Johnson v. Steen

• Decision Date: 14 February 1978
• Citation: 575 P.2d 141,281 Or. 361
• Parties: Cecil R. JOHNSON, Conservator of the Estate of Carl W. Johnson, Respondent, v. Lillian STEEN, Donald R. Steen and Elizabeth F. Steen, Appellants.
• Court: Oregon Supreme Court

Page 141

575 P.2d 141

281 Or. 361

Cecil R. JOHNSON, Conservator of the Estate of Carl W Johnson, Respondent, v. Lillian STEEN, Donald R. Steen and Elizabeth F. Steen, Appellants.

Supreme Court of Oregon, Department 1.

Argued and Submitted Nov. 7, 1977.

Decided Feb. 14, 1978.

[281 Or. 362-A] Ralph W. G. Wyckoff, Salem, argued the cause and filed the briefs for appellant Lillian Steen.

Paula M. Bechtold, Coos Bay, argued the cause for appellants Donald R. Steen and Elizabeth F. Steen. With her on the brief was Bechtold & Laird, Coos Bay.

Roger B. Todd, North Bend, argued the cause for respondent. With him on the brief was Flaxel, Todd & Nylander, North Bend.

Before DENECKE, C. J., and HOWELL and BRYSON, JJ., and RICHARDSON, J. Pro Tem.

RICHARDSON, Justice Pro Tem.

This is a suit in equity to recover $150,000 acquired by defendants from plaintiff's ward. The court ruled the ward had not made a gift of the funds. The court decreed that two mortgages, which had been discharged by defendants from the funds in issue, were reinstated and that plaintiff was subrogated to the rights of these secured creditors. The decree awarded plaintiff an equitable lien on three items of personal property purchased by defendants and awarded judgments against defendants for the balance of the funds which had been expended but which could not be traced to an identifiable asset.

On appeal the defendants make three contentions. (1) The evidence establishes there was a gift of the funds to defendant Lillian Steen. (2) Assuming there was no gift a money judgment for the untraceable funds is not an appropriate remedy. (3) Plaintiff had an adequate remedy at law and the complaint in equity should be dismissed. The matter being tried as a suit in equity, our review is de novo, ORS 19.125(3). We affirm.

In resolving these issues it is necessary to detail the factual setting of this suit. All of the parties are related. Plaintiff, who is the nephew of the ward, was appointed conservator after the alleged misappropriation of funds. He is the sole beneficiary named in the ward's present will. The ward, Carl Johnson, who is still living, was 84 years old at the time the money was taken. From the record we can determine his estate was in excess of $200,000 including the funds in issue. The record suggests there are additional assets, but there is insufficient information to determine what they are or their value.

Defendant Lillian Steen, who is 77 years old, is the sister of the ward Carl Johnson. Defendants Donald and Elizabeth Steen are her son and daughter-in-law.

Sometime in 1974 the ward, Carl Johnson, was injured in an automobile accident. He was hospitalized and ultimately placed in a nursing home for recuperation. During his incapacitation Lillian Steen assisted him with some of his financial affairs. To facilitate her handling of these matters she was given joint signature authority on his checking and savings accounts. She would write checks or withdraw funds as necessary for Carl's benefit or upon his request. She visited Carl almost on a daily basis while he was in the hospital and the nursing home.

The ward rented a safety deposit box at the First National Bank and prior to June 16, 1975, was the only person authorized to open it. On that date he extended authorization to enter the box to Lillian Steen, the plaintiff and plaintiff's son. Plaintiff had been assisting Carl in some measure with his financial affairs but had not as yet been appointed conservator.

A week or so after being given authority to enter the safety deposit box, Lillian opened it to inventory its contents so as to know what was in it in case the ward wanted her to retrieve an item. At that time she discovered an envelope bearing the notation, in Carl's handwriting: "5-28-75 For L E Steen only." L. E. Steen is defendant Lillian Steen. Inside the envelope was a Time Certificate of Deposit (TCD) in the amount of $150,000 made out to Carl Johnson as payee. She was very elated and immediately showed the envelope and TCD to Dorothy McNeil, the loan officer of the bank, and also to the bank's operations officer. They both advised Lillian that the notation on the envelope had no legal significance unless her name appeared on the certificate as a payee. Dorothy McNeil explained to Lillian that she would have to have Carl sign off the old certificate and authorize issuance of a new certificate to include Lillian's name as a payee.

