Filed 5/26/22 Lizer v. Romano CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from an order of the Superior Court of Los Angeles County, David Cowan, Judge. Reversed.

Hill, Farrer & Burrill, Dean E. Dennis and Robert C. Eroen for Defendant and Appellant.

Loeb & Loeb, David C. Nelson; Katten Muchin Rosenman and Carol A. Johnston for Plaintiffs and Respondents.

_________________________

Gina Martin Romano, a beneficiary under the Dean Martin Family Trust (Trust), challenges an order approving a written settlement agreement between the Trust’s co-trustees, Laura Lizer and Joel McCabe Smith (collectively, Trustees), and some of the other Trust beneficiaries (collectively, Settling Beneficiaries). Among other things, Romano contends the order unlawfully modifies the Trust by eliminating provisions (1) mandating that the share of each beneficiary “shall be held in a separate trust,” and (2) directing a successor trustee to take action “to obtain redress for breach of trust” by a prior trustee upon a beneficiary’s written request. Because the record establishes the settlement did not satisfy the statutory prerequisites for modification of an irrevocable trust, the trial court abused its discretion by ordering the modifications. (See Prob. Code, §§ 15403, 15409.)[1] We reverse.

FACTS AND PROCEDURAL HISTORY

1. The Trust

Dean Martin, the settlor, created the Trust on December 14, 1995, naming Mort Viner and Lizer as co-trustees. The Trust became irrevocable upon Martin’s death on December 25, 1995. Romano is one of the current beneficiaries under the Trust.

Viner died in June 2003, at which time Lizer became the sole trustee. She served in that capacity until December 31, 2010, when she appointed Smith as co-trustee.[2]

The Trust directs the trustees, upon Martin’s death, to divide the trust estate into “separate shares” for each of the named beneficiaries and to hold each share “in a separate trust.” (Trust, art. I, § 3, subd. 1.) The Trust grants the trustees “absolute discretion” in dividing the trust estate into separate shares to determine which property shall be allocated to each of the shares and “whether separate trusts shall own undivided interests in trust property.” (Ibid.) Apart from directing that each share shall be held in a separate trust, the Trust also provides that “[e]ach trust share created hereunder shall be treated as a separate trust for all purposes and separate accounts shall be kept for each trust[;] [h]owever, the Trustees may maintain and administer the assets of the trusts as a unit until such time as the Trustees are required to make distribution.” (Id., art. II, § 3, subd. D.)

Regarding the obligations of successor trustees, the Trust states: “No successor Trustee shall be responsible for the acts or omissions of any prior Trustee, or have any duty to audit or investigate the accounts or administration o[f] any such Trustee, or, unless requested in writing to do so by a person having a present or future beneficiary interest under any trust, have any duty to take action or to obtain redress for breach of trust.” (Trust, art. II, § 1, subd. I.)

2. Pending Litigation Matters

As early as 2011, disagreements arose between the beneficiaries and the Trustees over the administration of the Trust. As relevant to this appeal, the following matters remain pending in the trial court:

• On March 15, 2011, Lizer filed her First and Final Account; Report of Trustee; and Petition for Approval of Account, Instructions and Interpretation of Trust Instrument (Lizer’s Final Account). The beneficiaries filed objections to Lizer’s Final Account on December 16, 2011.
• On June 3, 2011, the beneficiaries filed a Petition for Orders: (1) Compelling Trustee to Account; (2) for Removal of Trustee; and (3) for Surcharge of Trustee (Removal Petition). The Removal Petition alleged Lizer breached her fiduciary duties as trustee by, among other things, taking Trust resources for her own use and benefit in violation of the Trust and her fiduciary duties; maintaining inaccurate, incomplete, and misleading books and records; and failing to correctly allocate Trust receipts and outflows between income and principal. Lizer filed an opposition to the Removal Petition on August 16, 2011.
• Between April 11, 2012 and March 23, 2018, the Trustees filed their First through Seventh Accounts Current (the Trustees’ Accounts). The beneficiaries filed objections to each of the Trustees’ Accounts.

3. Lizer’s Initial Settlement Proposal and Romano’s Amended Petition for Removal

On December 4, 2018, the Trustees and several beneficiaries, including Romano, met and conferred as directed by the trial court. According to Romano, the parties verbally agreed, among other things, to appointment of a corporate trustee, with input from the beneficiaries, which would operate as a co-trustee with Lizer and Smith.

