Estate of Nabi

Filed 8/8/08 Estate of Nabi CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Richard G. Cline, Judge. Affirmed in part; reversed in part with instructions.

After a bench trial of competing claims to the estate of Gulam Nabi (Gulam), the probate court entered a judgment awarding Gulam's brother Mohsan Ali (Mohsan) Gulam's community property interest in a Franklin Templeton investment account. The probate court found that at all times the funds in the account were community property, that before he died, Gulam had effectively revoked any right of survivorship in the account, and, accordingly, that Gulam could, by will, leave his interest in the account to his brother. Gulam's surviving spouse Emily Nabi (Emily) appeals.

Contrary to Emily's argument, the probate court did not require that she show the funds in the account were transmuted into joint tenancy property. Rather, as a predicate to its ultimate finding that Gulam had the right to dispose of his interest in the account by will, the probate court found the property was at all times community property. The probate court expressly recognized that even as community property the funds in the account might be subject to a nonprobate right of survivorship. The court then went on to find any such right of survivorship was effectively revoked by Gulam prior to his death. In that regard the probate court erred. Although, by means prescribed by the Probate Code and the terms under which a joint account is established, one joint owner of an account may revoke a right of survivorship, Gulam in fact died before employing any of the available means of doing so.

FACTS

Gulam and Emily met and married in Fiji in 1966. Although the couple had no children together, Emily had three children from a previous marriage. Gulam had numerous siblings. He was especially close to his younger brother Mohsan and Mohsan's wife Amrita Ali (Amrita).

Gulam and Emily sold their property in Fiji and moved to the United States in the mid-1970's. Over the years the couple bought and sold multiple properties in California. They deposited the proceeds into various joint accounts, including a Franklin Templeton investment account, which held approximately $800,000 at the time of Gulam's death. At various times over the preceding years, Gulam and Emily executed mirror wills benefiting the surviving spouse. Moshan was named as a contingent beneficiary in the latest of these mirror wills.

Gulam and Emily moved to San Diego in the fall of 2004. Moshan and Amrita also lived in San Diego and they assisted the by then elderly couple in the move. Gulam's health began to markedly decline immediately after the relocation, which prompted Gulam and Emily to revise their estate plan. Gulam and Emily contacted attorney James Provencher and discussed the preparation of a will and trust. However, the documents were not signed as Emily and Gulam disagreed regarding certain dispositions.

On December 14, 2004, Gulam signed a will and trust prepared by attorney Darius Khayat at the request of Emily and her son. The next day Provencher prepared and Gulam executed a revocation of the will and trust. Provencher was unable to further assist Gulam in his estate planning and referred him to attorney John Bothwell.

Bothwell met with Gulam, Mohsan and Amrita several times in the hospital and drafted a new will and trust for Gulam. Gulam executed the new will and trust on December 21, 2004. Those instruments bequeathed $100 to Emily and the remainder of Gulam's property to Mohsan. On December 27, 2004, Bothwell sent a letter to Franklin Templeton demanding funds in the joint account be divided and Gulam's share be placed in a separate account. Franklin Templeton responded with a letter dated January 6, 2005, stating the account was frozen and the funds would not be released until Franklin Templeton received a release signed by both Emily and Gulam or a court order. Gulam died on January 9, 2005, at the age of 77.

Emily attempted to claim the entire estate. She argued the trust executed December 21, 2004, was invalid for various reasons, including undue influence. Emily asserted she was entitled to the entire joint estate by right of survivorship. The court found for Mohsan, the trustee under the December 21, 2004, will and trust. With regard to the validity of the will and trust, the court found that although Gulam was vulnerable to undue influence, none was exerted upon him by Mohsan and Amrita. The court further found Bothwell prepared the December 21, 2004, will and trust according to Gulam's intentions and he adequately explained the will and trust to Gulam.

With respect to the Franklin Templeton account, the court found: the funds in the account remained community property; Gulam retained the power to dispose of his share of community property and he did so through his will and trust; and Gulam's actions through his agent, Bothwell, were a clear and unequivocal intent to sever the joint account and effectively ended any right to survivorship in the account.

