Property Class Notes 3/31/04


Secret severance


One of the problems with joint tenancies is that they are easy to sever.  It’s even possible to sever them secretly!


Let’s say a husband and wife own property as joint tenants with the right of survivorship.  The husband executes a deed conveying his interest in the property to a straw and then the straw reconveys the property to the husband.  The husband never tells the wife.  What if the wife dies first?  He could pretend that the deed never happened and get everything!  What if the husband dies first?  He’ll leave the deed where his folks can find it, which would mean that the wife only gets half.  This seems unfair!  But it’s certainly possible to do.


Harms v. Sprague


Here is a mortgage on a farm held as joint tenants by two brothers.  The brothers have a falling out.  One brother moves out and lends money to a friend by taking out a mortgage on his share of the farm.  But then he dies, and it turns out that the mortgage is worthless because the other brother gets the whole farm.  The moral of the story is that the bank must require either to have the joint tenancy severed, or have both joint tenants sign off on a loan.  In that case, if all tenants join in to sell the property, that doesn’t sever the joint tenancy, they’ll just have a joint tenancy in the proceeds of the sale.  In order to have a severance, there must be an intent to sever.


In re Estate of Thompson


What happened here?  A couple is divorcing.  The wife sought a restraining order to try to keep him from withdrawing money from two survivorship accounts.  The husband closed the joint accounts, withdrew the money, and then put them into accounts in his name only.  He was served with the complaint the next day.  Not long after, the wife went into a coma and later died.  Her daughter wants to get the money.


Joint accounts are a very common way of holding wealth.  But usually, it’s just for convenience.  Couples will put money in joint checking accounts because they pay the bills jointly.  A lot of times they have no idea what will happen when one of them dies!


Also, joint accounts are frequently used to make gifts to children.  Litigation arises over the parties’ actual intent very frequently.  What did they intend when they made the contribution to the joint account?  (1) What did they intend when they’re both alive?  (2) What did they intend upon the death of one of the contributors?  You must be able to answer both questions.


How does this court deal with it?  The court eventually concludes that the husband should get basically just that money which he put in.


What is the effect of the Ohio statutes?  What is their purpose?  This is a relativity of title thing.  The bank has properly paid out the money if it has paid to one of the joint tenants.  But it doesn’t say that the joint tenants don’t have claims against each other.  These statutes are designed to protect the banks rather than adjust the relationships between the joint tenants.


This court is concerned that joint tenancy accounts were being used as will substitutes.  The court is suspicious of them even though they are very commonly used.  The normal formalities of a will are not complied with in the case of these accounts.  However, the court will recognize them anyway as an exception to the Ohio statutes dealing with wills.


What about the Uniform Probate Code sections that are quoted?  What is their function?  A rebuttable presumption is created that during the lifetimes of the joint tenants they mean to own shares proportional to how much money they put in rather than in the form of a present gift.  There is also a rebuttable presumption that the whole shebang goes to the survivor upon the death of the other tenant.  But there are other reasons you could have a joint tenancy account.  You would just introduce evidence to show a contrary intent to the one presumed.


But what’s the problem with this rule?  Who will introduce the evidence?  The one who isn’t dead!  If one of the joint tenants is dead, it will be difficult rebutting the evidence of the living joint tenant.  During the lifetime of the parties, things will be easier to handle.


Here’s an example: A, B, and C each contribute $5,000 to a joint account.  So all three of them own $5,000, unless there is clear and convincing evidence that one of them intended to make a gift to another one.  Now C dies.  A and B both own $7,500.  C has nothing.  This is consistent with the two presumptions that the court adopts.


The rule of Thompson has since been overruled in Wright v. Bloom because this rule led to a lot of litigation in Ohio!  There really is no good rule.  Some people don’t intend survivorship, but some do.  If we have a bright line rule, we’ll get some injustice, but if we don’t, we’ll get lots of litigation.


The later case found that the second rebuttable presumption of Thompson actually should not be rebuttable.  Once one of the joint tenants dies, the presumption in favor of a survivorship account is irrebuttable.  The problem was one of endless litigation.  They have gone back to a situation where there will be lower administrative costs, though more of a chance of injustice.


Williams v. Studstill


At the time the will was made, Georgia didn’t recognize joint tenancy at common law.  But when Alice died, she left 750 acres in joint tenancy to her two children.  But it didn’t seem like joint tenancy was allowed in Georgia at the time of Alice’s death.


Furthermore, did the joint tenancy get severed when Mary transferred her interest to Williams?


The court reads the devise of Alice as: “To my two children for life, and then to Mary if Mary survives James and to James if James survives Mary.”  What is the significance of that?  What happens when Mary conveys her interest to Williams?  She retained her life estate, so the only thing she would have conveyed to him was her contingent remainder.  James died first.  So what happens?  It looks like Williams gets everything.  So Louise is not happy!  James Studstill’s contingent remainder is worth nothing because he didn’t survive his sister!


The Michigan bar problem


Goldacre goes to A and B jointly with the right of survivorship.  Amy transfers her interest to her nephew Norman.  Betty dies, willing her estate to “Environmental Awareness”.


What is the first issue?  What do A and B have?  There’s a presumption in favor of the tenancy in common.  In that case, they each have half of the estate.  The environmental group would get Betty’s half.  But is this a tenancy in common?  The language of the deed seems clear that the right of survivorship is intended, which is inconsistent with the tenancy in common.  The language is likely enough to overcome the presumption for tenancy in common.  If it was a joint tenancy with right of survivorship, there’s an issue as to whether Amy severed the joint tenancy when she gave her interest to her nephew.  After severance, Betty’s half would still go to the environmental group.


But it turns out that it won’t be a joint tenancy because Michigan doesn’t recognize joint tenancies.  So we’ll have life estates and alternative contingent remainders.  This tenancy is called a survivorship tenancy in Ohio.  Is the language here as clear as the language in Williams v. Studstill?  Nope.  In that case, the will said that she didn’t want the children to be tenants in common.  But what if this is sufficient to create a joint tenancy?


In Ohio and Michigan courts, the language would probably create a life estate with contingent remainders, and Norman would get everything as the owner of Amy’s contingent remainder.  The environmental group would get nothing.


Back to Class Notes