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ZINK et al. v. STAFFORD (59787)

ZINK et al.



January 8, 1999
Record No. 980283






John F. Daffron, Jr., Judge
Present: All the Justices

In this chancery suit, we consider whether four
promissory notes are estate assets or whether the notes passed to
the decedent’s daughter, individually, by right of survivorship.

Thomas J. Stafford, a widower, died intestate
in 1984, survived by his only children, a son, appellee Thomas L.
Stafford, and a daughter, appellant June S. Zink. In 1985, the
daughter qualified as administrator of the decedent’s estate.

In 1988, the son filed a bill of complaint,
later amended, against the daughter individually and in her
representative capacity, and Continental Insurance Company,
surety on the administrator’s bond. The son alleged, inter
alia, that four promissory notes were estate assets rather
than assets that passed to the daughter individually by right of
survivorship, as she claimed.

The cause was referred to a commissioner in
chancery, who reported to the court in 1992. In a 1994 order,
after argument of counsel, the chancellor remanded the cause to
the commissioner in chancery, who was directed to report, inter
alia, "Whether the . . . promissory notes
referred to in paragraph 5 of the Amended Bill of Complaint are
assets of the Estate of Thomas J. Stafford or whether they passed
to his daughter, June S. Zink, by right of survivorship or

The commissioner held two additional hearings
and reported to the court in 1996 that the four promissory notes
were not estate assets but "became the property of" the
daughter by right of survivorship. The son excepted to the
commissioner’s finding on this issue.

After further argument of counsel, the
chancellor, in a written opinion, sustained the son’s exception,
ruling that the four promissory notes "are assets of the
estate." This ruling was incorporated in a November 1997
judgment order, from which we awarded the daughter this appeal.

At the time of his death, the decedent resided
in Chesterfield County, where he had been engaged in farming, and
in the development of a residential subdivision upon a parcel of
land that he owned. Prior to his death, he built four houses in
the subdivision, each on an individual subdivided lot. He sold
each of the lots with improvements and in each instance took back
a purchase money note secured by a deed of trust from the
purchaser for part of the purchase price.

These notes have been referred to throughout
this prolonged litigation as the "Higgerson note," the
"Wood note," the "Brockwell note," and the
"Ross note," so called because the names referred to
the makers of the notes and the purchasers of the real estate.
The Higgerson note originally was payable to the decedent’s order
and subsequently endorsed by him on the note, "Pay to the
order of Thomas J. Stafford or June S. Zink, or the
survivor." The payee on the other three notes in each
instance was "Thomas J. Stafford and June S. Zink, or the

Proceeds from the notes were deposited into a
"collection account" at a local bank. The account was
maintained in the names of "Thomas J. Stafford and June S.
Zink as joint tenants with right of survivorship." During
the several years before his death, the decedent’s health failed,
he "couldn’t write checks on his own," and he was
legally blind. Funds from the account were used for the
decedent’s maintenance or otherwise spent as he directed.

On appeal, the daughter says, "The sole
question in the case is whether the Court below was correct in
its ruling that the four promissory notes were assets of the
decedent’s estate, or whether they passed by right of
survivorship to the surviving joint tenant."

The daughter focuses her argument on the
provisions of Code ?? 55-20 and -21, and upon this Court’s
decision in Pitts v. United States, 242 Va. 254,
408 S.E.2d 901 (1991). Section ? 55-21 creates an exception
to ? 55-20 (which abolished the common law right of
survivorship between joint tenants) "when it manifestly
appears from the tenor of the instrument that it was intended the
part of the one dying should then belong to the others." See
Buck v. Jordan, 256 Va. 535, 542, ___ S.E.2d ___,
___ (1998). In Pitts, interpreting those statutes, we
found "that they were intended to apply to joint tenancies
and to tenancies by the entireties created by an ‘instrument’ of
conveyance or devise." Pitts, 242 Va. at 260, 408
S.E.2d at 904. We said that the promissory notes in issue there
were "not such instruments." Id.

The daughter argues that the trial court
misread Pitts when it held that Pitts required a
holding that the notes in question here were not instruments of
conveyance or devise and, thus, did not qualify for the
? 55-21 exception. She contends that the Wood, Brockwell
and Ross notes, "in their original form, were the
instruments that created the joint form of ownership
. They
were therefore instruments of conveyance." Continuing, the
daughter argues, "The Higgerson note could not, in its
original form, be regarded as an instrument of conveyance."
She says, "That note, like the notes in Pitts, was a
memorial of a chose in action, meaning the right of Thomas J.
Stafford to the fund represented by the note. However, Mr.
Stafford’s endorsement of the Higgerson note so as to make it
payable ‘to the order of Thomas J. Stafford or June S. Zink, or
the survivor’ made the note, as indorsed, an instrument of
conveyance" under ? 55-21.

