Halvorsen v. Halvorsen

Filed 3/23/07 Halvorsen v. Halvorsen 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NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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)

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Appellants challenge the trial courts removal of them as trustees of a trust, the courts failure to issue a statement of decision on that ruling, and the courts resolution of a trust dispute. We affirm the trial court in its entirety.

FACTS

In 1988, Ralph and Evelyn Marston created the Marston Family Revocable Living Trust. Ralphs third marriage was to Evelyn. He had two biological children from a prior marriage: Ralph Marston, Jr., and Charles Marston. He also had three stepchildren from his second marriage: Barbara Norton, Kathye Blessing, and Howard Smith.

Evelyn had four biological children from a previous marriage: Michael Halvorsen, plaintiff Patrick Halvorsen, and defendants Ronald Halvorsen and Colleen Dunaway.

The trust agreement named Ralph and Evelyn as trustors and trustees, and it named Charles Marston as the successor trustee.

The trust was designed in part so as to avoid the payment of federal estate taxes upon the deaths of both spouses. Upon the death of the first spouse, the trust would split into two separate trusts, Trust A and Trust B. Trust A would consist of the surviving spouses interest in the community property, the surviving spouses separate property included in the trust, any interest in the predeceased spouses separate property, and any other property held in trust that would qualify for the federal estate tax marital deduction. However, to ensure Trust A did not pay estate taxes, no more of the property qualifying for the marital deduction would pass to Trust A than that amount necessary to bring the total value of Trust A to the maximum amount that could pass tax free under the federal estate tax exemption.

Trust B would consist of the balance of the trust estate and any portion of Trust A disclaimed by the surviving spouse. Upon the death of the first spouse, Trust B would become irrevocable, but the surviving spouse would continue to exercise discretion over Trust A. Upon the surviving spouses death, distribution of Trust A would proceed according to a will executed by the surviving spouse. Distribution of Trust B would be according to the terms of the trust, and would pass to the beneficiaries without requiring payment of the estate tax. (See generally Drafting Cal. Revocable Trusts (Cont.Ed.Bar 4th ed. 2005) 11.1, 14.1.)

Ralph and Evelyn amended the trust agreement in 1991 and 1994. In the second amendment, executed in 1994, Ralph and Evelyn agreed to distribute upon the death of the last surviving spouse the contents of Trust B and the entire trust estate generally in equal parts to all nine children and stepchildren.

Ralph died on February 27, 1999. It is undisputed that immediately prior to Ralphs death, the trust had a total value of $494,352. It is also undisputed that at the time of Ralphs death, the federal estate tax exemption amount was $675,000.

On April 14, 1999, shortly after Ralph died, Evelyn amended the trust agreement a third time in which she changed the distribution of Trust A. Now, if she as the surviving spouse did not appoint the distribution of Trust A in a will, Trust A would be distributed equally only to her four biological children, Michael, Patrick, Ronald, and Colleen. Evelyn also appointed Patrick as cotrustee and successor trustee as to Trust A.

The following day, April 15, Evelyn executed a Notification by Trustee pursuant to Probate Code section 16061.7. This document formally noticed Ralphs death, resulting in Trust B of said Trust becoming irrevocable. Attached to the notice was the 1994 second amendment to the trust agreement, which set forth the terms of distribution of Trust B. The notice was served on all of the Trusts beneficiaries.

On the same day, Evelyn received a federal tax identification number for Trust B. As of April 15, 1999, there were no assets in Trust B.

On July 22, 1999, certain real property in Sutter County was transferred into Trust B by means of a grant deed. On October 4, 1999, by means of a Correction Grant Deed, Evelyn and Patrick, named as cotrustees for Trust B, transferred the same property from Trust B to Trust A.

On November 29, 1999, as part of a settlement of a separate legal action between the trust and Charles Marston, Charles declined to act as successor trustee to either Trust A or Trust B, and Evelyn declared Patrick to be the successor trustee for both Trusts A and B.

On March 10, 2000, Evelyn executed another amendment to the trust agreement, declaring Patrick shall no longer serve as a Successor Trustee and is replaced by Michael and Ronald. She also declared that all remaining assets are to be distributed in equal shares to Michael, Patrick, Ronald, and Colleen.

On October 30, 2002, Evelyn amended the trust agreement, naming Ronald the successor trustee. If Ronald was unable or unwilling to serve, then Colleen would fulfill that role.

On January 10, 2005, Evelyn executed yet another amendment, this time naming Ronald and Colleen jointly as successor trustees.

Evelyn died on January 25, 2005.

PROCEDURAL HISTORY

On April 29, 2005, Patrick filed a petition for instructions and an accounting of the trust pursuant to Probate Code section 17200. He sought an order directing the trustees of Trust A (whomever the court determined those persons to be) to (1) submit an accounting of Trusts A and B from 2000 to the present; (2) adequately fund Trust B; and (3) distribute the trust assets. Patrick claimed Trust B must be funded so the wishes of his stepfather could be carried out and the beneficiaries of that trust receive their portion of the estate.

