Filed 10/20/17 Jue v. Jue CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

A mother and her son settled a lawsuit over disputed real estate transactions between the two of them, but they conditioned their settlement agreement on court approval. Two of the son’s siblings objected to the settlement, and the probate court declined to approve it. The son argues in this appeal that the court erred, but we disagree and therefore affirm.

I.
Factual and Procedural
Background

Lillie Jue, a nonagenarian, has four children: Clifford, appellant Jeffrey, and respondents Jennifer and Terrence.[1] While her husband Jun was alive, Lillie and Jun created a trust that contained real property. After Jun died, the trust was divided into three different “sub-trusts.” Lillie’s four children are equal beneficiaries of one of those trusts, the “Marital Trust.”

In her capacity as trustee, Lillie executed eight deeds in 2010 and 2012 transferring to Jeffrey interests in various real properties. Whether these transfers came about because of Jeffrey’s fraud and undue influence is the subject of these proceedings.

Acting as an agent for his mother, Clifford sued Jeffrey in October 2014 for rescission, financial elder abuse, fraud, conversion, and for aiding and abetting a breach of fiduciary duty. Lillie, acting individually, later filed an amended complaint alleging the same causes of action. In December 2014, Jeffrey filed a cross-complaint against his mother alleging breach of contract and requesting an accounting.

Following a three-day mediation, Lillie and Jeffrey reached an agreement settling their disputes, conditioned on court approval. They agreed that if the court denied approval of their settlement agreement, the matter would be set for trial at the earliest possible date. The parties eventually stipulated to transferring the case to the trial court’s probate department to rule on the agreement.

Jeffrey and Lillie filed a joint petition for approval of the settlement agreement and provided notice to the other three siblings as beneficiaries. Jennifer and Terrence together filed objections to the petition and requested an evidentiary hearing.

The Alameda County probate examiners filed a case summary raising the concern that the joint petition was not verified as required under both the Probate Code and the terms of the settlement agreement.

At a hearing on August 31, 2016, the probate court briefly raised the issue of verifying the petition, and Jeffrey’s attorney said he could obtain Jeffrey’s verification “right away.” The court then questioned the parties about substantive matters, asking whether the original real estate transactions as well as the settlement agreement violated Lillie’s fiduciary duties under the trusts. Jeffrey’s attorney argued at length why it did not. The discussion also focused on the effect of the settlement’s release provisions and whether trust beneficiaries other than Jeffrey would be foreclosed from asserting claims against Lillie. Jeffrey’s attorney said although he “really ha[d]n’t thought about the issue” he did not think “there’s anything in there inherent in the settlement agreement that precludes the beneficiaries, as such, from asserting claims against Lillie.” After a discussion of whether the settlement agreement foreclosed litigation over the tax implications of the original real estate transactions, Jeffrey’s attorney represented that the settlement agreement contained “an exception for any estate or gift tax consequences of the 2010 transactions. It expressly carves that out. So that claim is not released by Lillie. It’s not purported to be released by Lillie on anyone else’s behalf.” The court asked Lillie’s attorney whether he agreed with counsel’s statement. What followed was a discussion that led to what appeared to be an agreement on how to settle the parties’ conflict.

Lillie’s attorney candidly acknowledged that the parties to the settlement agreement had not intended to release Jeffrey from any potential tax consequences of the previous sales, but that the settlement agreement did not accurately reflect that intent. The court expressed concern that Lillie could not object to the settlement agreement while also purporting to join in the petition to approve the agreement. Lillie’s attorney said he had proposed to Jeffrey’s attorney that they modify the agreement to reflect the parties’ intent but had not heard back from Jeffrey’s attorney. Lillie’s attorney also said the settlement agreement specifically provided that it could be modified. The court at first objected to this process, stating, “Hold on a second. I’m not approving any settlement agreement that you all can go ahead and modify. What’s the point of my approval? To say, ‘We ran it by him, he said approved, yeah, we’ll run the flag up the pole’? That doesn’t make any sense. If I’m approving any agreement between the parties, I’m approving it. That’s it. No modifications. I’m not getting involved, if there’s going to be any modifications. [¶] If I missed that, I missed that. I’m approving what’s written. It’s like a contract. That’s what I’m approving. Not that you get my approval, and you go and you change the terms of it. If you don’t like this as written, then you withdraw your support of the joint petition, and the whole thing goes away.” Jeffrey’s attorney objected that Lillie could not oppose the petition, and the probate court responded: “Whoa. Whoa. No. The agreement I haven’t approved precludes that. So if he’s going to withdraw his support of it, then we’re done.”

