Sullivan v Bank of America

Filed 4/27/07 Sullivan v Bank of America CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

Appellant Mildred Sullivan, as personal representative of the Estate of Omega Cole, appeals the trial courts dismissal of her action against the Bank of America (BofA) to recover damages for alleged breach of contract in the handling of the decedents bank accounts. We affirm.

STATEMENT OF THE FACTS AND PROCEDURAL HISTORY[1]

Willie and Omega Cole had been married for almost 40 years and lived together in a home in Vallejo, California, when Willie died on May 11, 1997. Willie had children from a prior marriage, including Myrtleen who lived in a separate residence in the area. By all accounts, Omega was then in very frail health. A few weeks after the death, Myrtleen began staying regularly at her stepmothers residence to care for her; later she adopted a routine of living at the residence four days a week. During this period, Omega asked Myrtleen to help her with her financial affairs in addition to her medical needs.

On July 3, 1997, Omega and Myrtleen met with a banker, Marites Policarpio, at the Vallejo Plaza branch of BofA. According to Policarpio, Omega informed her that she wished to add Myrtleen to her two accounts at the bank. Omega and Myrtleen also asked Policarpio to open a new time deposit account in their names. As documentation for this transaction, both Omega and Myrtleen signed a form, printed on both sides and entitled Master Agreement, which we will call the signature card. Above their signatures, the front side of the signature card stated: If more than one person signs below, all accounts are held in joint tenancy with right of survivorship unless you specify another type of ownership. The signature card further stated: we may pay out funds on any one of the signatures below (unless you specify another number here ___). Omega and Myrtleen did not specify another type of ownership and left blank the space specifying the need for more than one signature. On the reverse side of the signature card, Policarpio wrote the numbers of the three accounts in a column calling for account information.

The signature card also contained the following provision: If we believe there is a dispute about ownership or control of your account, we may place a hold on it and not release funds until we receive either a court order or an instruction signed by all persons claiming an interest in the account.

On August 4, 1997, Omega signed a Durable General Power of Attorney giving Myrtleen certain powers to act on her behalf in the handling of money and property. The power of attorney, however, did not contain an express authorization, as required by Probate Code section 4264, subdivisions (a), (e) and (f), granting Myrtleen the power to (a) Create, modify, or revoke a trust . . . (e) Create or change survivorship interests in the principals property . . . [or] (f) Designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principals death. Moreover, it was not in either of the two preferred forms identified in the Deposit Agreement BofAs own form or the Uniform Statutory Form Power of Attorney.

The record disclose[d] that Myrtleen opened four additional accounts that are at issue in this litigation. She opened two accounts on September 19, 1997, and a third account on November 10, 1997. The date on which the fourth account was opened [was] disputed; BofA contends that it was opened on July 3, 1997, the same date as the original three accounts, but appellant offer[ed] evidence from which she infers that it was opened at a later time.

The only documentation for the creation of the four additional accounts consisted of the listing of the account numbers on the reverse side of the signature card in the account information column. A bank officer, Jean Miller, testified in the probate proceedings that she recognized the account numbers to be in her handwriting, but she could not recall the circumstances of the transactions. The reverse side of the signature card contained spaces, opposite the account information column, for recording the date on which an account is opened and client(s) authorization to add new account, but these spaces were not filled out.

Later in November 1997, Myrtleen executed a declaration of trust on behalf of Omega in reliance on her power of attorney. [A bank employee] testified that she advised Myrtleen to consult with a BofA investment advisor about a trust and, the advisor referred Myrtleen to various lawyers. [In opposition to the summary judgment motion that we considered in the prior appeal], appellant submitted a document entitled The Omega Cole Family Trust, Declaration of Trust, dated November 20, 1998. The trust agreement name[d] Myrtleen attorney in fact for Omega Cole, settlor and designate[d] Myrtleen as the sole trustee. The trust estate [was] described as all property hereafter transferred or conveyed to and received by the Trustee. The beneficiaries of the trust were the heirs designated in Omegas will: Myrtleen herself and three of Omegas nieces, Patricia Williams, Mildred Sullivan, and Omega Carter.

