Castellini v. Cunningham
Filed 7/11/13 Castellini v. Cunningham CA3
NOT TO BE PUBLISHED
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF
THIRD APPELLATE DISTRICT
(Nevada
----
GAIL CASTELLINI, as
Cotrustee, etc.,
Plaintiff and Appellant,
v.
WILLY CUNNINGHAM, as
Cotrustee, etc.,
Defendant and Respondent.
C069714
(Super. Ct. No. P14621)
Don
Cunningham (decedent) succumbed to
at the age of 85. In October 2007, his
daughter, Gail Castellini, filed a petition for an order instructing her (in
the performance of her duties as the successor cotrustee for the
Cunningham Family Trust (Trust)) to obtain an accounting from Willy Cunningham
(decedent’s widow and cotrustee of the Trust) from December 2004 to present; to
demand that Willy
title="">[1]
restore Trust assets and lodge a true copy of decedent’s will (Will); to
recover damages from Willy; and to remove Willy as a cotrustee.
Willy contested only the issue of whether the Trust remained revocable after
the death of her husband.
name="_ftnref4" title="">[4] In December 2007, Willy lodged what she
represented as being a true copy of the Will.
Willy filed a voluntary accounting in February 2008 and a restated
voluntary accounting in May 2009. In
response to the instant litigation, she also filed an amendment to the Trust in
May 2008 that sought to remove Gail as a successor cotrustee.
Following
10 days of trial in September 2010, the trial
court issued a proposed statement of decision, entertained Gail’s
objections, issued a statement of decision in May 2011, vacated that decision
and entertained further objections, issued a slightly different judgment
in June 2011, and reiterated that judgment in September 2011 after denying
a motion for new trial. The court
concluded the Trust remains revocable until the death of the surviving settlor,
Willy; for this reason, Willy did not owe any duty to account to beneficiaries,
her actions as trustee did not result in any damages to beneficiaries,
and there was not any basis for ordering her to restore assets. The court also found insufficient
evidence to remove Willy as cotrustee.
Gail’s timely notice of appeal followed.
(Briefing was completed in December 2012.)
On appeal,
Gail focuses on the finding that the Trust remains revocable until Willy’s
death, asserting this false premise permeated the judgment and rendered its findings
erroneous as well. She requests we
reverse the judgment with directions to order her requested relief. We shall reverse the judgment, but remand
with directions to reconsider the ruling in light of this opinion.
FACTUAL AND PROCEDURAL BACKGROUND
Willy and
decedent married in 1983. Willy was 11
years his junior. He had four children
from his first marriage, born between 1948 and 1954, of whom Gail is the
eldest.
On March 15, 2000, decedent executed his
Will. He and Willy executed the Trust on
the same day.
The Will
(containing 16 articles) provided that if any of its provisions conflicted with
the Trust, the latter should prevail.
(Art. 5.)
title="">[5] It specified that “[a]ll of the property in
Schedule A of the [trust] shall be given to my wife, [Willy],
listed in Schedule A, with the exception of the Certificates of Deposit at
Placer-Sierra Bank, shall go to my then-living children. The Certificates of Deposit . . .
shall go to my grandchildren, Laura . . . and Brian Castellini.†(Art. 6, italics added.) All of the property listed in Schedule B of
the Trust was to be divided among his surviving children. (Art. 6.)
The remainder of his estate was to be distributed under the terms of the
Trust. (Art. 9.) The Will named Gail as executor, but
withheld the power to probate the Will and limited her powers to enforcing the
Trust. (Arts. 12, 13.)
The Trust
(in paragraphs numbered ordinally, First through Tenth) provided that the
settlors “reserve the power during their lifetimes to withdraw [assets] at any
time†or to revoke the Trust entirely.
(Par. Second, subpar. A(1).)
The Trust was to become irrevocable “[o]n the death of [the]
instrument, the Trust stated that its “primary purpose . . . is to
provide for the [settlors], and the rights and interests of all others are
incidental to that purpose.†(Par.
