Neuschafer v. McHale

• Jurisdiction: Oregon
• Parties: Eulalia NEUSCHAFER and Eulalia D. James, Appellants, v. James McHALE, Respondent, American Telephone and Telegraph Company, a corporation, Defendant. 81-1542; CA A31222.
• Citation: 76 Or.App. 360,709 P.2d 734
• Court: Oregon Court of Appeals
• Decision Date: 14 November 1985

Page 734

709 P.2d 734

76 Or.App. 360

Eulalia NEUSCHAFER and Eulalia D. James, Appellants, v. James McHALE, Respondent American Telephone and Telegraph Company, a corporation, Defendant.

81-1542; CA A31222.

Court of Appeals of Oregon.

Argued and Submitted Feb. 22, 1985.

Decided Nov. 14, 1985.

Allyn E. Brown, Newberg, argued the cause for appellants. With him on briefs were Brown and Tarlow, Newberg.

Kaye D. Brand, McMinnville, argued the cause for respondent. With him on brief were Craig, Brand and Lake, McMinnville.

Before GILLETTE, P.J., and VAN HOOMISSEN and YOUNG, JJ.

YOUNG, Judge.

In this declaratory judgment action, the trial court declared that defendant McHale, "by virtue of a gift of a future interest therein," acquired title to 1,103 shares of stock in American Telephone and Telegraph Company (AT&T) and two dividend reinvestment accounts. Plaintiffs appeal and contend that they did not possess the requisite donative intent to make a valid gift inter vivos. We reverse.

Our initial concern is the scope of our review. A declaratory judgment proceeding may be legal or equitable in character. Kuhn v. Heerwagen, 43 Or.App. 755, 757 n. 1, 604 P.2d 416 (1979). If it is equitable, we review de novo. ORS 19.125(3). If it is legal, we must affirm the judgment of the trial court if there is any evidence to support it. Port of Portland v. Maxwell, 9 Or.App. 105, 111, 496 P.2d 23 (1972).

The parties agree in their briefs that this declaratory judgment proceeding is essentially equitable. Although we are not bound by that agreement, see May v. Chicago Insurance Co., 260 Or. 285, 292, 490 P.2d 150 (1971), we think that the parties are correct. The Supreme Court has stated:

"[W]hether an action for declaratory judgment is to be treated as an action at law or as a suit in equity normally depends upon the essential nature of the case, including the nature of the relief sought." State Farm Fire v. Sevier, 272 Or. 278, 299, 537 P.2d 88 (1975) (footnote omitted).

The essential underlying nature of this case is a proceeding to quiet title to personal property. It bears a striking resemblance to Rogelis v. Pettis, 49 Or.App. 537, 619 P.2d 1339 (1980), rev. den. 290 Or. 449 (1981), the facts of which were:

"The parties cohabited together in California in 1964 for approximately seven months prior to coming to Oregon to live. In March, 1965, 20 acres of land was conveyed to the parties in the names of 'Louis M. Rogelis and Dorothy M. Rogelis, husband and wife.' The parties were not then, nor have they ever been, husband and wife. Plaintiff paid for the land from money he had saved before retiring from the Navy. The parties sold 10 of the 20 acres to plaintiff's nephew. The parties purchased a mobile home which they lived in on the property until a home was constructed. Plaintiff did most of the construction on the home, contracting only minor portions out to others. The parties moved into the home in the fall, 1966, and lived together there until January, 1971, when defendant moved out of the home.

"In 1975, plaintiff married. In 1977, plaintiff desired to sell the property and asked defendant to sign a quit claim deed, which she refused to do. This [suit to quiet title] then ensued." 49 Or.App. at 539, 619 P.2d 1339.

The trial court quieted title in plaintiff. We reversed, stating:

"A suit to quiet title is an equitable proceeding and we review de novo. ORS 19.125. From our view of the record we find there was an intent on the part of the parties to own the property jointly." 49 Or.App. at 539, 619 P.2d 1339.

There are several similarities between Rogelis and the present case. First, there is a document in both which apparently created a valid joint interest. Second, the plaintiffs asked the defendants to release any interest they held. Third, defendants refused. Fourth, the underlying issue is the intent to create a present joint interest.

There is one major difference: Rogelis involved real property; this case involves personal property. Although actions to quiet title to personal property are rare in Oregon, they have occurred, see Davis v. Wood et ux, 200 Or. 602, 613, 268 P.2d 371 (1954); Endicott v. Digerness, 103 Or. 555, 559, 205 P. 975 (1922), and the Supreme Court treated them as equitable in nature. We conclude that the nature of this case is essentially an equitable proceeding to quiet title to personal property. Therefore, we review de novo. ORS 19.125(3); see Kuhn v. Heerwagen, supra.