Lillie’s attorney was careful when discussing the settlement agreement, apparently because the agreement provides that the parties “shall take no act to interfere with obtaining” court approval. Lillie’s counsel stated, however, that “I’m pointing out some of the very reasons why the other beneficiaries are here. And some of it is in the drafting. And one of the things that they’re concerned with, which I think is probably correct, is that there is some ambiguity in the releases that we just discussed, that was—that [Jeffrey’s attorney] has pointed out is what it means. [¶] What I’m concerned with is, does it say what he just expressed to the Court it says? And I think that is a major concern we have with the settlement agreement. I think that—you know, as he pointed out, maybe the parties can resolve this. And they should.”

Although Jeffrey’s attorney maintained that the settlement agreement was not ambiguous, the parties eventually agreed to work on an addendum to the settlement agreement that would address all parties’ concerns. The court scheduled a status hearing for September 13 but said it would cancel the hearing if the parties were able to reach agreement before then.

The day after the hearing, Jeffrey filed a verification of the joint petition for approval of the settlement agreement. Lillie’s attorney later represented that he had a “signed verification,” but it does not appear that Lillie ever filed a verification with the court.

The parties exchanged draft proposed orders but were unable to agree on an order modifying and approving the settlement agreement. They requested a continuance of the status hearing until September 20 so that they could continue to meet and confer. The negotiations were unsuccessful, and, on September 16, Jennifer and Terrence again filed objections to the joint petition for approval of the settlement agreement, and they argued that the probate court should refuse to approve the joint petition. (Prob. Code, § 17206 [court in its discretion may make any orders necessary or proper to dispose of petition to court].) They asked the court to “advise the parties that it will not approve the settlement agreement unless the release and indemnification provisions do not apply to the Marital Trust remainder beneficiaries and to any successor trustee and that the court give Lillie, Jeffrey and the Marital Trust beneficiaries additional time to negotiate a new settlement agreement.”

For his part, Jeffrey filed a status report informing the court that “little progress” had been made toward resolving the parties’ issues. He acknowledged that it was uncertain whether the parties could agree to a stipulation that would satisfy Jennifer and Terrance. Jeffrey asked the court to schedule (1) a hearing and a briefing schedule “to resolve the questions of law that the Objections present” and (2) a subsequent evidentiary hearing, if necessary.

At the hearing on September 20, Jennifer and Terrance’s attorney said the parties had agreed that Jeffrey be permitted to file a response to Jennifer and Terrance’s written objections to the settlement agreement. The court responded: “That seems like a lot of work for me, quite frankly, cut to the chase. This is a settlement agreement that you want approval of. You don’t need my approval. You want my approval.” Jeffrey’s attorney noted that the validity of the settlement was conditioned on the court approving it. The probate court responded, “Right. I have people objecting. So their—so why don’t I just say, which is what I am about to say, settlement’s not approved. Good luck.” The court also denied Jeffrey’s attorney’s request for oral argument on the petition for approval.

The probate court issued an order denying the petition to approve the settlement, and Jeffrey appealed. Lillie did not appeal, is not a party to this appeal, and has not filed any brief in this court.

II.
Discussion

Jeffrey offers many arguments why the probate court should have approved the settlement: the agreement did not release Jennifer and Terrance’s direct claims, its alleged ambiguity did not render it unenforceable, and it did not impair any tax claims against Jeffrey. Jennifer and Terrance counter that we should affirm the probate court’s decision not to approve the settlement. The parties dispute almost every issue, including the applicable standard of review.[2] Yet in more than 150 pages of appellate briefing, the parties hardly touch on what appears to be the main reason the court did not approve the settlement agreement: counsel for Lillie, one of the parties purporting to support the agreement, acknowledged it was ambiguously worded and did not entirely reflect the drafters’ intent.

