First Nat. Bank in Sioux City v. Curran

• Decision Date: 28 March 1973
• Docket Number: No. 55373,55373
• Parties: FIRST NATIONAL BANK IN SIOUX CITY, Executor of the Estate of Margaret Crosby, Deceased, Appellee, v. Anna CURRAN, a/k/a Mrs. James Curran, Appellant.
• Court: Iowa Supreme Court

Page 317

206 N.W.2d 317

FIRST NATIONAL BANK IN SIOUX CITY, Executor of the Estate of Margaret Crosby, Deceased, Appellee, v. Anna CURRAN, a/k/a Mrs. James Curran, Appellant.

No. 55373.

Supreme Court of Iowa.

March 28, 1973.

Kindig, Beebe, McCluhan, Rawlings & Nieland, Sioux City, for appellant.

Wilson, Rhinehart & Bikakis, Sioux City, for appellee.

Considered en banc.

UHLENHOPP, Justice.

This case involves the validity of transfers of bank deposits into joint tenancy by Margaret Crosby to her confidante, Mrs. James Curran.

Margaret Crosby was born in 1871 in Nebraska and died in 1969 in Sioux City, Iowa. She never married and left no close relatives. She was an intelligent person of strong will; one witness testified that she was 'a very genteel Christian woman, by the standards of today a little old-fashioned, she didn't have many wants, she was a charitable woman, cheerful and very appreciative.'

By 1961, when she was 90, Miss Croby's eyesight was almost gone. She was blind in one eye, had a cataract in the other, and could only see objects. In 1966 she had surgery for the cataract. Her sight in that eye improved but remained very poor. Otherwise she was healthy except for the infirmities of advanced age. She lived in the geriatric ward of St. Joseph's Hospital in Sioux City. When that ward was later closed, she lived in a rest home.

In about 1961, Mrs. James Curran took care of another patient in the same geriatric ward, and became acquainted with Miss Crosby. As years passed, Miss Crosby came to confide in Mrs. Curran. Whereas Miss Crosby was close-lipped with others about her affairs, she eventually took Mrs. Curran completely into her confidence. After the other patient died in 1964, Mrs. Curran began taking care of Miss Crosby's business affairs.

Early in 1964, Miss Crosby decided to make her will and had it prepared by (then) Attorney C. F. Stilwill. She executed the will and Mr. Stilwill and Mrs. Curran witnessed the execution. In the will Miss Crosby gave her property to various charitable uses and named as executor the First National Bank in Sioux City (the bank). At her death her estate amounted to approximately $83,352, not counting about $29,367 involved in this suit.

With the passing of time, Mrs. Curran, in consultation with Miss Crosby, handled more and more of Miss Crosby's affairs and eventually handled them completely. Mrs. Curran even had possession at her home of Miss Crosby's financial records. Miss Crosby retained her mental powers but reposed complete trust in Mrs. Curran. She made a number of gifts of money to Mrs. and to Mr. Curran, and to others.

A substantial portion of Miss Crosby's assets were in bank deposits. Between January 11, 1967, and March 12, 1968, when Miss Crosby was between the ages of 96 and 97 years, five of those deposits were changed from the name of Margaret Crosby to the names of Margaret Crosby and Mrs. James Curran as joint tenants with right of survivorship. The transfers were made at the request of Miss Crosby, through Mrs. Curran. They were signed by Miss Crosby in her room in the presence of Mrs. Curran and Mr. Curran. The transfers were effected at the banks by Mrs. Curran. All of the funds in the accounts originated with Miss Crosby.

After Miss Crosby's death, her will was admitted to probate, and the bank was appointed executor. The bank demanded the transferred deposits from Mrs. Curran, but she placed them in her name alone.

The bank then commenced the present suit in four divisions to recover the deposits from Mrs. Curran. Division I sought a writ of replevin, division II asked for accounting, division III alleged a constructive trust, and division IV requested reformation of the titles to the accounts. The bank demanded a jury on division I.

After a motion to dismiss by her was overruled, Mrs. Curran answered, denying in general the four divisions. She demanded jury trial.

The bank replied and in addition moved that divisions II, III, and IV be tried in equity. Mrs. Curran resisted the motion. The district court ruled that division II be tried by ordinary proceedings but that divisions III and IV be tried by equitable proceedings.

Thereafter, the bank dismissed divisions I and II without prejudice. Over Mrs. Curran's objection, the suit proceeded to trial in equity on divisions III and IV.

After trial, the trial court held that a constructive trust existed as to the transferred deposits together with interest which had been declared on them, and rendered decree for the bank on division III. Mrs. Curran appealed.

