.2d 383.)
Applying the foregoing rules to the facts in the present case we find that under rule (1) the handing of the deed to defendants Finkenstein and Warner created an escrow, and since Mr. Osborn reserved the right to revoke or cancel the deed upon the happening of certain conditions, there was no intent to make an unconditional delivery of the deed. Therefore, it not having been delivered to plaintiff prior to his father's death, under rule (2) the deed was never delivered and no title passed to plaintiff. Hence, under rule (3), plaintiff having failed to prove title in himself the trial court properly held that he was not entitled to have title quieted in him.
Second: Was there substantial evidence to sustain the trial court's finding that the transaction between the parties did not create a trust agreement but merely created an escrow?
Yes. The transaction falls squarely within the definition of an escrow as set forth under rule (1), supra. There is a total absence of any of the elements of a trust agreement. Therefore the court's finding is supported by substantial evidence.
[256 P.2d 659] An order denying a motion for a new trial in a civil case is nonappealable, therefore in my opinion, the purported appeal from such order should be dismissed and the judgment affirmed.