Sixth, subpar. E(1).) The trustees
were authorized to distribute to the settlors any sums of both income and
principal deemed in their discretion as being “necessary for the benefit and
comfort†of the settlors. (Par. Fifth,
subpar. A.)
In the
provisions central to this appeal, “[o]n the death of either of the [settlors]â€
(par. Sixth, subpar. A), the Trust’s entire balance “shall be
during his or her lifetime†(par. Sixth, subpar. (A)(2), italics
added). The Trust included two
provisos: “ ‘[T]otal and exclusive
use during . . . her lifetime’ shall be interpreted to mean†that
Willy had the right to live in the Penn Valley family residence listed in
Schedule A (or rent it out should she need to move closer to her health care
facility) until her death, even during decedent’s lifetime. (Par. Sixth, subpar. (A)(2)(a).) Also, on the death of decedent, “all items of
property listed on Schedule B hereto shall be distributed to his children
. . . .†(Par. Sixth,
subpar. (A)(2)(b).) “Upon the death
of the last surviving [settlor],†the successor trustee must give the notice
required for a trust that has become irrevocable (Prob. Code, § 16061.5),
distribute the Penn Valley home to the surviving children of decedent (along
with decedent’s “share of the remaining community property of the partiesâ€),
and distribute any property in “Schedule C†pursuant to Willy’s will. (Par. Sixth, subpar. (A)(3) & (4)(a).) Gail was designated as the successor
cotrustee upon the death of either settlor.
All decisions regarding the Trust required the unanimous vote of all
trustees. (Par. Eighth, subpars. A
& B.)
Schedule
A to the Trust included the Penn Valley residence, two certificates of deposit
at Placer-Sierra Bank, a Kemper Passport account, and two Templeton Growth Fund
accounts (with numbers ending -363 and -981).
Schedule B included Canadian real estate located in New Brunswick,
another certificate of deposit at Placer-Sierra Bank, and gold and silver
coins. It is not disputed that the
assets listed in the two schedules were the separate property of decedent.
property.
To the
extent any of decedent’s children or their spouses ever spoke with him about
his estate planning, they were generally aware (as Willy had written in a
letter to one of them just before her marriage) that Willy was to have a life
estate in the Penn Valley home, which at her death would be divided among the
siblings. Attorney Sandra Stanley, who
prepared the Will and Trust in 2000, testified that she would not have told
decedent that his Trust would remain revocable after his death, allowing his
assets to pass to Willy.
In
October 2001, the balance in the Schedule B certificate of deposit (about
$2,600) was withdrawn. The balances in
the Schedule A certificates of deposit were withdrawn in December 2001
(about $11,200) and February 2002 (about $5,400).
In
October 2002, decedent and Willy withdrew the funds from the Kemper Passport
account (then valued at about $11,000) in Schedule A and opened a Pacific
Life annuity. The annuity named
Willy as the beneficiary, with the Trust as a contingent beneficiary. They made an initial contribution of $5,000,
and the annuity account shows total contributions of about $26,000.
During a
November 2002 visit from Gail while Willy was in Mexico, decedent went with
Gail to his safe deposit box and made copies of the originals of the Will and
Trust instruments, which he gave to her.
handwritten codicil to his Will adding the names of additional grandchildren to
be included in the distribution of the certificates of deposit that
but no longer existed.
Attorney
Stanley prepared a will for Willy in September 2003. Willy did not discuss its terms with
decedent. It included the disposition of
a Franklin Income Fund account ending with the numbers -669 transferred from
the Templeton Growth Fund account ending with -981 in Schedule A. Willy transferred title to this -669 account
to herself at some unspecified point.
She also included it in an updated Schedule C to the Trust instrument
that she had Attorney Stanley draw up in her husband’s lifetime (that she did
not discuss with him). After this
litigation commenced, Willy retransferred title to the -669 account to the
Trust.
After her
father’s death, Gail learned that the bank listed as holding the certificates
of deposit in Schedules A and B had written to Willy to verify that it did not
have any accounts in decedent’s name individually
or jointly. Because Willy had not
specifically asked about existing accounts in the name of the Trust, the bank
did not mention them. When Gail wrote to
the bank to confirm whether there were any accounts in the name of the Trust,
it did not respond to her because Willy had identified herself as the sole
trustee of the Trust. The bank deferred
the matter to Attorney Stanley, whom Willy had told not to cooperate with Gail.
