Opinion
12-27-1956
in the Matter of the Estate of Merland Jose WOLFE, etc., deceased. Leanore L. WOLFE, Petitioner and Appellant, v. Trol C. WOLFE, Contestant and Respondent.* Civ. 21816.
Church, Howard & Stevens, Los Angeles, for appellant. Paul R. Hutchinson, Los Angeles, for respondent.
in the Matter of the Estate of Merland Jose WOLFE, etc., deceased.
Leanore L. WOLFE, Petitioner and Appellant,
v.
Trol C. WOLFE, Contestant and Respondent.*
Dec. 27, 1956.
Hearing Granted Feb. 19, 1957.
Church, Howard & Stevens, Los Angeles, for appellant.
Paul R. Hutchinson, Los Angeles, for respondent.
SHINN, Presiding Justice.
Merland J. Wolfe died testate on November 24, 1952 and his will was admitted to probate. This is an appeal from a decree determining heirship in the matter of his estate. Appellant Leanore L. Wolfe is the sister of decedent; respondent Troi C. Wolfe is his widow.
Appellant filed a petition for determination of heirship by which she sought a declaration that all the property in the estate of decedent was his separate property, or, in the alternative, that if there were any community property, that decedent's will put respondent to an election to take under the will or to assert her community rights. She alleged that Mr. and Mrs. Wolfe entered into a property settlement agreement in March 1940 whereby the community property of the parties was converted into separate property and that the agreement was still in full force and effect at the time of decedent's death. Respondent filed a statement of interest in which she admitted the execution of the agreement but alleged that it was never given effect and was wholly disregarded and abandoned by mutual consent. She further alleged that all the property inventoried in decedent's estate was purchased with community funds.
Trial was to the court. The court made findings and decreed that all the property in which decedent had an interest at the time of his death was community property, that respondent was not put to an election by reason of decedent's will and that distribution should be made to respondent of her community interest and to both parties the interests that remained, in accordance with the will. We are of the opinion that the court did not err in determining that the property in decedent's estate was community property, but we are persuaded that its determination that respondent was not put to an election was erroneous.
The will was executed on October 10, 1951. Its pertinent provisions are as follows: 'Third: All property in which at this date I have an interest is my separate property, pursuant to the provisions of a certain property settlement agreement heretofore entered into between my said wife and me. It is my intention to dispose of all property over which I have the power of testamentary disposition.'
Paragraph Fourth contains specific bequests of '* * * my Cadillac automobile, jewelry, silver, books, pictures, paintings, works of art, household furniture and furnishings, clothing, and other personal effects * * *' to respondent.
'Fifth: I give and bequeath the sum of Two Thousand Dollars ($2,000.00) to Angel Corona, in appreciation of his long and faithful service in my employ. It is my desire that my Executor and/or Trustee employ said Angel Corona to manage my ranch property in Northridge, California, so long as it shall remain and be a part of my probate estate of the trust estate hereinafter described.'
By paragraph Sixth, decedent gave, devised and bequeathed '* * * all the residue of my estate, real and personal, wherever situated, including all failed and lapsed gifts * * *' to the Bank of America in trust for the benefit of Leanore L. Wolfe and Troi C. Wolfe, or the survivor of them, said trust to terminate at the death of the survivor and the remainder of the trust estate to be distributed for certain charitable purposes. Under the provisions of the trust, the trustee is to distribute one-half of the net income to Leanore L. Wolfe and one-half to Troi C. Wolfe in convenient installments, the whole of the net income to be distributed to the survivor of them during her life. In the event the net income payable to respondent is less than $3,600 in any one year, the trustee is empowered to make up the difference from the principal of the trust estate. There is an identical provision as to appellant. The trustee is further empowered to invade the principal if the income is insufficient, in its discretion, to provide for the reasonable support, care and comfort of the two beneficiaries.
'Seventh: During such time as my ranch property in Northridge, California, shall remain and be a part of my probate estate or the trust estate, I direct that my wife, Troi C. Wolfe, shall, during her life, have the right to the use and occupancy of the residence located on said ranch property * * *' and the necessary surrounding area as determined by the trustee.
'Ninth: Any gift, devise, or bequest to my wife, Troi C. Wolfe, pursuant to the provisions of this Will, other than as set forth in Article Fourth hereof, shall be considered to be a gift, devise, or bequest to my said wife so long as she shall remain unmarried, and in the event she shall remarry, the provisions of this Will, other than as set forth in Article Fourth hereof, shall thereafter be carried out as though my wife had not survived the date of such remarriage. * * *'
Decedent's estate was inventoried at $118,384. Of this amount, $95,000 was represented by real property in Northridge, California, referred to in decedent's will as 'my ranch property.'
There was evidence of the following facts. Mr. and Mrs. Wolfe were married in June 1935. It was the second marriage for both parties and apparently was an unhappy one, for respondent filed an action for divorce against decedent in October 1937. This action never came to trial but was not dismissed until after respondent filed a second action for divorce against decedent on March 8, 1940. Mrs. Wolfe was awarded an interlocutory decree on April 30, 1940 and left for New York on a trip. She testified that she returned three weeks later and that she and decedent agreed to a reconciliation; that she lived with her husband throughout the seventeen years of their marriage with the exception of the three weeks she spent in New York. No final decree was entered in the second divorce action and the same was dismissed in 1943.
