Estate of Reams

Filed 2/28/07 Estate of Reams CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Marjorie Laird Carter, Judge. Affirmed.

Law Office of June Harris, June Harris for Objector and Appellant.

The Harland Law Firm, Geri Anne Johnson and Heather S. Gimle for Petitioner and Respondent.

Rosemarie Smith is the conservator of the estate of Virginia Reams. Kathy Maluy is the conservator and administrator for the estate of Carrol Reams. She is also Carrols niece. This appeal concerns a dispute over the sale proceeds of a home Virginia and Carrol purchased in Oregon. The home was sold after Carrols death. The court granted Smiths petition for an order directing Maluy to transfer the sale proceeds to Virginia. On appeal, Maluy seeks reversal based on her contention the petition was barred by the one-year statute of limitations found in Code of Civil Procedure section 366.2.^[1] We find her argument lacks merit and affirm the order.

I

Facts

In 1996, Virginia and Carrol together purchased a residence in Oregon before they were married. Virginia, then known as Virginia Smith, and Carrol held title to the property as follows: Carrol Reams and Virginia E. Smith, not, as tenants in common, but with the right of survivorship.

Within the year, the couple sold the property to Nhu and Lucinda Huynh, taking back an installment note and a trust deed. The installment note was for the principal amount of $242,000, payable in monthly installments of $1,800 per month. The trust deed securing the note indicated ownership as Carrol Reams and Virginia E. Smith, with right of survivorship, as [b]eneficiary.

Carrol and Virginia married in September 1999. In August 2001, Carrol modified The Reams Family Survivors Trust Dated November 4, 1992. He assigned his interest in the Oregon property to the revocable trust. In addition, he designated Maluy to be the beneficiary of this asset as her sole and separate property. On the trusts schedule of assets, the property is listed along with the statement note owned jointly.

Smith became Virginias conservator in September 2003. Soon thereafter, Maluy became Carrols conservator. The Huynhs made payments on the note to Carrol during the time he was under the conservatorship, and after he died in April 2004. During the conservatorship, Maluy put the checks in a conservatorship bank account, and after his death, put the payments (totaling $7,200) in the estates bank account.

In September 2004, the Huynhs sold the property and wanted to pay off the balance of the loan. Maluy and Smith disagreed as to who owned the sale proceeds, but agreed to effectuate the pay off by each taking 50 percent of the balance owed on the note (each received $76,372.61).

A few months later, Smith filed a petition seeking an order directing [the] administrator to transfer property pursuant to Probate Code section 850. She sought all the sale proceeds, plus $7,500 paid to the Estate after Carrols . . . death, for the monthly installments due on the note. Maluy filed an objection, stating the note was not held in joint tenancy and the petition was barred by a one-year statute of limitations ( 366.2).

Smith filed a motion for summary judgment arguing the case presented no material issues of fact. In her opposition, Maluy asserted that even if the note was held in joint tenancy, Carrol severed the joint tenancy when he modified his trust. The court denied the motion, concluding there was a triable issue as to the severance issue. The court noted, There wasnt sufficient evidence presented to the court for the court to truly make a determination.

Maluy filed a motion for judgment on the pleadings, arguing the petition was barred by section 366.2s statute of limitations. Her motion was denied without prejudice.

At the evidentiary hearing on the petition, the parties admitted seven exhibits. In addition, the court heard one witness testify he saw Carrol execute the modification to his trust. The court determined the property was held in joint tenancy. It reasoned the property was held with right of survivorship which in California would mean joint tenancy. [] And simply listing the asset, the property as an asset of the trust, either property or note, or proceeds thereof, did not sever the joint tenancy[.] . . . [I]f, in fact, [Carrol] had been the survivor, . . . it would have gone to his trust, and then be distributed pursuant to the trust. It held section 366.2s statute of limitations was not applicable since this is not a creditors claim. The court granted Smiths petition and ordered Maluy to pay $83,572.61 plus interest from September 9, 2004, at the legal rate of 10 percent.

II

Legal Discussion

A. Standard of Review

The parties agree our review is de novo. Matters presenting pure questions of law, not involving the resolution of disputed facts, are subject to de novo review. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)

B. Ownership of the Oregon Residence

Oregon has abolished joint tenancies as a form of ownership, but retains its equivalent in Oregon Revised Statutes section 93.180, which provides: Every conveyance or devise of lands, or interest therein, made to two or more persons, other than to a husband and wife . . . creates a tenancy in common unless it is in some manner clearly and expressly declared in the conveyance or devise that the grantees or devisees take the lands with right of survivorship. Such a declaration of a right to survivorship shall create a tenancy in common in the life estate with cross-contingent remainders in the fee simple. Joint tenancy is abolished and the use in a conveyance or devise of the words joint tenants or similar words without any other indication of an intent to create a right of survivorship shall create a tenancy in common.

