Osborn v. Osborn

267 P.2d 333, 42 Cal. 2d 358, 1954 Cal. LEXIS 177

• Court: California Supreme Court
• Decided: March 1, 1954
• Docket: L. A. 22540
• Status: Published

Opinions

TRAYNOR, J.

Plaintiff Merinoeth Osborn appeals from an adverse judgment on his complaint to quiet title to certain real property in Los Angeles County, known as Lot 97 of the Casa Verduga Villa Tract. Defendant Louise Osborn, plaintiff’s stepmother, answered and cross-complained to have title to Lot 97 quieted in her. Judgment was entered for plaintiff on the cross-complaint, and defendant Louise Osborn has not appealed therefrom. The other defendants named in the complaint disclaim any interest in the property.

Lot 97 was originally acquired by Merinoeth’s mother, Chloie Osborn, in 1922. Chloie died intestate leaving her husband, Thomas D. Osborn, and their son, Merinoeth, surviving. On June 27, 1939, during the administration of Chloie’s estate, Merinoeth and Thomas executed a “Stipulation,” subsequently approved by the court, to resolve their conflicting claims to Chloie’s estate. The material part of this stipulation follows: “It is further stipulated and agreed by and between the parties hereto that upon execution of the within Stipulation that Thomas D. Osborn will execute either by deed contract or declaration of trust sufficient documents, conveyances or declarations so that the property known as Lot 97, Casa Verduga Villa Tract, etc., will be retained in the name of Thomas D. Osborn, during his lifetime and that the same should vest in his son Merinoeth R Osborn at the time of the demise of the said Thomas D. Osborn. ’ ’ After the execution of the stipulation, the probate court distributed Lot 97 to Thomas.

On July 7, 1939, pursuant to the stipulation, Thomas and Merinoeth executed a trust agreement, and Thomas executed a deed “in accordance with the terms and conditions of that certain trust agreement of July 7th, 1939, . . . and . . . subject to all conditions, exceptions and, reservations as in said trust agreement provided.” (Italics added.) The deed granted Lot 97 to Merinoeth subject to a life estate in Thomas. The trust agreement provided that the deed to Lot 97 “shall be turned over and delivered to the Trustees to hold and keep possession of said deed, not to record the same during the lifetime of” Thomas. The trustees were instructed to “turn over and deliver” the deed to Merinoeth on the death of Thomas. It was recited in the trust agreement that Thomas reserved a life estate in the property, and that he also reserved “the right to revoke the deed in the event [Merinoeth] wilfully harms [Thomas], and [Merinoeth] reserves the right to cancel this agreement if [Thomas] wilfully harms” him. (Italics added.) Other material parts of the trust agreement are: “The parties hereto further agree that in the event any attempt is made by either party hereto to break the terms of the within trust agreement, or to force the trustees to surrender the within described deed prior to the demise of [Thomas] by court action, or other proceedings, then, in that event, the party attempting to break the terms of the within trust agreement, shall pay in addition to expenses and court costs, a reasonable attorney’s fee to the said trustees. The parties hereto further authorize and instruct the trustees herein mentioned to defend any attempts made by either parties hereto to break the terms of the within trust agreement, or to force the trustees to surrender the within described deed. . . . The wilfull failure or refusal on the party [sic] of either party hereto to carry out the terms and conditions of the within trust agreement, or the wilfull refusal or failure of either party to comply with the obligations herein provided, on his part to be performed, shall permit either party to rescind this agreement and shall confer upon the grantor the right to cancel the within mentioned deed and this agreement by a declaration duly executed and recorded with the formality of a deed and a thirty day written notice thereof served on the grantee, or his attorney.” (Italics added.) The deed was deposited with defendants Franklin and Warner, who were named as trustees in the trust agreement.

Merinoeth had become indebted to Warner for legal services in the probate of Chloie’s estate and the preparation of the trust agreement. In 1941, Warner resigned as trustee and assigned his claim against Merinoeth to his secretary, Champion, who recovered judgment thereon. Execution was levied on Merinoeth’s interest in Lot 97, and the property was sold in 1942 to Champion for $336.37. Thereafter, at the request of Thomas, Champion transferred the certificate of sale to Louise Osborn for $415. Although Louise contends that Merinoeth had notice of these proceedings, he made no appearance and disclaims any knowledge of them.

