Donovan v. Security-First National Bank

Plaintiff appeals from a judgment rendered in favor of defendants Security-First National Bank of Los Angeles and Assets Corporation. The action was for an accounting and the complaint alleged that a trust relationship existed between plaintiff and the defendants, that defendants had violated certain duties which they owed plaintiff as her trustee and had failed to render an accounting to her, except a certain “incomplete, untrue and incorrect statement of account.” The judgment appealed from contains a preface which indicates the basis of the trial court’s action, as will be seen from the following excerpt:

“The Court ordered, upon motion made by defendants, that the issues presented by the Second Defense and th"e Third Defense set forth in defendants’ answer, be presented and tried first by the Court. Thereupon plaintiff rested without the introduction .of any evidence; whereupon the defendants rested without the introduction of any oral testimony. No oral testimony having been introduced by either party, the Court ordered and directed that no Findings of Fact or Conclusions of Law were necessary or should be made.

“It appearing to the Court that the plaintiff has not served or filed an Affidavit, as required by Section 448 of the Code of Civil Procedure, denying the genuineness and due execution of the written instruments annexed to defendants’ answer and referred to therein, and that plaintiff has not otherwise denied the genuineness and due execution of said written instruments; and it further appearing to ..the Court that said written instruments annexed to defendants’ answer, and particularly those referred to in the Second and Third

Affirmative Defenses thereof, are admitted and that the written instruments referred to in the Second and Third Affirmative Defenses constitute a full and complete defense to the above entitled action.

“Now Therefore, it is hereby ordered, adjudged, and decreed that the plaintiff take nothing by her complaint herein [etc.].”

When the matter came on for hearing, the plaintiff moved the court for an interlocutory judgment upon the pleadings, directing the défendants to account “for the entire transaction involving the matters and things set forth in the complaint and that such accounting be made according to the rules and principles of accounting as recognized and administered by Certified Public Accountants. ’ ’ This motion was denied. Thereupon defendants moved for an order, which the court granted, directing plaintiff to proceed hpon the issues raised by the second and third affirmative defenses. The written instruments referred to in the judgment as constituting a full and complete defense to the action were executed, according to the answer, in 1932 and 1937, respec: tively. The first of these, denominated a “Release” and signed by appellant and one Jack Donovan, acknowledged the receipt of $10 “and other good, and valuable consideration to them in hand paid by the Security-First National Bank” and its successors and assigns, and in consideration therefor the signers to the instrument discharged the bank and its successors and assigns, including the defendant Assets Corporation, from any liability in law or in equity which they ever had “from the beginning of the world to the day of the date of these presents.” This instrument was signed on May 11, 1932. The second instrument set up In the answer is an “Agreement,” dated September 23, 1937, between the Assets Corporation therein termed “Corporation,” the Security-First National Bank, therein termed “Bank,” and the plaintiff, therein termed “Donovan,” which agreement was also approved and signed by Jack Donovan. The “Agreement” recited that on November 1, 1932, plaintiff executed to the corporation á promissory note for $89,370.27, maturing May 1, 1933, with interest at 7 per cent, which note was secured by a trust deed upon three parcels of plaintiff’s property (described therein), the plaintiff being the trustor, the Assets Corporation, the beneficiary, and the Security-First National Bank, the trustee; that no payments had been made by plaintiff upon the principal or

Plaintiff contends that the court erred in placing upon her the burden of proceeding under the second and third affirmative defense. She argues that “the pleadings show conclusively that upon the face of the transactions the respondents obtained ‘advantages’ over the appellant,” and, because of the fiduciary relationship existing between the parties, the presumption arises that the transactions were entered into without consideration and under undue influence and the burden rested upon defendants to prpve otherwise.