When Virginia and Carrol bought the Oregon residence as an unmarried couple, they took title not as tenants in common, but with the right of survivorship. Accordingly, they clearly and expressly declared as required by Oregons legislation to take the lands with right of survivorship. Moreover, it was expressly stated they were not creating a tenancy in common.

In California, only joint tenancy ownership has the distinguishing feature of right of survivorship. The title of each tenant extends to the whole estate. Hence when one tenant dies, the entire estate survives to the others, to the exclusion of the heirs of the decedent. [Citations.] (12 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property,  34, p. 86.) Therefore, in California, title to the residence would be deemed a joint tenancy.

When Virginia and Carrol sold the property to the Huynhs, they received a note secured by a trust deed. The parties agree the recorded trust deed did not sever the right of survivorship or create a tenancy in common. The deed clearly and expressly renamed Carrol and Virginia as beneficiaries, with right of survivorship.

On the other hand, the parties dispute ownership of the note. Maluy contends the note was personal property having an interest in common because it does not contain language specifically creating a joint interest or right of survivorship. (See generally Civ. Code,  686 & Cal. U. Com. Code  3110.)^[2] We disagree. It is well settled law in California that where a promissory note is secured by a mortgage or deed of

trust the two instruments form parts of one transaction and must be read and construed together. [Citation.] (Mutual Bldg. & Loan Assn of Long Beach v. Beers (1931)

117 Cal.App. 200, 204.) The notes silence as to ownership must be viewed in the context of the concurrently executed deed of trust clearly designating Carrol and Virginia as joint owners. Virginia and Carrols right of survivorship was not severed. As correctly decided by the trial court, Under both Oregon and California law, Carrol and Virginia . . . had the right of survivorship in the [n]ote.

C. Background on section 366.2

The trial court determined the statute of limitations set forth in section 366.2, which governs causes of action existing against a person and survives his or her death, was not applicable in this case. We conclude the court was right.

There are many statutory requirements and procedures for the determination, settlement, and payment of creditors claims against a decedents estate. Section 366.2 is one of many rules existing in the creditor claim-filing scheme.

The scheme contains several different filing deadlines. Creditors must file a claim in a probate proceeding either within four months after the court appoints a personal representative, or within 60 days after notice. (Prob. Code, 9100.) [S]ection 366.2 provides for an outside time limit of one year for filing any type of claim against a decedent. (Dobler v. Arluk Medical Center Industrial Group, Inc. (2001)

89 Cal.App.4th 530, 535 (Dobler).) This one-year statute of limitations applies to actions on all claims against the decedent which survive the decedents death. (Ibid.) The limitations period can be tolled by the timely filing of a creditors claim. ( 366.2, subd. (b)(1); Prob. Code, 9352.) However, if a claim is rejected, the creditor has only three months thereafter to file suit against the estate on the rejection of the claim. (Prob. Code, 9353.)

The purpose of these relatively short limitation periods is to protect[ ] a decedents heirs, legatees, or beneficiaries from stale and unknown claims (Dobler, supra, 89 Cal.App.4th at pp. 541-542), and thus to effectuate the strong public policy of expeditious and final estate administration . . . . (Bradley v. Breen (1999)

73 Cal.App.4th 798, 805-806.)

D. Section 366.2 does not apply because no cause of action existed before Carrols death. Probate Code section 850 governs this case.

Section 366.2, subdivision (a), provides, If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.

Maluy asserts Smith is making a claim against Carrols estate, as that term is intended by section 366.2. But, we agree with the trial court that Smiths claim is not for an unpaid judgment, tax, debt or any other right arising out of contract or tort. Rather, Smith sought to recover property in the hands of the estates administrator which she had no right to keep. [D]isputes regarding decedents title to specific property alleged to be included in the estate are not claims within the meaning of the [c]odes creditor claim rules. [Probate Code section 9000, subdivision (b)]. Instead, these disputes may be handled under [Probate Code section] 850. (Ross et al., Cal. Practice Guide: Probate (The Rutter Group 2006) 8:16, p. 8-14.)

Probate Code section 850 provides that personal representative or any interested person is permitted to file a petition requesting that the court make an order in certain cases, including: (1) Where the decedent died in possession of, or holding title to, real or personal property, and the property or some interest therein is claimed to belong to another; and (2) Where the decedent died having a claim to real or personal property, title to or possession of which is held by another. (Prob. Code,  850, subd. (a)(2) & (a)(2)(D).) This provision provides a mechanism for pursuing claims, causes of action, or matters that are normally raised in a civil action to the extent that the matters are related factually to the subject matter of a petition filed under this part. (Prob. Code,  855.)