Mrs. Curran asserts several propositions in this de novo appeal, but we find four issues to be determinative. First, did the district court erroneously transfer divisions III and IV to equity? Second, did oral testimony regarding the alleged constructive trust violate the parol evidence rule? Thrid, did a confidential relationship exist between Miss Crosby and Mrs. Curran? And fourth, did Mrs. Curran show by clear, satisfactory, and convincing evidence that the transfers were valid?

i. Transfer to Equity. The first issue involves two subsidiary issues. Were divisions III and IV cognizable in equity? How does a litigant joining legal and equitable causes secure trial by equitable proceedings of the latter?

(a) Constructive trusts and reformation of instruments are recognized heads of equity jurisdiction; such relief is exclusively equitable in nature. 54 Am.Jur. Trusts § 565 at 440, § 566 at 441; 45 Am.Jur. Reformation of Instruments § 2 at 584; 90 C.J.S. Trusts § 454b at 871; 76 C.J.S. Reformation of Instruments § 1 at 327.

(b) Joinder of legal and equitable causes is not forbidden by our present rules of civil procedure, but our statutes still recognize two kinds of civil proceedings--ordinary and equitable. Code 1973, § 611.3. See Iowa Const. Art. V, § 6 ('The District Court shall be a court of law and equity, which shall be distinct and separate jurisdictions . . .'). When an action involving law and equity causes is commenced by ordinary proceedings, as this one was since division I was replevin, either party is entitled to have the issues exclusively cognizable in equity tried by equitable proceedings. § 611.10. The bank so moved as to divisions II, III, and IV, and the district court properly sustained the motion as to divisions III and IV. Since divisions I and II were subsequently dropped, we need not inquire whether the court was right in refusing to order division II tried by equitable proceedings. Neither need we consider the proper sequence of trial as to divisions I and II, on one hand, and III and IV, on the other. The issues of fact as well as of law on the remaining divisions III and IV were triable to the court. Klopp v. Chicago, M. & St. P. Ry., 156 Iowa 466, 136 N.W. 906; Hobart v. Hobart, 51 Iowa 512, 1 N.W. 780; see Frank v. Hollands, 81 Iowa 164, 46 N.W. 979.

The trial court properly tried divisions III and IV by equitable proceedings.

II. Parol Evidence Rule. Mrs. Curran contends that the joint tenancy deposits constituted three-party contracts among herself, Miss Crosby, and the respective banks, and she cites, among other decisions, Hyland v. Standiford, 253 Iowa 294, 111 N.W.2d 260. She says, therefore, that the transfers by Miss Crosby could not be invalidated by parol evidence.

But in suits to declare constructive trusts or to reform instruments, such as we have here, the chancellor looks behind the documents to the actual transactions, and the parol evidence rule does not forbid him from doing so. Perkins v. City National Bank, 253 Iowa 922, 114 N.W.2d 45; Luse v. Grenko, 251 Iowa 211, 100 N.W.2d 170; 9 Wigmore, Evidence, § 2423 (3rd ed.). See also Hill v. Havens, 242 Iowa 920, 48 N.W.2d 870; McManis v. Keokuk Savings Bank &3 Trust Co., 239 Iowa 1105, 33 N.W.2d 410; In re Estate of Murdoch, 238 Iowa 898, 29 N.W.2d 177.

The parol evidence rule did not require exclusion of the evidence adduced.

III. Did a Confidential Relationship Exist? We thus come to the merits of the case. The trial court held, first, that a confidential relationship existed between the two women and second, that Mrs. Curran did not sustain her burden of upholding the transfers of the deposits into joint tenancy.

The Iowa law in this area stems mainly from Curtis v. Armagast, 158 Iowa 507, 138 N.W. 873. There the court stated the doctrine of equity that if a person comes to repose trust in another so that the other has influence over such person, and the two are thereby not at arm's length, equity will regard transfers by such person to the other as presumptively invalid and cast upon the other the burden of upholding the transfers. The court said (158 Iowa at 520--521, 138 N.W. 873 at 878):

Though strictly of differing signification, the phrases 'fiduciary relations' and 'confidential relations' are ordinarily used as convertible terms and have reference to any relationship of blood, business, friendship, or association in which the parties repose special trust and confidence in each other and are in a position to have and exercise, or do have and exercise, influence over each other.

This relationship of confidence was defined thus in Dibel v. Meredith, 233 Iowa 545, 549, 10 N.W.2d 28, 30:

Confidential relationship is a very broad term and is not at all confined to any specific association of the parties to it. In law it has been defined or described as any relation existing between the parties to a transaction wherein one of the parties is duty bound to act with the utmost good faith for the benefit of the other party. In its broadest connotation the phrase embraces those multiform positions in life wherein one comes to rely on and trust another in his important affairs.

A confidential relationship arises whenever a continuous trust is reposed by one person in the skill and integrity of another, and so it has been said that all the variety of relations in which dominion may be exercised by one person fall...