On February 4, 2019, Lizer presented a settlement proposal to the beneficiaries, without Smith’s endorsement, that proposed to install City National Bank as the corporate trustee. In response, Smith sent a letter to the beneficiaries expressing his objection to the proposal and his intention to propose other corporate co-trustees.

On February 7, 2019, Romano’s counsel sent Lizer a letter outlining Romano’s objections to several of the settlement proposal’s provisions, including a provision requiring withdrawal of the Removal Petition with prejudice. The letter also noted the proposed settlement did not address the Trustees’ failure to establish “sub-trust[s],” which had resulted in all the Trust assets being encumbered for loans to pay a tax liability upon the death of one of the beneficiaries.

On February 13, 2019, after Lizer declined to respond to the objections, Romano filed an Amended Petition for Removal of the Trustees (Amended Removal Petition). Lizer and Smith filed separate responses.

4. The First Settlement Agreement

Shortly after Romano filed her Amended Removal Petition, Lizer entered into discussions with certain beneficiaries (not including Romano), which resulted in a settlement agreement with six of the beneficiaries (First Settlement). On March 13, 2019, Lizer filed a Petition for an Order Approving the First Settlement Agreement (First Settlement Petition). Romano and the non-settling beneficiaries filed objections.

Smith likewise filed objections to the First Settlement. As co-trustee, Smith argued the First Settlement was “not in the best interest of the Trust” because (1) it contemplated “the appointment of different corporate co-trustees with respect to the Settling Beneficiaries and the other Beneficiaries’ trust shares,” which would make trust administration “costly [and] unworkable”; (2) it afforded the settling beneficiaries benefits not afforded to the other beneficiaries in violation of the Trustees’ duty of impartiality; and (3) it impermissibly directed that “any attorneys’ fees and costs incurred by the Co-Trustees in connection with ongoing Litigations” would be charged solely to the non-settling beneficiaries’ share, in violation of law establishing the probate court’s jurisdiction “to determine and allocate legal fees.” Smith further objected that Lizer impermissibly negotiated the “terms of the [First] Settlement Agreement by leveraging the [non-settling beneficiaries’] financial interests.”

5. The Current Settlement Agreement

On September 13, 2019, before the trial court ruled on the First Settlement Petition, the Trustees entered into the current settlement (Settlement) with the Settling Beneficiaries.[3] The Settlement expressly supersedes the First Settlement. As relevant to this appeal, its key terms provide:

• Lizer shall appoint and designate the Bessemer Trust (Bessemer) as an additional co-trustee of the Trust and each of the separate shares, provided that the trial court enter an order directing Bessemer “shall have no obligation or duty to investigate or seek any relief of any kind concerning . . . any acts or omissions by either or both of the Current

Co-Trustees.”

• With respect to the pending litigation matters:
  • Lizer’s Final Account and the Trustees’ Accounts are approved and the Settling Beneficiaries’ objections to those accounts are denied with prejudice, but Romano’s objections remain pending.
  • The Removal Petition is denied with prejudice as to the Settling Beneficiaries, but the petition remains pending as to Romano.
• “[N]o separate trusts [or sub-trusts] shall be drafted or required to be created,” but the Trustees will “separately account[ ]” for each share.
• The Trustees may pay from the Settling Beneficiaries’ shares the corresponding proportionate amounts of the Trustees’ attorney fees incurred in connection with the pending litigation matters and negotiation of the Settlement, while the attorney fees and costs incurred after the Settlement shall be charged solely to Romano’s share.
• The Settlement is “subject to and conditioned upon” the trial court entering orders giving effect to each of the foregoing terms of the Settlement.

6. Petition Approving the Settlement

The Trustees filed a verified Petition for Order Approving Settlement and Related Orders (Settlement Petition). In addition to seeking approval of the Settlement, the petition requested the trial court enter an order “directing that if any order or judgment is entered in any of the [pending litigation matters] that affords any relief of any kind against either or both of the [Trustees], such relief shall be applicable only to [Romano’s] Share and [Romano].” The Trustees acknowledged Romano might continue to prosecute the pending litigation matters, but they maintained a principal purpose of the Settlement was to “end” the pending litigation matters as to the Settling Beneficiaries, “including eliminating any effect that continuation of the [pending litigation matters] might otherwise have on the Co-Trustees with respect to . . . the Settling Beneficiaries.”

