O'Hair v. O'Hair

• Decision Date: 20 March 1972
• Docket Number: Nos. 1,CA-CIV,s. 1
• Parties: Martha Kathryn Hazlett O'HAIR, Appellant, v. Huston Harding O'HAIR, Appellee. 1719, 1 1637.
• Court: Arizona Court of Appeals

Page 765

494 P.2d 765

16 Ariz.App. 565

Martha Kathryn Hazlett O'HAIR, Appellant, v. Huston Harding O'HAIR, Appellee.

Nos. 1 CA-CIV 1719, 1 CA-CIV 1637.

Court of Appeals of Arizona, Division 1, Department B.

March 20, 1972.

Rehearing Denied May 8, 1972.

Rawlins, Ellis, Burrus & Kiewit, by Norman D. Hall, Jr., Phoenix, for appellant.

Cavness, DeRose, Senner & Rood, by John W. Rood, Phoenix, for appellee.

JACOBSON, Judge.

When a married man places his sole and separate personal property in a joint savings account and in a joint certificate of deposit with his wife as the joint tenant and the wife exercises the right of control thus granted to her and withdraws funds in the joint accounts, what is the status of the funds thus withdrawn?

This question is presented in this appeal from a judgment of the Superior Court of Maricopa County holding that upon the divorce of the parties, the funds previously withdrawn by the wife were the sole and separate property of the husband.

The plaintiff-appellant, Martha Kathryn Hazlett O'Hair and defendant-appellee, Huston Harding O'Hair, were married in Phoenix, Arizona, in 1947. The parties have three children, ages 15, 18 and 20 at time of trial. At time of trial, the two youngest children were in school, while the oldest child, a daughter, is both legally blind and mentally retarded, but had previously been working for the Industries for the Blind.

During the marriage the parties accumulated various community property consisting of a residence having a net value, after deductions for encumbrances, of approximately $30,000.00, three automobiles, and a $5,000.00 savings account.

In addition, the defendant husband had received from the sale of his sole and separate property acquired by inheritance, the sum of approximately.$150,00.00. On September 23, 1968, this sum was placed in a joint savings account at Western Savings & Loan and in various joint certificates of deposit purchased from Western Savings. The plaintiff-wife appeared as a joint tenant with right of survivorship on both the joint savings account and on the certificate of deposit. The wife was given possession of the passbook to the joint savings account.

Some six or seven years prior to trial, the husband had suffered a cerebral accident and had not been gainfully employed since that time. It appears that the wife, prior to the filing of the divorce action, had exercised the right of withdrawal of some of the funds located in the joint savings account at Western Savings and used these withdrawn funds for community living expenses. In addition, she had made withdrawals from the joint savings account at the direction of the husband. The evidence disclosed that all the cash assets of the parties at the time of trial, including various checking accounts had initially come from the joint savings account at Western Savings.

The evidence further disclosed that the husband had entered into numerous unprofitable business ventures which had dissipated a large portion of his inheritance and that the grounds for the wife's divorce were based upon the husband's extramarital relationship with a woman from Texas.

Sometime prior to the wife filing her complaint for divorce, the joint savings account at Western Savings contained the sum of $75,000.00. There was also a $25,000.00 joint certificate of deposit at the same institution. Prior to the commencement of the divorce action, the wife withdrew these sums from Western Savings and established a trust at the Union Bank. The trust agreement provided that the $100,000 corpus of the trust was to be used for her support and maintenance and the support and maintenance of the children of the parties, but no provision was made for the husband. The evidence is in dispute as to whether the husband was aware of the last withdrawal from Western Savings prior to the withdrawal having been made and whether he had acquiesced in the establishment of the support trust at Union Bank.

Further, the testimony is in dispute as to the husband's intention in establishing the joint accounts at Western Savings--the wife contending that the husband wanted her to have one-half the account, while he contended that the sole purpose of establishing the account was to facilitate payment of joint community living expenses and to provide for ease of transfer of the funds to his wife in the event of his death. At time of trial, the wife was 49 years old and had not been gainfully employed since the marriage.

