California Court of Appeals, Second District, Fifth Division
ARTHUR C. HIGGINS, as Executor, etc., Plaintiff and Appellant,
MARIA LUPE HIGGINS, Defendant and Respondent.
from a judgment of the Superior Court of Los Angeles County,
Dan Thomas Oki, Judge. Reversed and Remanded.
Office of Robert E. Knudsen and Robert E. Knudsen; Law
Offices of Layne A. Bartholomew, Layne A. Bartholomew, for
Plaintiff and Appellant.
Law Group, Wayne T. Kasai and Kristin E. Reynolds, for
Defendant and Respondent.
KRIEGLER, Acting P.J.
agreed to hold funds in trust for her husband's elderly
stepmother. After her husband's death, the wife changed
the form of the accounts and used the funds for her own
purposes. The stepmother died and her personal representative
brought this action to impose a constructive trust on the
funds. At the conclusion of the personal representative's
case-in-chief, the trial court granted judgment in favor of
the wife under Code of Civil Procedure section 631.8. The
trial court found the husband committed no wrongdoing in
transferring the funds to the accounts, and the trust
designation on the accounts was revocable, so no constructive
trust could be imposed on the funds. We hold that despite the
form of the bank accounts, when clear and convincing evidence
shows funds were transferred to an account owner to hold in
an irrevocable trust for a third party beneficiary and the
trustee repudiates the trust, a constructive trust may be
imposed on the funds for the beneficiary's estate to
prevent unjust enrichment. We reverse the judgment and remand
for further proceedings.
AND PROCEDURAL BACKGROUND
Plan and Transfer of Assets
Lopez Higgins (Maria) and her husband, Bartlett Higgins,
prepared a thorough estate plan in 1994. They established the
Higgins Family Trust dated March 11, 1994 (the Family Trust),
and placed real property on Sunset Boulevard into the trust,
along with other assets. The trust provided for the settlors
during their lifetimes. Upon the death of the second spouse,
the trustee would distribute $10, 000 to each surviving
grandchild and $10, 000 to Maria's niece. The primary
beneficiaries of the remaining trust assets would be
Bartlett's sons, who were Maria's stepsons: W. Clive
Higgins, Arthur C. Higgins, James Higgins, and Karl Higgins.
The trustee would divide the balance by allocating one share
to each living son and one share to each deceased son with
will provided for her property at her death, including
savings and checking accounts to be added to the Family Trust
and administered under its terms. She nominated Bartlett to
serve as her executor. If he was unwilling or unable to act
as executor, she nominated Clive. If Clive was unwilling or
unable to serve, she nominated Arthur. Maria and Bartlett
executed powers of attorney as well.
died the following year. Maria was authorized under the terms
of the Family Trust to serve as the sole trustee after
Bartlett's death, although she was required to serve with
a co-trustee under certain circumstances to avoid taxes. The
individuals nominated to serve as executor under her will
were appointed as successor trustees under the Family Trust.
Maria did not take actions as trustee in the name of the
Family Trust, however. She continued to conduct transactions
during her lifetime in her own name.
leased the Sunset Boulevard property for $10, 000 per month
to a family business operated by Clive, Arthur, and Karl.
After his father's death, Clive visited Maria regularly
to assist with her finances. He helped her pay bills, collect
rents, and deposit checks. Clive became the sole owner of the
family business when Karl passed away in August 1999, and
Arthur sold his shares to Clive after a dispute in December
1999. Clive had four sons of his own, including Michael
Higgins and Mark Higgins, prior to his marriage to defendant
and respondent Maria Lupe Higgins (Lupe). When Clive became
the sole owner of the business, his son Michael took a
management position to assist his father.
executed a second power of attorney on March 20, 2007,
appointing Clive and another individual to make joint
decisions if she became disabled or incapacitated. She
executed a new lease with Clive for the Sunset Boulevard
property, reducing the rent to $5, 000 per month. On March
30, 2007, Maria reported complaints about her short-term
memory to Dr. Nelson Sanchez. She was 91 years old and had a
regular caregiver. In Dr. Sanchez's opinion, her
cognitive dysfunction was more than normal memory loss and
could progress into dementia. He prescribed a medication
commonly used for dementia or Alzheimer's patients.