Romano filed verified objections to the Settlement Petition. She argued the Settlement was premised “on the fiction that it applies only to ‘Sub-Trusts’ ” belonging to the Settling Beneficiaries, when in “actuality, no such . . . ‘Sub-Trusts’ . . . exist because the Co-Trustees ha[d] never divided the Trust into Sub-Trusts.” Because the Trustees never created “these fictional Sub-Trusts,” Romano maintained the Settlement would harm the non-settling beneficiaries under the Trustees’ interpretation of the Trust.

Among other things, Romano objected to the provision seeking an order denying the Removal Petition with prejudice as to the Settling Beneficiaries. She argued Lizer sought “permanently [to] embed herself in the Trust,” regardless of whether the court ultimately granted the pending Removal Petition. Romano maintained this provision necessarily harmed her interest because the Trustees acknowledged “the Trust assets are mingled, and no division exists among the fictional Sub-Trusts.”

Romano similarly objected to the provision approving the Trustees’ Accounts as to the Settling Beneficiaries’ shares. She argued this provision, like “nearly all of [the Settlement’s] terms,” was premised on “the fiction that Sub-Trusts exist,” and it could not be reconciled with the fact that the Trustees had “maintained and accounted for [the Trust] as a whole.” Because an “accounting is either approved or it is not,” Romano urged that she was “entitled to an evidentiary hearing” on her pending objections before the court entered an order declaring the Trustees’ Accounts “ ‘accurate statements of the administration of the [Trust] and the [fictional Sub-Trusts].’ ”

As for the provision conditioning Bessemer’s appointment on an order directing that Bessemer would have no obligation to investigate or seek relief of any kind for the current Trustees’ alleged breach of trust, Romano asserted the requested order improperly sought “to modify the Trust” by nullifying the provision requiring a successor trustee “to take action or to obtain redress” for a prior trustee’s breach of trust when “ ‘requested in writing to do so by a person having a present or future beneficiary interest under any trust.’ ” She similarly argued the Settlement sought to improperly modify the Trust to the extent it provided “ ‘no separate trusts shall be drafted or required to be created,’ ” in direct contravention of the Trust’s mandate that each “share set aside for each [beneficiary] shall be held in a separate trust.”

Finally, as relevant here, Romano objected to the request for an order charging the costs of ongoing litigation solely to her share. She argued the court could only make such an order under section 17211, subdivision (b) upon a finding that she “objected to the accountings or otherwise engaged in litigation in bad faith.”

The Trustees filed separate, but substantively similar, responses to Romano’s objections. They argued the objections were largely premised on “semantic games” that substituted “the word ‘Sub-Trusts’ for the defined term ‘Shares’ ” used in the Settlement. Contrary to Romano’s assertion, the Trustees maintained “[n]othing in the [Trust] mandates that ‘separate trusts shall be drafted or required to be created,’ ” and they urged they had properly “administer[ed] all of the assets together as a unit.” Because the Settlement was “not binding” on Romano, the Trustees argued it did “not preclude her from pursuing her claims” on behalf of her share, and she had offered “no reason” why the Settling Beneficiaries could not settle similar claims as to themselves and their shares.

7. The Order Approving Settlement and Related Orders

The trial court held a hearing on the Settlement Petition, observing at the outset that it did not believe adjudication of the petition required an evidentiary hearing, nor did the court believe it was necessary to make factual determinations regarding the underlying allegations against the Trustees. Rather, the court suggested the critical issue was whether it could “permissibly enter” the various orders the Trustees requested in connection with seeking approval of the Settlement, specifically those that purported to “foreclose or partially foreclose” Romano’s right to relief on her pending petitions. In that regard, the court identified the “issue of the subtrusts or shares” as a “big issue.” Given the “reality” that “the trust has not been subdivided yet,” the court suggested the Trustees might have “ ‘greater’ ” duties than they otherwise would have owed to “ ‘separate beneficiaries.’ ” The court also suggested the requested order eliminating the successor trustee’s duty to investigate past breaches of trust seemed “problematic.”

