This appeal involves a family. While it might not rise to the level of King Lear, it is about as tragic as families can get when all they are fighting about is money. We address two consolidated
From the time Tim was appointed trustee in February of 2002, until the death of his father, trust settlor William A. Giraldin (Bill) in May of 2005, Bill retained the right to revoke the trust. As a result, Tim's duties as trustee were owed solely to Bill during that period, and not to the trust beneficiaries. Thus respondents, as beneficiaries, lack standing to complain of any alleged breaches of those duties occurring prior to Bill's death. Moreover, the beneficiaries have no right to compel an accounting of the trustee's actions for the period in which the trust remained revocable (Prob. Code, § 16069, subd. (a); Prob. Code, former § 16064, subd. (b)), and thus also lack standing to seek such relief for the period prior to Bill's death. Because the judgment entered in favor of respondents in this case stemmed primarily (if not exclusively) from events occurring before Bill's death, and from Tim's alleged breach of duties owed to them as trust beneficiaries, it must be reversed. On remand, respondents can seek a new accounting against Tim if they choose, and can pursue whatever claims for breach of fiduciary duty they might have, but confined solely to the period in which the trust had become irrevocable in the wake of Bill's death.
Mary, Bill's widow, filed a spousal property petition challenging the inclusion of her share of community property in the family trust, which she contended had been prepared by Bill without her knowledge or consent. The trial court found that although all of the property in the trust was community property, Mary had waived her right to challenge the inclusion of her share by "elect[ing] to accept [trust] benefits." On appeal, Mary challenges the order only to the extent it determines she waived her interests in the residence she and Bill occupied at the time of his death—commonly referred to as "the Lakeshore property"—and in a vacation property referred to as the "Lake Hume cabin." Mary contends, correctly, that there is insufficient evidence to establish Bill actually conveyed either property into the trust prior to his death, and thus no basis exists to conclude her community interest in the two properties was ever made subject to the trust provisions. And because Mary's shares of these two properties were never made subject to the trust, the court
Bill and Mary were married in 1959. When they married, Bill had four children and Mary had three. Bill adopted Mary's three children. Together, Bill and Mary had twin sons, Patrick and Tim, born in 1964. Bill started a savings and loan, Mission Savings, in the 1950's, which was apparently a very lucrative move. Mission Savings was acquired by another institution, which was, in turn, acquired by Washington Mutual (WaMu). Bill was also, by all accounts, a savvy investor during his life.
However, in late 2001, Bill contemplated making a substantial, and perhaps less savvy, investment. In August or September of that year, he began expressing an interest in investing $4 million, which was roughly two-thirds of his fortune, in a company called SafeTzone Technologies Corporation (SafeTzone), which had been started some years earlier by his son, Patrick, Tim's twin brother.
However, Tim did not negotiate the contemplated investment with Bill. Instead, Tim set up a lunch meeting to allow Bill to discuss the matter with Regan Kelly, SafeTzone's general counsel. Kelly testified that his primary goal at the lunch meeting was to make sure Bill "understands this is an early stage company" and "to be sure that he understood the nature of what he was thinking about in terms of getting into a company like SafeTzone."
Also in late 2001, Bill decided to revoke his estate plan (established in 1997) and create a new one. Rather than employ the same attorney who had drafted his earlier trust, Bill decided to find a new attorney to draft the new one. In October of 2001, Tim referred Bill to an attorney with whom Tim's wife had been previously employed.
With the assistance of that new attorney, Bill revoked his 1997 trust and established a new revocable family trust, the William A. Giraldin Trust, dated February 11, 2002 (the family trust.) the attorney testified Bill had expressed a clear intention to "essentially gut" the 1997 trust, and "set up a new estate plan." The attorney worked with Bill directly in drafting the trust, and went so far as to ask Tim to leave an early meeting, so he and Bill could continue to discuss the trust details alone.
Although Bill himself had acted as trustee of the 1997 trust, he designated Tim to act as the initial trustee of the new family trust. The terms of the family trust specify that Bill was to be its sole beneficiary during his lifetime, and that he retained certain "reserved" rights, including the rights to amend or revoke the trust, to add or remove property from the Trust, to remove the trustee, and to direct and approve the trustee's actions, including any investment decisions. The trust document provided that Bill could exercise those "reserved rights" only in writing.
In a section of the trust entitled "The Protection Provided the Trustees," the trust document also specifies that "[d]uring [Bill's] lifetime, the trustee shall have no duty to provide any information regarding the trust to anyone other than [Bill.]" And after Bill's death, if Mary survived him, the trustee "shall have no duty to disclose to any beneficiary other than [Mary] the existence of this trust or any information about its terms or administration, except as required by law." The document also specified Bill specifically "waive[d] all statutory requirements . . . that the Trustee . . . render a report or account to the beneficiaries of the trust."
