In Re Estate of Sheimo

156 N.W.2d 681, 261 Iowa 775, 1968 Iowa Sup. LEXIS 785

• Court: Supreme Court of Iowa
• Decided: February 6, 1968
• Docket: 52640
• Status: Published

Opinions

RAWLINGS, Justice.

Asserting ownership in estate represented, plaintiff-administrator filed application in probate for determination of rights in two bank certificates of deposit, each in the name of a single designated defendant-payee, found in decedent’s safety deposit box. Defendant-payees both appeared and answered resisting the claim made by plaintiff. After hearing, trial court adjudged these certificates to be property of decedent’s estate. Defendants appeal. We reverse.

Plaintiff is administrator of estate of Andrew M. Sheimo, deceased. Evidence produced by him discloses two time certificates of deposit were found in decedent’s bank box, No. 3160 for $6000 payable to Richard Sheimo, and No. 3161 for $2000 payable to Marlyn Sheimo.

Defendants’ evidence reveals decedent originally held an $8000 certificate issued by Citizens Savings Bank of Hanlontown, on which he had written with pencil, $2000 to go to Marlyn Sheimo, $6000 to go to Richard Sheimo.

August 7, 1964, Marion O. Hall, president of the bank, talked to Andrew Sheimo and told him if anybody should die the bank could not go by the penciled writing. In the words of this banker he said to decedent: “The only way you could do it if you wanted that — want six thousand to go to Richard and two thousand to Marlyn — is to fix out separate certificates of deposit for them and you do — you don’t want your name on them. They get the interest.” Decedent replied, “no, they are to be theirs. I don’t want my name on them at all.”

Hall then told Andrew to have Richard or Marlyn come in. and endorse the original certificate. Richard did so and the new ones, here in question, were issued. The banker was told by Andrew he would deliver them to Richard and Marlyn at a later date.

These new certificates were then placed in decedent’s lock box, all interest on them being subsequently paid to and retained by each of above named payees.

I. Defendants assert plaintiff-administrator had the burden of proof and failed to meet it. With this we are inclined to agree although the matter of burden of proof is here of little or no significance. See rule 344(f) (5), R.C.P.

At commencement of hearing to the court, plaintiff proceeded with introduction of evidence which consisted of this stipulation: “That Phil R. Sheimo is the Administrator of the A. M. Sheimo estate. That A. M. Sheimo for approximately a year before his death was unable to attend to his business affairs and was confined to a nursing home. That Phil Sheimo, as Administrator of this Estate, found the certificates involved, being Numbers 3160 and 3161, issued on August 7, 1964, by the Citizens Savings Bank of Hanlontown, Iowa. The certificate numbered 3160 shows the name of Richard Sheimo, and the certificate numbered 3161 shows the name of Marlyn Sheimo. These certificates of deposit were found in the decedent’s safety deposit box and had been placed there by the decedent. The Administrator of the estate had no instructions concerning them. It was further stipulated that the certificates herein referred to were received into evidence.”

Defendants then proceeded with introduction of evidence to which reference will later be made.

It would thus appear plaintiff had and assumed the burden of proof. In this regard see Liberty Mutual Insurance Co. v. Sweeney, 3 Cir., 216 F.2d 209, 211.

II. Neither trial court nor the parties refer to nature of original proceeding, or our review.

In this regard it appears the matter was triable as in equity. Section 633.33, Code, 1966. That means we consider it de novo. Rule 344(f) (7), R.C.P., and Henderson v. Hawkeye-Security Ins. Co., 252 Iowa 97, 100, 106 N.W.2d 86.

III. It is to us apparent the trial court reached an erroneous conclusion as the result of a sincere hut nevertheless faulty application of the gift doctrine. See Hamilton v. Wosepka, Iowa, 154 N.W.2d 164, 166, and citations.

Where appropriate, the gift or trust concept may serve a just purpose. However, in recent times they have, per se, often been found to be too rigid and unrealistic when applied to vesting of rights in a bank deposit. They frequently serve to defeat rather than effectuate an evident intent and purpose.

In re Estate of Martin, Iowa, 155 N.W.2d 401 (opinion filed January 9, 1968), reviews development of the relatively new contract theory in Iowa and its application to bank deposits, citing among others, In re Estate of Stamets, 260 Iowa 93, 148 N.W.2d 468; In re Estate of Murdoch, 238 Iowa 898, 29 N.W.2d 177; O’Brien v. Biegger, 233 Iowa 1179, 11 N.W.2d 412; and In re Estate of Winkler, 232 Iowa 930, 5 N.W.2d 153.

