Barber v. Ruth

• Decision Date: 15 October 1993
• Docket Number: Nos. 92-1077,92-1156 and 92-1529,s. 92-1077
• Citation: 7 F.3d 636
• Parties: Richard W. BARBER, Personal Representative of the Estate of Barbara W. Reese, Deceased, Plaintiff-Appellee, Cross-Appellant, v. John J. RUTH and Lucille A. Ruth, Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 636

7 F.3d 636

27 Fed.R.Serv.3d 397

Richard W. BARBER, Personal Representative of the Estate of Barbara W. Reese, Deceased, Plaintiff-Appellee, Cross-Appellant, v. John J. RUTH and Lucille A. Ruth, Defendants-Appellants,

Cross-Appellees.

Nos. 92-1077, 92-1156 and 92-1529.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 4, 1992.

Decided Oct. 15, 1993.

Paul V. Esposito (argued), Douglas A. Lindsay, Thomas M. Weithers, Lewis, Overbeck & Furman, Chicago, IL, for plaintiff-appellee.

James E. Spiotto, Wendy A. Grossman (argued), Franklin H. Top, III, Chapman & Cutler, Chicago, IL, for defendants-appellants.

Before COFFEY and EASTERBROOK, Circuit Judges, and ENGEL, Senior Circuit Judge. ^*

ENGEL, Senior Circuit Judge.

In this diversity case, defendants John and Lucille Ruth appeal the district court's entry of judgment, after trial, in favor of plaintiff Richard Barber, personal representative of the estate of Barbara Reese. Specifically, the Ruths appeal the district court's finding that Ms. Reese, in establishing a joint bank account with the Ruths, did not have the donative intent necessary to create a true joint tenancy. The Ruths also appeal certain aspects of the district court's award of costs. Mr. Barber cross-appeals the district court's award of interest on a general pecuniary bequest that the court applied as a set-off. For the reasons stated below, we AFFIRM the district court's rulings in part, REVERSE the award of costs and of interest on the set-off, and REMAND the cause for recalculation of the set-off and of the award of costs.

I

A

Barbara and Ralph Reese Sr. were married in 1972. Both had adult children from prior marriages. Ralph Sr. had a son, Ralph Jr., and a daughter, Lucy, who married John Ruth. Barbara had a daughter, Marion, who married Rodney Charrier. In 1984, Ralph Sr. was diagnosed as terminally ill. He wished to spend his remaining days at home rather than in a nursing home, but he learned that his medical insurance would not cover the increased cost. He turned to his daughter and son-in-law, the Ruths, for financial assistance. The Ruths eventually advanced approximately $65,000 to cover expenses incurred up to the time of Ralph's death in 1986. ¹

Upon Mr. Reese's death, his entire estate passed directly to Ms. Reese, as all of their assets had been held jointly. Later that year, Ms. Reese decided to sell the family home, located in Florida. Mr. Ruth assisted in the negotiations, and Richard Barber, Ms. Reese's attorney, supervised the closing. Ms. Reese received $160,000 for the house. She informed Mr. Barber that she intended to entrust these funds to Mr. Ruth to invest for her. She made a similar statement in her diary entry for the day. She explained to Mr. Barber that she had a high opinion of Mr. Ruth's expertise in managing investments. She also indicated to Mr. Barber on another occasion that she believed that, by placing the funds in an account owned jointly by her and the Ruths, she could ensure federal deposit insurance coverage up to $300,000. ²

Four days after the closing, upon the suggestion of the Ruths, who live in Illinois, Ms. Reese transferred $125,000 from an account in Florida to the Harris Trust and Savings Bank in Chicago. Shortly thereafter, the Ruths obtained, signed, and forwarded to Ms. Reese a signature card and account agreement covering a joint money market account. The agreement provided, in part, as follows:

Account Ownership: If this account is held in the name of two or more people, the form of ownership is Joint Tenancy with Right of Survivorship unless otherwise specified on your Money Market Account signature card.

Ms. Reese received the card and agreement, signed them both, and returned them to the bank. There is no evidence that she read or understood the terms of the agreement. Her diary entry for the day indicates that she had completed the paperwork for a new bank account, and it does not mention the possibility of a gift. ³

Over the course of the next several years, Reese deposited into the account a total of approximately $100,000 in additional funds, which represented interest from other investments, the proceeds from the sale of securities, and the like. She also made a number of withdrawals from the account to cover her living expenses. Finally, she instructed Mr. Ruth on several occasions about the proper handling of the account, and she registered her displeasure when Mr. Ruth failed to carry out those instructions.