The trial court, in its judgment awarding the wife a divorce, granted her as her share of the community property the family residence and furniture, two of the automobiles and all of the checking accounts. ¹

The judgment further found that the corpus of the trust established by the wife at the United Bank was the sole and separate property of the husband; that the wife was entitled to no alimony; and that the wife was not entitled to collect support for the eldest daughter after attaining the age of 21 years. Subsequent to filing of this action, the husband established an irrevocable trust, to be funded by any property awarded him by the divorce decree, which provided for the support of the eldest daughter during her lifetime.

The wife on this appeal questioned the propriety of the trial court's judgment in the following respects:

1. The determination that the $100,000.00 corpus of the United Bank Trust established by her was the sole and separate property of the husband;

2. The failure of the trial court to award her alimony; and

3. The failure of the trial court to require the husband to support the eldest daughter after reaching her 2ust birthday.

The two-party bank account has been the source of much litigation and has received the attention of numerous legal scholars. ²

The cases dealing with this subject arise, as is the fact here, where prior to opening the joint account, all of the money used as a deposit belonged solely to one of the parties.

The difficulty experienced by the courts with this subject stems primarily from the impossibility in capturing the typical joint bank account within the recognized common law concepts of holding property--either real or personal. The joint savings account form utilized by Western Savings in this case and signed by both parties is illustrative of this dilemma:

'The undersigned . . . hereby apply for a Joint Tenancy Savings Account. . . . Such account together with all deposits and accumulations therein shall be held . . . as Joint tenants with right of survivorship and not as tenants in common nor community property. . . . Association is authorized unless otherwise agreed in writing by Association and all Applicants, without further inquiry, Either before or after the death of any Applicants, in accordance with writings bearing Any one or more of Applicants' signatures, to: (1) pay, deliver, or transfer in any way, All or any part of such account. . . . (2) Accept pledges of such account as security for loans. . . .' (Emphasis supplied.)

This instrument on its face purports to place the account in joint tenancy with right of survivorship. In following common law precepts on joint tenancy, the account passes to the survivor on the death of the 'joint tenant.' However, the document deviates from common law joint tenancy by authorizing, under its terms, the bank to pay on the signature of only one, all of the funds in said account and thus destroy the other joint tenant's interest in the account. It is this feature of alienation of a joint tenant's interest that has caused the courts the most difficulty.

Thus, the early cases held that the survivorship feature of joint tenancy accounts was invalid either as an unsuccessful attempt to create a joint tenancy (failure of the four unities concept of common law joint tenancies of deed, time, persons, and interest) thus, being an ineffective gift because of non-delivery, McNabb v. Fisher, 38 Ariz. 288, 299 P. 679 (1931), or an invalid testamentary disposition, Phoenix Title & Trust Co. v. King, 58 Ariz. 477, 121 P.2d 429 (1942). However, through the persistence of the banks and with the help of the legislature, ³ today the Survivorship aspects of the joint account have generally been upheld. ⁴

However, the problem still remains as to what interest, if any, a non-contributing member to the joint account has in the account, during the lives of both signators. This problem, on analysis, is in fact two problems: (1) by what means does the contributing member of the joint account transfer an interest to the non-contributing member? and (2) what is that interest, if any?

In answering both of these questions, the courts have generally utilized two legal theories--gift and contract.

Those courts which have utilized the gift theory in determining both how the non-contributing interest was acquired and what the interest acquired was, necessarily turn upon a determination of the intent of the contributing member at the time the account was opened. Saylor v. Southern Ariz. Bank & Trust Co., 8 Ariz.App. 368, 446 P.2d 474 (1968). Thus, depending upon that intent, courts have held that the non-contributing party acquired both survivorship rights and rights to withdraw during both lives (Kranjcec v. Belinak, 114 Mont. 26, 132 P.2d 150 (1942)); survivorship rights only (In re Estate of Voegeli, 108 Ohio App. 371, 161 N.E.2d 778 (1959)); or the right to withdraw for the benefit of the contributing party only with no survivorship rights or individual withdrawal rights (Landman v. Landman, 136 A.2d 392 (D.C.Mun.App., 1957)).

The problem with the gift approach in ascertaining the interest acquired is that it necessarily overlooks the clear and express terms of the instrument normally signed by both parties giving rise to the account. This writing clearly gives to the non-contributing party both the right of Intervivos withdrawals and survivorship rights.

Other courts have utilized the theory that the...