Haner v. King

Filed 7/26/07 Haner v. King 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NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 CALIFORNIA

THIRD APPELLATE DISTRICT

(Placer)

----

Dorothy King, the surviving spouse of Clyde King, appeals from an order that found she was not entitled to a distributive share of a trust through Clyde because he did not survive distribution as required by the trust. (Prob. Code, 1304, subd. (a).)^[1] We affirm.

Background

Sylvia Majors (Majors) established her trust (the Trust) on May 7, 1997, and amended it on January 14, 2000, August 20, 2002, and October 7, 2004. Clyde King (Clyde), Majors brother, was named a trust beneficiary. Clyde died on February 21, 2006, just 44 days after Majors and prior to distribution of the Trusts assets. Appellant Dorothy King (Dorothy) is Clydes surviving wife.^[2]

Respondent Nancy K. Haner (Haner) filed a Petition to Determine Beneficiaries of Trust on May 4, 2006, to determine what was to be done with Clydes share under the Trust. ( 17200, subds. (a), (b)(4).)

Interpreting the Trust, the trial court determined that the share allocated to Clyde King lapsed by virtue of the fact that Clyde King did not survive distribution of the [T]rust as provided by the terms of the [T]]rust and therefore neither he nor his heirs are entitled to share in the [T]rust by virtue of the share purportedly left to him.

Dorothys appeal followed. ( 1304, subd. (a).)

Discussion

Since there were no conflicts in extrinsic evidence or credibility determinations involving the interpretation of the Trust concerning Clydes share, this issue of interpretation is one of law that we determine independently. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866; Wells Fargo Bank v. Marshall (1993) 20 Cal.App.4th 447, 452-453 (Wells Fargo Bank).) Specifically, the interpretive issue here is whether the Trust beneficiaries, to take under the Trust, had to survive only Majors, or had to survive the actual distribution of the Trusts assets. We conclude it is the latter.

The relevant provisions of the Trust are as follows.

The Trusts purpose is specified in article I, section A:

PURPOSE: This Trust was created to hold the Settlors [i.e., Majors] combined estate and provide continuity of management of the estate, both during the Settlors lifetime and upon the Settlors death and to avoid probate of the estate. During the life of the Settlor, all trust benefits shall accrue to the Settlor. At the death of the Settlor, any property remaining outside the Trust may pass to the Trust estate through provisions of the deceased Settlors Last Will and Testament (Pour-Over Will). After the death of the Settlor, all trust benefits shall pass to the beneficiaries as provided herein.

The relevant provisions of the Trust governing beneficiary distribution have stated as follows:

--January 14, 2000, Amended and Complete Restatement of
Article VI, Sections A-1, A-2, A-3 and B):

VI. DISTRIBUTIONS TO SUCCESSOR BENEFICIARIES

A. SUCCESSOR BENEFICIARIES: Upon the death of the Settlor [Majors] . . . , the . . . persons[] named below shall become the Successor Beneficiaries of the Trust estate, and the Trustee shall distribute the Trust estate . . . to these persons or their issue as hereinafter provided.

1. ASSIGNMENT OF PERSONAL EFFECTS: Prior to making any allocation of the Trust estate, upon Trustor[]s [i.e., Majors] death, the Trustee shall distribute the personal effects of the deceased Trustor as . . . she may direct by a separate written statement . . . . [] . . . []

2. SUCCESSOR BENEFICIARIES: Upon the death of the Settlor, the persons herein named as Successor Beneficiaries shall receive the following:

CLYDE L. KING 100%

3. BENEFICIARIES UNDER AGE OF TWENTY-FIVE (25): Said distribution shall not take place until said beneficiaries attain the age of twenty-five (25) years of age. . . . [Clyde, who was Majors brother, was in his 70s at this point.]

B. BENEFICIARIES WHO PREDECEASE DISTRIBUTION: [] . . . [] 

If any beneficiary predeceases the distribution of the Trust estate, in part or whole, then each deceased beneficiarys respective share shall go equally to his/her issue, per stirpes. If a beneficiary has no issue, then that deceased persons share shall pass to the other surviving beneficiaries in equal shares.

