Vai v. Bank of America National Trust & Savings Ass'n

• Decision Date: 26 July 1961
• Citation: 15 Cal.Rptr. 71,56 Cal.2d 329,364 P.2d 247
• Court: California Supreme Court
• Parties: , 364 P.2d 247 Transquilla VAI, Plaintiff and Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Coexecutor and Trustee, etc., et al., Defendants and Respondents. L. A. 25550.

Page 71

15 Cal.Rptr. 71

56 Cal.2d 329, 364 P.2d 247

Transquilla VAI, Plaintiff and Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Coexecutor and Trustee, etc., et al., Defendants and Respondents.

L. A. 25550.

Supreme Court of California, In Bank.

July 26, 1961.

As Modified on Denial of Rehearing Aug. 23, 1961.

Martin & Camusi, William P. Camusi, Los Angeles, and Kenneth D. Holland, Beverly Hills, for plaintiff-appellant.

Appel, Liebermann & Leonard and Boekel, Moran & Morris, San Francisco, as amici curiae on behalf of plaintiff-appellant.

George M. Breslin, Michael G. Luddy, Henry & Bodkin, Jr., E. E. Hitchcock, Cosgrove, Cramer, Diether & Rindge Samuel H. Rindge, Wallace & Wallace, and W. Woodson Wallace, Los Angeles, and Alden Reid, San Bernardino, for defendants-respondents.

WHITE, Justice.

This is an appeal by Tranquilla Vai from a judgment for defendant Bank of America as co-executor with Henry Bodkin of the estate of Giovanni Vai, deceased, in a suit brought to rescind a property settlement agreement on the ground of fraud, for recovery of part of the property received by the husband under the agreement, and for damages in the event recovery thereof cannot be had.

Plaintiff and Giovanni (John) Vai were married in Italy in 1907 and emigrated to this country and Los Angeles in 1912. John joined his brother James in operating a winery. He remained in this business and related operations continuously from 1912 until his death in February 1957, and plaintiff actively assisted him until their only child Madeline was born in 1925. Their daughter is mentally arrested and has required constant care and attention. Apparently the relations between plaintiff and her husband had been something less than harmonious for several years before January 1953, when she left their home in Alta Loma and moved to another residence they owned in Parkside, where she has since resided. She consulted with counsel, Mr. Hallam Mathews, on January 7, 1953. After plaintiff gave him a list of the property in which she believed John had an interest, Mr. Mathews secured a Dun and Bradstreet report on Padre Vineyard Company owned jointly by John and his brother, and a combined report on Cucamonga Valley Wine Company and Rancho El Camino, John's individual businesses. Mr. Mathews also secured descriptions of real property in San Bernardino County and a description of the Parkside property, consisting of a 30 year old residence with 15 apartments.

On February 6, 1953, plaintiff filed a separate maintenance action, and John was served with a 'Subpoena In Re Deposition and Order to Show Cause for Support, etc. Pendente Lite.' John and his attorney represented, and the trial court so found, that John's health was such that adversary proceedings would be highly detrimental; that it would not be necessary for Mr. Mathews to pursue his legal remedies of discovery; that plaintiff would be voluntarily supplied with full and complete information; and that John would negotiate a fair and equitable property settlement agreement. No further independent investigation was made by plaintiff except for an appraisal of the Parkside property which she was to receive in the property settlement agreement. Following execution of this agreement, on March 16, 1953, the action for separate maintenance was abandoned. The present action was instituted shortly after John's death.

The property settlement agreement provided that plaintiff should have one-half of any property later discovered to have been inadvertently omitted from the list of community assets. Pursuant to this clause, the trial court awarded her a total of $84,000 as her share of the following items of 'after-discovered' property: 95 shares of common stock of the Bank of America, together with all dividends paid thereon since March 16, 1953, amounting to $897.75; a promissory note in the principal sum of $33,640 with $1,462.55 interest; an account payable to Giovanni Vai, from Padre Vineyard Company, in the sum of $23,000; the balance owing on a promissory note of Padre Vineyard Company in favor of Giovanni Vai in the sum of $25,630.44; the balance owing on two notes of Padre Vineyard Company to Giovanni Vai, doing business as the Cucamonga Valley Wine Company in the sum of $42,315.38.