In anticipation of a sale of Merinoeth’s interest in Lot 97 to Thomas, an agreement purporting to cancel the trust agreement was executed on January 14, 1946 and then cancelled in March 1946. Thomas died intestate on December 31, 1946, leaving his second wife, Louise, and Merinoeth surviving. Merinoeth’s subsequent demand upon the trustees for the deed executed by Thomas was refused.

In Refusing to quiet title in either Merinoeth or Louise, the trial court concluded that Merinoeth had not acquired any interest in Lot 97 under the deed executed by Thomas and deposited with Warner and Franklin. Since Merinoeth had acquired no interest, the court concluded that Louise acquired none by reason of the execution sale.

Plaintiff’s basic contention on this appeal is that the trial court erred in holding that he acquired no interest in Lot 97 under the deed executed by Thomas and deposited with Warner and Franklin to be transmitted to him on the death of Thomas. Plaintiff contends that the deposit with Warner and Franklin constituted a valid delivery immediately vesting in him a remainder interest in the property. The first issue to be resolved, therefore, is the validity and effect of the deed executed by Thomas.

It has long been established in this state that the deposit of a deed granting an estate in fee simple, with instructions that it be transmitted to the grantee upon the death of the grantor, conveys a remainder interest in fee simple with a life estate reserved in the grantor, if the grantor intended the deposit to be irrevocable. (Bury v. Young, 98 Cal. 446, 451-452 [33 P. 338, 35 Am.St.Rep. 186] ; Hunt v. Wicht, 174 Cal. 205, 206-208 [162 P. 639, L.R.A. 1917C 961] ; Wilkerson v Seib, 20 Cal.2d 556, 560 [127 P.2d 904].) The result is the same as if the grantor delivered to the grantee a deed reserving a life estate and granting a remainder in fee. The same result is also accomplished by the deposit of a deed in escrow pursuant to a binding contract of sale of a remainder and the grantee’s performance of the conditions of the escrow. At the time of the execution of the contract of sale, the grantee acquires an equitable title to the estate being sold; the grantor retains the legal title as security for the purchase price. The legal title passes to the grantee at the time of his completion of the conditions precedent, whether or not the escrow holder gives him physical possession of the deed; the grantor’s delivery to the escrow holder is absolute and cannot thereafter be disaffirmed. (Cannon v. Handley, 72 Cal. 133, 140 [13 P. 315]; McDonald v. Huff, 77 Cal. 279, 282 [19 P. 499]; Bradbury v. Davenport, 120 Cal. 152, 154 [52 P. 301]; see, also, Hagge v. Drew, 27 Cal.2d 368, 375 [165 P.2d 461].)

In the present case, the deed from Thomas to Merinoeth was executed pursuant to a binding contract supported by adequate consideration. On the face of the deed, Thomas reserved a life estate and granted a remainder to Merinoeth. When Thomas delivered the deed to the trustees, there were no conditions precedent for Merinoeth to perform. Thomas had received the consideration for the grant, when the compromise settlement of Chloie’s estate was executed. The provision that the trustees should hold the deed until Thomas’ death was not a condition precedent to the passage of legal title, for even in cases of gift, e.g., Bury v. Young, supra, an instruction that the depositary is to retain possession of the deed until the death of the grantor does not prevent the deed from being operative as a present conveyance. In this ease, Merinoeth was not a donee; he was a purchaser for value, already vested with an equitable title to the remainder. The situation is thus analogous to that of a true escrow after the purchaser has performed all of the conditions precedent. Performance of those conditions automatically vests the legal title in him, even though the escrow holder retains possession of the deed.