Omega died on January 12, 1999. [A bank employee] testified that she received a copy of the death certificate a little later than that, apparently referring to the date of death. In a declaration submitted in support of summary judgment, [she] state[d] that in January 1999 Myrtleen told me that she thought the trust was invalid and that the accounts held in the trust should be changed back to joint tenancy. I asked [Myrtleen] to prepare a letter explaining why the trust was invalid. On or about January 21, 1999, [Myrtleen] returned to the Bank with a letter explaining why the trust she had created (and as to which she and Mrs. Cole were the sole co-trustees) was invalid and a copy of Omega Coles death certificate. 

In [the] letter . . . Myrtleen state[d], After speaking with my attorney, it has come to my attention that I did not have authority to create a trust for Omega Cole under the Durable General Power of Attorney form signed by Mrs. Cole on August 4, 1997. Therefore, please change the names of all bank accounts into my name alone. [] The accounts were held in joint tenancy until November, 1998, when I tried to create a trust. The accounts were placed in the name of the trust. Because that trust was invalid, the accounts would revert to their previous joint tenancy. However, Omega Cole died on January 12, 1999, which leaves these accounts solely to me. 

[A]fter receiving the letter and death certificate, [the bank employee] changed the accounts that were previously in the name of the trust back to Mrs. Cole and [Myrtleens] names. In the probate proceedings, she explained that she put the accounts into joint tenancy . . . because thats the way they were set up. The declaration of BofA paralegal . . . confirms that [i]n January 1999, the names on these accounts was [sic] changed back to Omega Cole and Myrtleen Champion as joint tenants. . . . [] . . . Soon afterward, [Myrtleen] withdrew all funds from the various joint tenancy accounts that she had held with Mrs. Cole and closed them. 

On March 31, 1999, appellant and her attorney visited the BofA Vallejo branch to obtain information about the decedents accounts. Appellant did not provide BofA with an affidavit of adverse claim, nor did she at any time obtain a restraining order preventing the distribution of the funds to Myrtleen.

In a decision entered November 15, 1999, the probate court found that no joint tenancy was created in . . . four accounts,[2] in which Myrtleen claimed to hold the sum of $447,000 jointly with Omega and therefore Myrtleen had no authority to withdraw those funds as a surviving joint tenant after Omegas death. A judgment for $447,438 in favor of the estate and against Myrtleen was subsequently entered on December 8, 1999.

On April 25, 2001, appellant filed her third amended complaint against BofA, alleging that Myrtleen was insolvent and could not satisfy the judgment against her for the return of the funds. The complaint contained causes of action for negligence and breach of contract.

On March 14, 2003, the trial court entered an order for summary judgment on both breach of contract and negligence causes of action. The court found that the undisputed facts established that the accounts in question [were] held in joint tenancy; BofA violated no duties imposed . . . by law or contract by permitting the transfer of assets from these accounts; Myrtleen as a signer of those joint tenancy accounts had the right to withdraw any or all funds from those accounts on her own signature at any time; and appellant could not establish any damages recoverable against [BofA] for permitting the . . . withdrawals. A judgment entered on this order gave BofA leave to seek costs and attorney fees in postjudgment proceedings.

Appellant filed a motion for reconsideration, and upon denial of that motion, filed a notice of appeal from the judgment and order denying the motion for reconsideration.

In her first appeal to this court, appellant addressed her arguments to the breach of contract cause of action only. We therefore held that she waived any assignment of error relating to the summary adjudication dismissing the negligence cause of action.

We found the evidence insufficient to support the granting of summary judgment with respect to the claim for breach of contract. Based on the evidence offered by BofA, we found it unclear as to whether the nature of the accounts was altered by the purported trust. We also found it unclear as to whether, under the covenant of good faith and fair dealing, BofA was obligated to place a hold on the accounts after Coles death.