The parties are three generations of the same family. Plaintiff Neuschafer is the mother of plaintiff James and the grandmother of defendant McHale; James is McHale's mother. In 1945, the family moved from Illinois to a farm near Newberg. During McHale's youth, Neuschafer indulged him with innumerable gifts, and as he grew older she continued the gifts, usually money. She paid his college expenses and gave him the down payment for his first home in California. Neuschafer's generosity continued until 1981.

Neuschafer and James, through their employment with AT&T, and by their individual purchases, acquired stock in AT&T. By 1963, Neuschafer owned 1,103 shares and James 416 shares. In addition, each owned an AT&T stock dividend reinvestment account. In 1963, with the aid of a local banker, they named McHale as a joint tenant with right of survivorship on their respective stock and accounts. Neuschafer named McHale as a joint tenant with her on a block of 498 shares and on her account. She named James and McHale as joint tenants with her on her remaining 605 shares. James named McHale as a joint tenant with her on all of her stock (416 shares) and on her account. New stock certificates were issued, and the reinvestment accounts were changed to joint tenancies. Plaintiffs continued in possession of the stock certificates and accounts. They received notices and proxies, voted the shares and received the dividends. When plaintiffs created the joint tenancy, no gift tax returns were filed. Plaintiffs continued to report the dividends as their taxable income.

In 1981, McHale retired and moved back to the Newberg farm, where he started building a house. In order to permit some estate planning, James asked McHale to remove himself as joint tenant on her stock; he complied with her request. Her reinvestment account remained in the joint names of James and McHale, although there is evidence that he agreed to "sign off" that account as well.

During the months of July through October, 1981, Neuschafer was seriously ill and hospitalized. During that time McHale claimed the July and October quarterly cash dividends paid on the block of 498 shares in the joint names of Neuschafer and McHale. Although Neuschafer had given McHale amounts of money that often equalled the cash dividends on the 498 shares, she was concerned that, because of her health, she would need the dividends to pay her expenses. However, McHale's persistence eventually prevailed, and he obtained the checks. ¹ That episode caused a serious breach in the relations of the parties. Shortly thereafter McHale asked Neuschafer to transfer to him the block of 498 shares. She refused, and this action followed.

Plaintiffs sought a declaration that defendant had no interest in the 1,103 shares of stock originally owned by Neuschafer and the two reinvestment accounts. The trial court determined that defendant's claim that there was an agreement to bequeath the stock was unfounded and denied his counterclaims.

The pertinent portion of the judgment provides:

"1. Defendant, JAMES McHALE, by virtue of a gift of a future interest therein, is entitled to full title to the following described stock and dividend reinvestment accounts upon the death of plaintiff, EULALIA NEUSCHAFER. Until the death of EULALIA NEUSCHAFER defendant, JAMES McHALE, has no present interest in and to such stock and such dividend reinvestment accounts, and plaintiffs, EULALIA NEUSCHAFER and EULALIA JAMES, are entitled to the dividends from such stock and reinvestment accounts as may be declared up until the death of EULALIA NEUSCHAFER. Upon the death of EULALIA NEUSCHAFER full right, title and interest in and to such stock and reinvestment accounts shall vest in defendant, JAMES McHALE. The stock shall vest in defendant, JAMES McHALE. The stock and dividend reinvestment accounts subject to this declaratory judgment are identified as follows:

[stock and reinvestment accounts identified]."

By the terms of the judgment, McHale is the donee of a future interest in 1,103 shares of stock originally in the name of Neuschafer, together with the two reinvestment accounts originally in the separate names of Neuschafer and James. Until Neuschafer's death, plaintiffs are entitled to the dividends. On Neuschafer's death, McHale will become the sole owner of the stock and the two accounts. ²

We turn to plaintiffs' four assignments of error. They involve essentially the question of whether plaintiffs intended in 1963 to make a gift inter vivos to McHale. The essential elements of a gift inter vivos are stated in Johnson v. Steen, 281 Or. 361, 369, 575 P.2d 141 (1978).

"[A]n intent on the part of the [donor] that there be a gift that goes into immediate and absolute effect, that there be delivery by transfer of possession and absolute dominion over the subject of the putative gift and acceptance of the gift by the claimed donee." (Emphasis supplied; citations omitted.)

As to the intent element in the present case, the trial court determined that

"[t]he intent of Mrs. Neuschafer to make a gift at the time she caused [McHale's] name to be placed on the stock certificates and the investment accounts has been conclusively established by her own testimony and the documents evidencing [McHale's] interest in the securities."

In reaching that conclusion, the trial court relied on Manning v. U.S. National Bank, 174 Or. 118, 148 P.2d 255 (1944), and Simonton and Prichard v. Dwyer, et al, 167 Or. 50, 115...