Attorney
Stanley informed Gail’s attorney that decedent had executed a will in February
2003 superseding the 2000 will, which named Willy as executor. Attorney Stanley asserted a copy was in her
files. (At trial, Attorney Stanley could
not confirm the existence of this will, because her office did not have any
copy of it.) Attorney Stanley also
testified that she had drafted the multiple versions of page four of the 2000
will reflected in the record because it had been her advice to name Willy as executor,
but decedent decided on Gail. She could
not explain why the version naming Willy or the counterfeit page lodged with
the court naming Gail would be in Willy’s possession. Although Willy testified that she had
received the alternative page fours from Attorney Stanley with instructions to
put the one naming her as executor into the Will because that had been her
husband’s intent (which Willy later replaced with the counterfeit page four,
because she thought this was fraud),
Attorney Stanley did not have any record or recollection of advising Willy to
take this action. (The trial court,
in light of the evidence, reminded Attorney Stanley before her testimony
of her privilege against self-incrimination.)
Attorney
Stanley sent a letter to Gail’s attorney in May 2005, asserting that Willy was
entitled to all of the Schedule A assets “for life,†and the Schedule B assets
had been distributed according to the terms of the Trust. However, Attorney Stanley had not properly
completed the transfer of the Canadian real estate as of that date (ultimately
requiring Gail to hire attorneys to accomplish the transfer), and the Schedule
B certificate of deposit (as earlier noted) did not exist any longer. In June 2005, Willy dismissed Attorney
Stanley and obtained other counsel.
Gail’s
attorney testified he would have informed her that under the Trust Willy was
entitled to the outright distribution of all of the Schedule A assets other
than the house. This would accordingly
have been Gail’s duty as trustee.
At some
point, Willy transferred title to the Templeton Growth Fund account ending with
-363 in Schedule A to a new individual trust that she established in
2006. She later realized this was a
“mistake†and transferred title back to the Trust. As of the first quarter of 2009 (in the
restated voluntary accounting), the -363 Templeton account and the -669
Franklin account had diminished from a combined total of about $193,000 in
December 2004 to about $82,000. In an
August 2010 brokerage statement admitted as an exhibit at trial, the combined
value of a Templeton Growth Fund and a Franklin Income Fund transferred to a
new broker in September 2009 from the -363 and -669 accounts was about
$124,000. Title to the accounts was
still in the name of the Trust as of that date.
DISCUSSION
I. Willy Could
Not Revoke the Trust as to Decedent’s Assets
A. The Trust
Instrument Is Not Controlling
The trial
court relied on the express language of the Trust, which declared it was
revocable until the death of the surviving settlor, in finding that Willy did
not have a duty to account for the assets of the Trust or to restore any assets
that she had withdrawn, and that Willy’s actions as trustee did not damage the
remainder beneficiaries in any way. This
interpretation, however, is contrary to our decision in Estate of Powell (2000) 83 Cal.App.4th 1434 (
community assets. The trust permitted
revocation during the lifetime of either settlor. On the death of the surviving settlor, the
assets were to be distributed to the wife’s son from her previous
marriage. The wife’s will devised all of
her property to the trust for distribution in accordance with the trust’s
terms. After his wife’s death, the
husband purported to revoke the trust and distribute the entirety of its assets
to himself. (Powell, supra,
83 Cal.App.4th at pp. 1437-1438, 1441.) In a part of our ruling not directly relevant
to the present case, we noted that on the wife’s death community property
in the trust transmuted into equal shares of separate property of the two
spouses. (Id. at p. 1441.) As a
result, the general rule that joint trustors can revoke a trust
was applicable, and not the exception allowing either spouse to revoke the
entirety of a trust consisting of only community property (unless the trust
provides otherwise). The widower
accordingly could only revoke the trust as to his separate property and not the
decedent’s. (Powell, at pp. 1440-1441.)