Defendant contends, however, that Thomas did not make a legal delivery of the deed. Delivery is a question of intent. In some cases to ascertain the grantor’s intent it is necessary to have recourse to his acts and declarations both before and after his transmission of the deed to the grantee or a third party (Williams v. Kidd, 170 Cal. 631, 649-652 [151 P. 1, Ann.Cas. 1916E 703] ; Rice v. Carey, 170 Cal. 748, 753-754 [151 P. 135] ; Donahue v. Sweeney, 171 Cal. 388, 391-392 [153 P. 708]; Northern Calif. Conference Assn. v. Smith, 209 Cal. 26, 33 [285 P. 314]). When, as here, however, the grantor’s “only instructions are in writing, the effect of the transaction depends upon the true construction of the writing. It is in other words a pure question of law whether there was an absolute delivery or not.” (Moore v. Trott, 156 Cal. 353, 357 [104 P. 578, 134 Am.St.Rep. 131].) Thomas executed the deed and delivered it to the trustees pursuant to the provisions of the trust agreement. It was a completed act and nothing remained to be done to vest the legal title to the remainder in Merinoeth. Thomas was bound by the terms of the trust agreement, executed contemporaneously with the deed, not to attempt to recall the deed from the possession of the trustees. The trustees were specifically instructed to resist any attempt by either Thomas or Merinoeth to obtain possession of the deed prior to the demise of Thomas, and were further instructed to hold the deed for the benefit of Merinoeth. Even if it had been contended that Merinoeth had harmed Thomas or failed to carry out the terms of the trust agreement and Thomas had wished to assert his right to revoke, he. could not recall the deed; he had to execute and record a declaration of revocation with the formality of a deed, after giving 30 days’ notice thereof to Merinoeth, who might then defeat the proposed revocation by showing that there was no violation of the trust agreement.

It is clear, therefore, that Thomas did not retain control over the deed after he delivered it to the trustees. There is nothing in the trust agreement, or external to it, to indicate that Thomas did not intend the transmission of the deed to the trustees to be a valid legal delivery. Indeed, the whole tenor of the stipulation and the trust agreement is that Thomas intended to grant Merinoeth a presently vested remainder interest. In the stipulation of June 27th, Thomas promised that “upon execution of the within Stipulation” he would execute the documents necessary to transfer a remainder interest to Merinoeth. The trust agreement contained a number of restrictions on Thomas’ right to use the property during his lifetime. If Merinoeth was not to have a presently vested remainder interest, these provisions were superfluous. Furthermore, Thomas’ conduct after the execution and delivery of the deed, in requesting Champion to sell the certificate from the execution sale and in negotiating with Merinoeth in 1946 (after the execution sale) for the purchase of his interest in the property for $3,500, is corroborative of Thomas’ intent as revealed in the documents.

Defendant contends, however, that Thomas’ reservation of the right to revoke the deed, in the event that Merinoeth harmed him or refused to carry out the terms of the trust agreement, made the delivery to the trustees conditional so that no estate vested in Merinoeth by virtue of the deposit of the deed with the trustees. This contention cannot be sustained. Thomas’ right to revoke did not affect the delivery to the trustees, but merely limited the future interest created to a vested remainder subject to being divested upon the happening of a condition subsequent. The situation is similar to that in Tennant v. John Tennant Memorial Home, 167 Cal. 570 [140 P. 242], where the grantor reserved an unqualified right to revoke on the face of the deed, which granted a remainder in fee to vest in possession at the termination of the grantor’s life estate. It was there held that the grantee acquired a remainder subject to a condition subsequent, and that “The power to revoke did not operate to destroy, or in anywise to restrict the effect of the deed as a present conveyance of a future-vested interest.” (167 Cal. 570, 578; see, also, Gray v. Union Trust Co., 171 Cal. 637, 642-643 [154 P. 306] ; Scott, The Law of Trusts, 1939, vol. 1, § 57.1.) These cases are distinguishable from those on which defendant relies to sustain her contention that the grantor’s reservation of a right to revoke renders the delivery conditional. (See Kenney v. Parks, 125 Cal. 146, 150-151 [57 P. 772]; Moore v. Trott, 156 Cal. 353, 357 [104 P. 578, 134 Am.St.Rep. 131]; Long v. Ryan, 166 Cal. 442, 445 [137 P. 29].) The latter eases were cases of gift, and the court was concerned with the problem of attempted testamentary disposition without compliance with the statute of wills. In those cases, the grantors reserved the right to recall their deeds from the depositary. It was found that the respective grantors did not intend any interest to pass to the grantees when the deeds were given to the depositary, but only intended an interest to pass at the time of their death. The right to revoke was, therefore, a right to recall the deed, and attached to the delivery and not to the interest granted. In the present case, the deed was executed and delivered to the trustees, not to accomplish any testamentary purpose, but to discharge Thomas’ obligations under the contract he entered into with Merinoeth to compromise their conflicting claims to Chloie’s estate. This contract vested Merinoeth with an equitable title to the remainder, since he had a specifically enforceable right to have Thomas convey the legal title. The legal title was conveyed when the deed was delivered to the trustees under a binding contract that made the delivery irrevocable. (Cannon v. Handley, supra; McDonald v. Huff, supra; Pothast v. Kind, 218 Cal. 192, 195 [24 P.2d 771] ; see, also, Brunoni v. Brunoni, 93 Cal.App.2d 215, 219 [208 P.2d 1028].) Although Thomas could have accomplished the same result by delivering a deed to Merinoeth with the same reservations as those set forth in the trust agreement (see Tennant v. John Tennant Memorial Home, supra) •—-just as in the cases like Bury v. Young, supra, the same result could be accomplished by delivery to the grantee of a deed granting a remainder interest—the effect of the transaction is the same: Merinoeth acquired a vested remainder subject to divestment should he breach the terms of the trust agreement.