In response to the court’s stated concerns, Lizer’s counsel represented that the Trust “does not require separate trusts.” He maintained it required only that “each share is to be treated as a separate trust for all purposes,” but the Trust also permitted the Trustees to “ ‘hold all of the assets together and administer them together as a single unit.’ ” Counsel argued this provision “suggests they’re not really separate trusts”; rather, “t’s all one big pot that’s treated as separate trusts” and the Trust contemplates “it would be the same trustee for all of these different shares or trusts because different trustees couldn’t hold them all together as a pot.” As for the term eliminating the successor trustee’s duty to take action on a past breach of trust, Lizer’s counsel said this was “something that Bessemer asked for.”

1. [i]Standard of Review

We review the probate court’s approval of a settlement for an abuse of discretion. (Breslin v. Breslin (2021) 62 Cal.App.5th 801, 806; Estate of Green (1956) 145 Cal.App.2d 25, 28.) Section 17200 authorizes a trustee or beneficiary of a trust to petition the probate court for a determination “concerning the internal affairs of the trust,” including the propriety of “the acts of the trustee” and “redress of a breach of the trust by any available remedy.” (§ 17200, subds. (a), (b)(5), (b)(12); see also § 9837 [procedural requirements for a petition for an order authorizing a compromise or settlement].) Under section 17206, the probate court “in its discretion may make any orders and take any other action necessary or proper to dispose of the matters presented by the petition.” However, a court cannot enforce a contract that is “ ‘tainted with illegality.’ ” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1074.) The term “illegality,” as used in this context, is “a broad term,” encompassing the violation of any statute or rule. (Kashani v. Tsann Kuen China Enterprise Co. (2004) 118 Cal.App.4th 531, 542.) A court abuses its discretion when it takes action that “transgresses the confines of the applicable principles of law.” (City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 1297; see also Dunlap v. Mayer (2021) 63 Cal.App.5th 419, 424 (Dunlap) [“A court abuses its discretion if ‘ “it exceeded the bounds of reason or contravened the uncontradicted evidence [citation], failed to follow proper procedure in reaching its decision [citation], or applied the wrong legal standard to the determination.” ’ ”].)

2. The Order Unlawfully Modifies the Trust

The probate court is statutorily authorized to modify an irrevocable trust (1) if “all beneficiaries of [the] irrevocable trust consent” and they “petition the court for modification or termination of the trust” (§ 15403, subd. (a)); or (2) on petition by a trustee or beneficiary, “if, owing to circumstances not known to the settlor and not anticipated by the settlor, the continuation of the trust under its terms would defeat or substantially impair

the accomplishment of the purposes of the trust” (§ 15409, subd. (a)).[4] Romano maintains, and the Trustees do not dispute, that neither of these prerequisites for modification was established when the trial court entered the challenged order.

Romano contends the Order unlawfully modifies the Trust in two ways. First, she points to article II, section one of the Trust, which relieves a successor trustee of “any duty to take action or to obtain redress for breach of trust” by a prior trustee, “unless requested in writing to do so by a person having a present or future beneficiary interest under any trust.” (Trust, art. II, § 1, subd. I, italics added.) Under this provision, Romano maintains she would have had the right to have Bessemer take action to redress the Trustees’ alleged misconduct upon written request, but the trial court modified the Trust to eliminate this right by ordering that “Bessemer shall have no obligation or duty to investigate or seek any relief of any kind concerning, and no liability for, any acts or omissions by either or both of the Current Co-Trustees prior to [the Settlement], whether known, unknown or subsequently discovered.” Romano argues the modification, to which she objected, contravenes the Trust’s purpose by “mak[ing] it more difficult for beneficiaries to hold Trustees accountable.”

The Trustees insist the Order does not modify the Trust provision requiring a successor trustee to seek redress for a past breach of trust upon a beneficiary’s written request. Rather, they maintain the order “merely is a reasonable exercise of the trial court’s discretion to relieve Bessemer of this particular obligation.” The distinction, if there is one, makes no difference in this case.

As the court explained in Stanton v. Wells Fargo Bank & Union Trust Co. (1957) 150 Cal.App.2d 763 (Stanton) (a case the Trustees cite and rely upon in their respondents’ brief), “the court should not permit a deviation [from a trust’s terms] simply because the beneficiaries request it where the main purpose of the trust is not threatened and no emergency exists or is threatened.” (Id. at p. 770.) There, the trial court entered a judgment “amend[ing]” the trust’s restrictive investment provision, agreeing with the petitioning beneficiaries that “a change in economic conditions not anticipated by the settlor since the trust was executed” threatened “substantially [to] impair the purpose of the trust” if the investment provision were followed. (Id. at pp. 765–766.) The reviewing court held the trial court abused its discretion by authorizing the deviation, explaining: “A court should not presume to remake a trust instrument even though the court believes that it could do a better job. The court’s power to permit a deviation exists so that the settlor’s main trust purpose will not fail, and to take care of grave emergencies. That is not this case. The trial court should not have permitted the deviation.” (Id. at p. 776.)