The trial court found that the net worth of John and Tranquilla Vai at the time of the settlement was $1,270,000, not including one-half the shares of Padre, net book value of which was $800,000. All of the property was conceded by the parties to be community. There were debts for which the community was liable of $85,000. In the settlement, plaintiff received the Parkside property, valued at $150,000, $25,000 in cash, a Dodge automobile, $1,204 balance in an account in the Bank of America, and helf of the Italian lire on deposit in Italy (about $1,000). She was released from any obligation to support the daughter, Madeline, and from any possible liability as co-guarantor with her husband on a note securing a debt from Padre Vineyards to the Bank of America. Although she awived alimony, she was guaranteed a net income of $500 per month from Parkside, which defendant agreed to keep in repair as long as she owned it. John received the balance of the property which was, it now appears, valued at least at $1,500,000.

The complaint initiating this suit to rescind the property settlement agreement charged that in the negotiation of the property settlement, John Vai was guilty of actual fraud, consisting of allegedly false representations and intentional concealment of material facts, by which the plaintiff was deceived and defrauded. It also charged constructive fraud, consisting of breach of John Vai's duty as a fiduciary to make a free and full disclosure of all important and relevant facts. The trial court ruled that John was not a fiduciary, that the parties dealt at arm's length, that there was no issue of constructive fraud and that there was no proof of actual fraud.

Plaintiff contends that although the confidential relationship between herself and her husband, based on her confidence and trust in him, may have been terminated by her filing suit for separate maintenance, her husband remained in a fiduciary position in respect to her interest in the community property. He breached his fiduciary duty, she asserts, by concealing material facts and by falsely representing others.

Defendants contend that Collins v. Collins, 48 Cal.2d 325, 309 P.2d 420, is directly applicable to the facts at bar as found by the trial court. In Collins, the wife sought rescission of a property settlement agreement on the ground that her husband had concealed community property assets from her and thus breached his duty of full disclosure arising out of the confidential relationship. Her attorney in Nevada where she had gone to establish residence for divorce, requested the defendant husband to furnish them with a full and accurate list of community property. This request was never complied with. Mrs. Collins returned to California and signed an agreement prepared by defendant's attorney, and against the advice of her own counsel. Some properties standing in defendant's name were not listed in the agreement, but no attempt had been made by the defendant to conceal these properties which he claimed to be his separate property, or to hinder in any way an investigation begun by Mrs. Collins and her attorney. Manifestly, Mrs. Collins was fully aware that her husband had not disclosed any information about their community property, and expressly waived any such disclosure in writing when she executed the agreement. She knowingly chose to deal at arms length and to rely on her own investigation of community assets. Thus by her own act, Mrs. Collins terminated the fiduciary relationship in respect to her interest in the community property and the attendant duty to disclose.

Plaintiff in the instant case discontinued the adversary proceedings commenced by her at the request of the defendant who offered to supply full and complete information concerning the property all of which was conceded to be community, and who further stated that he was willing to negotiate a fair and equitable property settlement. It would seem that plaintiff chose not to terminate the fiduciary relationship nor to deal at arm's length, but instead to take the defendant's offer at face value. She signed the agreement believing that she was fully and accurately informed as to the Vai community financial position.

Manifestly, therefore, the facts in Collins, supra, are markedly dissimilar from those in the instant case except insofar as both wives were represented by counsel who commenced investigations.

Section 161a (Civ.Code) provides: 'The respective interest of the husband and wife in community property during continuance of the marriage relation are present, existing and equal interests under the management and control of the husband as is provided in sections 172 and 172a. This section shall be construed as defining the respective interests and rights of husband and wife in the community property.' ¹

Because of his management and control over the community property, the husband occupies the position of trustee for his wife in respect to her one-half interests in the community assets. Fields v. Michael, 91 Cal.App.2d 443, 447-448, 205 P.2d 402. Recognizing this principle, Justice Traynor, speaking for a unanimous court, stated in Jorgensen v. Jorgensen, 32 Cal.2d 13, 21, 193 P.2d 728, 733, 'As the manager of the community property the husband occupies a position of trust (Civ.Code. secs. 172-173, 158), which is not terminated as to assets remaining in his hands when the spouses separate. It is part of his fiduciary duties to account to the wife for the community property when the spouses are negotiating a property settlement agreement.'

'Even divorce proceedings do not, in themselves, interrupt the husband's powers...