Catron v. First National Bank & Trust Co. of Tulsa

BERRY, Justice

(dissenting):

This is an equitable proceeding in which, at the conclusion of trial, the court stated:

“At the conclusion of the evidence the Court will render judgment for the defendants on the ground that the plaintiff has not, by the evidence in the case, demonstrated her cause of action by the clear, cogent, and convincing nature of evidence that’s required for a judgment to be granted in her favor. * * * it’s just not the clear, cogent and convincing type of evidence that the Court would require to go into this detailed mass of records and draw a complete true picture of a partnership that may or — I think possibly did occur, but by difficulty of proof through no fault of the plaintiff, through perhaps even by concerted effort of the deceased, by the loss of records, that a failure of proof on behalf of the plaintiff is indicated by the Court’s ruling. I will prepare findings of fact and conclusions of law, if you desire.

******

“I’m making the bare judgment on the amount, failure of the evidence, overall picture, not the high quality that’s neces *277 sary under the Supreme Court decisions of clear, cogent, convincing and unequivocal. I think perhaps you do have a preponderance. The mere preponderance in cases like this is not enough. You can make your record and exceptions are allowed.” (emphasis supplied)

It is my opinion the evidence supporting plaintiff was sufficiently clear, cogent and convincing; and that the judgment which is affirmed is against the clear weight of the evidence. My disagreement with the majority, however, results from failure to recognize and apply our own statutes and case law which, in my opinion, are determinative of the issues. As a result of this, our prior decisions, declarative of legal principles concerning trusts and property rights jointly acquired during coverture, become conflicting and inconsistent.

As I understand the opinion the main premise is that no basis exists for imposing a constructive trust because there is no evidence of fraud, duress, abuse of confidence, or other misconduct by the husband in his dealings with plaintiff. This premise is effectively rebutted by the trial court’s recognition that deceased’s conduct of their joint affairs reflected an undue advantage taken of the plaintiff. Evidence as to the original partnership, which produced the funds which financed the entire Tulsa dealings, is disregarded upon the ground it is unnecessary to determine whether such partnership was valid or a sham for tax purposes.

The record shows execution of a certificate of fictitious partnership in 1942, and that thereafter the business operations were carried on in conformity therewith. The suggestion that the partnership might have been created as a sham for tax purposes lacks legal foundation, for the reason that there is no special concept of a partnership for tax purposes as opposed to ordinary partnership. A family partnership for tax purposes is measurable by rules applicable to family partnerships in general. Commissioner of Internal Revenue v. Culbertson, 337 U.S. 733 , 69 S.Ct. 1210 , 93 L.Ed. 1659 . The evidence conclusively showed establishment of a partnership and plaintiff’s acquisition of funds therefrom, which forcefully negates the findings and conclusions of the trial court in this respect.

As concerns the claim that all property became community property, it is asserted that plaintiff never objected to commingling of the assets, or attempted to withhold her separate property from the community. This premise is the basis for declaring that even if there were separate assets in 1945, these became so mingled with community property of considerably greater value that the separate property lost its identity and required all assets to be considered community property. Under the definition of community property contained in the Act, (32 O.S.Supp.1945 § 51 et seq.) in sections 1 and 2 of the Act (repealed S.L.1949, p. 229, § 1) no property acquired by either party either prior or subsequent to effective date of the Act fell within such definition. And, further, our decisions construing the Community Property Act, clearly establish that the estate of the non-managing spouse was a vested estate. Davis’ Estate v. Oklahoma Tax Comm., 206 Okl. 644 , 246 P.2d 318 . And, under the Act the spouse had a present, vested interest in one-half of the community property. Page v. Sherman, Okl., 341 P.2d 270 . In view of these decisions the conclusion, that the separate assets had lost their identity so that the aggregate became community property, is unfounded. The conclusion that, even if it be assumed the parties held separate assets in 1945, these were so commingled as to lose their identity is not supported by the record. Defendants’ accountants corroborated plaintiff’s evidence showing these parties held separate assets of approximately $47,000.00 each, plus joint accounts of $14,000.00. No assumption is required to establish this fact. And, the conclusion wholly fails to accord recognition to the unbiased evidence of witnesses who knew and discussed the Catrons’ business endeavors, and patterned their own affairs after the Catrons’ operations. The *278 conclusion reached directly conflicts with the law stated in Boroughs v. Whitley, Okl., 363 P.2d 150 , and the cases above cited, all of which should be overruled to avoid further conflict in our case law.

The further conclusion is stated that plaintiff failed to protect her interests by compliance with requirements of the Act, by recording an instrument showing existence or renewal of the parties’ agreement. This can be sustained only by failure to accord any recognition to cogent and unbiased evidence which reflects the continued course of business dealings subsequent to 1949.