The trust instrument also specifies that Bill "[did] not want the Trustee to be personally liable for his or her good faith efforts in administering the trust estate," and provides that "[t]he discretionary powers granted to the Trustee under this Trust Agreement shall be absolute. This means that the Trustee can act arbitrarily, so long as he or she does not act in bad faith, and that no requirement of reasonableness shall apply to the exercise of his or her absolute discretion." Bill expressly "waive[d] the requirement that the Trustee's conduct at all times must satisfy the standard of judgment and care exercised by a reasonable, prudent person. In particular, the decision of the Trustee as to the distributions to be made to beneficiaries under the distribution standards provided in this Trust Agreement shall be conclusive on all persons."
When the family trust was first established in February of 2002, it contained no assets. Instead, the trust instrument signed by Bill simply reflected that he "had transferred and delivered to the Trustee the property described in schedule 1, attached." The version of schedule 1 attached to the signed trust instrument was, in turn, blank. According to the attorney who
Bill also executed a new will at the same time he established the family trust. That will provides, in pertinent part, that Bill intends thereby "to provide for the disposition of all the property, wherever located, I own at my death, including my separate property and my share of all community property, if any, held with my wife." (Italics added.) The will names Tim as executor of Bill's estate, and provides that the entire residue of Bill's estate, including "my interest in my residences," is given to the trustee of the family trust.
Meanwhile, in January of 2002, just prior to the establishment of the new family trust, Bill actually signed the initial two-page term sheet detailing his planned $4 million investment in SafeTzone. That document was prepared by SafeTzone's outside counsel, and was signed by Bill in a meeting with Kelly, SafeTzone's general counsel.
On February 11, 2002, the day he executed the family trust document, Bill also signed a written "Gift Acknowledgement Form," which confirmed the terms of a $150,000 gift to Bill's son, Thomas Giraldin, including the fact that Tim Giraldin had funded part of the initial $100,000 payment of the gift with his own funds, and was entitled to be reimbursed by Bill for that portion. The document went on to reference Bill's commitment to the SafeTzone investment, stating that "after the trust has been set up William A. Giraldin and Timothy W. Giraldin will begin the process of selling stock and converting assets to fulfill the investment into SafeTzone Technologies corporation of $4 million dollars [sic]."
Bill then executed a revised term sheet for the SafeTzone investment on February 15, 2002, just a few days after he executed the family trust. And on February 22, 2002, Bill signed a "call for investment" document prepared by SafeTzone's counsel, authorizing the withdrawal of funds from accounts held "in my name or in the name of my trust" in the amount of $1.6 million, in "furtherance of my agreement to invest in SafeTzone. . . ." In that same document, Bill expressly authorized "the execution of the reasonable transactions necessary to effect [his] desire to invest this amount."
Finally, in April of 2002, Bill signed a formal, and rather lengthy, subscription agreement documenting the details of his investment in SafeTzone.
The documents in our record also support Tim's contention, at least as to the first three payments to SafeTzone, dated February 28, March 4, and May 28, 2002, and totaling $1.65 million. Each of those payments was made from a "market rate" account held jointly in the names of Bill and Tim, and not paid from any accounts held in the name of the family trust.
As the investment was funded, SafeTzone issued stock directly to Bill, in proportion to the amount of the funds paid. It was only after the investment was fully funded that the SafeTzone stock was transferred into the name of the family trust.
Unfortunately, the SafeTzone investment went badly, and by the time Bill died in May of 2005, the family trust's stake in the company was worth relatively little. In the wake of that loss, four of Bill's and Mary's seven older children, Patricia Gray, Christine Giraldin, Michael Giraldin and Philip Giraldin (respondents), chose to sue Tim in his capacity as trustee of the family trust, alleging he violated certain fiduciary duties "owed to Trust beneficiaries." Respondents' stated purpose in doing so was to seek redress for Tim's acts which "effectively [took] his father's life savings for his and his twin brother's benefits and deprived his father's other seven children of benefit from the Trust."
Thus, in December of 2006, respondents filed their initial petition, which sought to remove Tim as trustee of the family trust, and to compel him to account for his actions during the period of his trusteeship. In their amended petition, filed in January of 2008, respondents also alleged Tim should be surcharged for violation of fiduciary duties including his duty to "diversify investments of trust," his duty to administer the trust "solely in the interest of the beneficiaries," his duty to "deal impartially with beneficiaries," his duty to "avoid conflict of interest," and his duty to "make trust property productive," by allowing the trust's funds to be used for the SafeTzone investment.
Respondents also alleged Tim violated his fiduciary duties when he made improper loans of trust funds to both himself and Patrick during Bill's
Respondents never claimed Bill did not intend to make the investment in SafeTzone. To the contrary, they essentially concede he did.
