Estate of Propst, S006951

• Decision Date: 02 April 1990
• Docket Number: No. S006951,S006951
• Citation: 788 P.2d 628,268 Cal.Rptr. 114,50 Cal.3d 448
• Court: California Supreme Court
• Parties: , 788 P.2d 628 ESTATE OF Floyd D. PROPST, Deceased. Graple Eula PROPST, Petitioner and Respondent, v. Neta STILLMAN, et al., Objectors and Appellants.

Page 114

268 Cal.Rptr. 114

50 Cal.3d 448, 788 P.2d 628

ESTATE OF Floyd D. PROPST, Deceased.

Graple Eula PROPST, Petitioner and Respondent, v. Neta STILLMAN, et al., Objectors and Appellants.

No. S006951.

Supreme Court of California,

In Bank.

April 2, 1990.

Norlen E. Drossel, Law Offices of Anderson & Drossel, Berkeley, for objectors and appellants.

Watson, Hoffe & Barbieri, Francis A. Watson, Jr., Karen R. Barbieri and Dean E. Barbieri, Richmond, for petitioner and respondent.

KENNARD, Justice.

The issue we consider in this case is whether a joint tenancy in personal property, such as a joint tenancy bank account, may be severed by the unilateral action of one joint tenant.

Under the common law, a joint tenant had the right to sever a joint tenancy in either real or personal property without the consent of the other joint tenants; thus joint tenants could dispose of their interest in the property free of the right of survivorship. In California, however, a line of decisions by this court and the Court of Appeal has held that, in the absence of contrary agreement, the proceeds of personal property held in joint tenancy retain their joint tenancy character even when those proceeds are held in the name of only one joint tenant. (E.g., Fish v. Security-First Nat. Bank (1948) 31 Cal.2d 378, 387, 189 P.2d 10.) Under this rule, a joint tenant is powerless to defeat the right of survivorship (the principal characteristic of joint tenancy) by severing the joint tenancy unilaterally.

Deeming itself bound by these decisions, but disclaiming approval of their wisdom, the Court of Appeal in this case "reluctantly" upheld the claim of a widow to all the funds that her deceased husband had withdrawn from their joint tenancy bank accounts and placed in new accounts under his name alone, even though the husband had intended thereby to defeat her survivorship interest. We reverse the decision of the Court of Appeal, disapprove the earlier holdings, and hold that, in the absence of prior contrary agreement, joint tenancies in personal property, like joint tenancies in real property, may be unilaterally severed.

The prior rule is not only inconsistent with the common law and based on a flawed interpretation of the leading case (Estate of Harris (1915) 169 Cal. 725, 147 P. 967 [Harris I ] ), it also defeats joint tenants' prevailing expectations that they will be able to deal with their property interests unilaterally. The Court of Appeal's decision in this case has given rise to concerns that, while the joint tenants are still alive, each joint tenant should be free to sever his or her own undivided interest and thus terminate the other joint tenant's survivorship right to the entire joint tenancy property (e.g., a bank account) or its proceeds, particularly when the joint tenants are husband and wife. (See 20 Cal.Law Revision Com.Rep. (Feb.1989) pp. 102-105, 137-139.) Such concerns are by no means new. (See, e.g., Note, Joint Tenancy: Character of Personal Property Acquired with Withdrawals from Joint Bank Accounts (1940) 28 Cal.L.Rev. 224, 226.)

Because of these concerns, the California Law Revision Commission recommended and the Legislature enacted statutory changes, effective July 1, 1990, that prospectively apply the substance of our present holding to joint tenancy accounts with banks and savings and loan associations. (Prob.Code, § 5128; id., § 5303, subd. (c), as amended by Stats.1989, ch. 397, § 30, No. 4 Deering's Adv.Legis.Service, pp. 1335-1336 [adding subdivision (c) to section 5303].) Though these statutory provisions come too late to apply directly to the case before us, they reflect a legislative policy, to which our present holding will give effect, with respect to all personal property held in joint tenancy. Our holding also is more likely than the prior rule to accord with the expectations of most joint tenants. Accordingly, we have concluded that our present holding shall be given retroactive effect unless the party claiming the right of survivorship proves that application of the holding would cause the party substantial detriment as a result of the party's reasonable reliance upon the prior rule.

FACTS

Respondent Graple Eula Propst is the widow of Floyd D. Propst. They were The decedent and respondent had a number of bank accounts, which they held in joint tenancy. In February 1983, the decedent withdrew all of the funds from two of these accounts; in October and early November 1983, he closed six additional bank accounts and immediately deposited those funds in accounts in his name alone. His intent in closing the accounts was to sever the joint tenancy, thus cutting off respondent's right of survivorship.