In response, the son observes the daughter’s
appeal is based solely on the argument the trial court erred in
ruling that a survivorship interest cannot be created by a
promissory note because it is not an instrument of conveyance or
devise as required by ? 55-21. He argues that the daughter,
however, fails to consider another ruling by the trial court that
renders her argument moot. He says she incorrectly assumes a
critical fact, which is that she held a joint tenancy in the
notes with the decedent before his death. To the contrary, the
son points out, the chancellor found that the daughter failed to
prove the father made a valid gift of the note proceeds to her
during his lifetime. Thus, the son argues, the broader question
whether these notes create a survivorship interest is immaterial,
because the notes did not vest any interest in the daughter
during the decedent’s lifetime. Before a survivorship interest in
the daughter could have been created, the son contends, the
father must have created a joint tenancy between himself and the
daughter during his lifetime by conveying or giving her an
interest in the notes that vested at the time of the gift.
Without such a conveyance or gift, the son argues, a joint
tenancy did not exist from which to create survivorship. We agree
with the son.

At common law, survivorship was an incident of
joint tenancy. Allen v. Parkey, 154 Va. 739, 744,
149 S.E. 615, 617 (1929). A survivorship interest can only be
created between joint tenants. See Camp v. Camp,
220 Va. 595, 599, 260 S.E.2d 243, 246 (1979).

In the present case, because the daughter did
not purchase an interest in any of the notes, the only manner in
which she could have become a joint tenant with her father was
for him to have made a gift to her of an interest in the notes
before his death. To determine whether the decedent made a valid
gift inter vivos, the trier of fact must look
beyond the declarations on the instrument in question and
consider the surrounding facts and circumstances.

In Swan v. Swan, 136 Va. 496, 117
S.E. 858 (1923), a donor had retitled several shares of stock to
include his wife’s name. This Court said that the manner in which
the shares of stock were retitled was technically sufficient to
transfer title. But the Court further explained that "it is
quite possible and often happens, for reasons of convenience or
otherwise, that stock held in the name of one person really
belongs to another. In such a case the certificate, though prima
facie evidence of ownership in the person to whom it has
been issued, possesses no such magic or sacredness as to prevent
an inquiry into the facts. Sometimes the transferee is merely a
nominal holder or ‘dummy,’ and in that event, although the
transfer may be perfectly regular and complete on its fac[e], the
true ownership remains in the transferor, and that fact may be
shown." Id. at 519, 117 S.E. at 865.

The burden to prove a gift was on the daughter.
When a donee claims title to personal property by virtue of a
gift, the burden of proof rests upon the donee to show every fact
and circumstance necessary to constitute a valid gift by clear
and convincing evidence. Rust v. Phillips, 208 Va.
573, 578, 159 S.E.2d 628, 631 (1968).

One of the elements necessary to constitute a
gift inter vivos is that title to the property must
vest in the donee at the time of the gift. Taylor v. Smith,
199 Va. 871, 874, 102 S.E.2d 160, 162-63 (1958). The gift
"must be absolute, irrevocable and without any reference to
its taking effect at some future period." Quesenberry
v. Funk, 203 Va. 619, 623, 125 S.E.2d 869, 873 (1962). If
a purported gift is not to take effect until the donor’s death,
then there "is an abortive testamentary act and not a
gift." Knight v. Mears, 156 Va. 676, 681, 159
S.E. 119, 120 (1931).

The evidence in the present case clearly shows
that the decedent during his lifetime never divested himself of
dominion and control over any portion of the promissory notes.
Although the note proceeds were deposited into the joint
"collection account" from which both the father and
daughter could withdraw funds, she never deposited any of her own
funds into the account during his lifetime. She admitted that
during his lifetime she was on the account solely as a
convenience to her father, and agreed in testimony that he was
not making a gift of those proceeds to her during his lifetime.
For example, when asked, "And you didn’t consider one-half
of those accounts yours while your father was alive?", she
responded, "No, sir, I did not." Moreover, the daughter
admitted she could not spend during his lifetime any monies in
the account without his prior approval. Also, the evidence showed
the interest earned on the account was reported as income on the
father’s tax returns and none of it was reported on her income
tax returns.

Thus, the survivorship language on each note
was an abortive testamentary act and not a gift. See Quesenberry,
supra, 203 Va. at 623-24, 125 S.E.2d at 873 (gift in
praesenti of interest in joint bank account naming father
and daughter not shown when daughter considered the money
belonged to father during his lifetime); Wrenn v. Daniels,
200 Va. 419, 430, 106 S.E.2d 126, 133 (1958) (parol evidence
showed decedent had not made valid gift inter vivos
of interest in shares of stock and bank account titled jointly in
name of decedent and his son).

In sum, because there was no valid gift to the
daughter of any portion of the notes, she did not hold title with
her father as a joint tenant. Thus, without the prerequisite of a
joint tenancy, survivorship could not be created.

Consequently, we hold that the trial court
correctly determined that the promissory notes and their proceeds
were estate assets and did not pass to the daughter individually.
Hence, the judgment below will be






[1] In applying the law of gifts inter
vivos to determine whether the daughter had an ownership
interest in the notes as a joint tenant, we observe the present
case is distinguishable from cases like Buck, supra,
which applied contract principles when construing language in
signature cards or account agreements to determine whether a
surviving joint tenant acquired title to all the proceeds in a
bank account. In Buck, the parties did not contest that
the surviving joint tenant had an ownership interest in the
investment account.