In January of 2007, the month after respondents filed their initial petition against Tim, Mary filed her own petition to confirm her community interest in (1) the Lakeshore property; (2) the Lake Hume cabin; and (3) all of the assets "placed in the William A. Giraldin trust. . . ." In support of her petition, Mary declared that at the time of her marriage to Bill, he had a negative net worth, and he acquired all of his wealth during their marriage. She acknowledged he had received an inheritance of approximately $90,000 during the marriage, but claimed he did not maintain it separately. She stated that the Lake Hume cabin, acquired in 1971, was held in Bill's name alone, and that the Lakeshore property was held in the name of Bill's 1997 trust.
Respondents objected to Mary's petition, asserting that all of the property she sought to claim an interest in was held in the trust, and that Mary herself had acknowledged she "relies on the Trust as her only support." Respondents claimed Mary "has affirmed and acquiesced to the existence and terms of the Trust by accepting distributions from the Trust." They further asserted that "Mary cannot accept the full benefits from the Trust as she has been doing and, at the same time, disavow the Trust by claiming an interest in half of the Trust property."
The court held a trial in October and November of 2008. Tim's position was that he never wanted to be trustee of the family trust, but had been
Tim claimed that he had been told his duties as trustee would not "kick in" until Bill died, and until that time, Tim viewed his role as simply that of a son, doing the things his father asked him to do. The attorney who drafted the family trust acknowledged that he never went over the details of the trust with Tim, but did explain to Tim his duties generally and about being a trustee in general. He stated that Tim "clearly understood that he was going to be working at the suggestions and directions of his father with respect to decisions."
As to the loans to family members, Tim testified all were made pursuant to Bill's oral instructions. Having never read the trust document, Tim was unaware of any obligation to document Bill's instructions in writing, but he claimed he never took any action with respect to trust property except in accordance with Bill's wishes. And according to the terms of the family trust, all outstanding loans made by Bill to any of his children, either before or after the effective date of the trust, and whether or not documented in writing, were deemed forgiven upon his death.
Tim also said the investment in SafeTzone had been entirely Bill's idea, and he had done nothing to induce it. The attorney who drafted the family trust testified that Bill had told him the SafeTzone investment was "a done deal" prior to execution of the family trust, and also that Bill had chosen to enter into the SafeTzone deal personally, rather than through the trust, to protect Tim from any conflict of interest claims.
In December of 2008, after conducting a trial, the probate court ruled against both Tim and Mary. With respect to Tim, the court's statement of decision reflected that when Tim "directed and facilitated" the transfer of funds from the trust to SafeTzone, he "elected to serve his own interests and the interests of his business, SafeTzone, to the detriment of the Trust and Bill." In doing so, Tim violated his fiduciary duty to not "take part in any transaction in which the trustee has an interest adverse to the beneficiary."
As the court saw it, "[a]s of February 11, 2002, the relationship between William Giraldin and Tim Giraldin changed as a matter of law and fact. [¶] By executing the trust document, Tim Giraldin was committed to a course of
The court also found that by facilitating the SafeTzone investment, and by making distributions of cash, characterized as "gifts" or "loans," to some beneficiaries, and not others, Tim violated his duty to "deal impartially" with all trust beneficiaries. Tim was also found to have breached his duty to "take and keep control of and to preserve the trust property" because he failed to consider "the interests of the remainder beneficiaries of the trust" when he "invest[ed] and disburse[d] Trust funds." Tim was also found to have violated his duty to preserve trust property "by indiscriminately transferring Trust funds into his personal account, by commingling his personal funds with Trust funds, and by making numerous, unsupported disbursements of Trust funds." And the court found that Tim violated his duty to "diversify the investments of the trust," and to make the trust property "productive."
With respect to Tim's disbursement of trust funds other than in connection with the SafeTzone investment, the court specifically faulted Tim for making disbursements which "either conflict with the backup documentation provided by Tim, are unsupported by appropriate backup documentation or were otherwise improper," including "[p]urported distributions to Mary in the amount of $155,443.67";
The court explained that "Bill did not direct or authorize the foregoing, purported disbursements, distributions and loans by the Trust in a manner required by the Trust and the Probate Code . . . [and there was] no evidence
The court "further [found] that Bill lacked mental capacity to understand that certain documents proffered by Tim were written directions to the Trustee to authorize any of these transactions by the Trust or to relieve Tim of any of the statutory trustee duties." Moreover, the court concluded "Bill was not sufficiently mentally competent in late 2001 and thereafter to either analyze the benefits and risks of an investment in SafeTzone . . . or to authorize and direct Tim to make such an investment."