The claim underlying the [Probate Code section] 850 petition is subject to the same statute of limitations that would apply had an ordinary . . . civil suit been brought. (Ross et al., Cal. Practice Guide: Probate, supra, 15:350.3, p. 15-98.) But otherwise, There is no statutory time limit on filing the petition. Presumably, therefore, the proceeding may be commenced at any time up until final distribution and closing of the estate. [] Indeed, the court has authority to act on a third partys [Probate Code section] 850[, subdivision,] (a)(12) petition even after the property in question has been sold to a bona fide purchaser. Under these circumstances, the petition reaches the sale proceeds now held by the estate. (Ross et al., Cal. Practice Guide: Probate, supra,

15:250.2, pp. 15-97 to 15-98.)

We conclude Probate Code section 850 applies to the dispute raised in Smiths petition. Simply stated, Smith offered evidence Carrols conservator and estate administrator collected and kept some payments and sale proceeds arising from the jointly held note, which Virginia claims now belongs to her. Virginia survived Carrol and had a right to collect all proceeds from the note. The action arose after Carrol died and Maluy failed to distribute the money to Virginias conservator.

Maluy asserts all accusations of wrongdoing on her part are unfounded and unfair. She maintains the claims raised in the petition arose before Carrols death and concern an underlying dispute solely between Virginia and Carrol. Specifically, Maluy contends the petition merely asserts Virginias quiet title action that arose either (1) when the note was created because it did not clearly contain a survivorship designation, or (2) when Carrol modified his trust by assigning his interest in the note. Maluy asserts both of these events could potentially harm Virginia, creating a cause of action. She acknowledges Virginias claim did not accrue until Carrols death, but the causes of action existed before Carrol died and not after his death, thus bringing the one year bar under section 366.2 into play. She is wrong, and the cases she cites do not support her argument.

We conclude Virginia had no grounds to assert any cause of action against Carrol when the note was created. As explained above, the note and contemporaneously executed deed of trust must be read together. (Mutual Bldg. & Loan Assn of Long Beach v. Beers, supra, 117 Cal.App. at p. 204.) And when the note is read in this context, there was no reason for Virginia to seek further clarification on the form of ownership. The trial court correctly concluded, Under both Oregon and California law, Carrol and Virginia . . . had the right of survivorship in the [n]ote. Any action to quiet title or for specific performance, as suggested by Maluy, would be deemed frivolous.

Similarly, we find no cause of action arose when Carrol assigned his interest in the note to his trust. The case authority Maluy cites to support this claim is not analogous. In Battuello v. Battuello (1998) 64 Cal.App.4th 842, 845 (Battuello), a son was promised he would inherit the family vineyard when his father died. However, the parents changed their mind and executed a trust stating their son would not receive the vineyard as he had been promised. (Ibid.)

The Battuello court endorsed the general rule that section 366.2 cannot be applied to a cause of action alleging a promise to leave certain property in a will because such a cause of action neither accrue[s] prior to the promisors death nor survives his death. (Battuello, supra, 64 Cal.App.4th at p. 846.) However, the court determined an exception to this general rule occurs in a case where the promisor had during his lifetime made a transfer of the promised property to another. In that circumstance, a cause of action did exist prior to the decedents death and section 366.2 therefore applied. The promisee may seek equitable relief against the promisor during the promisors lifetime. [Citations.] (Ibid.)

Therefore, in Battuello, when the parents created the trust, they also in effect affirmatively precluded their son from receiving the property as he had been promised. The son therefore had a cause of action against his parents prior to his fathers death, which survived his fathers death, and consequently section 366.2s one year limitation applied. (Battuello, supra, 64 Cal.App.4th at p. 846.) The only reason the appellate court overturned the ruling on demurrer was because it found the son had alleged sufficient facts to support a claim of equitable estoppel, to preclude the mother and the estate from asserting section 366.2 as a defense. (Id. at pp. 847-848.)

When Carrol changed his trust, he did not express any intent to sever the joint tenancy or right of survivorship. [A] joint tenancy may be served by (1) a unilateral conveyance of the interest to a third party or recordation of a writing [citation], (2) an express or implied agreement of the joint tenants [citation], (3) a judgment [citation], or (4) an execution sale [citation]. (Estate of Layton(1996)

44 Cal.App.4th 1337, 1339-1340.) There is no evidence Carrol declared or indicated his intent to terminate joint tenancy status via his trust document. To the contrary, the trust modifications and corresponding estate planning documents show Carrol simply restated the joint nature of the asset.