six visits to Dr. Sanchez between May 2007 and June 2008,
Maria was oriented, participated in interviews, and
understood instructions. On August 25, 2008, however, Maria
did not know the year or the president, which was a cognitive
decline from the previous year. Maria's memory function
further declined by March 16, 2009. Dr. Sanchez switched her
medication to one typically prescribed for more severe
owned checking and savings accounts for many years at Los
Angeles National Bank. On May 4, 2009, Maria executed new
signature cards adding Clive as a joint account holder to her
checking and savings accounts. Maria's social security
check was deposited directly into the checking account. In
addition to the checking and savings accounts, Maria had two
certificates of deposit.
2010, Maria had full-time care. On September 30, 2010, Dr.
Sanchez included dementia in Maria's diagnosis.
Clive's health began to suffer in June 2011. His son Mark
took him to Mexico for treatments. Maria's caregiver gave
notice and Maria was placed in a nursing care facility in
February 2012. Clive was diagnosed with cancer at the end of
February 2012. His health declined rapidly. In March 2012, he
was placed under hospice care at home. On March 25, 2012, he
was hospitalized for a few days.
Clive returned from the hospital at the end of March, he
could not walk or care for himself. He was completely
dependent on Lupe and hospice. He was not capable of caring
for Maria's finances. Clive and Lupe conducted all of
their banking transactions through bank manager Juan
Sandoval. At times, Sandoval came to Clive and Lupe's
home to conduct transactions.
March 28, 2012, Clive closed Maria's checking account. He
transferred the balance of $113, 889.75 into a new account by
a check endorsed by Clive and Lupe “in trust for Maria
Lopez.” On the signature card for the new checking
account, the account owners were listed as “William
Clive Higgins [¶] Lupe Higgins [¶] ITF Maria Lopez
Higgins.” The boxes on the form for a joint account,
trust under a separate agreement, Totten trust, or
pay-on-death (POD) designation were not selected. Instead,
“ITF: Maria Lopez Higgins” was typed in.
withdrew $121, 887.74 from Maria's savings account,
closed the account, and deposited the funds in a new savings
account which he opened on March 30, 2012. The account owners
were listed as “William Clive Higgins [¶] Lupe
Higgins [¶] ITF Maria Lopez Higgins.” In the area
to indicate the ownership of the account and the consumer
purpose, “In Trust for Maria Lopez Higgins” was
same day, Clive withdrew $100, 420.92 from Maria's
certificate of deposit number 104208447, and transferred the
funds to a new certificate of deposit number 104211312. He
also withdrew $99, 983.47 from Maria's certificate of
deposit number 104208465, resulting in early withdrawal
penalties of $73.99, and transferred the funds to a new
certificate of deposit number 104211314. On the signature
cards for the new certificates of deposit, the owners were
listed for both accounts as “William Clive Higgins
[¶] Lupe Higgins [¶] ITF Maria Lopez
Higgins.” In the area for the form of ownership and
consumer purpose, “In Trust for Maria Lopez
Higgins” was typed in. The signature cards state the
initial deposits were $100, 000 and $100, 375.84. A debit
notice for $16.53 was issued for one account and a credit of
$45.08 was issued for the other.
Clive asked her to sign the bank documents, Lupe signed the
signature cards at their home without asking questions. She
did not have any discussions with Clive about the reasons for
opening the accounts. Lupe understood the owners of the
checking account to be Maria and Clive. She understood the
savings account to be owned by “Clive, Lupe, everything
on behalf of Maria.” Lupe knew at the time she signed
the signature cards, including the certificates of deposit,
that the purpose for which she was opening accounts in trust
for Maria was that everything was for Maria to take care of
social security checks, monthly rent of $5, 000 from the
Sunset Boulevard property, and checks from life insurance
companies and other entities made out to Maria were deposited
into the checking account. Clive's son Mark helped Lupe
pay Maria's bills by filling out checks for Lupe to sign.
early May 2012, Clive died without a will. His estate
included real property and the stock of the business. After
Clive passed away, Mark helped Lupe every day. Lupe wanted
Maria to move in with her, so Mark ...