The court also rejected Tim's assertion respondents' claims were barred by the doctrine of laches and the statute of limitations, finding "insufficient evidence that any of the [respondents] had knowledge of Tim's breaches of trust and fiduciary duty until after Bill's death."
Based upon these findings, the court determined Tim should be surcharged in the amount of $4,376,044 for the SafeTzone investment, and surcharged in the amount of $625,619 for the other "unsupported disbursements, distributions and loans of Trust funds. . . ." The court also determined that Patrick Giraldin must return the $155,000 loaned to him by the family trust, on the ground he "acted in collusion" with Tim in the disbursement of those funds,
However, while the court's statement of decision included specific findings that Tim had violated duties owed to respondents, its formal order specified that the entire surcharge amount of $4,376,044 was based on Tim's "breach of the Trust and breach of fiduciary duties owed to Decedent William A. Giraldin pursuant to Probate Code section 16440." (Italics added.)
On the same day the court issued its order resolving respondents' petition against Tim, it also issued a separate order "settling the first account current and report of trustee," in which it surcharged Tim $675,619. It is unclear what this second surcharged amount refers to, and whether it is duplicative of any amounts surcharged against Tim in the first order.
With respect to Mary's petition, the court first found that all of the assets owned by Bill and Mary at the time of Bill's death were community assets, including the Lakeshore property and the Lake Hume cabin. The court implicitly found that all of those assets, including the real properties, were held by the family trust, noting that Mary had not only accepted the benefits of the family trust but "resided in real property of the Trust," without making any claim for her community share of those trust assets. The court opined that Mary's decision to assert her community property interest in the assets held in the trust was "made not with her own interests in mind, but to benefit, or some would say to save, her son, the trustee, Tim Giraldin." The court then determined that "Mary, through her acceptance of the Trust distributions after Bill's death, made an election to accept the Trust as the vehicle to be utilized in asset management and support for the balance of her life" and that "Mary's conduct is totally inconsistent with a disavowment of the Trust in favor of her community property rights." The court concluded that the doctrine of spousal election applied to Mary, and that Mary "elected to receive her benefits as a beneficiary of the Trust, rather than pursue her community property rights to the assets of the trust."
We first address the orders entered against Tim. In his opening brief, Tim raised four issues: (1) that the court prejudicially erred by sustaining numerous hearsay objections to evidence offered to demonstrate Bill's mental
Tim's brief does note—in the course of his argument about the court's erroneous application of the hearsay rule—that his duties as trustee were owed to Bill alone, and "respondents have no independent standing to complain," citing Probate Code section 15800, but he did not develop this contention into a full-blown argument. Respondents, in turn, ignored the contention, but then defended Tim's contentions about the statute of limitations and laches by arguing they could not be penalized for their delay in asserting claims, because they "had no standing to bring any action until after [Bill] died." (Italics added.)
We begin with the basic rule that "`standing to sue . . . is the right to relief in court.'" (Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604 [52 Cal.Rptr.2d 443], italics omitted, quoting Friendly Village Community Assn., Inc. v. Silva & Hill Constr. Co. (1973) 31 Cal.App.3d 220, 224 [107 Cal.Rptr. 123].) And the right to seek relief for breach of a duty belongs to the person to whom the duty was owed. (Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282,
In this case, the family trust was revocable by Bill during his lifetime, and thus Tim's duties as trustee were owed solely to Bill, as settlor, and not to respondents. Probate Code section 15800 sets forth the rule: "Except to the extent that the trust instrument otherwise provides or where the joint action of the settlor and all beneficiaries is required, during the time that a trust is revocable and the person holding the power to revoke the trust is competent: [¶] (a) The person holding the power to revoke, and not the beneficiary, has the rights afforded beneficiaries under this division. [¶] (b) The duties of the trustee are owed to the person holding the power to revoke."
Respondents rely upon Evangelho v. Presoto (1998) 67 Cal.App.4th 615 [79 Cal.Rptr.2d 146] (Evangelho) for the proposition that the beneficiaries of a revocable trust develop standing to pursue claims against the trustee, for actions taken while the trust was revocable, as soon as the trust becomes irrevocable. This is essentially the position taken by the probate court in its statement of decision: "[Respondents'] interest in the Trust and rights against the trustee did not vest until Bill's death, at which time the Trust became irrevocable."
However, we find Evangelho unpersuasive, and decline to follow it. We first note the Evangelho court did not have the benefit of the Supreme Court's opinion in Steinhart, with its clear explanation of the special nature of a revocable trust, to aid in its interpretation of Probate Code section 15800. Absent that resource, the court relied solely on a portion of the Law Revision Commission comment, which states "This section has the effect of postponing the enjoyment of rights of beneficiaries of revocable trusts until the death or incompetence of the settlor or other person holding the power to revoke the trust." (Cal. Law Revision Com. com., reprinted at 54 West's Ann. Prob. Code (1991 ed.) foll. § 15800, p. 644, italics added.) The Evangelho court reasoned that under this rule, the beneficiaries' rights, "which were postponed while the holder of the power to revoke was alive, mature into present and enforceable rights [when the holder dies]. . . ." (Evangelho, supra, 67 Cal.App.4th at p. 624.)
