Kanawha Valley Bank v. Friend, 13914
Decision Date | 10 April 1979 |
Docket Number | No. 13914,13914 |
Citation | 162 W.Va. 925,253 S.E.2d 528 |
Court | West Virginia Supreme Court |
Parties | The KANAWHA VALLEY BANK, a corporation v. Marguerite Judy FRIEND et al., Appellants, Theodore B. Dunbar, Appellee. |
Syllabus by the Court
A presumption of constructive fraud may arise in connection with joint bank accounts with survivorship, if the parties to the joint account occupy a fiduciary or confidential relationship. This presumption requires the person who benefits from the creation of the account to bear the burden of proving that the funds were, in fact, a Bona fide gift.
Davis & Nesius, John J. Nesius, South Charleston, for appellants.
Robert J. Louderback, Charleston, for appellee.
Jackson, Kelly, Holt & O'Farrell, Lee O. Hill, Charleston, for Kanawha Valley Bank.
The Kanawha Valley Bank, as executor of the estate of Manassah S. Judy, filed a declaratory judgment action in the Circuit Court of Kanawha County. The purpose of the action was to determine the ownership of funds in two joint bank accounts, which were in the names of Mr. Judy and Mr. Theodore Dunbar and which had rights of survivorship. The defendants in the suit were Mr. Dunbar and the four nieces of Mr. Judy Marguerite Judy Friend, Virginia Judy Smith, Catherine Ours Evans, and Nelli Ours Leatherman. The nieces were the beneficiaries under the will.
The trial court held that the defendant, Mr. Dunbar, owned the money in the accounts by virtue of the survivorship provisions of W.Va.Code, 31A-4-33. The four nieces bring this appeal contending that the court ignored the presumption of constructive fraud, which existed as a result of the fiduciary relationship between Mr. Judy and Mr. Dunbar. We agree, and consequently reverse the trial court.
The case was tried initially before a commissioner whose findings were adopted by the Circuit Court. The findings show that the testator died on August 22, 1970, at age 77. Prior to his death, Mr. Judy was physically frail and suffered from advanced arteriosclerosis manifested by signs of senility, including occasional forgetfulness and restlessness or nervousness. He was not, however, mentally incompetent.
The defendant, Dunbar, was a brother-in-law and business associate of Mr. Judy and had for some time assisted him with his financial affairs and other needs. A housekeeper was employed to look after his home, prepare meals, and give Mr. Judy his medication.
On November 24, 1969, Mr. Judy executed a general power of attorney in favor of Mr. Dunbar to facilitate the handling of his financial and business affairs. On February 17, 1970, Mr. Dunbar delivered to the bank certain signature cards, bearing his signature and that of Mr. Judy, for the purpose of creating joint checking and savings accounts with survivorship. 1
In May of 1970, at the direction of Mr. Dunbar, $30,000 was placed in the joint savings account, which money came from matured United States Treasury Bills owned by Mr. Judy. When Mr. Judy died in August of 1970, there was $32,571.82 in the joint savings account and $4,646.26 in the joint checking account.
In Dorsey v. Short, W.Va., 205 S.E.2d 687 (1974), we reviewed in some detail the statute authorizing the creation of joint bank accounts with right of survivorship, which the common law termed a joint tenancy. Dorsey's central point was that the party creating the joint tenancy (the donor) could attach conditions to it which would operate to bar the property interest of the other co-tenant, at least during the lifetime of the donor. Dorsey also created a conclusive presumption of a Causa mortis gift by the donor in the absence of certain circumstances, as stated in its Syllabus Point 2:
"Code, 1931, 31A-4-33 as amended, creates, in the absence of fraud, mistake or other equally serious fault, a conclusive presumption that the donor depositor of a joint and survivorship bank account intended a causa mortis gift of the proceeds remaining in the account after his death to the surviving joint tenant."
Here, we deal with the question of constructive fraud which, if found, vitiates the presumption of a Causa mortis gift under Dorsey. We are asked to consider the fiduciary relationship which existed between Mr. Judy and Mr. Dunbar as a result of the power of attorney held by Mr. Dunbar. There is no dispute that the power of attorney was exercised. The record reveals that a notice from the bank of the maturity of the treasury bills and resulting availability of the $30,000 was sent to Mr. Dunbar and not Mr. Judy. The bank's notice also stated that unless contrary directions were given, the funds would be placed in Mr. Judy's savings account.
A power of attorney is a written instrument by which one person appoints another as his agent or attorney-in-fact and confers upon him authority to perform certain specified acts. 3 Am.Jur.2d Agency § 23; 2A C.J.S. Agency § 150. A power of attorney creates an agency and this establishes the fiduciary relationship which exists between a principal and agent. In Syllabus Point 1 of Sutherland v. Guthrie, 86 W.Va. 208, 103 S.E. 298 (1920), we set the following standard of conduct for an agent:
"In the conduct of his principal's business an agent is held to the utmost good faith, and will not be allowed to use his principal's property for his own advantage, or to derive secret profits or advantages to himself by reason of the relation of principal and agent existing between him and his principal."
Essentially the same rule was expressed in Kersey v. Kersey, 76 W.Va. 70, 85 S.E. 22 (1915), where one brother had obtained stock from another brother in a confidential relationship:
(76 W.Va. at 79, 85 S.E. at 25)
Accord, Moore v. Turner, 137 W.Va. 299, 71 S.E.2d 342 (1952); Gaston v. Wolfe, 132 W.Va. 791, 53 S.E.2d 632 (1949); Laing v. Crichton, 110 W.Va. 3, 156 S.E. 746 (1931). 2
A corollary to the fiduciary principle is the rule that a presumption of fraud arises where the fiduciary is shown to have obtained any benefit from the fiduciary relationship, as stated in 37 Am.Jur.2d Fraud and Deceit § 441:
"Thus, if in a transaction between parties who stand in a relationship of trust and confidence, the party in whom the confidence is reposed obtains an apparent advantage over the other, he is presumed to have obtained that advantage fraudulently; and if he seeks to support the transaction, he must assume the burden of proof that he has taken no advantage of his influence or knowledge and that the arrangement is fair and conscientious. . . ."
Accord, 37 C.J.S. Fraud §§ 2 and 95.
We adopted a virtually identical rule in Work v. Rogerson, 152 W.Va. 169, 160 S.E.2d 159 (1968), where three individuals entered into a declaration of trust which provided for equal sharing in profits from the sale of lands purchased at delinquent tax sales ...
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