On November 7, 2005, BofA filed a motion in limine seeking to exclude all evidence of the trust from the upcoming trial on the grounds that Osswald v. Anderson (1996) 49 Cal.App.4th 812 (Osswald) compelled the conclusion that the trust was void at its inception and therefore title to the four accounts at all times remained in joint tenancy. The motion was granted. BofA next moved to dismiss the action on the grounds that the order granting the motion in limine left no triable issues. The motion was denied.

BofA subsequently filed another motion in limine seeking to exclude all evidence or argument that BofA should incur liability for failing to have placed a hold on the four accounts. BofA also filed a motion for judgment on the pleadings (MJOP), and renewed its motion to dismiss, citing to Osswald and Financial Code section 952 (section 952). The trial court, this time with a different judge, granted all three motions without leave to amend. The court also denied appellants motion to vacate the courts order regarding BofAs first motion in limine.

In its order after hearing, the trial court stated: If a transfer to a trust is invalid, the legal title to te [sic] property remains in the grantor. [Citation to Osswald.] The attempted transfer of the joint tenant accounts to an invalid trust was void, resulting in legal title reverting to the joint tenants. The court also relied on section 952, stating: Section 952 provides immunity to banks which release funds to account holders in the absence of notice of adverse claims or contrary court order. [Appellant] has conceded that no such claims or order were provided to [BofA] before the withdrawal of the funds from these accounts. Judgment was thereafter entered. This appeal followed.

DISCUSSION

I. Standard of Review

Judgment on the pleadings is akin to a demurrer and is properly granted only if the complaint does not state facts sufficient to state a cause of action against that defendant. [Citations.] The grounds for the motion must appear on the face of the complaint, and in any matters subject to judicial notice. [Citation.] The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts. [Citations.] Appellate courts review the record de novo to determine whether the complaint states a cause of action as a matter of law. (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.)

II. Application of Osswald

Appellant attempts to defeat the application of Osswald by arguing that it is distinguishable because it involved real property and because, in the present case, only one of the joint tenants (Myrtleen) acted to have the accounts retitled from joint tenancy to the trust, thereby allegedly severing the original joint tenancy. She also argues that there are inconsistencies among the different appellate districts with respect to whether transfers to an invalid trust are void or voidable.

We note that the parties do not dispute that the purported trust was invalid when created. The trial court found that the purported trust was void and without effect. We agree with the trial courts determination that, per Osswald, the accounts retained their joint tenancy status until Coles death, at which time they became Myrtleens sole property by right of survivorship, notwithstanding her earlier ineffectual attempt to place the accounts in trust.

In Osswald, a case from the Fourth District Court of Appeal, the court determined two trusts were invalid. In 1987, Heidi and Otto Osswald signed a trust naming themselves as initial trustees and beneficiaries. The 1987 trust referred to schedule A as listing the trust property, but no schedule A was attached. The court reasoned that although the 1987 declaration of trust signed by the Osswalds clearly expressed their trust intent, purpose and beneficiaries and purported to identify the trust property by referring to schedule A, the evidence was insufficient to establish the trust was properly funded partly because no schedule A was attached. (Osswald, supra, 49 Cal.App.4th 812, 818820.)

The court determined a second trust, the 1988 trust, was invalid although it adequately described the real property by attaching schedule A. The 1988 trust was invalid because it named Gary (Heidis son) and Linda (Ottos paramour) as trustee and successor trustee, respectively, not Heidi and Otto, so that the Osswalds signatures on the trust document were not sufficient to satisfy the statute of frauds. (Osswald, supra, 49 Cal.App.4th 812, 820.) The court also concluded a 1988 quitclaim deed was invalid because it erroneously listed Otto and Heidi as grantees, rather than as trustees, which was insufficient to transfer title to the trust. (Ibid.)