And if the trustee's duties are not owed to the beneficiaries at the time of the acts in question, the death of the settlor cannot make them retroactively owed to the beneficiaries. To rule otherwise would put the trustee in an impossible position: while the settlor is alive, he is obligated to do what the settlor wants, even if it harms the expectations of the beneficiaries, but once the settlor dies, the trustee would have to answer for allowing the interests of those same beneficiaries to be diminished by conduct during the settlor's lifetime. For example, if the settlor of a revocable trust learned he had a terminal disease, and was going to die within six months, he might decide that his last wish was to take his mistress on a deluxe, six-month cruise around the world—dissipating most of the assets held in his trust. The trustee, whose duties are owed to the settlor at that point, would have no basis to deny that last wish. However, if the trustee's duties were deemed to be retroactively owed to the trust beneficiaries—say, the settlor's widow and children—as soon as the settlor breathes his last breath on a beach in Bali, the trustee would find himself liable for having failed to sufficiently preserve their interests in the trust corpus prior to the settlor's death. In other words, the trustee's act, which was not a breach of any duty owed by the trustee when he committed it, would suddenly be transformed into a breach of a different duty that only came into existence when the settlor died. That is not—and cannot be—the law.
Respondents also assert, in the alternative, that even if they lack standing to pursue claims in their own right, they had standing to enforce the duties owed by Tim to Bill. However, respondents do not explain why that would be, and we conclude there are several problems with the assertion. First, we note that respondents never alleged in their petition that they were acting on Bill's behalf, and never made any attempt to establish either that they were legally entitled to proceed as successors in interest to Bill's own claims, or that they were the most appropriate people to do so.
In this case, respondents were not actually Bill's "heirs"—the only "heir" named in his will was the trustee of the family trust—nor could they credibly claim to have "step[ped] into [his] position" for purposes of enforcing the duties owed by Tim to him during his lifetime. Respondents were simply remainder beneficiaries of Bill's family trust, and as revealed by the claims they actually asserted in this case, their interests were frankly in conflict with Bill's during the period in which the trust remained revocable. Indeed, one of the troubling aspects of respondents' attempt to claim standing based upon Tim's alleged breach of duties owed to Bill, is that respondents do not seem to recognize that those duties—which existed during the period the trust was revocable and Bill retained the express power to direct Tim's activities—were fundamentally inconsistent with the duties they would have us ascribe to Tim. Specifically, respondents' petition sought to hold Tim responsible for breaches of duties "owed to trust beneficiaries," such as the duty to "administer the trust solely in the interest of the beneficiaries"; the duty "to diversify investments"; the duty to "deal impartially with beneficiaries"; and the duty "to make trust property productive." Each of those alleged "duties" was actually inconsistent with Tim's obligation, during Bill's lifetime, to administer the trust solely for Bill's benefit and pursuant to Bill's direction.
Whereas Bill's interest during his lifetime was to preserve his options to do whatever he pleased with the trust corpus during his lifetime—including both the option of preserving it for his family members and the option of spending it unwisely and making risky investments—respondents' interests were best served by restricting Bill to only the first option, and implicitly requiring Tim to take steps to impose that restriction. Promoting those interests is essentially what respondents' petition sought to accomplish, and it was reflected in the court's statement of decision, which was largely based on the conclusion Bill lacked sufficient capacity to decide what should be done with trust assets, and thus should not have been allowed to retain control. That was not a claim Bill himself could have brought. "Stop me before I do something I'll regret," is not a recognized cause of action, even against the trustee of one's revocable trust.
Moreover, we note that although the court's order granting respondents' petition actually recites that Tim was surcharged based upon his "breach of the Trust and breach of fiduciary duties owed to Decedent William A. Giraldin," (italics added) its statement of decision made clear that the duties
By facilitating Bill's investment in SafeTzone, Tim was found to have breached his duty "to administer the trust solely in the interest of the beneficiaries"; his duty "to deal impartially with beneficiaries"; his duty to "preserve the trust property"; his duty "to make trust property productive"; and his duty to "diversify the investments of the trust." But Tim breached none of those duties vis-à-vis Bill, by allowing the trust money to be used as Bill wanted.
