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Higgins v. Higgins

California Court of Appeals, Second District, Fifth Division

May 9, 2017

ARTHUR C. HIGGINS, as Executor, etc., Plaintiff and Appellant,
v.
MARIA LUPE HIGGINS, Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of Los Angeles County, Dan Thomas Oki, Judge. Reversed and Remanded.

          Law Office of Robert E. Knudsen and Robert E. Knudsen; Law Offices of Layne A. Bartholomew, Layne A. Bartholomew, for Plaintiff and Appellant.

          Kasai Law Group, Wayne T. Kasai and Kristin E. Reynolds, for Defendant and Respondent.

          KRIEGLER, Acting P.J.

         A wife 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.

         FACTS AND PROCEDURAL BACKGROUND

         Estate Plan and Transfer of Assets

         Maria Lopez Higgins (Maria) and her husband, Bartlett Higgins, prepared a thorough estate plan in 1994.[1] 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 surviving issue.

         Maria's 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.

         Bartlett 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.

         Maria 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.

         Maria 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.

         During 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 dementia.

         Maria 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.

         By June 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.

         When 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.

         On 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.

         Clive 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 typed in.

         That 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.

         When 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 Maria.

         Maria's 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.

         In 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 ...


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