--)August 20, 2002, Amended (i.e., replaced
in its entirety) Article VI, Section A-2):

[2.] SUCCESSOR BENEFICIARIES: Upon the death of the Settlor, the persons herein named as Successor Beneficiaries shall receive the following:

NANCY K. HANER 25%

STEPHANIE J. HANER25%

CLYDE L. KING 25%

RENA KING 25%

--(October 7, 2004, Amended (i.e., replaced
in its entirety) Article VI, Section B):

If STEPHANIE J. RAUSCHER (formerly STEPHANIE J. HANER) predeceases the distribution of the Trust estate, in part or in whole, then her share shall be distributed to NANCY K. HANER.

If NANCY K. HANER predeceases the distribution of the Trust estate, in part or in whole, then her share shall be distributed to DARWIN G. HANER.

If NANCY K. HANER and DARWIN G. HANER predecease the distribution of the Trust estate, in part or in whole, then their share shall be distributed to STEPHANIE J. RAUSCHER.

If CLYDE L. KING and/or RENA KING predecease(s) the distribution of the Trust estate, in part or in whole, then his/her/their share(s) shall lapse (be distributed to the surviving beneficiaries).

As noted, the interpretive issue before us is whether a beneficiary may take under the Trust only if he or she survives the actual distribution of the Trusts estate. In construing a trust, the intent of the trustor (Majors) prevails. ( 21102, subd. (a).)

Appellant Dorothy King, Clyde Kings surviving spouse, argues that under the terms of the Trust, the death of Majors and the distribution of the Trust estate were concurrent events such that Clydes share of trust assets vested upon Majors death while he was still alive. The strongest provision in the Trust supporting this argument is article VI, section A-2, which specifies that, Upon the death of the Settlor [Majors], the persons herein named as Successor Beneficiaries shall receive the following [Clyde is named and a trust percentage for him is specified].

However, in construing a trust, the trustors intent must be ascertained from the whole instrument, not just particular parts of it. (Wells Fargo Bank, supra, 20 Cal.App.4th at p. 453.)

The Trust, as originally drafted and as amended, specifies repeatedly that a beneficiary cannot take under the Trust if he or she predeceases the distribution of the Trust estate, in part or in whole. Under Dorothys interpretation (i.e., Majors death and trust distribution as concurrent events), the phrase in part or in whole would be completely unnecessary since whatever share Clyde was to receive would have vested in its entirety immediately upon Majors (the settlors) death. Moreover, the Trusts other repetitive chant concerning the beneficiaries--predeceases the distribution of the Trust estate--aligns with an actual distribution of the Trusts property, which is not an immediate event. This view of distribution as actual distribution of trust assets is bolstered (1) by the Trusts title for article VI, section B (BENEFICIARIES WHO PREDECEASE DISTRIBUTION); (2) by article VI, section A-3, specifying that [s]aid distribution shall not take place until said beneficiaries attain the age of twenty-five . . .; and (3) by article VI, section A-1, specifying that the distribution of personal effects of the deceased Trustor is to take place upon Trustor[]s death before any allocation of the Trust estate.

Furthermore, Majors, in her last amendment (October 7, 2004), named the specific persons she wanted to benefit from her assets, and if those persons were not going to benefit by actually receiving the assets, she designated those who would. In her last amendment, Majors named specific alternative beneficiaries if one or more of the named beneficiaries did not survive distribution, and specified that if Clyde predecease[d] the distribution of the Trust estate, in part or in whole, then his . . . share[] shall lapse (be distributed to the surviving beneficiaries).

The provision setting forth the Trusts purpose (art. I,  A), moreover, provides some interpretive guidance. That section specifies in part, as highlighted: Atthe death of the Settlor, any property remaining outside the Trust may pass to the Trust estate through . . . the deceased Settlors . . . Pour-Over Will[]. Afterthe death of the Settlor, all trust benefits shall pass to the beneficiaries as provided herein. (Emphases added.) Had Dorothys interpretation of the Trust been intended (i.e., Majors death and trust distribution as concurrent events), it would have been an easy proposition to repeat the first preposition in article I, section A.

Requiring a beneficiary to survive the actual distribution of assets is a somewhat common requirement. It is common enough, in fact, to be the subject of its own chapter in the Probate Code (ch. 4, pt. 10, div. 7, 11801 et seq.), entitled Deceased Distributee, and is also the subject of decisional law.

As for this statutory chapter, section 11801, the cornerstone of the chapter, specifies as relevant:

(a) Except as provided in subdivision (b), the share in a decedents estate of a beneficiary who survives the decedent but who dies before distribution shall be distributed under this chapter with the same effect as though the distribution were made to the beneficiary while living.