And of course, respondents concede the SafeTzone investment was one that Bill himself wanted to make. They make no claim that Bill's free will was overcome by some wrongful conduct of Tim's. Respondents' position, which was adopted by the court in its statement of decision, was that Bill's "desire, even if competently formulated," was an insufficient basis to relieve Tim of liability for allowing Bill to tap into trust assets to fund the investment. But if the claim were being asserted by Bill himself, that competently formed desire clearly would be a sufficient basis to relieve Tim of liability. If Bill wanted to make that investment, and the assets in the family trust remained, in legal effect, Bill's own, then Bill himself would not have been aggrieved by Tim's mere cooperation with his plan.
Further, even if we assume Bill did suffer from some degree of diminished capacity, we cannot discern how Tim, acting in his capacity as trustee of Bill's family trust, would owe Bill any duty to either diagnose that problem or take action to restrict Bill's financial dealings as a result of it. The fact is that until such time as Bill was adjudicated legally incompetent to handle his own affairs, or until he self-imposed some formal restrictions on his ability to handle his assets (such as by making his trust irrevocable), Bill remained legally entitled to do what he wanted with the trust assets—which were effectively his own property—including doing financially risky or downright stupid things. No one—including Tim—had the authority to stop him. Thus, in the absence of an adjudication of Bill's incompetency, we cannot discern any legal basis on which Bill might have justified holding Tim liable for
Stated another way, we can discern no reason why Tim's role as trustee of Bill's family trust imposed a special obligation on him to question Bill's competency or capacity to make decisions, or to question the wisdom of the decisions Bill chose to make. By agreeing to act as trustee, Tim was not agreeing to assume the role of Bill's de facto conservator—and certainly Bill could not fault him for failing to act in that capacity. Indeed, imposing such a duty on the trustee of a revocable trust would create a conflict between the trustee and settlor, and in effect obligate the trustee to second-guess every decision the settlor makes with respect to trust assets, and then to evaluate whether those which appear fiscally unsound might be the product of an unsound mind.
And of course, determining whether a person's mind is so unsound as to interfere with his capacity to make particular decisions and enter into particular contracts is a seriously complicated business. (See Prob. Code, §§ 810-812.)
Finally, we note that the relief sought by respondents in this case demonstrates that the interests they sought to vindicate were actually their own, not Bill's. For example, respondents sought to have Tim surcharged for trust expenditures which were not properly documented in accordance with the requirements of the trust, including "loans" and other disbursements of trust funds made to various family members. But respondents sought to hold Tim responsible only for "loaning" trust money to himself and to other siblings who were not within the respondent group—while ignoring the similar "loans" made to respondents Philip and Michael during the same period. If respondents were really concerned about Bill's interests, they would have been forced to acknowledge that the undocumented loans of trust funds made to Philip and Michael in 2004 were just as problematic as the other "loans" authorized by Tim. But they did not. Respondents complained only about Tim's disbursement of "loans" to others. Moreover, respondents even sought to surcharge Tim for disbursements made to Bill himself. Again, if respondents had really been standing in Bill's shoes, they could not have successfully complained of funds paid to Bill—whether those payments were documented or not. But respondents' goal in asserting that claim was to vindicate their
Respondents contend that our failure to accord them standing in this case amounts to a sub rosa determination that the trustee of a revocable trust, such as Tim in this case, could breach any number of the statutory duties imposed on trustees during the settlor's lifetime, and need never answer to anyone for it. The claim is a red herring.
Of course, what the trustee cannot do is dispose of trust assets in a manner inconsistent with the settlor's wishes. If, as respondents posited at oral argument, Tim had taken money from the family trust without Bill's authorization just days before Bill died, so that Bill himself had no opportunity to do anything about it, there would still be a remedy. The representative of Bill's estate would have the right to pursue an appropriate claim for recovery of those funds on behalf of the estate. (Code Civ. Proc., § 377.20, subd. (a) ["Except as otherwise provided by statute, a cause of action for or against a person is not lost by reason of the person's death, but survives subject to the applicable limitations period."].) And even assuming the representative of Bill's estate was Tim himself, who might be expected to have little enthusiasm for bringing such a claim, respondents, or any other "interested person," would have the right to petition for Tim's removal in favor of an impartial special administrator who could then pursue whatever appropriate claims Bill might have had against Tim. (Prob. Code, § 8500, subd. (a).)
In this case, however, as we have already explained, respondents were not purporting to pursue Bill's claims, or to seek redress for alleged wrongs done
Because respondents lacked standing to pursue claims against Tim for breach of fiduciary duty, or to seek an accounting of the trust, for the period prior to Bill's death, the orders entered against Tim in this case must be reversed.
We acknowledge that some of the surcharges ordered against Tim may actually stem, at least in part, from actions he took in the wake of Bill's death—a time when respondents would have had standing to question them. Unfortunately, we cannot discern with any accuracy which ones those might be, since neither the parties nor the trial court made any attempt to segregate the claims against Tim with that issue in mind.