Following a hearing (of which there is no transcript), the trial court on August 30, 2005, determined Trust B came into existence when Evelyn and Patrick transferred real property into that trust in July 1999. The fact that Trust A never exceeded the federal estate tax exemption limit did not prohibit Evelyn from funding Trust B.

The trial court went on to state Evelyn and Patrick had no power to transfer property out of Trust B at a time when that trust had become irrevocable. However, the court left the matter up to the Trust B trustee to take whatever action he desired to address the transfer.

The trial court determined Ronald and Colleen were the successor trustees of Trust A and remained so. It also appointed Patrick to be the successor trustee of Trust B. The court made no mention of an accounting. The trial court served its ruling and order on August 30, 2005.

On October 6, 2005, Patrick filed a second petition under Probate Code section 17200. This petition sought an order directing the Trust A trustees to submit an accounting of Trust A from 2000 to the present. It also sought an order removing Ronald and Colleen as the Trust A trustees due to their alleged failure to communicate with the beneficiaries and to provide an accounting. Finally, it sought the distribution of all trust assets.

Patrick alleged Trust As main asset, Ralph and Evelyns home, may not be properly insured against hazards. He alleged, based on information and belief, that Ronald is currently under the constant medication of a derivative morphine drip, and is in no condition to tend to the trust. Also based on information and belief, Patrick alleged Colleen receives SSI assistance from the federal government, based upon a diagnosed mental condition, and is also unable to properly tend to the trust. Patrick verified the petition to be true and correct except for those items based on information and belief.

On October 19, 2005, Ronald and Colleen through their attorney served on Patrick an accounting. This accounting consisted entirely of various bank and brokerage statements, service provider invoices and sales receipts.

Also on October 19, 2005, Ronald and Colleen served on Patrick a copy of the homeowners insurance policy declaration showing the family home was insured at least through May 1, 2005.

Patrick argued the accounting was inadequate. It failed to contain a statement of assets and liabilities and a statement of the receipts and distributions of principal and income. (Prob. Code, 16063.) Patrick also faulted the accounting for not valuing the trusts assets and for making no mention of the real property transferred from Trust B to Trust A.

On December 8, 2005, counsel for Ronald and Colleen filed another accounting with the court. This accounting was limited to the period of time since Evelyns passing, when Ronald and Colleen became trustees. It included a statement summarizing the receipts and disbursements of principal and income and the trusts assets and liabilities. It also included bank statements, deposit records, the deed on the family home, and records of loan and property transactions, including a sale of real property located in Sutter County.

Patrick objected to this latest accounting, claiming it failed to value the entire trust, failed to value the family home, failed to include the terms of sale of the Sutter County property, and failed to include the terms of another loan made from the trust. He requested the court either replace the trustees, or order the sale of the family home.

In response, Ronald and Colleen argued the law did not require them to provide a total value of the trust or the family home. However, they provided a sales agreement of the Sutter County property, and a February 4, 2005, appraisal of the family home. The appraisal was actually only a real estate agents estimate of the current market value of the home. The document itself states: This is not an appraisal[.]

About two weeks later, Ronald and Colleen provided Patrick with a note documenting a small loan made by the trust before Evelyn died. They also objected to Patricks moving papers in their entirety because none of them were supported by sworn evidence or cited law.

Patrick again objected to the accountings sufficiency. He argued the trustees failed to include a financial statement and a report of administration pursuant to Probate Code sections 1060-1064. He claimed the accountings format was incorrect, and faulted the home value estimate of the family home for not being a legal appraisal. He argued the trustees failure to provide the required accounting demonstrated they were incapable of administering the trust. He requested the court order the sale of the family home and direct 50 percent of the proceeds be deposited into Trust B.

In response, Ronald and Colleen claimed the accounting was legally sufficient, and no grounds for removing them as trustee existed. They also argued the proper amount for funding Trust B was $0.00. Under the terms of the trust, they asserted, only those amounts exceeding the federal estate tax exemption limit were to go into the B Trust. The value of Trust A never exceeded the exemption limit; thus no assets went into Trust B.

Five days before the hearing and pursuant to Code of Civil Procedure section 632, Ronald and Colleen requested the trial court provide a written statement of its decision on Patricks petition. Their request did not specify the controverted issues on which they sought a statement of decision.

Following a hearing (again, where no reporter was present), the trial court on January 9, 2006, granted Patricks petition. It ordered Ronald and Colleen removed as trustees of Trust A, appointed Patrick as trustee of Trust A, and ordered the assets of Trust A be distributed according to the terms of the trust. The trial court did not file a statement of decision.

Ronald and Colleen now appeal, claiming the trial court erred when it (1) determined in its August 2005 ruling that Trust B came into existence when the Sutter County property was transferred to it; (2) failed to provide a written statement of decision for its January 2006 ruling; and (3) removed them as trustees.