(b) [D]istribution may not be made under this chapter if the decedents will provides that the beneficiary is entitled to take under the will only if the beneficiary survives the date of distribution or other period stated in the will and the beneficiary fails to survive the date of distribution or other period.

As for the decisional law, it comprises Estate of Taylor (1967) 66 Cal.2d 855 (Taylor) and Estate of Justesen (1999) 77 Cal.App.4th 352 (Justesen). Those two decisions concluded that when there is unreasonable delay in distributing an estate, a contingent interest--requiring the beneficiary to be alive at the time of distribution--vests at the time distribution should have been made. An unreasonable delay in distribution cannot defeat the beneficiarys interest. (Taylor, supra, 66 Cal.2d at p. 858; Justesen, supra, 77 Cal.App.4th at pp. 358-359.)

In Taylor, the provision at issue stated, In the event the [beneficiary] predeceases me, or predeceases the distribution of my estate, the share of my estate which [the beneficiary] would have taken . . . shall . . . be given in equal shares to [specified others] . . . . (Taylor, supra, 66 Cal.2d at p. 857, fn. 1, italics added.) This italicized language is nearly identical to the language of the Trust at issue here. By invoking the rule about unreasonable delay in distributing an estate, the Taylor court interpreted this language to mean that distribution was a process and not an event concurrent with the testators death. (Id. at pp. 856-857.) In Justesen, the relevant language stated that if the beneficiary does not survive distribution, then her . . . share shall be distributed to another. (Justesen, supra, 77 Cal.App.4th at p. 355.) Similarly, the Justesen court interpreted this language in line with the rule of unreasonable delay. (Ibid.)

Although section 11801, Taylor and Justesen involve wills, their validation of a requirement that a beneficiary survive the actual distribution of assets is just as applicable to trusts, where asset distribution is generally quicker.

Dorothy directs us to a case decided before Taylor and Justesen, Estate of Newman (1964) 230 Cal.App.2d 158. In Newman, a testamentary trust stated: Upon the death of decedents wife [Sophie] Newman, the principal then left of Trust A . . . shall be distributed as follows [setting forth the named beneficiaries respective shares]. (Id. at p. 160.) The instrument added: In the event any of the [named beneficiaries] are not living at the time of said distribution, the share which such [beneficiary] would receive if living shall be added . . . to the shares of the [beneficiaries] then living. (Id. at p. 161.)

The appellant in Newman contended that the death of a certain named beneficiary before taking physical possession of his share terminated his interest and that of his estate. The Newman court disagreed, explaining that the testamentary trust directed that upon the death of decedents wife, Sophie Newman, the principal then left of Trust A . . . shall be distributed as follows . . . and also provided for gifts over in the event the named legatees are not living at the time of said distribution. (Italics added [in Newman].) Clearly the distribution was to be as of the date of Sophie Newmans death. No other time for it is specified in the trust instrument. [] In this instrument upon the death of decedents wife and shall be distributed are inextricably linked in the dispositive sentence so as to make distribution and death of [Sophie] concurrent events upon which the rights of the remaindermen vest absolutely. (Newman, supra, 230 Cal.App.2d at pp. 162-163.)

In contrast to the testamentary trust in Newman, the Trust here, as we have seen, did not make the death of Majors and the distribution to beneficiaries concurrent events; another time for distribution, aside from Majors death, is specified in the Trust. For example, the Trust specifies that if a named beneficiary predeceases the distribution of the Trust estate, in part or in whole, then [that beneficiarys] share shall be distributed to another specified person.

Finally, Dorothy argues that our interpretation of the Trust--requiring a beneficiary to survive the actual distribution of the Trust estate--creates a conflict of interest for the trustee (who might be tempted to delay distribution) and violates the rule against perpetuities. We disagree. Under the rule set forth in Taylor and Justesen, an unreasonable delay in distribution cannot defeat a beneficiarys interest contingent on surviving distribution; that interest vests when the Trust should have been distributed. This counters Dorothys argument as to conflict of interest and the rule against perpetuities.

Disposition

The order is affirmed.

DAVIS , J.

We concur:

SIMS , Acting P.J.

RAYE , J.

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^[1] Hereafter, undesignated section references are to the Probate Code.

^[2] We will refer to some of the people involved by their first names because they share the same last name.