The court held that [i]f a transfer to a trust is invalid, the legal title to the property remains in the grantor. (Osswald, supra, 49 Cal.App.4th 812, 820.) In arriving at its holding, the court relied on an earlier case that held:  If a conveyance in trust is for any reason invalid or ineffectual, the legal title, so far as the trustees are concerned, must be deemed to have remained in the grantor.  (Booge v. Reinicke (1941) 45 Cal.App.2d 260, 265, citation omitted.)

In the present case, we agree with the trial court that, as the purported trust was void, the accounts remained at all times in joint tenancy. Unlike appellant, we do not find the fact that Osswald involved real property to be a distinguishing factor. Nor do we believe that the original joint tenancy was severed by Myrtleens unilateral actions. Simply put, the purported trust was invalid from its inception and therefore it had no legal effect upon the accounts that were held in joint tenancy.

Appellant attempts to avoid this result by arguing that there is a conflict between the courts of appeal regarding whether the invalid trust was voidable rather than void. Appellant relies on three cases: Cardoza v. White (1933) 219 Cal. 474 (Cardoza), along with Mulli v. Mulli (1951) 105 Cal.App.2d 68 (Mulli), and Jose v. Pacific Tile & Porcelain Co. (1967) 251 Cal.App.2d 141 (Jose), two First District cases. We find these cases unpersuasive.

The Supreme Court in Cardoza held that an oral trust in real property cannot be held wholly void; it is merely unenforceable when, in an action brought to compel performance of its terms, the party to be charged asserts its invalidity. (Cardoza, supra, 219 Cal. 474, 476.) The court in Mulli held: As a rule no express trust in land based on an entirely oral transaction can be enforced [citations]. However such trust is enforceable if, with the consent of the trustee, the beneficiary as such enters into possession of the land or makes valuable improvements thereon or irrevocably changes his position in reliance upon the trust. [Citations.] In this case the findings clearly show that respondents with the consent of appellant made valuable improvements on the property in reliance upon the trust. (Mulli, supra,105 Cal.App.2d 68, 7374.) The court in Jose was confronted with a statute of frauds issue and adopted language from Mulli. (Jose, supra, 251 Cal.App.2d 141, 144145.)

These three cases involve the validity of oral trusts in circumstances where the trustors or beneficiaries recognized the trusts and took actions in reliance on the oral trusts. Here we do not have such circumstances. Appellant concedes that the written trust is invalid, and there is no evidence that the trustor or any beneficiary took action in reliance on the invalid trust. Accordingly, the trial courts reliance on Osswald was proper.

III. Financial Code Section 952

The trial court also found that section 952[3] conferred immunity on BofA because appellant failed to follow the procedures set forth in that statute to place a hold on the accounts. Section 952 provides that banks must permit account holders to withdraw funds from their accounts unless the bank has received an affidavit of adverse claim or a restraining order, injunction, or other appropriate order.

[Section 952] allows a bank to disregard adverse claims to accounts unless they are made in one of two authorized forms: Notice to any bank of an adverse claim . . . to a deposit standing on its books to the credit of . . . any person shall be disregarded, and the bank, notwithstanding the notice, shall honor the checks, notes, or other instruments requiring payment of money by or for the account of the person to whose credit the account stands . . . without any liability on the part of the bank . . . . The statute provides, however, that the bank shall comply with appropriate judicial orders and may delay payment three days if served with an affidavit of the adverse claimant. [Citation.] (Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 538539.)

Instead, the bank . . . is required by Financial Code section 952 to disregard notice of adverse claims to the account, including notice conveyed by circumstantial evidence or documents in the banks possession, unless the claims are made through an appropriate affidavit or court order. Though the bank may be free to terminate the account, it incurs no liability by failing to do so. (Chazen v. Centennial Bank, supra, 61 Cal.App.4th 532, 541.)

It is undisputed that prior to the withdrawal of funds, appellant did not serve BofA with an affidavit of adverse claim regarding the accounts. Nor did she ever obtain a court order requiring the bank to place a hold on those funds. The trial court agreed with BofA that under these circumstances section 952 operated to immunize it from liability.