The Trustees do not maintain, and have never maintained, that a “deviation” from the Trust’s provision regarding the duties of a successor trustee was necessary to prevent the failure of the Trust’s main purpose or to “take care of a grave emergency.” (Stanton, supra, 150 Cal.App.2d at p. 776.) Because the Trustees did not invoke the probate court’s discretion to permit a deviation from the Trust’s terms, they cannot rely upon that authority now to justify an order that plainly eliminates an express right that the Trust confers upon the beneficiaries to have a successor trustee redress a past breach of trust upon written request. (See ibid.)

Nor can the Trustees justify this modification by claiming Bessemer requested it as a condition of consenting to serve as a co-trustee. The relevant Probate Code sections do not authorize the court to modify a trust simply because a prospective successor trustee demands it. (See §§ 15403, subd. (a), 15409, subd. (a).) Bessemer’s request has no bearing on whether the trial court could lawfully order the modification.

Finally, the Trustees argue Romano “withdrew” her objection to the modification of the Trust’s successor trustee provision and thus waived the issue for appeal. The record does not support the contention. Romano’s counsel made an offer to withdraw the objection in order to obtain Bessemer’s consent without relinquishing Romano’s objections to other aspects of the Settlement. The trial court rejected that offer, explaining that the petition could not be approved “piecemeal” because that was contrary to its terms and “not going to work for Bessemer.” Lizer’s counsel agreed with the court’s assessment, urging the court to “make whatever order it’s going to make at this point.” Because neither the court nor the Trustees accepted her terms, Romano did not withdraw her objection. And, because the consent of “all beneficiaries” is required to modify an irrevocable trust (§ 15403, subd. (a)), Romano’s standing objection precluded the court from modifying the Trust without evidence showing the modification was necessary to accomplish the Trust’s purpose (§ 15409, subd. (a)). The Trustees offered no such evidence in favor of the Settlement. The trial court thus abused its discretion by ordering the Trust modified to eliminate a beneficiary’s right to compel a successor trustee to seek redress for a past breach of trust upon written request.

Romano contends the Order unlawfully modifies the Trust in a second way by eliminating the provision under article I, section three directing that the “share[s] set aside for each [beneficiary] shall be held in a separate trust.” (Trust, art. I, § 3, subd. 1, italics added.) Notwithstanding this mandate, the Order provides “no separate trusts shall be drafted or required to be created for the Shares, but each Share will be separately accounted for in a manner to be determined.” Romano did not consent to this modification and she argues the Trustees offered no reason or evidence to demonstrate it was necessary to accomplish the Trust’s purposes. (See §§ 15403, subd. (a), 15409, subd. (a).)

Again, the Trustees do not dispute that the statutory prerequisites for modification are absent. Instead, they contend the Trust requires only that each “ ‘ “share” is to be “treated” as a separate trust and accounted for separately, but . . . [n]othing in the [Trust] mandates that “separate trusts shall be drafted or created.” ’ ” Thus, the Trustees maintain, “far from modifying” the Trust, the order “does nothing more than affirm the [Trustees’] interpretation” of the provision requiring the separate shares to “ ‘be treated as [ ] separate trust[s] for all purposes.’ ”

The Trustees’ position cannot be reconciled with several Trust provisions that expressly contemplate the creation of separate trusts for each separate share. First, as discussed above, the express mandate at article I, section three directs the trustees to “divid[e] the trust estate into separate shares,” and that the “share[s] set aside for each [beneficiary] shall be held in a separate trust.” (Trust, art. I, § 3, subd. 1, italics added.) Consistent with that mandate, the same section grants the trustees “discretion to determine which property shall be allocated to each of the shares, and to determine whether separate trusts shall own undivided interests in trust property.” (Ibid., italics added.) To comply with the rule against perpetuities, the section further provides “all trusts created under this [section] shall terminate one day prior to the

twenty-first (21st) anniversary of the death of the last survivor of myself and my lawful issue living at the date of my death.” (Id., subd. 10, italics added.)