In 1947 the deceased attempted to secure plaintiff’s agreement to a. will, under the terms of which plaintiff was to acknowledge that all property, jointly acquired or standing in the parties’ joint names, was deceased’s separate property in which plaintiff had no interest. The plaintiff refused to sign such agreement. Up to this point there has been a failure to recognize existence of any trust relationship; However, solely upon the basis of plaintiff’s knowledge of deceased’s proposed will claim, the conclusion reached is that this constituted recognition of deceased’s definite repudiation of the trust which set the 5 year statute of limitations running against her claim.

The proposed will, by- which deceased sought to" have plaintiff' agree that all property was his individually and that she should waive her rights ’therein under the law, was simply an effort'to secure execution of a contract void under the law. A surviving widow has ah absolute right to participate in the husband’s estate, but has no interest in the property until the other’s death; hence there 'is nothing which can be disposed of by contract. In re Blaydes’ Estate, 202 Okl. 558 , 216 P.2d 277 . A contract which has for its purpose the destruction of a right granted by law is void as against public policy. In re Blaydes’ Estate, supra.

The further conclusion, in relation to running of:the-statute against-plaintiff, is bottomed upon- the declaration that there is no evidence deceased’s' repudiation of the trust ever was withdrawn or qualified. There are obvious answers which destroy the force of this argument. Had the trial court believed deceased’s presentation of the 1947 will constitutéd an unequivocal repudiation of the trust, which started limitations running against plaintiff’s claim, the issue would have been .closed and the cause determinable itpon that basis alone.

There is the further argument that positive evidence plaintiff joined in execution of instruments, by which deceased continued to take title'in his own name, is indicative of nothing more than that plaintiff was complying with accepted custom concerning title requirements and to facilitate consummation of the transaction by eliminating problems which might arise upon title examination. ■ Whether anticipated title examination problems ¡suffice to destroy the verity of..formal instruments, the fact remains the undisputed evidence was that, at the time o.f .trial, various mortgagees considered plaintiff liable upon the financial obligations,^evidenced by the notes and mortgages she signed, .standing against certain properties .to .which deceased took sole title and which.are decreed to be separate property.

If the’ conclusion that plaintiff’s claim was barred under 12 Ó.S.1961, § 95(7),.be-cause deceased had Repudiated the existing ■trust is to 'Stand,- it is. respectfully urged that In re¡ Blaydes’, Estate, supra, and other cases of similar import must be specifically overruled since no longer expressive of the law in this State.

• The conclusion ■ relative to non-applicability of our statutes, ,12 O.S.1961, § 1278 and 84 O.S.1961,- § ¡213, as to what constitutes property acquired'by joint industry during coverture, announces a new and startling -rule -of¡-law.. -Even more disruptive of our own decisional law is the fact that the rule, declarative, of what constitutes jointly acquired, property, is injected into our law-upon .thp- basis of questionable foreign- authority . and without overruling prior, controlling decisions.

*279 It is determined that property recognized as jointly acquired by the marital community under the statutes, supra, is not to be measured by the same tests in a case involving trusts, or breach of confidential relationship. Thus, hereafter, this Court will be called upon to decide questions involving jointly acquired property upon the basis of what form the cause of action takes. Under the statutes, supra, jointly acquired property will consist of property acquired during marriage by joint efforts of each spouse in his or her recognized sphere of marital activity. Thompson v. Thompson, 70 Okl. 207 , 173 P. 1037 ; Stone v. Stone, 86 Okl. 33 , 206 P. 246 . However, in a suit to establish a trust, or to set aside a conveyance on the ground of fraud, the fact that joint acquisition resulted from a spouse’s “ * * * economy, industry, frugality and sturdy virtues, which have been a stay to the home and the constant guard of the accumulations * * * ” no longer will be considered. See Tobin v. Tobin, 89 Okl. 12 , 213 P. 884 , and innumerable cases following the rule.

Jones v. Farris, 180 Okl. 341 , 69 P.2d 344 , is cited in support of the conclusion, that our statutes have no application unless the case involves divorce or intestate succession. Cursory examination of that decision discloses that inapplicability of section 213, supra, was determined upon another ground. Moreover, this' Court specifically declined to pass upon the question whether § 1278, supra, should apply to an interest based upon an asserted resulting trust. It appears that Farris, supra, provides no support for the statement that our statutes have no application except in cases involving divorce or intestate succession.