Respondent testified that at the time of the marriage, decedent was engaged in operating a service station in Los Angeles. He did not own the station and had no lease. He had some equipment which he sold for a few hundred dollars. She sold some property which she had acquired prior to the marriage and loaned some of the proceeds to decedent, which he used in establishing a garage business. The loan was never repaid in full. One garage was operated by decedent until 1939 or 1940 and a corporation was formed in 1936 to conduct the operation of another agrage. During the existence of the corporation (it was dissolved in 1942) stock was held from time to time by decedent, respondent, and respondent's son by her former marriage.
On March 11, 1940, during the pendency of the second divorce action, Mr. and Mrs. Wolfe executed a property settlement agreement which purported to adjust their respective property rights and to divide the community property. It contained the usual releases of after acquired property and it transferred to respondent certain furniture and furnishings as her separate property. Decedent also waived all his right, title and interest to four shares of stock in the corporation, which were then in the name of respondent. A second agreement was executed on May 1, 1940, whereby respondent agreed to sell her stock to decedent for $3,500 to be paid in installments. This agreement antedated the reconciliation and respondent testified that decedent did not pay any of the installments. The corporation was dissolved in 1942, by which time the stock had been transferred to decedent. The assets of the corporation were distributed to him. Thereafter decedent operated the garage business as sole proprietor until his death. Respondent assisted him without compensation until about 1948, doing bookkeeping, making collections and answering the telephone. She testified that the property settlement agreement was never discussed with her husband after the reconciliation.
Real property was purchased in 1941 and title was taken in the name of 'Merland J. Wolfe, a married man.' Respondent testified that it was purchased out of the earnings of the garage business. This property was sold in 1944 and decedent took back a trust deed as his separate property. The proceeds of the sale were used in the purchase of the real property in Northridge which is the main asset in the estate. Title to this property was taken in the name of 'M. J. Wolfe, a married man.' A trust deed on this property was executed by decedent and respondent ans payments on the purchase price and the taxes were made out of the earnings of the garage business. The spouses lived on the ranch property from 1950 until decedent's death.
In 1951, three months before the execution of the will, decedent brought an action for declaratory relief against respondent it which he alleged that the Northridge real property was his separate property. Respondent contested the action. She testified that it was dismissed in 1952 by mutual consent.
The first assignment of error to be considered is that the court erred in determining that the estate of decedent was the community property of decedent and respondent. In this connection appellant relies heavily upon the execution of the property settlement agreement of March 1940 which purported to divide the community property. Respondent contends that the agreement was terminated by consent, evidenced by the reconciliation and resumption of marital relations between the spouses, whereas appellant argues that the agreement was not abandoned, but remained in full force and effect until decedent's death. We believe appellant's position to be untenable.
Whether the spouses intended to abandon the agreement and treated it as a nullity was a question of fact and the subject of reasonable inferences to be drawn from the evidence. The question of intention was one for which the answer was to be found in the agreement, construed in the light of the situation of the parties and the surrounding circumstances from which inferences could be drawn. The following were material facts to be considered. The agreement was executed during the pendency of the divorce action. It recited that the spouses had already separated, but respondent testified that this was not so and that they were not living in separate abodes. Although it contained the usual disclaimer that it was not an agreement for a divorce, it was reasonable to assume that the parties intended to adjust their property relations so as to remove the property question from the divorce proceedings. It was a reasonable inference that the intention of the parties to sever the marital relation was the primary, if not the sole reason for the agreement. Respondent testified that there was a reconciliation soon after she obtained her interlocutory decree and it was undisputed that she lived with decedent until his death twelve years later. Although Mr. Wolfe had agreed to pay respondent $3,500 for her stock in the corporation he paid no part of it and there was no evidence that Mrs. Wolfe ever demanded payment. And although he was to obtain the stock only upon payment of the agreed sum it was in his name at the time of the dissolution of the corporation. Respondent contributed valuable services to the garage business without compensation. Two parcels of real property were purchased after the reconciliation and title was taken in the name of decedent as a married man. Other circumstances were that when one of these parcels was sold in 1943 the trust deed was made payable to decedent as his separate property; also commencement of the declaratory relief action. There was no direct evidence as to the source of the funds that went into liquidation of the purchase money trust deed on the ranch property. While the evidence as to the cost of the property is not too clear, it appears that the price was $10,240 of which only $2,560 was paid down. The trust deed payments were evidently made from the earnings of the garage business.