Therefore,
the Trust in the present case became irrevocable with respect to the assets in
Schedules A and B upon the death of decedent, because these were his separate
property. However, this is limited to
the assets to which the Trust still held title at his death in December
2004. Up until that point, decedent had
retained the power to withdraw any asset from the Trust. As the evidence demonstrates, he chose to
withdraw the balance from the Kemper Passport account and the three
certificates of deposit in Schedules A and B (although, curiously, he later
executed a codicil regarding the nonexistent accounts). He opened an annuity (the balance of which is
mostly equivalent to all of the withdrawn funds) and chose to make Willy the
beneficiary rather than the Trust. Gail
failed to produce any evidence that the withdrawals or the opening of the
annuity were either without decedent’s knowledge or informed consent.
were the Penn Valley home and the investment accounts.
Willy
could not revoke the Trust as to these assets, and the interests of the
beneficiaries vested at the time of decedent’s death. (See Estate
of Giraldin (2012) 55 Cal.4th 1058, 1062.) We must reverse the judgment as a result, and
remand for the trial court to redetermine the remaining issues in light of our
following discussion of them.
B. Practical
Consequences of Irrevocability
While
Willy could not revoke the Trust as to these assets, the question remains about
the manner in which the Trust directs the disposition of these assets on the
death of her husband. Attorney Stanley
disavowed any expertise in the field of estate planning. The wording of the Will and Trust instruments
reflect this.
The Trust
instrument directs that the entirety of its assets are to be “distributed†to
the surviving trustor, which would by itself indicate an unrestricted right to
take title in fee to the assets (which is how Gail’s attorney at the time
interpreted it). However, this is
qualified with the language “during his or her lifetime,†which suggests only a
beneficial interest in a life estate (and Attorney Stanley’s testimony seemed
to indicate that this was the intention, as she eschewed the possibility that
she would have told decedent that Willy would have the assets outright on his
death). The proviso regarding the scope
of this distribution with respect to the Penn Valley home, granting Willy the
right to live in or rent out the home even during decedent’s lifetime, could be
read as limiting a life estate only to the home (as opposed to the other
Schedule A assets). However, we can also
read it as restricting Willy from selling the home after her husband’s death
for her own benefit
name="_ftnref13" title="">[13]
and granting a right to receive rental income from the home during her
husband’s lifetime (which would not render the proviso surplusage). The residuary clause, which distributes the
Penn Valley home and decedent’s share of remaining community property, is equally ambiguous. The parties never had community property, and
even if they did it would (as noted in Powell)
commute to separate property. As a
result, the reference to distributing community
property is on its face a meaningless object.
We have the task of resolving these
ambiguities without the aid of the trial court.
We agree with Gail that the language in the Will, enacted
contemporaneously with the Trust, is a proper source of guidance in the absence
of any other evidence (other than the tenebrous recollection of Attorney
Stanley). The Will in straightforward
language creates a prototypical life estate for Willy in all of the Schedule A assets, with the remainder distributed on her
death among the beneficiaries. Willy
does not give us any cogent reason to interpret the Trust differently such that
it prevails over the Will. We therefore
assume the Trust intended to create a life estate by including “during his or
her lifetime†in the distribution to the surviving settlor, and that the
reference to remaining community
property—rather than the remaining separate
property—of decedent in the residuary clause was a drafting error. (Cf. County
of Sacramento v. Superior Court (2012) 209 Cal.App.4th 776, 782 [may
depart from plain statutory language if it leads to absurd result].) Accordingly, Willy does not have any power to take outright title to the home
We thus
view Gail’s arguments through the lens of a vested remainder interest after
Willy’s life estate in these assets.
However, we also must keep in mind that the Trust grants Willy
essentially unbridled discretion to distribute as much of the income
accounts as is necessary “for her benefit and comfort,†in furtherance of
the Trust’s primary purpose of providing for the surviving settlor (rather than
preserve the remainder interests of the beneficiaries in the investment
accounts).
1. Right to
accounting.
