Leatherman v. Leatherman

• Decision Date: 30 July 1979
• Docket Number: No. 27,27
• Citation: 297 N.C. 618,256 S.E.2d 793
• Court: North Carolina Supreme Court
• Parties: Bessie LEATHERMAN v. Floyd Herman LEATHERMAN and Leatherman, Inc.

Page 793

256 S.E.2d 793

297 N.C. 618

Bessie LEATHERMAN v. Floyd Herman LEATHERMAN and Leatherman, Inc.

No. 27.

Supreme Court of North Carolina.

July 30, 1979.

Rudisill & Brackett by Charles W. Childs, Jr., and J. Steven Brackett, Hickory, for plaintiff-appellant.

Patton, Starnes & Thompson by Thomas M. Starnes, Morganton, for defendants-appellees.

BRITT, Justice.

Plaintiff contends the Court of Appeals erred in failing to uphold the constructive trust imposed by the trial court on the stock holdings of defendant in the corporation. In its decision the Court of Appeals held that plaintiff had failed to show from the facts and circumstances that a "special contract" existed between herself and defendant which entitled her to compensation for work performed for the business; therefore, her claim of legal ownership in the stock could not be maintained. The Court of Appeals held that plaintiff had failed to show any wrongdoing on the part of defendant which justified the imposition of a constructive trust. The decision of the Court of Appeals is well reasoned and is based upon sound legal principles. It is therefore affirmed.

Two classes of trusts arise by operation of law; resulting trusts and constructive trusts. Bowen v. Darden, 241 N.C. 11, 84 S.E.2d 289 (1954); Teachey v. Gurley, 214 N.C. 288, 199 S.E. 83 (1938). "(T)he creation of a resulting trust involves the application of the doctrine that valuable consideration rather than legal title determines the equitable title resulting from a transaction; whereas a constructive trust ordinarily arises out of the existence of fraud, actual or presumptive usually involving the violation of a confidential or fiduciary relation in view of which equity transfers the beneficial title to some person other than the holder of the legal title." Bowen, supra 241 N.C. at pages 13-14, 84 S.E.2d at page 292. Before either type of trust can be imposed by the court, it must be shown that the party seeking to invoke these doctrines has been deprived of the beneficial interest to which he is entitled in some property. The elementary flaw in plaintiff's case for a resulting trust is her failure to prove that she owned a portion of the funds in the joint accounts. Absent an enforceable interest in those funds, she cannot have an equitable interest in the stock purchased therewith.

The trial court found "(t)hat the funds transferred from joint accounts to the corporate account in 1966 were the property of the plaintiff and defendant, either of whom could have withdrawn any or all of the funds at any time." Although denominated a finding of fact, this is actually a mixed question of law and fact which may be reviewed on appeal. Carolina-Virginia Fashion Exhibitors, Inc. v. Gunter, 291 N.C. 208, 230 S.E.2d 380 (1976); Davison v. Duke University, 282 N.C. 676, 194 S.E.2d 761 (1973). We do not believe that the trial court correctly applied the law to the facts shown at the trial of this case. Plaintiff has not overcome the presumption that services rendered by a wife in her husband's business are gratuitously performed absent a special agreement to the contrary. Smith v. Smith, 255 N.C. 152, 120 S.E.2d 575 (1961); Sprinkle v. Ponder, 233 N.C. 312, 64 S.E.2d 171 (1951); Dorsett v. Dorsett, 183 N.C. 354, 111 S.E. 541 (1922). Nor has plaintiff sustained the burden of proving that her husband, by depositing funds to an account in the name of himself and his wife, intended to make her an Inter vivos gift of such funds. Smith, supra.

"A wife in North Carolina may recover from her husband, on the basis of an express contract, for services rendered him in connection with his business or outside of the purely domestic relations of the marital status. The status, or marriage, nothing else appearing, negatives an implied promise on the part of the husband to do so." 2 R. Lee, North Carolina Family Law § 110, p. 43 (1963). In this case there is no evidence of an express contract providing that plaintiff be compensated for her work in her husband's business.

The facts and circumstances of a particular case may, of course, give rise to an implied promise that the wife will be paid. Smith, supra; Sprinkle, supra; Eggleston v. Eggleston, 228 N.C. 668, 47 S.E.2d 243 (1948); Carlisle v. Carlisle, 225 N.C. 462, 35 S.E.2d 418 (1945); Dorsett, supra. In Dorsett, plaintiff and her husband maintained a shop in Greensboro where bicycles, locks, guns and keys were repaired. The wife brought an action in Quantum meruit to recover pay for services rendered in the defendant's shop. Chief Justice Clark, writing for the court, reasoned:

"There are instances where there is not only a matrimonial partnership between a husband and wife, but a financial or business partnership; also where the wife is to receive compensation from her husband for services rendered; but in all such cases the business partnership, or the liability of the husband to the wife for compensation, must arise out of an agreement, not out of the marital relation . . . ." Dorsett, supra 183 N.C. at page 358, 111 S.E. at page 543.

