Thursday, May 11, 2017
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C.A. Says Man’s Intent to Create Trust for Elderly Stepmother Must Be Honored
By KENNETH OFGANG, Staff Writer
A settlor’s clear intent to create a trust for the benefit of a third party takes precedence over the form of the account in which the funds are held, the Court of Appeal for this district has ruled.
Div. Five yesterday reversed Los Angeles Superior Court Judge Dan T. Oki’s ruling directing judgment in favor of Maria Lupe Higgins, who claimed the funds in joint bank accounts after her husband’s death. The panel ruled that, although the form of the accounts was such as to permit Higgins to revoke the trust feature, her intent, and that of her late husband, that the money go to his stepmother would be controlling if proven by clear and convincing evidence.
The case was sent back to the trial court for further proceedings.
Lupe Higgins is the widow of Clive Higgins, who over time became the sole owner of a family business that he had once operated with his brothers. Clive Higgins was diagnosed with cancer in February 2012 and deteriorated rapidly, dying in May of that year.
Before he died, he closed the checking account of his nonagenarian stepmother, Maria Lopez Higgins, who had added him as a signatory on her accounts a few years earlier. He transferred the balance of more than $100,000 into a new account, by a check endorsed by Clive and Lupe Higgins “in trust for Maria Lopez.”
The signature card for the new account listed the account owners as “William Clive Higgins [and] Lupe Higgins ITF Maria Lopez Higgins.”
Clive Higgins also closed out his stepmother’s savings account and transferred more than $120,000 to a new account in the names of he and his wife “In Trust for Maria Lopez Higgins.” He further withdrew more than $200,000 from his stepmothers’ certificates of deposit and transferred the funds to new CDs with indicia of ownership similar to those of the new savings and checking accounts.
Maria Lopez Higgins’s subsequent income from various sources, including rent paid by Clive Higgins’s business, was deposited in the checking account. Maria Lopez Higgins moved in with Lupe Higgins after Clive Higgins died.
In June 2012, Lupe Higgins met with the manager of the bank where the accounts and CDs were located and changed the ownership of the accounts, listing herself as sole owner with no notation of any trust. Days later, Maria Lopez Higgins was moved to a nursing home.
She died in August 2012, and Lupe Higgins paid for her funeral from the checking account. She subsequently began making payments from the account to members of her family, and closed the CDs, moving the funds to the savings account, and eventually transferred all of the remaining funds to her own accounts.
In September 2013, Arthur Higgins—Clive Higgins’s brother, Maria Lopez Higgins’s executor, and the trustee of the Higgins Family Trust, which was to receive his stepmother’s assets upon her death, according to her will—sued Lupe Higgins. He asked the court to impose a constructive trust on all of the funds, alleging that the defendant unduly influenced his late brother to transfer the funds to her to deprive Maria Lopez Higgins and the trust of the money.
At trial, Lupe Higgins testified that she treated the funds in the account as Maria Lopez Higgins’s during her lifetime, but believed the funds—and the right to retain subsequent transfers such as life insurance proceeds—transferred to her upon the older woman’s death.
At the close of the plaintiff’s evidence, Oki granted the defendant’s motion for judgment pursuant to Code of Civil Procedure §631.8. He held that Clive Higgins, as joint account holder, had the right to dispose of the funds as he saw fit, and that—while the bank signature cards expressed an intent to hold the funds in trust for Maria Lopez Higgins—the agreement with the bank made Lupe Higgins a joint tenant, giving her the right to do as she pleased with the funds after her husband’s death.
The judge rejected the contention of undue influence.
Justice Sandy Kriegler, however, in his opinion for the Court of Appeal, found that all of the conditions for the imposition of a constructive trust had been met, on the face of the plaintiff’s evidence. There was, he said, “clear and convincing evidence that Clive and Lupe intended to create irrevocable trust accounts in which Maria had a present beneficial interest in the funds on deposit, not Totten trust accounts.”
The transfer of the older woman’s money—and none of Clive or Lupe Higgins’s money—into the accounts, the continuing deposits of moneys later received by her, and Lupe Higgins’s own testimony about her intent established that Maria Lopez Higgins was the intended beneficiary of a trust, with Clive and Lupe Higgins holding legal title as co-trustees.
“As a co-trustee, Clive’s death had no effect on Maria’s beneficial ownership of the accounts,” Kriegler wrote. Lupe Higgins, he said, “repudiated the trust by removing Maria’s name from the accounts...and she breached her fiduciary duty by using the funds for her own purposes.”
Whether Lupe Higgins committed actual fraud, or merely acted under a mistaken belief as to the legal status of the funds, is an issue that need not be resolved at this point, the justice said. The plaintiff, he concluded, made out a prima facie case for the imposition of a constructive trust, and the defendant may present evidence to the contrary on remand.
Attorneys on appeal in Higgins v. Higgins, 17 S.O.S. 2403, were Robert E. Knudsen and Layne A. Bartholomew for the plaintiff and Wayne T. Kasai and Kristin E. Reynolds of Kasai Law Group for the defendant.
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