The patent inapplicability of the .rule, quoted from In re Marsh’s Estate, 125 Mont. 239 , 234 P.2d 459 , that a wife’s services during coverture create no joint interest in the husband’s estate, is apparent. This is best evidenced by the fact that in Montana, a dower state, there is no statutory authority for a trial court in a divorce action to divest the husband of any property in the wife’.s behalf. In that jurisdiction the statutes require, where title to property is in the, husband’s name only, that the wife prove any contributions made were not a gift. Absent such proof the wife is held to be a stranger to the title. And, it is interesting to note that in Bingham v. Nat’l Bank, 105 Mont. 159 , 72 P.2d 90 , 113 A.L.R. 315 , it is .recognized that Montana applies a minority rule because of the special statutes.

The case of Johnson v. Johnson, (Ky.) 255 S.W.2d 610 , also cited, likewise arose in a dower state. Both in Johnson, and Eckhoff v. Eckhoff, (Ky.) 247 S.W.2d 374 , that court stated that a wife’s services which aid the husband in procuring property give the wife no interest therein, because her services are not of. the type which constitute valuable consideration within meaning of the Kentucky statute, which controlled the court’s judgment.

It is respectfully submitted that the authorities cited do not support the conclusion stated. Time prevents elaboration of this discussion, or citation of our decided cases destroyed by such holding. The, true basis and extent of the rule as to what constitutes jointly acquired.property may be observed in In re Keith’s Estate, Okl., 298 P.2d 423 , wherein the parties lived together three days prior to the husband being killed during army service. Money which had accrued to deceased from army pay following the marriage was held to be jointly acquired property. In the body of the opinion this Court stated:

“Once it is recognized that the statutory proviso in question here pertains to an estate in the nature of common, or community, property and that; because of this nature, it makes no difference whether the wife has contributed any particular effort or industry, mental or physical, to its acquisition, and that a valid marriage is the only requisite to the existence of such an estate, it will be seen that the proviso applies to an estate like the one involved here, the same as to other estates, where the widow, as the wife, con *280 tributed nothing tangible to the estate’s accumulation through ‘industry’ in the strict sense of the word. A contrary interpretation of said statute would be arbitrary, discriminatory, and without valid foundation in the law. * * * Both the law and public policy dictate against such interpretation. * * * ”

Our statutes recognize that property acquired by joint industry of the parties to a marriage is jointly acquired property and subject to disposition as such. 12 O.S.1961, § 1278; 84 O.S.1961, § 213. Upon basis of .these statutes we have declared without exception that property acquired by joint industry of the parties during coverture is jointly acquired property. I am unfamiliar with any case that has declared a wife, whose efforts consisted of performance of the customary duties of the marital relationship, fails to acquire a joint interest in the property accumulated during coverture.

In Stone v. Stone, 86 Okl. 33 , 206 P. 246 , the Court had occasion to construe 84 O.S. 1961 , § 213, then Section 8418, R.L.1910, and particularly the proviso therein which concerns disposition of property acquired during coverture when there is no issue of marriage. This syllabus states, in pertinent part:

“It is the purpose of section 8418 * * * to provide a general rule of descent and when the first sentence thereof is read in connection with the proviso * * * a fair interpretation would be as follows: Provided that in all cases where the property is acquired by the joint industry of husband and wife during coverture, and there is no issue, the whole estate shall go to the survivors at whose death, if any of said property remain (undisposed of by will) one-half of such property shall go to the heirs of the husband and one-half to the heirs of the wife, according to their right of representation, and the phrase, ‘That in all cases where the property is acquired by the joint industry of husband and wife during coverture,’ includes all property not owned by the husband or wife at the time of their marriage or acquired by them respectively thereafter by gift, devise or descent, and further held, that the phrase ‘by the joint industry of husband and wife during coverture’ means the industry of a husband and wife each, in his or her recognized sphere of marital activity, and not that both must pursue jointly the same business or calling.”

In Thompson v. Thompson, 70 Okl. 207 , 173 P. 1037 , a divorce proceeding involved application of Section 4969, R.L.1910, now 12 O.S.1961, § 1278. The paramount question concerned division of the property the title to which stood in the wife’s name., In that case, similar in many respects to the present appeal, the court stated that the statute regards the property of married persons as falling within two classes — separate property of each spouse and property accumulated by the business side of the marriage. In relation to the latter, we said:

“ * * * This latter character of property, very similar in conception to the community property of the community property states, is regarded as being held by a species of common ownership. This is shown by the statute itself, where it speaks of the property ‘acquired by the parties jointly during marriage, whether the title be in either or both of said parties.’ No one will question the power and duty of the court in dissolving the marriage relation to divide the common property, and the above-quoted statute allows the court to go beyond this and give to either party under certain circumstances a portion of the separate property of the other. The power of a divorce court to deal with the separate property of the spouses is not here involved, for the reason that the property awarded the husband was not separate property; it was acquired during the marriage relation as a result of the judgment and industry of the husband and wife, truly one in the eyes of the law in the earning and accumulation of new property. The notion that the title to the property being in the wife by reason of conveyance or contracts *281 with the husband shows that it was her separate property must he rejected for several all-sufficient reasons. The statute itself negatives the idea that the record title is to prevail.”

