Leatherman v. Leatherman , 297 N.C. 618 ( 1979 )

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 constuctive 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 at pages 13-14. 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 plaintiffs 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accounts to the corporate account in 1966 were the property of the plaintiff and defendant, either of whom could have withdrawn any or all of the funds at any time.”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 at page 358.

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 plaintiffs 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 at pages 154-155.

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 that the funds in the joint accounts were the exclusive property of defendant. Both husband and wife had the authority to deposit and withdraw money from the accounts. The evidence of both parties tends to show that plaintiff acted as the agent of her husband, not the owner, with regard to these funds. Nowhere in the record is there evidence which would sustain a finding that defendant intended to make a gift of his property to his wife. On the facts presented the .Court could not properly find that plaintiff was a co-owner of the joint accounts.

Absent an ownership interest in the joint checking and savings accounts, plaintiff is clearly not entitled to have a resulting trust imposed upon defendant’s stock holdings in the corporation. A resulting trust arises, if at all, when valuable consideration is given by one party for property but title thereto is put in the name of another. Fulp v. Fulp, 264 N.C. 20, 140 S.E. 2d 708 (1965); Bowen, supra; D. Dobbs, Remedies § 4.3, p. 241 (1973). In the present case plaintiff did not furnish any of the consideration used by defendant to acquire the stock on which plaintiff seeks to have her claim imposed. Granting a resulting trust would therefore be improper.

Plaintiff further contends, however, that a constructive trust may be imposed upon the stock in her favor even though it be determined that she had no ownership interest in the funds in the joint accounts. Her argument is that defendant will be unjustly enriched if he is allowed to retain the stock acquired in violation of the confidential marital relationship with funds which were the product of the joint efforts of the couple. This argument cannot sustain the imposition of a constructive trust in this case.

Ordinarily, a constructive trust arises where “a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.” R. Lee, Trusts § 13a, p. 67 (7th ed. 1978). Plaintiffs argument overlooks the fact that no unjust enrichment can inure to defendant in this case because he has not acquired any property through the use of funds to which she has an equitable or legal claim.

Assuming that defendant was enriched unjustly, however, plaintiff’s case would still fail as she has not shown that defendant violated any duty to her. There must be some actual or presumptive fraud, some breach of duty, or other wrongdoing before a constructive trust can be imposed. Wilson v. Development Co., 276 N.C. 198, 171 S.E. 2d 873 (1970); Fulp, supra; Bowen, supra; Teachey, supra. We are fully cognizant of the fact that “[t]he relationship between husband and wife is the most confidential of all relationships, and transactions between them, to be valid, must be fair and reasonable.” Eubanks v. Eubanks, 273 N.C. 189, 159 S.E. 2d 562 (1968); see also: Link v. Link, 278 N.C. 181, 179 S.E. 2d 697 (1971); Vail v. Vail, 233 N.C. 109, 63 S.E. 2d 202 (1951). Where such a confidential relation exists, the person in whom the confidence is reposed must exercise good faith in his dealings with the other party. He must not take advantage of the fiduciary relation between them to obtain profit for himself, and he must fully apprise the other of all material facts surrounding the transactions between them. We believe that defendant fulfilled the obligation to his wife in this case.

As the Court of Appeals noted, the evidence discloses that defendant explained the process of incorporation to his wife and discussed with her the issuance of the stock in the corporation in his name. Nor can any wrongdoing on his part be implied from the execution of cross-wills by the parties subsequent to the issuance of the stock. In so doing defendant did not acknowledge an interest on the part of his wife in the business, but rather, he acknowledged that she was at that time the natural object of his bounty. The court made no other findings of fact which tend to support an inference of malfeasance on the part of defendant with regard to the confidential relationship between himself and his wife. Absent any breach of duty to her, plaintiff is not entitled to have the court impose a constructive trust upon defendant’s stock in the corporation.

For the reasons stated the decision of the Court of Appeals is

Affirmed.

Justice BROCK did not participate in the consideration or decision of this case.