Article II of the Trust sets forth the “GENERAL PROVISIONS REGARDING ALL TRUSTS.” (Italics added, underline omitted.) Under this article, trustee compensation is to be calculated based on the value of the principal of “each trust” and for “services rendered to each of the trusts created hereunder.” (Trust, art. II, § 1, subd. E, italics added.) Expenses are to be charged “to the particular trust or trusts to which such expenses are attributable.” (Id., § 1, subd. F.) A trustee has the right to resign his position as trustee and “[a]ny such resignation from a separate trust shall not be deemed to be a resignation from any of the other trusts created hereunder.” (Id., § 1, subd. G., italics added.) The trustees are vested with enumerated powers and discretion until final distribution to “carry out the purposes of each trust created by this instrument.” (Id., § 2, italics added.)

Article III of the Trust expressly authorizes the trustees to take action to mitigate the effect of the federal generation-skipping tax if “any trust to be established hereunder may be subject to” the tax. (Trust, art. III, subd. B, italics added.) In that circumstance, the trustees are directed to “first divide the portion of the trust estate allocable to such trust into two separate trusts” to avail the trust of an applicable tax exemption, and, “if the addition of any portion of the trust estate to another trust hereunder will cause such trust to have some property that is exempt from the generation-skipping tax and some property that is not exempt,” the trustees “may retain such portion as a separate trust in lieu of adding it to the previously established trust.” (Ibid., italics added.) Article III further vests the trustees with “the power to take any action and to make any election to minimize the tax liabilities of any trust created hereunder and such trust’s beneficiaries.”[5] (Id., subd. C, italics added.)

A trust must be administered according to the settlor’s intent. (§ 21102, subd. (a).) Administration consistent with that intent, as expressed in the testamentary instrument, is the “ ‘ “paramount rule . . . to which all other rules must yield.” ’ ” (Newman v. Wells Fargo Bank (1996) 14 Cal.4th 126, 134; In re Wilson’s Estate (1920) 184 Cal. 63, 66–67; Estate of Russell (1968) 69 Cal.2d 200, 205–206.) Contrary to the Trustees’ assertion, the plain text of the foregoing provisions unambiguously establishes that the Trust both contemplates and mandates the creation of a separate trust for each beneficiary’s separate share. The context and interrelation of the provisions demonstrate the settlor intended these separate trusts to be created to facilitate trust administration and to minimize tax liabilities on the trust assets and beneficiaries.[6] To the extent Romano is correct about the tax liability incurred by the entire Trust upon her brother’s death, those purposes have already been frustrated by the Trustees’ admitted refusal to create a separate trust for each share. (See ante, fn. 5.)

The Trust provision directing that “[e]ach trust share created hereunder shall be treated as a separate trust for all purposes” (Trust, art. II, § 3, subd. D) cannot negate these other provisions calling for and contemplating the creation of separate trusts. Rather, to give effect to those latter provisions, the former provision must be construed simply to recognize that there would be a period when, after the settlor’s death, the trustees had yet to create the separate trusts mandated under article I, section three, and, even during this period, each beneficiary’s share was still to “be treated as a separate trust for all purposes and separate accounts [were to] be kept for each trust.”[7] (Ibid.) To construe this provision as a negation of the other provisions contemplating the creation of separate trusts, as the Trustees advocate, would run afoul of the rule requiring courts to interpret “testamentary instruments as a whole and together, so that all of their provisions may be given effect.”[8] (Estate of Nielsen (1959) 169 Cal.App.2d 297, 305, citing Moore v. Wood (1945) 26 Cal.2d 621, 629; Schwan v. Permann (2018) 28 Cal.App.5th 678, 685; see § 21121 [“All parts of an instrument are to be construed in relation to each other and so as, if possible, to form a consistent whole.”].)

