Steinberger v. Steinberger

In Steinberger v. Steinberger (1943) 60 Cal. App. 2d 116, the grandmother of the plaintiff deeded her real property to Earle Steinberger, his uncle, William Steinberger, and Earle's brother. Each received a one-third undivided interest. Earle planned to be unavailable to help with the management of the property for an extended period of time and William requested Earle to convey his interest to him and orally promised to reconvey it to Earle when requested. Before Earle made any request for reconveyance of his one-third interest request, William died. The administrator of William's estate refused to recognize Earle's interest in the property. The administrator did not deny the fact of the confidential relationship or the oral agreement, but argued that the evidence is inadmissible as a violation of the parol evidence rule and the statute of frauds. The court found that Earle and William had a confidential relationship and that Earle executed the deed to make it more convenient to manage the property in Earle's absence and imposed a constructive trust to restore Earle's interest in the property. The question was whether the predecessor of Probate Code section 15206, providing that no trust in relation to real estate is valid unless created by a written instrument, bars the imposition of a constructive trust as in the circumstances presented here. The court observed that California has aligned itself with the English and the minority American view citing Taylor v. Morris (1912) 163 Cal. 717, 127 P. 66. "Without reference to the confidential relationship there existing, the court stated (p. 722): 'The statute of frauds is never permitted to become a shield for fraud, and fraud at once arises upon the repudiation by the trustee of any trust, even if that trust rests in parol. When it rests in parol, either parol evidence must be received to establish the trust, or the faithless trustee will always prevail. Certainly no elaboration of so plain a proposition is necessary.'" ( Steinberger v. Steinberger, supra, 60 Cal. App. 2d at p. 119.) But, the Steinberger court observes, the proposition is qualified and requires that a confidential relationship exists between the transferee and the transferor. "It is well settled in this state that breach of the oral promise to reconvey by the transferee or his administrator when the transferee was in a confidential relationship with the transferor at the time of the transfer constitutes sufficient 'fraud' to create the constructive trust." ( Id. at p. 121.)