A reconciliation and the resumption of marital relations do not, as a matter of law, effect a rescission of a property settlement agreement, Crossley v. Crossley, 97 Cal.App.2d 627, 218 P.2d 132, although it has been held that they may be sufficient to cancel the executory provisions of the agreement. Mundt v. Connecticut Gen. Life Ins. Co., 35 Cal.App.2d 416, 95 P.2d 966; Lloyd Corp., Ltd. v. Industrial Acc. Comm., 61 Cal.App.2d 275, 142 P.2d 754; Harrold v. Harrold, 100 Cal.App.2d 601, 224 P.2d 66. Whether the agreement continues in force after the reconciliation and resumption of marital relations is a question of fact and depends upon the mutual intentions and understanding of the spouses. Morgan v. Morgan, 106 Cal.App.2d 189, 234 P.2d 782; Margolis v. Margolis, 115 Cal.App.2d 131, 251 P.2d 396. Although the reconciliation itself is material evidence of their intention, it is not conclusive. DeVault v. DeVault, 90 Cal.App.2d 15, 202 P.2d 375. Where rescission or abandonment of a property settlement agreement is asserted there can be no formula for ascertaining the intentions of the parties from their conduct. No two cases are alike. All the circumstances must be weighed before it can be known whether they preponderate for or against abandonment of rights under the agreement.
Mr. and Mrs. Wolfe did not agree to release each other from the agreement. They did not even discuss it. Since they did not orally express their intentions it was necessary to determine from their conduct whether they considered themselves bound by their agreement or released from it. The circumstances indicated the latter. We shall not reiterate them. Prominent among them is the fact that under the agreement Mrs. Wolfe was to own the stock which represented ownership of the garage business; Mr. Wolfe was to buy it from her for $3,500. He acquired the stock without paying anything for it and when the corporation was liquidated he, and not Mrs. Wolfe, was distributee of the assets. The ranch property was paid for out of the earnings of the business which, having come from the joint efforts of the parties, would properly be considered as community property. This, without mention of the other circumstances, was sufficient to justify an inference that the agreement and all rights thereunder were abandoned and waived. The evidence supports the finding of the community character of the property.
The remaining question is whether the court committed error in adjudging that respondent was not put to an election under the will. We have concluded that the court did commit error.
A testator is presumed to know that his power of testamentary disposition extends only to his undivided half interest in the community property. But where it is manifest from the language of the will that he intended to dispose of his entire estate, including his wife's community interest, she will be put to an election to take either under the will, or under the law, if her assertion of both claims would be inconsistent with his plainly expressed testamentary scheme. In re Estate of Moore, 62 Cal.App. 265, 216 P. 981; In re Estate of Emerson, 82 Cal.App.2d 510, 189 P.2d 734; In re Estate of Vogt, 154 Cal. 508, 98 P. 265.
From a reading of the will and a consideration of the surrounding circumstances we are convinced that the testator intented to dispose of the entire property in disregard of respondent's community interest therein.
Respondent relies heavily on decedent's declaration that he intended to dispose only of the property over which he had the power of testamentary disposition. She argues that since the court found the estate to be community property, decedent must be deemed to have intended only to will his undivided half interest. The argument is unconvincing. Of far greater weight than the recital stressed by respondent is the statement in the will that all property in which decedent had an interest was his separate property. It was not an unfounded statement, even if erroneous, since it was doubtless based upon a belief that the property settlement was still operative. We think it is clear that decedent believed the entire estate to be his separate property and that he had absolute testamentary power over it. That was the crucial fact which was indicative of his intention. Even where a testator is mistaken as to the character of his property and erroneously believes it to be his separate property, the controlling factor is his intention to will the entire estate and not the soundness of the belief upon which his intention is based. In re Estate of Moore, supra, 62 Cal.App. 265, 219 P. 981.
Respondent's assertion of her right to half of the community property, to the specific bequests under the will, and to participate in the trust, would defeat the main purpose of the will, which was to establish a testamentary trust for the benefit of respondent and decedent's sister, with gifts over to charity after the death of the survivor. The estate was inventoried at $118,000. Respondent and appellant are each to receive $3,600 annual income from the trust estate. Were respondent's community interest of approximately $59,000 excluded from the trust estate, the remaining $59,000 would have to produce $7,200 in annual income, a return of better than 12%. This computation does not take into account any diminution of the estate due to the payment of the specific bequests, taxes, commissions and attorneys' fees. We would judge from the description of the property we find in the record that the so-called ranch property consisted of about 20 acres in the San Fernando Valley. There was a house on it and it was the home of the parties. It is obvious that its value increased greatly between the time of its purchase and the death of Mr. Wolfe. The trustee was not authorized to sell the entire property; Mrs. Wolfe had the right to remain in the home. There was no evidence as to the income from any ranching operations nor of expected income from any source that would enable the trustee to meet the directions of the will without a sale of the trust assets. It seems certain that at the time he executed the will Mr. Wolfe intended that the entire residue of his estate would go into the trust. The circumstances indicate that he believed he had a right to dispose of the entire property and that he did not contemplate that his surviving wife would take half of it under the law as community property; his will so declared and it contained numerous references to the home property as 'my ranch.' It is clear to us that Mr. Wolfe would not have executed the will in question if he had believed that his wife had a community interest in the property. But his belief and intentions at the time it was executed are controlling. It follows from the views we have expressed that the judgment should be reversed and a new judgment entered which will require Mrs. Wolfe to make an election in accordance with the foregoing opinion.
The judgment is reversed.
PARKER WOOD and VALLEE, JJ., concur. --------------- * Opinion vacated 311 P.2d 476.