During this period, Ms. Reese's affections for her friends and relatives seemed to undergo dramatic changes. At times she regarded Rodney and Marion Charrier as lazy and grasping, respectively, while the Ruths were, in her opinion, both wealthy and caring. On other occasions, however, she became displeased with the Ruths, and she regarded the Charriers as a generous and nurturing couple. Her attentions during this period also turned to Beverly Nickel, her personal nurse and assistant.

Ms. Reese's mutable sentiments were reflected in her will, which she changed repeatedly during this period. Ms. Reese and her husband had executed wills under which the estate passed to the survivor and then equally to Marion Charrier, Lucy Ruth, and Ralph Reese Jr. In early October, 1987, Ms. Reese executed a new will, under which all of her personal effects were to go to Marion Charrier, and the residue of the estate was to be placed in trust. The income of the trust was to go to Marion Charrier for life, and then to the Charriers' adopted son for life, and the remainder was to go to Lucy Ruth or her lineal descendants. Approximately three weeks later, she revised her will once again. This will provided that an antique clock was to go to Beverly Nickel, that $65,000 and her jewelry was to go to Lucy Ruth, that her personal effects and household furnishings were to go to Marion Charrier, and that the residual estate was to be placed into trust, with the income to Marion for life and the remainder over to Lucy Ruth or her lineal descendants. Finally, in April of 1988, Ms. Reese executed her final will. This will provided that $65,000 was to go to Lucy Ruth, and that the residual estate was to be placed in trust, with the income to Marion, and the remainder over to Beverly Nickel or her lineal descendants.

Reese died in 1989. By that time, the joint bank account contained a little over a quarter of a million dollars. This amount, if included in Reese's estate, represented approximately half of the value of the estate. Less than a week after Reese's death, the Ruths withdrew the funds from the joint account and closed the account. Shortly thereafter, Richard Barber brought this action to recover the funds previously contained in the joint bank account.

B

Barber sought recovery under the equitable theory of unjust enrichment. The crux of the complaint was that the joint account was not what it purported to be, but rather was an account established for the convenience of Barbara Reese. As the trial date of December 2 approached, the presiding judge noted that, due to a potential scheduling conflict, he could not guarantee that the trial would start before December 12. Mr. Barber was due to appear in a Florida court on December 9, and he requested that his testimony be taken in the form of an evidentiary deposition. The Ruths agreed on the condition that the deposition be videotaped. The deposition was recorded on December 3, Mr. Barber departed, and the trial began on December 4.

The case was tried to a judge. In addition to the recorded testimony of Richard Barber, the trial judge heard the testimony of John and Lucy Ruth, Marion and Rodney Charrier, and Beverly Nickel. The central issue in the case was the intention with which Ms. Reese opened the account. The judge phrased the inquiry as follows:

[T]he real dispute is what were her intentions with respect to where that money would go when she died. Was there a donative intent as to the future interest at the time the account was created or when subsequent deposits went in.

Probably there is a presumption. For the purposes of deciding this case, I conclude that there is a presumption that has to be overcome by clear and convincing evidence.

Barber v. Ruth, No. 90 C 6794, Transcript at 404-05 (N.D.Ill. Dec. 10, 1991). After four days of trial, the judge found for Mr. Barber. On the question of Ms. Reese's intent, he announced his finding as follows:

[W]hen we get back to the time [the account] was set up and the initial and subsequent deposits went in, between what Barbara Reese told Barber and what she told Beverly Nickel and what she said in her diaries, it seemed to me very clear that her interest was to cover the insurance as she perceived it and have it there so John Ruth could invest it. She wasn't talking in terms of a gift at that point, and there is nothing indicating that she was even thinking in terms of a gift at that point.

Id. at 405.

In accordance with these findings, the trial judge entered judgment for Barber in the amount of $218,838. That figure represented the amount in the account less the $65,000 bequest to the Ruths, to which the trial judge added $11,224 in interest accrued since the closing of the joint account. The trial judge also awarded Barber costs in the amount of $6,217. These costs included $530 for videotaping and $387 for transcribing Barber's deposition. The figure also includes $1,021 for the travel and subsistence expenses of Marion Charrier, $1,077 for those of Rodney Charrier, and $1,159 for those of Beverly Nickel.

The Ruths appeal the judgment. They argue that the trial judge failed to adhere to the principle, recognized under Illinois law, that the opening of a joint bank account gives rise to a presumption of donative intent, a presumption that can be overcome only by clear and convincing evidence. Further, they argue that, had the trial judge applied the proper law, the evidence would have been insufficient...