The Trustees contend the part of the Order eliminating the mandate to create separate trusts does not prejudice Romano’s interest because it is expressly subject to another part of the Order specifying that the Settlement and Order “ ‘shall be without prejudice’ ” to Romano’s rights as a beneficiary “ ‘to pursue her claims and objections . . . as to herself and [her] Share.’ ” This argument cannot be reconciled with the requirement under section 15403, subdivision (a) that “all beneficiaries of an irrevocable trust” must consent to a modification. (Italics added.) Permitting only some of the beneficiaries to modify the terms of an irrevocable trust by, in effect, creating different trust terms for the non-consenting beneficiary would violate the settlor’s intent to create an irrevocable trust and nullify the legislative judgment that an irrevocable trust may be modified only with the consent of all beneficiaries. (See Aguilar v. Aguilar (2008) 168 Cal.App.4th 35, 39 [joint trustor could not withdraw property from trust after it became irrevocable without consent of all beneficiaries, even though property she sought to withdraw was her share of community property]; see also Estate of Nicholas (1986) 177 Cal.App.3d 1071, 1089 [“even a majority of beneficiaries cannot authorize a trustee to act contrary to the terms of a trust or statute”].)

The trial court’s Order modifies the Trust by eliminating the beneficiaries’ right to compel a successor trustee “to take action or to obtain redress for breach of trust” upon written request, and jettisoning the mandate that each “share set aside for each [beneficiary] shall be held in a separate trust.” As it is undisputed that the Settlement Petition did not satisfy either statutory basis for modification, the trial court abused its discretion by ordering the Trust to be modified as provided in the Order.

3. Because the Portions of the Order Modifying the Trust Are Not Severable, the Entire Order Must Be Reversed

We may order a partial reversal of an appealed judgment or order “where some of the issues were correctly determined below and thus do not require a retrial.” (Eisenberg et al., Cal. Practice Guide: Civil Appeals & Writs (The Rutter Group 2021) ¶ 11:76.) However, a partial reversal is appropriate only if the portion of the order to be reversed “is severable from the rest of the judgment or order.” (Id. at ¶ 11:77, italics added; Gray v. Cotton (1913) 166 Cal. 130, 139 (Gray) [partial reversal appropriate only “where the error found to have been committed has affected the determination of but one or more of a greater number of distinct and severable issues or causes of action”].) A portion of a judgment or order “is severable when . . . any determination which could be made as the result of an appeal cannot affect the determination of the remaining issues of the suit.” (American Enterprise, Inc. v. Van Winkle (1952) 39 Cal.2d 210, 217.)

In this case, our reversal of the parts of the Order improperly modifying the Trust requires reversal of the entire Order because, by the Settlement’s terms, the Settlement is “subject to and conditioned upon entry of all of the Approval Orders and all of the Approval Orders becoming final.” (Italics added.) The Settlement defines the “Approval Orders” as “(i) an Order approving this Agreement and (ii) each of the further Orders contemplated by this Agreement.” Among the matters to be approved in the Settlement is the provision that “no separate trusts shall be drafted or required to be created” under the Trust. Among the “further Orders” listed in the Settlement is an order directing that “Bessemer shall have no obligation or duty to investigate or seek any relief of any kind concerning . . . any acts or omissions by either or both of the Current Co-Trustees prior to the [Settlement], whether known, unknown or subsequently discovered.” Consistent with these terms, the Settlement Petition “pray[ed]” that the trial court “issue its Orders” directing, among other things, that Bessemer shall have no obligation or duty to investigate or seek any relief of any kind concerning the Trustees’ past acts, and that no separate trusts shall be drafted or required to be created. The Order makes each of these requested directives, as well as all other Approval Orders specified in the Settlement. Because the Trustees and Settling Beneficiaries expressly stipulated that their agreement to the Settlement was “subject to and conditioned upon entry of all of the Approval Orders,” our reversal of the parts of the Order improperly modifying the Trust undermines a necessary predicate for the entire Order. These parts of the Order therefore are not severable and a partial reversal is not permitted. (Cf. Gray, supra, 166 Cal. at p. 139.)

We recognize Romano also challenges the Order on the grounds that it (1) prejudicially impairs her pending removal petitions and (2) authorizes the Trustees to charge her for costs of litigation without a finding that she objected to the accountings or petitioned for the Trustees’ removal in bad faith. Because we must reverse the entire Order based on the parts unlawfully modifying the Trust, we do not reach these issues.

Finally, we note that Romano has identified several factual disputes related to the Settlement’s terms that she contends warranted an evidentiary hearing before the trial court entered an order approving the Settlement. (See Estate of Bennett (2008) 163 Cal.App.4th 1303, 1308–1310; Dunlap, supra, 63 Cal.App.5th at p. 425.) Because we must reverse the entire Order due to the improper modification of the Trust, we do not reach this issue. On remand, Romano will have an opportunity to request an evidentiary hearing should she have objections to any other settlement the Trustees may reach with the beneficiaries.