Before proceeding, we quote with approval the following good advice given to trust and estate attorneys who appear before the courts of appeal: The informality of most trust and estate litigation stands in stark contrast to the rigors that counsel will face at certain stages of an appeal. Attorneys who are accustomed to a laissez faire approach may be uncomfortable at having a record reviewed for the purpose of determining whether they filed a timely notice of appeal or whether they preserved important arguments. No matter how counsel prefer to conduct their business in the trial courts, they should understand that as far as the law is concerned, trust and estate disputes are subject to the normal rules of civil practice. [(Prob. Code, 1000.)] Furthermore, what some may regard as a useless technicality may be indispensable at certain stages of an appeal, when counsel may find the rules to be both unexpected and unforgiving. [] Experienced counsel will plan for the appeal before the underlying hearing takes place. (2 Cal. Trust and Probate Litigation (Cont.Ed.Bar 2006) 23.2, p. 807.)

As will become readily apparent, the failure to follow this counsel curtails our review of this matter.

DISCUSSION

I

Determination of Trust Bs Existence

Ronald and Colleen assert the trial court erred when it determined in its August 30, 2005, ruling that Trust B came into existence when real property was transferred into it. They correctly argue the August 30, 2005, ruling was an appealable order (Prob. Code, 1300, 1304), but they fail to recognize the time limits within which an appeal from that order had to be filed.

The record demonstrates the trial court served on Ronald and Colleen a file-stamped copy of the courts order on August 30, 2005. Thus, their notice of appeal from that order was due 60 days following that date -- October 31, 2005. (Cal. Rules of Court, rule 8.104(a)(1).) They filed their notice of appeal from the August order on January 9, 2006, 70 days too late. They are thus time barred from challenging the courts ruling on the existence of Trust B.

II

Failure to File Statement of Decision

Ronald and Colleen claim the trial court committed reversible error by not issuing a statement of decision in its January 2006 ruling as they had requested. Patrick asserts a statement of decision was not required by law in this type of hearing because no issues of fact were resolved. We need not reach either of these points because the request for a statement of decision was invalid on its face.

A trial court is required to issue a statement of decision following trial upon the timely request of a party. (Code Civ. Proc., 632.) To be valid, a request for a statement of decision shall specify those controverted issues as to which the party is requesting a statement of decision. (Ibid., italics added.)

The request filed by Ronald and Colleen did not specify the controverted issues they sought resolved in the statement of decision. The request simply asked the trial court to make precise fact findings and specify the grounds on which the ruling/decision/order rests. This request was insufficient to put the court on notice of the issues they sought addressed in a statement.

The court thus did not commit prejudicial error when it failed to issue a statement of decision in this instance.

III

Removal of Trustees

Ronald and Colleen argue the trial court erred when it removed them as trustees of Trust A. They claim the trial court did not provide them with an evidentiary hearing before removing them, and the courts ruling is not supported by any substantial evidence.

A decision to remove a trustee is left to the sound discretion of the trial court. (Estate of Gilmaker (1962) 57 Cal.2d 627, 633.) The power is not to be exercised lightly. The courts decision must depend on the facts and circumstances of the case, and also on how the trustee who is to be removed assumed office. (Estate of Bixby (1961) 55 Cal.2d 819, 826.) It is not our function as a reviewing court to reweigh the evidence, resolve conflicting evidence and inferences, or to judge the credibility of the witnesses. (Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 806.)

Without the benefit of a statement of decision and a reporters transcript, we are left with a judgment roll appeal. In a judgment roll appeal based on a clerks transcript, every presumption is in favor of the validity of the judgment and all facts consistent with its validity will be presumed to have existed. The sufficiency of the evidence is not open to review. The trial courts findings of fact and conclusions of law are presumed to be supported by substantial evidence and are binding on the appellate court, unless reversible error appears on the record. (Bond v. Pulsar Video Productions (1996) 50 Cal.App.4th 918, 924; see also Cal. Rules of Court, rule 8.163.)

A trustee can be removed for, among other reasons, a breach of the trust, failing to act, or for other good cause. (Prob. Code, 15642, subds. (b)(1), (4), (9).) We must presume sufficient facts supported the trial courts decision to remove Ronald and Colleen as trustees on any one or all of these bases.

Ronald and Colleen claim error occurred when the trial court failed to give them an evidentiary hearing. Without the transcript, we cannot determine what type of hearing occurred. However, the parties were given numerous opportunities to submit argument supported by sworn declarations and other evidence which we presume the court considered in making its decision.

Moreover, at no time did Ronald and Colleen object to the procedure or form of the hearing. A trustees appearing and defending on the merits of a noticed motion to remove the trustee waives any defects in the form of the proceeding. (Estate of Gilmaker, supra, 57 Cal.2d at p. 630.)

For these reasons, we conclude the trial court did not abuse its discretion when it removed Ronald and Colleen as trustees.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to plaintiff. (Cal. Rules of Court, rule 8.276(a).)

NICHOLSON , J.

We concur:

DAVIS, Acting P.J.

MORRISON , J.

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