DISCUSSION

Emily has chosen not to appeal the court's findings with respect to the validity of the December 21, 2004, will and trust. However, she does challenge the court's ruling with respect to the Franklin Templeton account. Emily contends the Franklin Templeton account is community property with a right of survivorship and under the terms of the account the right of survivorship could only be severed by mutual consent of the parties.

I

When the material facts are not disputed, the effect or legal significance of those facts is a question of law, and the appellate court is free to draw its own conclusions, independent of the ruling of the trial court. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.) Moreover, we independently determine the proper interpretation of the applicable statutes and are not bound by the lower court's interpretation. (Burden v. Snowden (1992) 2 Cal.4th 556, 562.) However, "[w]here the words of the statute are clear, we may not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history." (Ibid.)

Here, none of the material facts are in dispute. Hence we are required to review de novo the probate court's determination of the significance of those facts.

II

As we noted at the outset, the probate court found Gulam and Emily's contributions to the Franklin Templeton account remained community property at all times. This finding was correct.

Under California Probate Code^[1]section 5305, if the parties to an account are married, the net contributions are presumed to be and remain their community property. (5305, subd. (a).) This presumption can only be rebutted by a written agreement, separate from the deposit agreement, expressly stating the sums deposited are not community property, but have taken another form. (5305, subd. (b)(2).) Although the writing need not contain the words "transmutation," "community property" or "separate property," there must be language that expressly states the character or ownership of the spouse's interest is being changed. (Estate of MacDonald (1990) 51 Cal.3d 262, 273.)

There is no dispute that the source of the funds used to create the Franklin Templeton account were community assets. The account application filled out by Gulam and Emily is the equivalent to a deposit agreement. Although, the application states "[i]f more than one owner, 'joint tenants with rights of survivorship' is assumed unless otherwise specified," no other written agreement exists expressly stating the funds deposited were anything other than community property. Therefore, the Franklin Templeton account remained community property, and each party to the account retained their respective community property interest in the funds so long as both were alive. (Estate of Petersen (1994) 28 Cal.App.4th 1742, 1750;  5305, subd. (a).)

Contrary to Emily's argument on appeal, the probate court did not require that she show the funds in the account lost their character as community property. The probate court's statement of decision stated: "From the foregoing, the court concludes that the Franklin Templeton account remained community property [citation]. As such, decedent retained the power to dispose of his share of the community property. He did so by his trust and will.

"However the account may be an account with rights of survivorship. In this case, it is appropriate to consider the efforts of Gulam Nabi to terminate the right of survivorship." (Italics added.) The probate court could not have more clearly recognized the possibility that Gulam's community property interest in the account was nonetheless subject to a nonprobate right of survivorship in favor of Emily.

III

Although the funds in the account were community property, like the probate court we must determine whether a right of survivorship in the Franklin Templeton account existed in favor of Emily at the time of Gulam's death. Like the probate court, we find that a presumed right of survivorship arose at the time the account was opened. Unlike the probate court, we find that Gulam did not effectively rebut the presumption prior to his death.

We begin with section 5302, subdivision (a), which provides in part: "Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intent." (Italics added.) Section 5303, subdivision (a), in turn provides: "The provisions of Section 5302 as to rights of survivorship are determined by the form of the account at the death of a party." Under section 5303, subdivision (b), once the terms of a joint account are established, they may be altered only by one of four methods: closing the account and reopening it under different terms ( 5303, subd. (b)(1)); presenting a modification agreement signed by all parties with a present right of withdrawal ( 5303, subd. (b)(2)); any other method of modification provided under the terms of the account ( 5303, subd. (b)(3); notice to a financial institution that withdrawals cannot be made except with the signatures of more than one party ( 5303, subd. (b)(4).) In addition, section 5303, subdivision (c), provides: "During the lifetime of a party, the terms of the account may be changed as provided in subdivision (b) to eliminate or to add rights of survivorship. Withdrawal of funds from the account by a party with a present right of withdrawal during the lifetime of a party also eliminates rights of survivorship upon the death of that party with respect to the funds withdrawn."