The court in Dorsett sustained defendant's demurrer to the complaint because plaintiff had failed to allege an agreement, understanding, or intention express or implied that she was to be compensated for her work. Likewise, plaintiff in the case before us has not alleged an agreement for compensation between herself and defendant. Nor does the evidence reveal that either an explicit or implicit agreement for plaintiff's compensation existed between the parties.

The evidence in this case is unlike that in Eggleston v. Eggleston,supra, where plaintiff wife was granted a new trial after this court determined that evidence of a partnership between her and her husband, the defendant, had been improperly excluded. Much like the parties in this case, the Egglestons through their joint efforts developed a thriving commercial enterprise from a small family business which began with a single gas station. Mrs. Eggleston testified that she operated the filling station and maintained its books. Her duties in the business were, in short, very similar to those which plaintiff performed for the grading business in this case. The feature which distinguishes Eggleston from the case before us, however, is that in that case the husband and wife filed partnership income tax returns on which they listed themselves as partners. This fact is evidence from which the jury could infer that there was an implied agreement or contract between the parties providing for the wife's compensation. No similar circumstance is shown in this case. There is simply no evidence from which the trial court could find an agreement to pay for plaintiff's services. Quite properly, the court did not find that such an agreement existed.

The evidence is also insufficient to sustain the finding of co-ownership of the accounts on the theory that both plaintiff and defendant exercised control over the funds deposited therein.

Under the laws in this jurisdiction, nothing else appearing, money in the bank to the joint credit of husband and wife belongs one-half to the husband and one-half to the wife. Bowling v. Bowling, 243 N.C. 515, 519, 91 S.E.2d 176; Smith v. Smith, 190 N.C. 764, 767, 130 S.E. 614; Turlington v. Lucas, 186 N.C. 283, 290, 119 S.E. 366.

But in the absence of evidence to the contrary the person making a deposit in a bank is deemed to be the owner of the fund. If a husband deposits his own money in a bank and the money is entered upon the records of the bank in the name of the husband or his wife, it is still the property of the husband, nothing else appearing. Hall v. Hall, 235 N.C. 711, 714, 71 S.E.2d 471; Nannie v. Pollard, 205 N.C. 362, 171 S.E. 341; Jones v. Fullbright, 197 N.C. 274, 277, 148 S.E. 229; Thomas v. Houston, 181 N.C. 91, 93, 106 S.E. 466.

Such deposit does not constitute a gift to the wife. To make a gift Inter vivos There must be an intention to give coupled with a delivery of, and loss of dominion over, the property given, on the part of the donor. Donor must divest himself of all right and title to, and control of, the gift. Such gift cannot be made to take place in the future. The transaction must show a completely executed transfer to the donee of the present right to the property and the possession. Buffaloe v. Barnes, 226 N.C. 313, 318, 38 S.E.2d 222; Nannie v. Pollard, supra; Thomas v. Houston, supra. When a husband deposits his money in the name of husband or wife, this fact taken alone does not necessarily indicate an intent to make a gift to the wife. It may, indeed, be only for the convenience of the husband. Furthermore, he does not thereby divest himself of dominion over the fund. He may withdraw any or all of it at any time. "The delivery of the deposit book for such an account is not sufficient to meet the formal requirements for a gift." 14 N.C.Law Rev. 133, and cases there cited (N. 23).

When a husband deposits his money in this manner he merely constitutes the wife his agent with authority to withdraw funds from the account, and the agency is terminated by death of the husband. (See cases cited in the second paragraph next above.) The agency may be terminated during the lives of husband and wife by withdrawal of the fund and closing the account by the husband, notice to the agent and the bank, or by other methods recognized by law for termination of the principal and agent relation. Annotation, 161 A.L.R., Joint Deposit Powers as to, pp. 71-95; Zollmann Banks and Banking (Perm.Ed.), Vol. 5, s. 3231, p. 250; Cashman v. Mason, 72 F.Supp. 487, 491.

Smith, supra 255 N.C. at pages 154-155, 120 S.E.2d at pages 578-579.

Plaintiff testified that she did not deposit any of her personal funds in the joint accounts and that all of the "money that went into those accounts was money that was earned on grading jobs by Floyd Leatherman either personally or through his employees." This testimony makes it clear...