In his opening brief, Jeffrey omits the concession when describing the August 31, 2016 hearing, and he omits the failed negotiations to address the agreement’s ambiguities. In his appellate briefing he contends, and at oral argument he reiterated, that the probate court rejected the agreement simply because objections had been made and considering the petition’s merits would require too much work by the court. In support of the contention, he points to the court’s remark at the second hearing that further briefing “seem[ed] like a lot of work for me” and that it was a problem that the court “ha[d] people objecting” to the petition. But the contention takes the court’s comments completely out of context; it ignores that the remarks were made after the parties had already debated the merits at the first hearing, a party to the agreement acknowledged that at least some of the objections might have merit, and the parties were given the opportunity, which they unsuccessfully exercised, to work out their differences.

Jennifer and Terrance, for their part, do note that the parties discussed a possible addendum at the August 31 hearing to address the objections. But they do not explain that the reason an addendum was raised in the first place was because Lillie’s attorney acknowledged that the settlement agreement did not accurately reflect the parties’ intent. In short, the parties’ arguments on appeal fail to acknowledge the full procedural context of what occurred in the probate court.

At bottom, Jeffrey is asking this court to reverse the probate court’s decision to reject his settlement agreement with Lillie without ever addressing at least four important issues: Lillie’s admission below that the agreement was ambiguous and did not reflect the parties’ intent, the absence of Lillie’s verification of the petition to approve the agreement, the probate court’s reliance on these facts in denying the petition to approve the settlement, and Lillie’s decision not to appeal or to file a brief in this court.

With this background in mind, the arguments Jeffery raises are not persuasive. He first argues that “Respondents” misconstrue the settlement agreement as having released Jennifer and Terrance’s claims against himself and Lillie, and he argues at length why the agreement’s release is not ambiguous. He goes so far as to argue that Jennifer and Terrance’s construction of the agreement is “absurd.” But the fact is that Lillie’s attorney agreed with respondents below that the releases were ambiguous and that it was a “major concern we have with the settlement agreement.” (Italics added.)

More to the point, if respondents’ interpretation of the settlement agreement was so “absurd” and if Jeffrey’s interpretation was so straightforward as he claims, presumably the parties could have come to an agreement. At one point Jeffrey argues that to the extent there is any ambiguity in “the release and indemnification provisions as they relate to the Martial Trust . . . the Court can easily resolve it.” Again, if the task were so easy, the parties presumably would have been able to accomplish it on their own.

Jeffrey—and Jennifer and Terrance, for that matter—fail to address that the probate court apparently rejected the settlement agreement at least in part because a party to it acknowledged it was ambiguous. This strikes us as a reasonable reason to decline to approve the agreement, and it certainly does not amount to an abuse of the probate court’s discretion under Probate Code section 17200. Jeffrey’s other arguments in support of the settlement agreement (it did not “impair[] the marital deduction,” did not have adverse tax consequences, did not bar a successor trustee from collecting Jeffrey’s share of estate taxes, and did not bar Jennifer and Terrance’s claims against Jeffrey for tax consequences) thus are beside the point. In light of our conclusion that the probate court did not abuse its discretion in declining to approve the settlement agreement, we need not address Jennifer and Terrance’s argument, raised for the first time on appeal, that Lillie breached her fiduciary duties by entering into the settlement agreement.

The settlement agreement provides that if the court does not approve it, the underlying litigation “will be immediately set for trial at the earliest possible trial date.” As the probate court observed, “The chips will fall where they may, or all of you get together and maybe you can resolve this on terms in agreement to all . . . .” Because Jeffrey offers no valid reason to set aside the probate court’s order, we reject his arguments.

III.
Disposition

The probate court’s order denying approval of the settlement agreement is affirmed. Respondents shall recover their costs on appeal.

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Humes, P.J.

We concur:

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Dondero, J.

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Banke, J.