Brown v. Hermann

• Decision Date: 11 August 1982
• Docket Number: No. C-82-755 RPA.,C-82-755 RPA.
• Citation: 551 F. Supp. 201
• Parties: Lynn L. BROWN, et al., Plaintiffs, v. Donald A. HERMANN, et al., Defendants.
• Court: U.S. District Court — Northern District of California

551 F. Supp. 201

Lynn L. BROWN, et al., Plaintiffs, v. Donald A. HERMANN, et al., Defendants.

No. C-82-755 RPA.

United States District Court, N.D. California.

August 11, 1982.

Flynn & Stewart, San Francisco, Cal., for plaintiffs.

G. Douglas Day, Legal Dept., American Sav. & Loan Ass'n, San Jose, Cal., for American Sav.

G. William Snipes, Landels, Ripley & Diamond, San Francisco, Cal., for defendant Donald A. Hermann.

OPINION AND ORDER

AGUILAR, District Judge.

Between 1973 and 1980, Robert M. Lauder and Donald A. Hermann, defendant herein, established six trust savings accounts at defendant American Savings and Loan Association. Lauder and defendant were named as co-trustees on each of these six accounts, and one of Lauder's three sisters, plaintiffs herein, was named as the sole beneficiary of each of the six accounts. The declarations of trust for the accounts provided that Lauder and defendant could revoke the trusts, or any part of them, by withdrawing funds from the trusts.

In late December of 1981, Lauder died. On February 23, 1982, Lauder's three sisters filed an action in this court to establish the trusts and to receive their interests in the trust savings accounts. The Court has entered a preliminary injunction enjoining defendant Hermann from withdrawing, pledging or hypothecating any monies on deposit in the accounts pending the outcome of this litigation. The Court found that irreparable harm was alleged by plaintiffs as defendant would likely not be able to respond in money damages if he liquidated the trusts and these actions were later determined to be wrongful. The Court also found sufficiently serious questions to be deserving of litigation.

Defendant Hermann now moves for summary judgment contending that there is no genuine issue as to any material fact, and that he is entitled to judgment. Defendant asserts that both the trusts instruments, and the intentions of he and Lauder, indicate that upon Lauder's death, defendant was to have use of the trust account funds, and that such funds would only pass to plaintiff sisters upon the deaths of both Lauder and defendant.

By their actions, Lauder and defendant established what are commonly referred to as "Totten," or savings account, trusts. In establishing such a trust, the depositor deposits money in a savings bank account to the credit of the depositor, in trust for a beneficiary. A Totten trust is not really a trust, but is an exception to the law of testamentary disposition. Estate of Collins, 84 Cal.App.3d 928, 932, 149 Cal.Rptr. 65 (1978). Upon the death of the trustee, the money in the savings account goes directly to the beneficiary without the necessity of probate. Totten trusts are recognized and accepted in California. Id.

However, a Totten trust is a tentative trust, as the depositor may revoke the trust or withdraw interest or principal from the savings account during his or her life. Thus, the interest of the beneficiary can be revoked, and is subject to defeasance by withdrawal of portions of the funds from the account. Bogert, Law of Trusts, § 20, p. 46 (Hornbook Series). Most bank instruments establishing such trusts provide that such activities by the trustee are authorized.

In the present case, the following appeared as the "Declaration of Trust" signed by Lauder and defendant with respect to each of the six accounts:

We hereby declare that the savings account ... designated ... and all additions thereto made at any time in the future, shall be held by us or the survivor or survivors of us, in trust, for the Beneficiary above named, reserving to us, however, any interest not credited to said account, and the right at any time to revoke this trust, in whole or in part, by withdrawing all or part of the funds in said account or by executing and delivering ... a notice of intention to withdraw all or part of the funds in said account. In the event of the death of the last survivor of us, Association American Savings may pay the whole or any part of said account to Beneficiary .... If no Beneficiary should be living at the time of death of the last survivor of us, Association may pay the whole or any part of said account to the personal representatives of such last survivor.

For four of the trusts, the reverse side of the signature card provided as follows:

"The undersigned, as joint trustees for Beneficiary named on the reverse side, hereby apply for a withdrawable investment certificate account in AMERICAN SAVINGS and LOAN ASSOCIATION ("Association" herein) and for issuance to them, as joint trustees for Beneficiary, under the trust created by Declaration of Trust set forth on the reverse side hereof, of a withdrawable investment certificate subject to the terms and conditions printed thereon.

Association is authorized to act, without further inquiry, on any writings bearing the signature of either of the undersigned in all matters relating to said account, including but not limited to withdrawals from said account and the pledging of said account for any loan made to the undersigned or any one of them. If not otherwise designated above, Association may act upon the signature of any one of the undersigned. Any and all checks for interest not credited to said investment certificate account shall, in form, be payable to the undersigned in alternative, and shall be mailed to the address of the person whose signature first appears below, and any and all notices from the Association to the undersigned shall also be mailed to said address. In the event of the death of any of the parties to said account, the survivor(s) will notify the Association at once. The Association is authorized to accept and credit to said account any and all checks payable to any or all of the undersigned when endorsed by any of the undersigned, or by one for the other or others, or if presented unendorsed to supply the required endorsement. Withdrawals may not be made on account of such items until collected, and any amount not collected may be charged back to said account including all expenses incurred with said

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