Fletcher's Estate v. Jackson, 4137

• Decision Date: 10 April 1980
• Docket Number: No. 4137,4137
• Parties: In the Matter of the ESTATE of Willie B. (Neutie) FLETCHER, Deceased, John J. Fletcher, Jr., Devisee, Appellee, v. William Rosson JACKSON and Robert Turner Jackson, Appellants.
• Court: Court of Appeals of New Mexico

Page 714

613 P.2d 714

94 N.M. 572

In the Matter of the ESTATE of Willie B. (Neutie) FLETCHER,

Deceased, John J. Fletcher, Jr., Devisee, Appellee, v. William Rosson JACKSON and Robert Turner Jackson, Appellants.

No. 4137.

Court of Appeals of New Mexico.

April 10, 1980.

Writ of Certiorari Denied May 16, 1980.

James E. Templeman, Templeman & Crutchfield, Lovington, for appellants

Lowell Stout, Hobbs, for appellee.

OPINION

WOOD, Chief Judge.

Neutie married John J. Fletcher, Jr. on December 29, 1939. Neutie died testate, July 4, 1977. Formal probate proceedings were instituted. Neutie had two sons from a prior marriage; these sons (Jackson) moved for an order including certain stock certificates in the inventory of Neutie's estate. After an evidentiary hearing, the motion was denied. The sons appeal. We discuss: (1) proof of separate ownership; (2) proof of transmutation of community property to joint tenancy between husband and wife; and (3) whether transmutation can occur absent a written agreement between the spouses.

Proof of Separate Ownership

The sons' motion sought inclusion, in the inventory, of 400 shares of stock in Texaco, Inc. and 749 shares of stock in the Southern Company. The trial court found that all of these shares were acquired by Fletcher by using separate funds that Fletcher had inherited from his father. The sons do not challenge this finding as to the Texaco stock or as to 584 shares of the Southern Company. The sons challenge the sufficiency of the evidence as to 165 shares of the Southern Company.

The parties recognize that both the Texaco and the Southern Company stock were acquired during the marriage of Neutie and Fletcher and that, initially, all of this stock was presumed to be community property. Fletcher had the burden of going forward with evidence and the burden of persuading the trial court that the stock was his separate property. These burdens would be met, and the community property presumption rebutted, by a preponderance of the evidence. Thaxton v. Thaxton, 75 N.M. 450, 405 P.2d 932 (1965); Burlingham v. Burlingham, 72 N.M. 433, 384 P.2d 699 (1963); Campbell v. Campbell, 62 N.M. 330, 310 P.2d 266 (1957).

Evidence Rule 301 effected no change in the application of the above rules in this case. The community property presumption, under Evidence Rule 301, imposed upon Fletcher (the party against whom the presumption was directed), the burden of proving that the nonexistence of the presumed fact is more probable than its existence. Trujillo v. Chavez, 93 N.M. 626, 603 P.2d 736 (1979). However, under the rules stated in the preceding paragraph, Fletcher's burden was greater than proving it was more probable that the stock was not community property than that it was; rather, Fletcher's burden was to persuade the trial court that the stock was his separate property.

There is evidence that Fletcher inherited a sum of money, more than enough to purchase both the Texaco and the Southern Company stocks. He established a separate "special account" with these funds. He testified that all of the stock was purchased with these separate funds. A reconciliation of deposits into, and expenditures from, the special account included the cost of purchasing the stock.

The sons' contention is based on Fletcher's inability to produce cancelled checks for the 165 shares of the Southern Company. Fletcher explained that his bank records for October and November, 1975 were missing. However, cancelled checks for both before and after this two-month period were in evidence. The missing bank records for the two-month period do not benefit the sons. The reconciliation of the special account, Fletcher's testimony that no community funds were used to purchase the stock, and Fletcher's other financial records, all point to the purchase of the 165 shares with separate funds. The officer representing the bank executor testified that the separate fund purchases were verified "all the way" through other records.

The appellate issue is whether there is substantial evidence to support the trial court's finding (of purchase from separate funds), of the 165 shares of the Southern Company. Thaxton v. Thaxton, supra. The evidence supporting the finding is substantial.

Proof of Transmutation of Community Property to Joint Tenancy

This issue involves 1718 shares of Standard (Standard Oil Co. of Indiana) stock. Fletcher testified that these shares accumulated as part of a "savings" or "retirement" program with his employer; that the certificates were issued after his retirement. The three certificates involved were issued in Fletcher's name only, while he was married. There is no claim that these shares were not community property at the time of acquisition. In November, 1976, Fletcher had this stock reissued to Neutie and Fletcher as joint tenants. This issue involves the sufficiency of the evidence to prove the transmutation. The trial court decided this issue on two grounds: (a) under the Trimble rule (In re Trimble's Estate, 57 N.M. 51, 253 P.2d 805 (1953)) and (b) under § 47-1-16, N.M.S.A. 1978.