We now turn to Mary's appeal. Mary's opening brief challenged the court's determination she had "elected" to accept the benefits of the family trust, and thereby forfeited her community property interest in the Lakeshore property and the Lake Hume cabin, on two grounds. First, Mary asserted that because there was no provision in the family trust which explicitly required her to make such an election—and such an election would not be necessary to effectuate Bill's estate plan—she was legally entitled to retain both her community property and any benefits received under the trust.
And second, Mary argued there was insufficient evidence in the record to establish that Bill had ever attempted to transfer ownership of either the Lakeshore property or the Lake Hume cabin to the family trust during his lifetime. Specifically, Mary cited undisputed evidence that no property had been identified on the version of "Schedule 1"—the purported list of assets "initially" transferred to the trust—which was incorporated into the family
Respondents countered Mary's factual assertion concerning Schedule 1 by simply claiming that both "the Lakeshore Property and the Hume Lake Cabin . . . were clearly identified on Schedule 1 of the trust." Because we were unable to reconcile that claim with the undisputed evidence Mary cited, we invited respondents to provide us with a comprehensive recitation, including citations to the record, of the evidence they believed established that the disputed properties had been transferred to the family trust. Respondents complied.
"The word `election' in this context means `. . . the obligation imposed upon a party to choose between two inconsistent or alternative rights or claims in cases when there is a clear intention of the person from whom he derives one, that he should not enjoy both.' (Morrison v. Bowman (1865) 29 Cal. 337, 347; italics supplied.)" (Estate of Webb (1977) 76 Cal.App.3d 169, 173 [142 Cal.Rptr. 642].)
In this case, of course, Bill did not purport to dispose of Mary's community property in his will. To the contrary, Bill explicitly eschewed any such intent, by specifying that "[u]nder this Will I intend to provide for the disposition of all the property, wherever located, I own at my death, including my separate property and my share of all community property, if any, held with my wife." The will goes on to provide that Bill gives all "my interest in the residue of my estate," including "my interest in my residences, to [the family trust.]" (Italics added.) Moreover, Bill's will did not contain any provision requiring Mary to elect between her community property and taking a share of his estate. Consequently, nothing in Bill's will obligated Mary to choose between sharing in Bill's estate or retaining her share of the community property.
But as neither side has raised that issue, we will simply presume for purposes of this analysis that Mary could be required to forfeit her interest in
With that in mind we consider whether any of the evidence cited by respondents qualifies as a sufficient written memorialization of Bill's transfer of these properties into the family trust. Respondents begin with the fact that Bill had originally transferred the Lakeshore property to his 1997 revocable trust. However, Bill's express revocation of that 1997 trust means we cannot consider its content as evidence of Bill's intentions thereafter.
Respondents next claim Bill's intention to transfer the properties into the family trust is evidenced by the terms of his written revocation of the 1997 trust. According to respondents, Bill's revocation of the trust included instructions that Tim should transfer title of all properties owned by that earlier trust to the new family trust. This is simply not true. What Bill's revocation document actually said was that Tim was appointed trustee of the earlier trust, "for the sole and exclusive purpose of liquidating any assets that may be vested in the name of the Trust." Tim was then "directed to deliver forthwith the entire corpus of the trust estate . . . to William A. Giraldin." Indeed, nothing in the revocation of Bill's earlier trust expressed his intention that ownership of the Lakeshore property be transferred to the family trust.
With respect to Schedule 1 of the family trust, respondents simply ignore the fact the version actually incorporated into the trust is blank. Instead, they rely upon a different version of Schedule 1, which Bill's trust attorney was apparently working on after Bill signed the family trust document. That later version of Schedule 1 lists numerous assets, including both the Lakeshore property and the Lake Hume cabin. However, the evidence is undisputed that
Respondents next rely upon the terms of the family trust itself, which they claim specifically reference the Lakeshore property as being subject to its provisions. Again, respondents are incorrect. The family trust does include a provision defining "residence" as "that dwelling or dwellings, as the case may be, in which I normally lived prior to my death." And while that definition would include the Lakeshore property, where Bill and Mary resided at the time of Bill's death, it would also include every residence Bill had ever lived in. It does not qualify as a specific reference to the Lakeshore property. More significantly, the provision is merely a definition, and does not reflect any intention to transfer ownership of any residence to the family trust.
Finally, respondents cite article 22 of the family trust, entitled "Residence Provisions" which requires the trustee to "permit [Mary] to live in and occupy the Residences during her lifetime." However, by its terms, the provision applies only to "any residences held under the terms of this Trust Agreement." But since there is nothing in this provision which purports to provide that any properties are in fact held under the terms of the trust, it is nugatory as evidence that ownership of either the Lakeshore property or the Lake Hume cabin was transferred into the trust during Bill's lifetime.