There is no dispute Carrol assigned his interest in the note to the trust. He listed the Oregon property in the schedule of assets as a note owned jointly. Because Carrol could transfer 100 percent of the note if he survived Virginia, he designated Maluy in the trusts schedule of beneficiaries to inherit 100 percent. If the note had been owned as tenants in common, he would have only a 50 percent interest to give to Maluy.

Moreover, the parties submitted correspondence between Carrols financial advisor, attorney, and a charitable beneficiary, which confirm Carrol did not desire to sever the notes right of survivorship. These exhibits show Carrols financial advisor and the charity attempted to persuade Carrol to sever the joint tenancy. In one letter written by his attorney to the charity, the attorney explains, [Carrol] declines to put the notes and trust deeds into the trust on the belief that these obligations will be paid off in the near future. . . . [Carrol] is taking an informed risk as to these assets. [] I believe that I have done everything I can to get the trust funded.

Thus, unlike the parents in Battuello, Carrol did not jeopardize Virginias right of survivorship in the note by amending his trust.^[3] Section 366.2 refers to a cause of action which survives the death of a person. Here, no cause of action survived Carrol because no cause of action existed before his death.

Maluy also cites Bradley v. Breen (1999) 73 Cal.App.4th 798 (Bradley), as supporting her case, but we fail to find the connection. In that case, the court determined the statute of limitations for an equity indemnity action that had not yet accrued was nevertheless barred by the one-year limitation period of section 366.2. The case concerned two individuals who filed cross-complaints for equitable indemnity against a decedents estate. The plaintiff in the main action had alleged he was sexually abused by the decedent, and four years after the decedent died, he filed an action against the two individuals who the victim alleged aided and abetted the decedents molestations. The court restated the rule: With limited exceptions, the statute of limitations in . . . section 366.2 . . . governs causes of action against a decedent that existed at the time of death, whether accrued or not accrued. (Id. at p. 800.) It concluded, section 366.2 barred the cross-complaint, despite the ordinary rule that an indemnity action does not accrue for statute of limitations purposes until a tort defendant pays a judgment or settlement for which that defendant is entitled to indemnity. (Ibid.)

As explained above, the facts creating the basis for Smiths petition did not exist before Carrols death. Carrol did not change the ownership of the note before his death. It was Maluy who failed to distribute the estate property and kept assets rightfully belonging to Virginia.

Finally, we conclude Embree v. Embree (2004) 125 Cal.App.4th 487 (Embree), does not support Maluys contention. In Embree, a divorcing husband and wife entered into a marital settlement agreement, where the husband agreed to provide a trust or annuity for her benefit upon his death. Wife waited over one year after the husbands death to file a lawsuit against the trust beneficiaries, seeking to enforce the marital settlement agreement. The court determined the action was time-barred by sections 366.2 and 366.3. (Id. at pp. 490-491.) The appellate court rejected the wifes argument the marital settlement agreement amounted to a spousal support judgment not subject to creditor claim limitation periods. It concluded property distributed to the trust beneficiaries is not available to satisfy her support judgment because she failed to file her claim within one year of [decedents] death. (Id. at p. 493.)

The wife in Embree stood in the position of any general creditor seeking a portion of the estate. In contrast, Virginias dispute concerns title to a specific asset included in Carrols estate by the administrator. The petition properly seeks to recover property in the hands of the estates administrator, which she had no right to keep. Such disputes are not claims within the meaning of the codes creditor claim rules. (Prob. Code  9000, subd. (b).) Because she possessed more than a mere monetary claim, she need not present a creditors claim. (See Kenworthy v. Hadden (1978) 87 Cal.App.3d 696, 702 [the community property value of a partnership interest shared by a husband and wife could be pursued in the estate of the husband without the prior filing of a creditors claim].)

III

Disposition

The order is affirmed. Appellant shall recover her costs on appeal.

OLEARY, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

MOORE, J.

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^[1] All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.

^[2] Civil Code section 686 provides, WHAT INTERESTS ARE IN COMMON. Every interest created in favor of several persons in their own right is an interest in common, unless acquired by them in partnership, for partnership purposes, or unless declared in its creation to be a joint interest, as provided in [s]ection 683, or unless acquired as community property.

The California Uniform Commercial Code section 3110 governs payees of negotiable instruments. It provides that if an instrument is payable to X and Y, the note is owned by both parties jointly, neither party has the right to receive a deceased partys share. (See Official Comment 4, Cal. U. Com. Code  3110.)

^[3] Maluy believes it is important the court denied summary judgment because it found a triable issue of fact as to whether Carrol transferred his interest in the note to his trust. She apparently forgets the court also ruled there was insufficient evidence presented to make the determination. At the hearing, the parties submitted additional evidence which confirm Carrol did not sever, and never intended to sever, the right of survivorship.