A. The Trimble Rule

Section 40-2-2, N.M.S.A. 1978, enacted by Laws 1907, ch. 37, § 4, and never amended, states:

Either husband or wife may enter into any engagement or transaction with the other, or with any other person respecting property, which either might, if unmarried; subject, in transactions between themselves, to the general rules of common law which control the actions of persons occupying confidential relations with each other.

We are not concerned here with rules of common law which control the actions of persons occupying confidential relations with one another. See Trujillo v. Padilla, 79 N.M. 245, 442 P.2d 203 (1968); Curtis v. Curtis, 56 N.M. 695, 248 P.2d 683 (1952); Beals v. Ares, 25 N.M. 459, 185 P. 780 (1919).

Apart from such common law rules, § 40-2-2, supra, authorizes a spouse to enter any transaction with the other spouse, in regards to their property, which either might, if unmarried. Such language permits spouses to change the way in which property is owned.

The plain language of § 40-2-2, supra, has not, however, been applied by our Supreme Court. Newton v. Wilson, 53 N.M. 480, 211 P.2d 776 (1949) and McDonald v. Lambert, 43 N.M. 27, 85 P.2d 78 (1938) severely limited the transmutation of property, as between husband and wife. Chavez v. Chavez, 56 N.M. 393, 244 P.2d 781, 30 A.L.R.2d 1236 (1952) overruled Newton and McDonald, and recognized that § 40-2-2, supra, permitted transmutation of property, but subjected transmutation to an extraordinary proof requirement. In re Trimble's Estate, supra, stated that "transmutation must be established by clear, strong and convincing proof more than a mere preponderance of evidence."

One part of the trial court's decision assumed this proof requirement was in effect, and held that the proof requirement had been met. We agree that if this proof requirement applies to the joint tenancy in this case, the proof requirement has been met.

The rule for determining whether the Trimble proof requirement has been met is stated in Duke City Lumber Company, Inc. v. Terrel, 88 N.M. 299, 540 P.2d 229 (1975); see also Matter of Valdez, 88 N.M. 338, 540 P.2d 818 (1975). The rule is: It is for the fact finder, in this case the trial court, to determine whether the proof requirement had been met; the appellate court reviews the evidence in the light most favorable to the prevailing party and determines whether the fact finder could properly have determined whether the proof requirement had been met.

In contending the evidence of transmutation was insufficient, the sons contend that Fletcher's testimony of conversations between Fletcher and Neutie was inadmissible and cannot be considered in determining the sufficiency of the evidence. We do not answer this question because the trial court's letter decision states that the conversations were not considered. Our evidence review also does not consider the conversations.

Fletcher testified that, to take care of whichever spouse survived, four specific items of property were deliberately placed in joint tenancy; that other property of the spouses would go directly to the sons, rather than to the surviving spouse, as a tax avoidance maneuver. This testimony is consistent with other evidence.

The Standard stock, other than the shares involved in this issue, was issued to Neutie and Fletcher as joint tenants. The May, 1960 signature card for a credit union savings account, signed by Neutie and by Fletcher, was, prima facie, a joint tenancy account. The deed to the home, in January, 1967, granted the property to Neutie and Fletcher as joint tenants. Fletcher testified that the checking accounts were in joint tenancy; we do not know when they were established.

The Standard stock, other than the shares involved in this issue, which was issued as joint tenancy stock, is dated in 1951, 1952, 1953, 1954 and 1964. Certificates for the contested stock were issued in 1973 and 1974; they were sent in to be reissued as joint tenancy stock in 1976. According to Fletcher, this reissuance was for the purpose of conforming to the joint tenancy plan. The only joint tenancy stock was the Standard stock; after the 1976 reissuance, all but 38 shares of Standard stock was in joint tenancy. All other stock, quite a bit as shown by the inventory, was in the name of Fletcher alone, and was handled in the estate as community property.

Neutie died of cancer; she first learned of her cancer in 1975. On May 3, 1976, Fletcher executed his will and on May 7, 1976, Neutie executed a codicil to her 1964 will. The will and codicil contained almost identical provisions the "equity" in the home and the furnishings of the home were left to the other spouse; the sons were residual legatees under both the will and codicil. Under the 1976 will of Fletcher, his separately owned property would have gone to Neutie's sons. Fletcher testified that...