Although
remainder beneficiaries do not have any right to compel an annual accounting
under section 16062 (Esslinger v. Cummins
(2006) 144 Cal.App.4th 517, 526), a remainder beneficiary may make a
reasonable request for information about the state of the assets of a trust and
its operation, which can be enforced through court order after 60 days if
ignored (Esslinger, at
pp. 523-525; §§ 16061, 17200).
Moreover, Willy has an even broader duty under section 16060 to provide
the remainder beneficiaries with sufficient information to enforce their rights
or prevent any breach of the Trust. (
176 Cal.App.4th 1184, 1187-1188.)
Willy was thus obligated to provide Gail and the other beneficiaries
with information about the state of Trust assets and her administration of
them. Willy did not do so until 2008 and
2009, after Gail was forced to bring
this action under section 17200 to compel Willy to comply with this
obligation. On remand, the trial court
must direct Willy to provide information as a matter of statutory duty and not
mere largesse.
2. Right to restoration of
Trust assets.
Gail
contends that under section 16420, she was entitled to an order directing Willy
to restore assets to the Trust. However,
by the time of trial, Willy had put the investment accounts back in the name of
the Trust (which also continued to hold title to the Penn Valley home). Gail has not identified any other Schedule A
assets that must be transferred back to the Trust, nor identified any evidence
that Willy abused her discretion under the Trust in distributing sums to
herself from the investment accounts for her benefit and comfort.
Gail did not demonstrate any damages flowing
from the wrongful commingling of Trust assets (§ 16009) with Willy’s
separate property. While Gail adverts to
Willy’s duties to preserve assets and make them productive (§§ 16006,
16007), she does not identify any evidence that Willy ignored more profitable
investment opportunities, and in any event Willy’s primary duty under the terms
of the Trust is the maintenance of her own comfort, not the preservation of the
assets for the remainder beneficiaries.
As a result,
Gail is not entitled to an order directing the restoration of any assets. The trial court shall deny this relief on
remand.
3. Damages.
Although
Gail claims she is entitled to recover damages on behalf of herself and the
other beneficiaries from Willy’s wrongful conduct, she does not suggest any
causally related damages (except for speculation about the existence of other
undisclosed assets that does not have any basis in the evidence), other than
the costs associated with the need to bring this litigation to compel Willy to
comply with her obligations under the Trust and the legal fees expended in
perfecting transfer of title to the Schedule B Canadian real property (an issue
we shall address subsequently). We
cannot identify any. The trial court shall
therefore deny this relief on remand.
4. Late lodging of the Will.
Under
section 8200, the custodian of a will must
lodge it with the superior court in which the estate will be administered
within 30 days of the testator’s death.
A custodian who does not comply incurs liability for damages to anyone
injured as a result. (See
37 Cal.App.2d 698, 707.)
Willy
does not dispute the existence of her duty under this statute, but makes the
unavailing claim that neither Attorney Stanley nor Willy’s subsequently
obtained attorney informed her of this duty (both of whom had received demands
for the Will to be lodged). More to the
point, Willy contends Gail cannot demonstrate any damages attributable to the
belated lodging of the Will. We
agree. Gail had a copy of the true Will
already in her possession (in the event of a will contest if Willy filed the
forged will). The Will did not have any
effect on the assets in the Trust or their distribution pursuant to the Trust,
as it was identical to the forged will in all respects other than the
identification of the executor. Gail did
not have any greater rights under the Will as executor, which did not empower
her to probate it and limited her duties to those of carrying out the Trust’s
provisions. The trial court should
therefore deny relief under this statute.
5. Purported removal of Gail
as cotrustee.
The trial
court did not address this issue in its ultimate judgment, perhaps having
concluded that the power to revoke included the power to amend the Trust to
remove Gail as trustee. However, the
Trust did not allow for unilateral
action on Willy’s part to amend the Trust.
It required actions to have the unanimous consent of all trustees. The trial court shall therefore expressly include
a ruling that Willy’s attempt to amend the Trust to remove Gail was
ineffective.