It seems advisable at this point to summarize the pleadings. The complaint alleged that a fiduciary relationship between plaintiff and the bank began on December 13, 1923, when she assigned to it her interest, as lessor, in a 99-year lease on her Sunset Boulevard property, which relationship “at all times” continued, the bank managing her property “as trustee,” and collecting rents, the amounts of which were unknown to her; that from December 13, 1923, to November 1, 1932, she entered into various financial transactions with the bank, borrowing substantial sums of money and securing her indebtedness with mortgages upon her Sunset Boulevard, Brentwood and Santa Monica properties, specifically described in the complaint and, as additional security, assigning a $29,000 note. The complaint alleges, further, that after June 28, 1928, the Assets Corporation was the “alter ego” and agent of the bank and that it, too, “at all times continued” a relationship of personal confidence with plaintiff; that on January 1, 1929, the two defendants, with her consent, managed her Sunset Boulevard and Brentwood properties, as well as certain personal property, “as trustees,” collecting the rents, the amounts of which were unknown to her; that on October 31, 1931, the assignees of the lessees of the leasehold estate conveyed to the bank their interest in the leasehold estate, together with possession, and that the bank has “ever since continuously occupied the same, ” all of which was concealed from the plaintiff until about March 1, 1939; that on May 6, 1932, defendants acquired possession of certain personal property while administering plaintiff’s business affairs valued at $3,000; that on November 1, 1932, she signed a renewal promissory note in the sum of $89,370.27, represented to her to be her indebtedness to the bank, which note was payable to the First

In answer to the complaint, defendants denied that the bank “at all times” from December 13, 1923, “continued” a fiduciary relationship with plaintiff and alleged that the relationship “ceased long prior to the commencement” of the action; they admitted “that at times” during the period from December 13, 1923, to February 1, 1938, the bank collected the rents, but “at other times” plaintiff and Jack Donovan collected the rents, managed the property and occupied it; that the bank accounted and paid over to plaintiff her share of all rents and profits accruing from the property, or applied the same with her consent to the maintenance and upkeep of the property and payment of debts which she from time to time owed the bank; they denied that the amounts received by the bank were unknown to plaintiff; they denied that the Assets Corporation was the “alter ego” or agent of the bank, and admitted that the bank and the Assets Corporation “did at times” collect rents from the property, but denied that the amounts were unknown to plaintiff, and alleged that an accounting had been made to her; they denied that the deed from the assignees of the lessees of the leasehold estate was without plaintiff’s knowledge or that the transaction was concealed from her at any time; they denied that the bank then entered into possession and “ever since continuously” occupied it, but on the contrary alleged that plaintiff entered into possession

That the court had power to order the case tried first upon the two affirmative defenses cannot be questioned, for the order of proof may be regulated by the trial court in its discretion (Code Civ. Proc., § 2042). Where, as here, no abuse of discretion appears, the order of the trial court may not be disturbed on appeal (24 Cal.Jur. 764). Since the instruments relied on in the second and third affirmative defenses were set out in the pleadings, and since they were not denied by plaintiff in an affidavit as provided in section 448 of the Code of Civil Procedure, their genuineness and due execution must be deemed admitted for all purposes of the trial, the effect of the failure to file the affidavit being to admit that the instruments were what they purported on their face to be, and that they were executed and delivered by the par

It is appellant’s contention that the presumption created by section 2235, Civil Code, prevails over the presumptions which arise under the pleadings in this case, but this argument was satisfactorily answered in the negative in Es

The instruments relied upon by the defendants do not, of themselves, indicate that defendants have obtained an “unfair advantage, ’ ’ and, in view of the presumptions which we have mentioned, in favor of the defendants, mere allegations of abuse of a fiduciary relationship, denied by defendants, cannot take the place of evidence. The case of Allen v. Meyers (1936), 5 Cal.2d 311 [ 54 P.2d 450 ], invoked by appellant as authority for her position that the burden of proof was upon the defendants, has no application to the instant cause, for there the plaintiffs offered evidence to prove that the trustee had obtained an unfair advantage and, in that situation, the burden was upon the one claiming through the trustee to satisfy the court that the transaction was supported by a sufficient consideration and was not the result of fraud or of undue influence exercised by the trustee upon his beneficiaries. Under the circumstances of the case at bar, the trial court properly rendered judgment in accordance with the presump

The judgment is affirmed.

Wood (Parker), J., and Fox, J. pro tern., concurred.

A petition for a rehearing was denied March 5, 1945.