Based upon all of the foregoing, we agree with Mary's contention there is insufficient evidence in the record to establish that ownership of either the Lakeshore property or the Lake Hume cabin was ever transferred into the family trust during Bill's lifetime. It consequently follows that the properties became subject to the trust's terms only upon Bill's death, by operation of his will.
Respondents' last contention is that Mary is bound by the court's ruling against her, even if erroneous, because she failed to appeal from a November 2, 2009 order, now purportedly "final," which determined that title to the Lakeshore property is "vested in the name of Linda Rogers, Temporary Trustee of the William A. Giraldin Family Trust. . . ."
The order relied upon by respondents, arises out of their petition, filed in May of 2009 (five months after issuance of the orders challenged in this appeal and after this appeal had been filed), to "correct the title" to the Lakeshore property, which was then held "in the name of `William A. Giraldin, Trustee of the William A. Giraldin Trust, dated February 25, 1997.'" Respondents claimed in their petition that Bill had legally transferred title to the Lakeshore property into the family trust by virtue of its inclusion on a list of property "added . . . to Schedule 1 prior to execution of the Trust." (Italics added.)
Linda Rogers, the temporary trustee of the family trust, filed a response to the petition, in which she took pains to correct some of the information offered by respondents in support of their petition. She explained to the court that her counsel had contacted the attorney who drafted the family trust, and he confirmed that no version of Schedule 1, listing any property "initially transferred" to the family trust, had ever been completed. She also pointed out that the version of Schedule 1 relied upon by respondents reflected on its face that it had been prepared after the date the family trust became effective.
Having brought those facts to the court's attention, Rogers candidly admitted she would prefer that title to the Lakeshore property be transferred
At the hearing, the court explicitly rejected respondents' effort to demonstrate that Bill had actually transferred title of the property into the family trust by including it on a Schedule 1 list of assets, while adopting Rogers's position that the transfer of title could be justified based solely on the earlier court orders: "I do agree with [Rogers] that the court's already found it to be part of this trust . . . so the court's going to find that the real property belongs to the 2002 trust and not to the 1998 [sic] trust."
"`[T]he perfecting of an appeal stays [the] proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order. . . .' ([Code Civ. Proc.,] § 916, subd. (a).) The purpose of the rule depriving the trial court of jurisdiction in a case during a pending appeal is to protect the appellate court's jurisdiction by preserving the status quo until the appeal is decided. The rule prevents the trial court from rendering an appeal futile by altering the appealed judgment or order by conducting other proceedings that may affect it." (Betz v. Pankow (1993) 16 Cal.App.4th 931, 938 [20 Cal.Rptr.2d 841].) "Whether a matter is `embraced' in or `affected' by a judgment within the meaning of [Code of Civil Procedure] section 916 depends upon whether postjudgment trial court proceedings on the particular matter would have any impact on the `effectiveness' of the appeal. If so, the proceedings are stayed; if not, the proceedings are permitted." (Ibid.)
The effect of Tim's and Mary's appeals in this case was to stay proceedings in the probate court on matters embraced by or affected by the orders appealed from, and to deprive the court of jurisdiction to make orders affecting those appeals. Consequently, the November 2, 2009 order had no effect.
The orders filed December 19, 2008, granting respondents' petition to remove Tim Giraldin as trustee of the family trust, to surcharge him, and to require him to account to trust beneficiaries, and settling trustee's first account, are reversed. Respondents lacked standing to request such relief based upon Tim's alleged acts or omissions during the period when the family trust remained revocable. This reversal is without prejudice to respondents' right to seek a new accounting pertaining solely to the period after Bill Giraldin's death, and we express no opinion on the merits of such a claim.
The court's order denying Mary's spousal property petition is likewise reversed, and the court is directed on remand to enter a new order limiting its finding of Mary's waiver of her community property rights to assets other than the Lakeshore property and the Lake Hume cabin, and confirming that Mary at all times retained her community property interest in those properties.
Tim and Mary are entitled to recover their costs on appeal.
Aronson, J., and Fybel, J., concurred.
Probate Code section 812 provides: "Except where otherwise provided by law, including, but not limited to, Section 813 and the statutory and decisional law of testamentary capacity, a person lacks the capacity to make a decision unless the person has the ability to communicate verbally, or by any other means, the decision, and to understand and appreciate, to the extent relevant, all of the following: [¶] (a) The rights, duties, and responsibilities created by, or affected by the decision. [¶] (b) The probable consequences for the decisionmaker and, where appropriate, the persons affected by the decision. [¶] (c) The significant risks, benefits, and reasonable alternatives involved in the decision."