Willy
suggests that she had good cause to remove Gail as cotrustee under section
15642, particularly on the ground of hostility or lack of cooperation among
cotrustees. We are loathe to make this
discretionary determination (Estate of
Gilmaker (1962) 57 Cal.2d 627, 633) as a matter of law initially on
appeal, as much as we would prefer to spare the parties the expense of further
litigation. It may be that with the determination
of the nature of Willy’s interests in the Trust and her duties to account for
Trust assets, future hostility and lack of cooperation are not likely any
longer. We will therefore direct the
trial court to determine on the existing
record whether there is good cause to remove Gail for this or any other reason
Willy asserted at trial.
6. Removal of Willy as
trustee.
Gail
asserts that Willy’s breach of her various trustee duties to the beneficiaries
is grounds for removal pursuant to section 15642. The judgment stated only that there was
without further embellishment of its reasoning.
We cannot
tell if the trial court’s erroneous legal conclusion regarding the Trust’s
revocability played any part in its finding that there was an absence of
evidence to remove Willy. This would
mean the trial court did not exercise informed discretion. On the other hand, it may have concluded that
the inherent conflict of interest under the Trust is insufficient of itself as
a ground to remove Willy in the absence of a
substantial breach regarding the Trust (Estate
of Cairns (2010) 188 Cal.App.4th 937, 949-950; Copley v. Copley (1981) 126 Cal.App.3d 248, 287), even though Willy wrongfully told the bank she was sole
trustee, directed her attorney not to cooperate with Gail, participated in the
presentation of a false will to Gail’s attorney, and transferred title to the
investment accounts to herself.
Accordingly, we will leave the matter open for the trial court to
reconsider on remand if it would come to a different conclusion.
II. Legal Fees
The trial
court concluded that Gail was not entitled to recover legal fees because she
did not prevail on any of her issues.
This conclusion is no longer correct.
Gail established that the Trust was irrevocable on the death of her
father and therefore that Willy owed the beneficiaries the duties of a trustee
that this litigation sought to enforce, and that Willy was limited to a life
estate in the Schedule A assets (and therefore was required to keep the
investment accounts in the name of the Trust).
The litigation also resulted in Willy’s concession that an amendment to
the Trust allowing her to sell the Penn Valley home was not valid. For some reason, even though Gail also had
established a breach of the duty to convey clear title to the Canadian real
estate to the beneficiaries, the trial court disregarded the resulting
damages to the beneficiaries.
Gail
contends she is entitled to recover legal fees from the Trust to the extent she
has prevailed as a matter of equity (citing Wells
Fargo Bank v. Marshall (1993) 20 Cal.App.4th 447, 458 [beneficiary
vindicating status as such can recover from trust] and Rudnick v. Rudnick (2009) 179 Cal.App.4th 1328, 1335
[beneficiary not vindicating right to greater share properly chargeable with
costs of litigation against share]).
Willy does not dispute the legal basis for the claim of reimbursement of
legal fees, but asserts that the bulk of the claimed fees were for issues on
which Gail did not prevail.
Although
we have the power to determine the amount of legal fees recoverable for
litigating the matter in the trial court, the better practice is to remand to
the trial court to decide the issue, including Gail’s entitlement to
reimbursement of appellate legal fees. (
22 Cal.App.4th 538, 546.) The award
shall include the cost incurred in obtaining title to the Canadian real
property.
DISPOSITION
The
judgment is reversed. The matter is
remanded for the trial court to enter a new judgment in accordance with the
holdings in this opinion, and to determine the extent to which Gail may recover
legal fees. Neither party shall recover
BUTZ , J.
We
concur:
RAYE ,
P. J.
DUARTE ,
J.
name="_ftn1" title="">[1] In keeping with the practice of the parties,
we will refer to them by their given names.
name="_ftn2" title="">[2] Gail filed another petition in December 2007
(and a supplementary petition in December 2008) seeking a determination that a
February 2003 amendment to the Trust was invalid, raising issues of mental
incapacity, undue influence, and elder abuse.
At trial, Willy stipulated to the invalidity of the amendment and the
trial court rejected any claim of incapacity or elder abuse. Gail does not present any arguments about these
theories on appeal. We therefore will
omit any reference to evidence involving them.