The only question remaining is the order that should now be made by this court. Merinoeth contends that the part of the judgment refusing to quiet title in him should be reversed with directions to enter a judgment quieting his title to the property and that the part of the judgment refusing to quiet title in Louise should be affirmed because she did not appeal. This contention cannot be sustained.

The trial court determined that Merinoeth did not obtain an interest under the deed and therefore refused to quiet title either in him or in Louise. If Merinoeth did not acquire a remainder interest, Louise could acquire nothing by the execution sale. Apparently in the belief that as a result of the judgment each party would get half the property as an heir of Thomas, Louise did not appeal. Merinoeth appealed, contending that he acquired a remainder interest under the deed, that the execution sale did not pass any interest to Louise, and that he was therefore entitled to the property. Had Louise appealed, her position could only be that Merinoeth acquired a remainder interest and that the execution sale was effective. That contention, however, would concede the first half of Merinoeth’s proof—that he acquired a remainder interest— a concession fatal to a claim that she was entitled to half the property as an heir of Thomas. She was apparently willing to let the judgment stand and take half an interest as heir rather than risk an adverse ruling with respect to the exeeution sale, which, would leave her with nothing. “[T]he failure to take an appeal demonstrates only satisfaction with the judgment as is, not as changed by a partial reversal. One may elect to stand upon a judgment which, he believes, although largely in his favor, does not give him all of the benefits to which he is entitled. To avoid the time and expense of further litigation, he may be persuaded to permit the unfavorable portions to stand in reliance upon the benefits received in the other parts.” (American Enterprise, Inc. v. Van Winkle, 39 Cal.2d 210, 221 [246 P.2d 935].)

Both parts of the judgment turned on the trial court’s construction of the deed and agreement. It refused to quiet title in Merinoeth on the ground that he did not acquire an interest by the deed and agreement; it refused to quiet title in Louise for the same reason. Since both parts of the judgment embrace the identical issue—did Merinoeth acquire a remainder interest under the deed—we have jurisdiction to review the entire judgment. (American Enterprise, Inc. v. Van Winkle, supra, 39 Cal.2d 210, 217; Blache v. Blache, 37 Cal.2d 531, 538 [233 P.2d 547] ; Milo v. Prior, 210 Cal. 569, 571 [292 P. 647]; Whalen v. Smith, 163 Cal. 360, 362 [125 P. 904, Ann.Cas. 1913E 1319].) Our decision that a remainder interest passed under the deed removes the basis of the trial court’s decision adverse to Louise and unless the entire judgment is reversed she will be denied an opportunity to establish her claim that the execution sale was valid. A complete reversal is therefore appropriate. (Blache v. Blache, supra-, Rediker v. Rediker, 35 Cal.2d 796, 798 [221 P.2d 1, 20 A.L.R.2d 1152]; Estate of Murphey, 7 Cal.2d 712, 717 [62 P.2d 374]; cf. Hamasaki v. Flotho, 39 Cal.2d 602, 609 [248 P.2d 910].)

The judgment is reversed. The parties are to bear their own costs on appeal.

Gibson, C. J., Shenk, J., Edmonds, J., and Spence, J., concurred.