In Tobin v. Tobin, 89 Okl. 12 , 213 P. 884 , this Court again construed and applied Section 4969, R.L.1910, now 12 O.S.1961, § 1278, particularly .the second provision of the statute dealing with property acquired jointly during marriage, whether title stood in the name of either or both. The Court stated that the property division contemplated by the statute contemplated a just and reasonable division of the property acquired by the parties during marriage.

Therein we said that it was in no. sense alimony when this Court makes an equitable division of property jointly acquired by their business ability, industry and economy during married life, which property the law considers as jointly acquired accumulations of the husband and wife. And, whether divorce is granted to the husband or the wife, this provision of the law is the same as to all jointly acquired property — the parties are entitled to an equitable division. In that case attention was called to the fact that the factors to be considered involve the fact that joint acquisition of property may be due to the wife’s “economy, industry, frugality and sturdy virtues, which have been a stay to the home and the constant guard of the accumulations, ⅝ ⅝ ⅝ >>

In Turner v. First Nat’l Bank & Trust Co., Okl., 292 P.2d 1012, 1016 , we quoted Laughlin v. Laughlin, 49 N.M. 20 , 155 P.2d 1010 , at page 1018:

“ ‘The only assets of a community at its inception are the labor, skill, industry and talents of the spouses. The community owns no property, and could never own any, under the theory of the trial court, if the business carried on is farming separately owned lands of one or both spouses. If a husband at the time of marriage owned, say, a thousand acre farm that required all his time, industry and talent to operate, the community would never own a dollar’s worth of property. The husband could accumulate separate property from its usufructs and by will dispose of to others the original lands and all accumulations, and the wife would be without remedy. She might labor on the farm, bear children and spend a life of practical serfdom with no hope of accumulating any property she could call her own, or legally claim an interest therein.

“ ‘The views here expressed have the approval of no less an authority than Professor Pomeroy, as stated in an article written by him and published in 4 West Coast Reporter 193 (1894), from which we quote as follows:

“ ‘ “All the decisions which have discussed the nature of community property agree in stating this fundamental theory; that all property, not falling within the definition of separate property, acquired after marriage by the labor either of the husband or of the wife is nevertheless deemed to be acquired by the labor of both the spouses.” ’ ”

It is my opinion the end result of the rules announced is abrogation of our statutes, and destruction of our judicial precedents involving joint property acquired by the marital community. For this reason it is absolutely required that all decisions which have defined property acquired by joint industry, as delineated in Keith, supra, and innumerable earlier decisions, must be overruled specifically if we are to avoid complete chaos in our law respecting jointly acquired property.

One further error inheres in the expressions concerning the relationship within the marital community. A settled principle of law, expressed by text and supported by our decisions, involves violation of the confidential relationship which exists between husband and wife. This rule is that a constructive trust may result from actual or constructive fraud, or as an equitable principle independent of fraud, where there is a violation of confidence or of fiduciary relationship. 89 C.J.S., Trusts, *282 § 139 et seq.; Bogert, Trusts and Trustees (2d Ed.) § 471; Dike v. Martin, 85 Okl. 103 , 204 P. 1106 ; Lewis v. Schafer, 163 Okl. 94 , 20 P.2d 1048 ; Davis v. Travis, 175 Okl. 21 , 52 P.2d 72 ; DeMoss v. Rule, 194 Okl. 440 ; 152 P.2d 594 .

The relationship between husband and wife is of such highly confidential nature that undue influence, or the ability to exercise same, is implied from the very fact of the relationship. Thomas v. Thomas, 27 Okl. 784 , 109 P. 825 , 113 P. 1058 , 35 L.R.A., N.S., 124; Mann v. Mann, 135 Okl. 211 , 275 P. 348 ; Hamburg et al. v. Doak, 207 Okl. 517 , 251 P.2d 510 . The relationship being so highly confidential, the law presumes the parties act with one another in absolute confidence that each will be faithful to the other’s interests, and neither need take precautions when dealing with the other. The conclusions reached and the rules announced absolutely require that the cited cases, and others based upon these principles, should be overruled specifically.

I respectfully dissent.