Reference is also there made to Andrew v. Citizens St. Bank, 205 Iowa 237, 216 N.W. 12, involving a mother or daughter joint tenancy bank deposit. Quoting from the cited case, loc. cit., 205 Iowa 243, 216 N.W. 14, 15, we said: “Appellant also insists that the burden was upon Hazel Pent to allege and prove that a gift of the certificate was intended and made to her by her mother. While no evidence was offered for that purpose, we think the necessary inference from matters appearing in the record is that * * *. The certificate was lawfully payable to her (Hazel Pent) after her mother’s death, upon the surrender thereof to the bank issuing it. Section 9267, Code of 1924. (Section 528.64, Code, 1962) No other reason for the mother's making the certifcate payable to herself or daughter than that she intended her to receive the money, unless paid out on her own order, is suggested. The fact that the certificate remained unpaid and unchanged is some evidence of the mother’s intention. The record discloses neither pleading nor proof in any way denying or explaining the purpose and intention of the mother.’' (Emphasis supplied.)

Continuing, this court stated in the Martin Estate case, supra: “And, if funds are payable to an ‘or1 survivor pursuant to a bank deposit certificate under the joint tenancy doctrine, the same result will surely obtain with as much if not greater force and effect by application of the tripartite contract or third party beneficiary concept. A statement in 37 Iowa L.Rev. 293, amply supported by respectable authorities, sets forth both the rationale and demonstrates the ultimate efficacy of this approach. ‘The development of the contract theory may be said to have begun in Massachusetts in 1916. (Chippendale v. North Adams Savings Bank, 222 Mass. 499, 111 N.E. 371) It was fostered by the statutes protecting the bank from liability in payment to either party, and was instrumental in resolving the doctrinal confusion of the other theories. The primary doctrinal innovation brought about by the contract theory is that the interest of the court is directed solely at the bank-depositor relationship, rather than the relationship between the co-depositors. The gift, trust or joint tenancy theories, on the other hand, are concerned solely with this latter relationship. By stating the mutual rights and obligations of the co-depositors in terms of the bank’s duties, the fortnal requirements of a gift, trust or joint tenancy are finessed, but the relationship between the parties is nevertheless fixed and certain. Actually, this relationship most nearly approximates that of joint tenancy, but differs materially in the immediate right of- either depositor to withdraw the entire amount.

“ ‘The contract theory is not without its doctrinal difficulties. The problem of consideraton, especially with regard to a non-contributing depositor, has been discussed by the courts, but the consideration between the bank and the contributing depositor has been held sufficient to support the contract. The transaction has been viewed as a tripartite or third party beneficiary contract, and as a contract creating the rights of the parties against the bank, with no specific name being attached to the source of these rights.’ (Emphasis supplied.)”

IV. The question now to be resolved is whether the controverted certificates of deposit serve to vest in each of the named payees respectively, or to estate of decedent, all right to the funds on deposit.

We are persuaded the evident intent of the parties may be best determined and effectuated in this case by application of the previously mentioned tripartite or third party beneficiary doctrine.

Dealing with this subject, Simpson on Contracts, Second Ed., Hornbook Series, pages 242-243, states: “There are only two types of third parties who are permitted under American law to enforce a promise. There are (1) the donee beneficiary, and (2) the creditor beneficiary. If A for a consideration exacts a promise from B to render a stated performance to C, intending thereby to confer a gift upon C, C is a donee beneficiary entitled to sue B on the promise. It is the intent or purpose of the promisee, A, to exact a promise and ultimate performance as a gift to C that controls, not the purpose of the promisor, B. B’s purpose in promising is to obtain the consideration furnished by the promisee, A, as the agreed exchange. The promisee’s intent to obtain a gift promise for C’s benefit will appear from the terms of the promise which he exacted. If by that promise the performance is to be rendered directly to and for the third person, C, he alone will be benefitted, not A. * * *

“The strongest reason exists for permitting enforcement of the promise by the donee beneficiary, since if he cannot enforce it no one can.”

