Abrams v. Crocker-Citizens Nat. Bank

• Decision Date: 09 July 1974
• Docket Number: CROCKER-CITIZENS
• Citation: 114 Cal.Rptr. 913,41 Cal.App.3d 55
• Court: California Court of Appeals Court of Appeals
• Parties: Huston ABRAMS and Leola Abrams, and all others similarly situated, Plaintiffs, Cross-Defendants and Appellants, v.NATIONAL BANK, Defendant, Cross-Complainant and Respondent. Civ. 32625.

Page 913

114 Cal.Rptr. 913

41 Cal.App.3d 55

Huston ABRAMS and Leola Abrams, and all others similarly situated, Plaintiffs, Cross-Defendants and Appellants, v. CROCKER-CITIZENS NATIONAL BANK, Defendant, Cross-Complainant and Respondent.

Civ. 32625.

Court of Appeal, First District, Division 4, California.

July 9, 1974.

As Modified on Denial of Rehearing Aug. 8, 1974.

Hearing Denied Sept. 5, 1974.

Nathaniel S. Colley, Inc., Sacramento, for appellants.

James J. Garrett, Charles R. Farrar, Jr., Alys Briggs, Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, for respondent.

CHRISTIAN, Associate Justice.

Huston and Leola Abrams have appealed from a judment dismissing a class action which they had brought against respondent Crocker-Citizens National Bank for alleged improprieties in the handling of funds deposited by borrowers to meet tax and insurance payments on mortgaged realty.

The complaint stated three causes of action: (1) that respondent was a trustee of monies advanced by debtors for payment of real property taxes and insurance and that respondent misused such trust funds; (2) that respondent refused to account for the use of such funds; and (3) that respondent negligently failed to invest the funds. Appellants prayed for an accounting of the income derived from the funds, a declaration of the rights and obligations of the parties, compensatory damages, punitive damages, and attorney's fees. The court granted a summary judgment dismissing all three causes of action. We reverse as to the first two causes of action, holding that there were triable issues of fact.

On September 27, 1963, appellants borrowed the sum of $8,050 from respondent to finance the purchase of a home in Stockton. The loan was to be repaid over a 30-year period, and was secured by a deed of trust on appellants' property. The deed of trust requires appellants to pay, along with their monthly payment of principal and interest, advances to be accumulated by respondent to pay taxes and insurance premiums. The deed of trust requires respondent to 'hold such monthly payments in trust to pay such . . . premiums and taxes . . . before the same become delinquent.'

The loan was insured by the Federal Housing Administration. The loan was applied for, completed, and entered into on forms (including the deed of trust) which were furnished pursuant to rules published by the Federal Housing Administration. Those rules, embodied in the loan documents, required respondent to collect, manage and disburse sums deposited for tax and insurance premium payments. Neither the application nor the note, nor the deed of trust securing the loan, called for interest on the fund arising out of respondent's holding of deposits for insurance premiums and taxes.

Appellants commenced the repayment of their loan in 1963 and continued their payments thereafter. During the entire period of the loan, respondent has fully performed its obligations to collect and disburse tax and insurance deposits.

Reviewing the summary judgment, we are to determine whether the parties' affirdavits or declarations show conclusively that respondent was entitled to judgment. (Code Civ.Proc., §§ 437c, 2015.5; R. D. Reeder Lathing Co. v. Allen (1967) 66 Cal.2d 373, 376, 57 Cal.Rptr. 841, 425 P.2d 785; Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417, 42 Cal.Rptr. 449, 398 P.2d 785.)

Appellants' causes of action are based on the theory that respondent holds the monies paid by appellants for property taxes and insurance purposes as a trustee. A voluntary trust is created by acts or words of the trustor which indicate (1) an intention to create a trust and (2) the subject, purpose, and beneficiary of the trust. (Civ.Code, § 2221.) The trustor's manifestations of trust are to be accompanied by the trustee's acts or words expressing (1) his acceptance of the trust, or his acknowledgement, made upon sufficient consideration, of its existence, and (2) the subject, purpose, and beneficiary of the trust. (Civ.Code, § 2222.)

The payment of money may create either a debt or a trust, depending upon the intention of the parties. 'If the intention is that the money shall be kept or used as a separate fund for the benefit of the payor or a third person, a trust is created. If the intention is that the person receiving the money shall have the unrestricted use thereof, being liable to pay a similar amount whether with or without interest to the payor or a third person, a debt is created.' (Rest.2d, Trusts, § 12, comment g, p. 37.) The intention of the parties is to be ascertained from their words and conduct in light of the circumstances surrounding the transaction. Circumstances that may be helpful are: (1) the presence or absence of an agreement to pay interest; (2) the amount of money paid; (3) the time to elapse before the payee must perform his agreement; (4) the relative financial positions of the parties; (5) the relationship between the parties; and (6) the custom in similar transactions. (Ibid.) The view expressed in the Restatement has been generally adopted in California. (See Bank of America v. Board of Supervisors (1949)93 Cal.App.2d 75, 80, 208 P.2d 772.) The status of funds held by banks has been litigated and discussed by commentators. (See 4 Scott on Trusts (2d ed. 1956) § 523, p. 3342.)

The factual question presented on appeal is whether the parties intended respondent to be a trustee of the escrow. In a declaration by a bank officer supporting the motion for summary judgment, it was recited that 'it is not now, nor . . . has it ever been, the intent or understanding of (respondent) or its officers that (respondent) be restricted to the role of a trustee in its receipt, maintenance and disbursement of such funds, and it is not now, nor has it ever been, the intent or understanding of (respondent) or its officers in connection with such funds, that it would have to account for its use of, or pay interest or other return on, those funds.'

Appellants declared in opposition that they never intended the payments made for tax and insurance payments to 'become a part of the general assets (of respondent)'; that they never intended the funds to be commingled with other funds of respondent; and that they intended and expected the funds to be held in trust by respondent. ¹ The deed of trust states that respondent 'shall hold such monthly payments in trust.'

There is thus a factual conflict between appellants' declaration that they expected and intended the fund to be held in trust and respondent's declaration that it never intended to create a trust. Money does not necessarily constitute a trust...