[788 P.2d 630] married on April 18, 1962; each had a child of a prior marriage. Appellant Neta Stillman is the daughter of the decedent's prior marriage. In 1976, the decedent and respondent executed "mirror wills," which provided that the survivor was to inherit the entire estate, and that upon the death of the survivor the estate was to be divided equally between the two children.

On November 7, 1983, the decedent executed a will that, among other things, confirmed respondent's interest in their community property; named appellant Neta Stillman as his residuary beneficiary; and appointed his attorney, appellant Robert Rigney, as executor. Two weeks later, the decedent died.

Attorney Rigney then filed a "Petition for Probate of Will and for Letters Testamentary," and in January 1985 respondent filed an "Amended Petition for Determination of Entitlement to Estate Distribution." Respondent alleged that the decedent had withdrawn the funds from the joint tenancy bank accounts without her consent or knowledge. She also asserted that funds from the two accounts the decedent had unilaterally closed in February 1983 "were drawn on cashier's check Nos. 3011 and 3036." She sought a determination that the funds the decedent had withdrawn from their joint bank accounts and deposited in bank accounts in his name alone remained joint tenancy property, and that title to the individual accounts and to the two cashier's checks had passed to her outside of the probate estate. Following a trial, the trial court so ruled.

Underlying the trial court's ruling was its reasoning that a party to a joint tenancy in personal property could not change the character of the joint tenancy without an agreement to do so. Therefore, the trial court concluded, the decedent's attempts "to terminate the joint tenancy by withdrawing funds ... and placing them in his name alone did not change the nature of the funds," which went to respondent, upon the decedent's death, by operation of law.

The decedent's daughter, Neta Stillman, and Robert Rigney, as executor of the estate, appealed. The Court of Appeal "reluctantly" affirmed the judgment. The court noted that the trial court's decision was "based on a line of authority applicable only to joint tenancy in personal property that has developed in California on the strength of two oft-cited and misinterpreted California Supreme Court decisions: Estate of Harris (1915) 169 Cal. 725, 147 P. 967 [Harris I ] ... and Estate of Harris (1937) 9 Cal.2d 649 ...." The Court of Appeal further observed that were it not for the fact that this court had cited Harris I as support for the rule of law applied by the trial court (see, e.g., Fish v. Security-First Nat. Bank, supra, 31 Cal.2d 378, 387, 189 P.2d 10), the Court of Appeal would have held that, "as is the case with severance of joint tenancies in real property, a joint tenant in personal property may sever the joint tenancy without the consent of his or her cotenants by an act which unambiguously establishes his or her desire to terminate the estate." The Court of Appeal concluded that in light of its "limited authority as an intermediate appellate court" (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937), it was compelled to affirm the trial court's judgment. ¹ The Court of Appeal further held that the current provisions of the Probate Code relating to the determination of ownership in joint bank accounts (Prob.Code, § 5301 et seq.) did not compel a different conclusion because those provisions applied only to credit unions and industrial loan companies. (Prob.Code, § 5101.) As already mentioned, the Legislature has since significantly broadened those provisions on the recommendation of the California Law Revision Commission. (SeeProb.Code, §§ 5128, 5303, subd. (c).)

DISCUSSION

1. Unilateral Severance of a Joint Tenancy in Personal Property

California's judicially developed rule prohibiting unilateral severance of a joint tenancy in personal property is an unwarranted departure from the common law. The rule seems to stem from a misunderstanding of the 1915 decision in which the rule was thought to originate (Harris I, supra, 169 Cal. 725, 147 P. 967), rather than from an analysis of the rule's intrinsic merits.

Under the common law, to create a joint tenancy a conveyance must convey "to two or more persons at the same time the same title to the same interest with the same right of possession." (4A Powell on Real Property (rev. ed. 1989) p 615, p. 51-2; see Civ.Code, § 683.) In other words, creation of a joint tenancy requires these four unities: time, title, possession, and interest. A joint tenant simultaneously possesses both the entire tenancy and an equal, undivided share of the tenancy. (See 4A Powell on Real Property, supra, p 617 at p. 51-9; 2 Tiffany, The Law of Real Property (3d ed. 1939) § 418, p. 196.)

The principal characteristic of joint tenancy is the right of survivorship. At common law, the destruction of one of the essential unities severs the joint tenancy and extinguishes the right of survivorship. (4A Powell on Real Property, supra, p 618 at pp. 51-14 & 51-15.) As we observed in Tenhet v. Boswell (1976) 18 Cal.3d 150, 155-156, 133 Cal.Rptr. 10, ...