DISPOSITION

The Order is reversed. Gina Martin Romano is entitled to her costs.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

EGERTON, J.

We concur:

EDMON, P. J.

LAVIN, J.

[1] Statutory references are to the Probate Code, unless otherwise designated.

[2] In the event of the resignation, disability, or death of one of the originally-named co-trustees, the Trust provides “the other person shall have the power to designate a successor Co-Trustee” and, until a successor is designated, “the other person shall act as sole Trustee.” (Trust, art. II, § 1, subd. A.)

[3] The Settling Beneficiaries include all current beneficiaries under the Trust, except Romano and the children of Ricci Martin, who died in 2016.

[4] Consistent with section 15409, the probate court also has “ ‘the equity power to modify the terms of a trust where such modification is necessary to preserve the trust or serve the original intentions of the trustor.’ ” (Ike v. Doolittle (1998) 61 Cal.App.4th 51, 80; see Moxley v. Title Ins. & Trust Co. (1946) 27 Cal.2d 457, 468 [the equity power is reserved for those “exceptional situations in which modification [is necessary] in order to carry out, rather than to defeat, the primary purpose of the trustor as expressed in the trust instrument”].) The record shows the Trustees did not invoke, and the trial court did not exercise, the court’s equity power with respect to the Settlement Petition or Order.

[5] In her verified objections to the Settlement, Romano asserted the Trustees’ failure to divide the Trust into separate trusts had “resulted in a tax liability for the entire Trust” when her brother Ricci Martin died, which the Trustees improperly paid by “encumbering all the Trust assets with debt.” Consistent with that contention, the Trustees acknowledged in the Settlement that “loans [were] incurred to pay the Generation Skipping Transfer (GST) tax that became due as a result of Ricci’s death.”

[6] At oral argument, Romano’s counsel suggested separate trusts were mandated to achieve another material purpose—transferring the estate assets to Martin’s grandchildren free and clear of the Trust after his children’s deaths. Consistent with that identified purpose, article I, section three, subdivision seven provides, “Upon the death of a child o[f] mine . . . the share set aside in the separate trust for such person shall be held in trust for the lawful issue of such person” and “[w]hen all of the children of such deceased person shall have attained the age of twenty-one years, all property then held in trust shall be distributed free of trust to the lawful issue upon the principle of representation.” (Italics added.)

[7] Indeed, this was the trial court’s initial instinct when it observed there were several “provisions indicating that perhaps [the Trust] should have been [subdivided] even though . . . [the] Trustees may not necessarily be required to immediately” create separate trusts for each share.

We also cannot ignore that, notwithstanding their arguments to the trial court and on appeal, the Trustees and Settling Beneficiaries seemed to recognize the Trust required the shares to be held in separate trusts. Consistent with that apparent understanding, the Settlement stipulates: “While the [Trust] provides that the Shares are to be separate trusts, the Parties agree that, while each Share will be separately accounted for, no separate trusts shall be drafted or required to be created.” (Italics added.)

[8] At oral argument, the Trustees’ counsel suggested this construction would produce absurd results under article I, section three, subdivision three, which provides: “The net income of each share set aside for the persons named above . . . shall be distributed in monthly or other convenient installments to or for the benefit of such person . . . .” Counsel maintains construing the Trust to require the trustees to replace “each share” with a “separate trust” would provide no method for income distribution because the relevant provision refers only to “each share.” But neither the Trust nor our construction contemplates replacement of the separate shares; rather, the Trust calls for each separate share to “be held in a separate trust.” (Trust, art. I, § 3, subd. 1.) Indeed, this mechanism of holding each separate share in a separate trust is echoed in the provision regarding transfer upon the death of a beneficiary, which states: “Upon the death of a child o[f] mine . . . the share set aside in the separate trust for such person shall be held in trust for the lawful issue of such person . . . .” (Id., subd. 7, italics added.)

The Trustees’ counsel also suggested that wherever the term “separate trust” appears in the Trust document, it should be construed to mean “separate share.” But that construction would produce absurd results, particularly in the critical provision at article I, section three which directs that each “share set aside for each [beneficiary] shall be held in a separate trust.” (Trust, art. I, § 3, subd. 1, italics added.)