And, Williston on Contracts, Single Volume, Revised Edition, section 357, pages 332-333, in explaining and justifying application of the third party beneficiary concept, says: “The Restatement of Contracts [section 133(1) (a) ] declares a person is a donee beneficiary when ‘it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise of all or part of the performance thereof is to make a gift to the beneficiary or to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary.’ * * * The donee, or as it is sometimes called, the ‘sole,’ beneficiary type, of which the ordinary life insurance contract payable to another than the insured is typical, was the earlier to receive recognition. The technical difficulty of permitting a third person who was neither in privity with the promise, since he was not the promisee, nor in privity with the consideration, since that moved from the promisee, to enforce a promise made for his benefit was counterbalanced by the fact that since the promisee himself had no pecuniary interest in the performance of the contract, he could recover only nominal damages for its breach, thus defeating the purpose of the parties and the value of the promise. Whatever the apparent technical difficulties, it was obvious that justice required some remedy to be given the beneficiary. The original bargain was convenient and proper, and the law should find a means to enforce it according to its terms. Some jurisdictions resorted to the trust theory in equity, but it was no easier to find a principle requiring the promisee to hold as trustee for the beneficiary what he recovered, and for which he had paid the consideration, than to find a principle allowing a direct recovery by the beneficiary against the promisor. Even less defensible is the close relationship doctrine, still widely prevalent in America, with its crude fiction of merging the legal personality of -a child, niece, wife, or even affianced wife, or other close relative of the promisee, into the promisee’s legal personality, so that in the eyes of the law the real donee beneficiary becomes the promisee with full power to sue and recover on the promise.”

In line with the foregoing this court stated in the case, In re Estate of Lindsey, 254 Iowa 699, 710, 118 N.W.2d 598, 604: “We have held repeatedly a contract between two persons for the benefit of a third person is valid as to such beneficiary and enforceable by him. Meyer v. Stortenbecker, 184 Iowa 441, 165 N.W. 456; In re Estate of Walker, 234 Iowa 1126, 15 N.W.2d 260; In re Disinterment of Tow, 243 Iowa 695, 53 N.W.2d 283; Reeves v. Better Taste Popcorn Co., 246 Iowa 508, 66 N.W.2d 853; 12 Am Jur., Contracts, section 288.

“In In re Disinterment of Tow, supra, at pages 698, 699 of 243 Iowa, page 285 of 53 N.W.2d, it is said:

“ ‘One for whose benefit a contract is entered into may maintain action to enforce his rights under it. Venz v. State Auto. Ins. Assn., 217 Iowa 662, 666, 251 N.W. 27. The rule is unquestioned in this state. It is unnecessary that the beneficiary assent to the contract or even that he have knowledge of it. Rodgers v. Reinking, 205 Iowa 1311, 1319,217 N.W. 411.’ ” (Emphasis supplied.)

On this subject see also Peoples Bank v. Baxter, 41 Tenn.App. 710, 298 S.W.2d 732, 738, and 17 Am.Jur.2d, Contracts, section 314, page 741.

This in turn points up the fact, as disclosed by In re Estate of Winkler, 232 Iowa 930, 934, 5 N.W.2d 153, that where the contract approach is employed, as in the case at bar, delivery need not be shown, either actual or symbolical.

V. Each of the two certificates here involved is specifically payable to a single named depositor, Richard in one instance, Marlyn in the other. It is also provided they are, “ * * * transferable only on the books of this bank, * * This means they are nonnegotiable instruments. 9 C.J.S. Banks and Banking § 316(b), p.'642, and 10 Am.Jur.2d, Banks, section 458, page 430. Incidentally see section 554.3104, Code, 1966.

Under these circumstances it is evident Richard and Marlyn, as sole named payees, have a concomitant right as donee third party beneficiaries to enforce their rights under the certificates here involved. See In re Estate of Lindsey, supra, and 10 Am.Jur.2d, Banks, section 461, page 432.

VI. Unquestionably the certificates before us are contracts and must be accordingly considered.

In that regard it is our duty to ascertain and give effect to their terms and provisions which are plain and unambiguous. Bruhl v. Thul, 257 Iowa 889, 892, 134 N.W.2d 571. See also Hamilton v. Wosepka, Iowa, 154 N.W.2d 164, 167-172.

Intent of the parties is not in doubt. As heretofore disclosed each of these certificates provides for payment to a designated payee. Admittedly Andrew M. Sheimo was the contributor, but his contracts with the bank were, in substance, that it pay the amounts specified in the certificates to Richard and Marlyn as third party beneficiaries.

Lawfully issued in each instance, these certificates are made payable to named persons, the defendants in this case. That was the apparent intent and purpose of the contracting parties, i. e., decedent and the bank. Above all else it was the evident aim and desire of the depositor. No other reason appears for making the certificates payable as they are, and the record discloses nothing which can be said to refute this clearly expressed objective.

VII. We conclude the evidence preponderates in favor of defendants and the trial court erred in holding otherwise. This means certificate No. 3160 is the property of Richard Sheimo, and certificate No. 3161 is the property of Marlyn Sheimo.

Reversed and remanded for entry of order and decree consistent with this opinion.

GARFIELD, C. J., and SNELL, MOORE, STUART, and MASON, JJ., concur. LARSON, J., concurs in result. BECKER and LeGRAND, JJ., dissent.