Shortly after finding the certificate Lillian contacted the ward's attorney and told him about the discovery of the certificate and the notation on the envelope. The attorney said "it would be better to put it in the will." Lillian relayed this message to Dorothy McNeil of the bank who responded that the attorney just wanted another fee for making a new will. She reiterated her conclusion that the transfer could be accomplished by reissuing the TCD in Lillian's name.

On the instructions of Lillian, the bank made out a new TCD designating the payees as "Carl W Johnson or Lillian Steen." The bank officer explained to Lillian that the use of the conjunction "or" meant either payee could negotiate the certificate. In Lillian's words this meant "it was as much mine as it was his." She arranged to go with Dorothy McNeil to the nursing home to complete the transaction. This they did on September 23, 1975. Dorothy McNeil, who arrived at the nursing home ten minutes before Lillian, testified Carl was awake, friendly and alert and was talking and thinking clearly. After Lillian arrived Dorothy McNeil explained at least twice to Carl that they were there to reissue the certificate. She also explained that putting both names on the certificate separated by the word "or" meant that either one could cash the TCD. She testified Carl read the new certificate, endorsed the old certificate and signed the authorization to issue the new one. Neither Dorothy McNeil nor Lillian explained, or in any way noted, to Carl that Lillian considered the TCD to be a gift to her or that she intended to cash the certificate on maturity for her own purposes. The new certificate was handed to Lillian in Carl's presence. The TCD matured on November 7, 1975.

Dorothy McNeil typed the following notation on the back of the old TCD:

"At Carl W Johnson's request and due to his poor health he asked us to reissue this TCD so as to issue a new one in the name of he and his sister. Everything is the same on the new TCD # 251106 except the payee."

She testified this explanation was necessary in order that there not be an interest penalty for premature negotiation of the old certificate. She testified she had not determined from Carl his reasons for reissuing the certificate. She said she merely satisfied herself that that is what he wished to do.

Lillian never discussed with Carl her intent to cash the certificate although she visited him often. She cashed the certificate on November 7, 1975, when it matured. Lillian subsequently paid the $150,000 proceeds of the TCD to her son and daughter-in-law as a gift. They in turn issued their check to Lillian for $25,000. Consequently the son and daughter-in-law received $125,000 and Lillian received $25,000 from the proceeds of the TCD.

Lillian used approximately.$19,000 to pay off the mortgage on her home and the balance was expended for various living expenses. The son and daughter-in-law, who own and operate a dairy farm, paid off a note secured by their cattle and farm equipment in the approximate amount of $79,000. They purchased a silo, a generator and a trailer house with the funds. The balance of approximately $24,000 was used for wages, supplies and hay for the farm and to pay off several debts. The son and daughter-in-law were told the money was a gift to Lillian by Carl but were unaware of the circumstances surrounding Lillian's receipt of the funds.

Carl did not testify, however, his deposition was received in evidence. In it he denied several times that he intended to make a gift to Lillian. Regarding the notation on the envelope containing the certificate "for L E Steen only" he stated " * * * I figured that was when my estate was settled, the judgment day."

On December 1, 1975, Carl sent a letter to Lillian. The letter had been written by his attorney but was signed by Carl. He noted that plaintiff had been appointed his conservator and asked that she turn over to plaintiff all of his property. The letter continued " * * * I have been told that you cashed in a C.D. issued by the First National Bank for $150,000.00 and that you put $130,000.00 of that into a Cashier's check in your own name. You have not told me about that. You must account to Cecil (plaintiff) for this without any delay and return this money to my estate."

He also indicated in the letter that it was not his intention to give away any of his property and that he had allowed her name to be included on his certificates and accounts so she could protect the funds and use them for his benefit.

After September 23, 1975, when the TCD in issue was changed to reflect Lillian and Carl as joint payees, Lillian had three other TCDs totalling approximately $35,000, which were drawn on another bank, reissued with Carl W. Johnson and Lillian Steen as payees. This was done by having Carl sign off the old certificates and authorizing the issue of new certificates in the presence of a bank officer. Sometime in October 1975, the plaintiff, who had not as yet been appointed conservator, began changing Carl's checking and savings accounts to reflect the plaintiff and Carl as joint signators. This was done at Carl's request so that plaintiff could manage Carl's financial affairs. Early in November 1975, prior to the maturity date of the certificate in issue, plaintiff discovered Lillian had procured the reissue of all the ward's TCDs in her joint name. Lillian and the plaintiff met in the parking lot of the nursing home on their way to visit Carl and plaint...