Appellant attempts to avoid the application of section 952, claiming that BofA violated the covenant of good faith and fair dealing by failing to place the accounts on hold. (See Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371372.) In her view, BofA should have entertained a reasonable suspicion that there were issues regarding ownership when Myrtleen asked to retitle the accounts from the trust to joint tenancy. She also claims that BofA waived its right to assert section 952 when it contractually provided via the signature card that under certain circumstances it might place a hold on an account. We disagree.

The language on the signature card informs its customers that, under certain circumstances, BofA reserves the right to place a hold on their accounts. It does not purport to waive any rights or immunities that BofA would otherwise be entitled to. Nor do we believe that the Legislature intended that the statutory requirements of section 952 be waived under such circumstances. And as it is undisputed that the trust in question was invalid at its inception, we fail to see how liability can attach to the act of restoring the accounts to their original joint tenancy status.[4]

Appellant also contends that section 952 does not apply to this case because it was not the paying out of the money from the accounts that constituted the wrongful act by BofA. Instead, she claims the wrongful conduct was retitling the accounts into joint tenancy after one of the parties was deceased. She speculates that Myrtleen possibly would not have withdrawn the money had the accounts not been retitled to joint tenancy. There is no evidence in the record, however, to support this assertion.

Citing to Civil Code section 3531 ([t]he law never requires impossibilities), appellant also claims she was unaware of three out of four of the accounts before they were closed by Myrtleen and therefore could not have filed an affidavit of adverse claim or a court order with respect to those three accounts. Accordingly, she maintains that the burden to place a hold on the accounts could only be on BofA. We are not persuaded.

The record shows that appellant and her attorney visited the bank and obtained information about the accounts two months after Omega died. There is no evidence that appellant ever filed a court order with respect to the remaining open account, which was closed approximately six weeks later. Under these circumstances, we do not find appellants impossibility argument to be compelling.

In sum, we agree with the trial court that section 952 confers immunity on BofA with respect to the accounts in question.

IV. Motion in Limine

Appellant infers that the first judge, who granted BofAs first motion in limine, contemplated the possibility that his ruling might later be vacated or modified because he did not grant BofAs contemporaneous motion to dismiss. Appellant thus implies that the second judge erred in declining to reconsider the earlier ruling, yet she offers no substantive argument in support of such a conclusion. As we have found that the second judge properly granted the renewed motion to dismiss and the motion for judgment on the pleadings, we need not consider appellants arguments concerning the motion in limine.

The judgment is affirmed.

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[1] This portion of the opinion is derived, in part, from the earlier opinion filed in this case on June 24, 2004. (Sullivan v. Bank of America N.A. (A103825) [nonpub. opn.].) Passages from the earlier opinion are set forth in quotation marks.

[2] The account numbers were: 01033-05521, 01036-04547, 01035-04897, 018130-00072.

[3] Section 952 provides, in part: Notice to any bank of an adverse claim (the person making the adverse claim being hereinafter called adverse claimant) to a deposit standing on its books to the credit of or to personal property held for the account of any person shall be disregarded, and the bank, notwithstanding the notice, shall honor the checks, notes, or other instruments requiring payment of money by or for the account of the person to whose credit the account stands and on demand shall deliver that property to, or on the order of, the person for whose account the property is held, without any liability on the part of the bank; subject, however, to the [filing of an affidavit or court order] . . . .

[4] We note BofA contends that even if section 952 does not apply, it acted in an objectively reasonable manner and therefore did not violate the covenant of good faith and fair dealing. It is well established that a bank has a duty to act with reasonable care in its transactions with its depositors ; the duty is an implied term in the contract between the bank and its depositor. (Chazen v. Centennial Bank, supra, 61 Cal.App.4th 532, 543, citation omitted.) This contractual relationship does not involve any implied duty to supervise account activity [citation] or to inquire into the purpose for which the funds are being used [citation] and entails no contractual obligation to persons other than the account holder . . . . (Id. at p. 537.)