Here, when the Franklin Templeton account was established, a presumed right of survivorship arose under the terms of the contract and section 5302, subdivision (a). Consistent with section 5302, subdivision (a), the Franklin Templeton prospectus assumed a right of survivorship "unless otherwise specified." Unlike the probate court, we find Gulam failed to overcome the presumed right of survivorship before he died.

We recognize that the Franklin Templeton account prospectus contains provisions which allow one owner to "[e]xchange shares from a jointly registered Fund account requiring all registered owner signatures into an identically registered money fund account that only requires one registered owner's signature to redeem shares" or "[r]edeem Fund shares and direct the redemption proceeds to a bank account that may or may not be owned by you and, if owned by you jointly with someone else, only requires one person to withdraw funds by check or otherwise." These provisions explicitly allow one owner to make transfers without the consent of the other owner and arguably to terminate a right of survivorship as permitted by section 5303, subdivisions (b)(3) and (c).

We also recognize that Gulam unambiguously attempted to terminate any right of survivorship on December 27, 2004, when his lawyer sent Franklin Templeton instructions directing that his one-half share of the account be put into a separate account. However, for two reasons those instructions did not meet the requirements of section 5303. First, the instructions do not appear to conform to what was permissible under the terms of the Franklin Templeton prospectus. As we have indicated, under the terms of the prospectus, one joint owner could transfer Franklin Templeton shares from an account which required joint signatures to redeem shares to "an identically registered account" which did not require joint signatures for redemption. However, Gulam's lawyer instructed Franklin Templeton to transfer half of the shares to an account in the name of Gulam's brother as trustee of Gulam's trust. It is difficult to conclude that such an account, if it were created, would have been "identically registered" within the meaning of the Franklin Templeton prospectus. As we have also noted, under the Franklin Templeton prospectus, one joint owner could simply redeem the Franklin Templeton shares and direct that the proceeds be placed in a bank account in which the other joint owner had no interest. However, the instructions Franklin Templeton received did not, by their terms, require any redemption or payment of proceeds to a bank account. Thus on this record it is difficult to conclude that the instructions Franklin Templeton received were a modification provided for under the terms of its account.

However, even if a unilateral change in the account was permitted by way of the instructions provided by Gulam's attorney, the record is clear Franklin Templeton never acted on those instructions prior to Gulam's death. Under section 5303, subdivision (a), we are required to determine any right of survivorship by looking to the form of the account at the death of a party. Here, on January 4, 2006, Gulam's lawyer followed up his December 24, 2005, letter with a second letter in which he advised Franklin Templeton a dispute had arisen between the parties as to the community property character of the funds in the account. Significantly, on January 6, 2005, Franklin Templeton responded to the lawyer's letter by suspending both parties' ability to liquidate the account until Franklin Templeton was provided with a release signed by both Gulam and Emily or a court order. Such a suspension was provided both under the terms of the account and section 5405, subdivision (c).

Thus at the time Gulam died on January 9, 2005, Gulam attempted to withdraw one-half of the account and Franklin Templeton froze the account. At the time Gulam died, although he attempted to change the form of the account, no change as provided for under section 5303, subdivision (b), took place. Thus at the time of death, the form of the account still provided Emily with a right of survivorship.

CONCLUSION

The funds in the Franklin Templeton account remained community assets. However, a presumptive right of survivorship arose under the terms of the account and section 5302, subdivision (a). Gulam never effectively severed the right of survivorship prior to his death. (See 5303, subd. (b).) Thus, as to the Franklin Templeton account, the probate court should have recognized Emily's right of survivorship.

The judgment is reversed in part, and the probate court is instructed to enter a judgment recognizing Emily's right of survivorship in the Franklin Templeton account. In all other respects, the judgment is affirmed. Emily is awarded her costs on appeal.

BENKE, Acting P. J.

WE CONCUR:

NARES, J.

IRION, J.

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^[1] All further statutory references are to the Probate Code unless otherwise specified.