Dunlap v. Mayer

63 Cal.App.5th 419

277 Cal.Rptr.3d 720

John T. DUNLAP, as Executor, etc., Plaintiff and Appellant,

v.Maria E. MAYER, as Trustee, etc., Defendant and Respondent.

D077561

Court of Appeal, Fourth District, Division 1, California.

Filed April 23, 2021

Withers Bergman; Mary F. Gillick and Matthew R. Owens, San Diego; Kimura London & White and William O. London, Irvine, for Plaintiff and Appellant.

Henderson, Caverly, Pum & Trytten; Kristen E. Caverly and Lisa B. Roper, San Diego, for Defendant and Respondent.

BENKE, J.

Plaintiff John T. Dunlap is the executor of the New York estate (Estate) of Josephine A. Mayer,¹ who passed away in 2016. Josephine was the lifetime beneficiary of a testamentary trust (Marital Trust) established by Josephine's husband, Erwin Mayer. The Estate petitioned the trustee of the Marital Trust, defendant Maria E. Mayer, for an accounting. Maria objected to the petition, alleging that she was never a trustee of the Marital Trust and that she never had possession or control of the assets of the trust. The court dismissed the petition at a case management conference, without an evidentiary hearing to resolve the contested facts. The court abused its discretion in doing so. We reverse the order of the court and remand for further proceedings.

BACKGROUND

Facts

Josephine and Erwin Mayer were married and had two children, Maria and Claudia. Erwin was a resident of San Diego County when he passed away in 1995 and his estate was probated here. Erwin created a trust in his will for the benefit of Josephine. In litigation over Erwin's estate, family members and business entities entered into a settlement agreement that modified the terms of the Marital Trust. The settlement agreement, including the terms of the Marital Trust, was approved by the San Diego probate court. Pursuant to the settlement agreement, Josephine was the sole income beneficiary of the Marital Trust during her lifetime, and Maria was the sole principal beneficiary upon Josephine's death. The court appointed Maria as the sole trustee of the Marital Trust, pursuant to the terms of the settlement agreement. Claudia disclaimed any interest in the Marital Trust.

The Marital Trust was to be funded with Erwin's 99 percent interest in Peterson & Ross Limited Partnership (P&R) and his stock in Fillmore Mercantile, Inc. (FMI). Maria's husband at that time, Ray F. Garman, III, was the president of FMI. P&R was a subsidiary of, affiliate of, or related to FMI. Maria and Garman subsequently divorced. Josephine, as executor of Erwin's estate, and Maria, as trustee of the Marital Trust, were responsible for funding the Marital Trust with the identified assets.

Procedural Background

The Estate filed this petition for an accounting of the Marital Trust for the period from Erwin's death until Josephine's death, January 21, 1995, through September 30, 2016. Maria filed a verified objection to the petition. The objection stated that Maria did not know if the Marital Trust was ever funded; she never acted as a trustee of the Marital Trust; to the best of her knowledge she never possessed the assets as a trustee of the Marital Trust; and upon investigation, information and belief, the entities that were to fund the Marital Trust had been defunct for more than 15 years. Maria further stated that she could not provide an accounting of the Marital Trust because she never served as a trustee. In her objection she claimed that she was not involved with, did not administer, and held no assets of the Marital Trust, other than being nominally named as a trustee in the settlement agreement.

The court held an initial case management conference in October 2019, and set another case management conference in January 2020, to give the Estate time to conduct discovery into the Marital Trust assets. The Estate sent discovery requests to Maria, but the responses were not received before the January conference. The Estate filed a progress report in advance of the hearing attaching documents showing that in 1996 the court approved a creditor claim for more than one million dollars to be transferred to FMI, and Maria signed a partnership agreement for P&R, as trustee of the Marital Trust, agreeing that the trust would provide a capital contribution of more than three million dollars to P&R.

At the case management conference on January 13, 2020, the court dismissed the petition without prejudice pursuant to Probate Code ² sections 17202 and 17206.³ The Estate timely appealed.

DISCUSSION

The court dismissed the petition at a case management conference without advance notice that the conference could result in a dismissal. The court based its order on Maria's objection. There was no evidentiary hearing and consequently no evidence was accepted into the record.

ISTANDARD OF REVIEW

Sections 17202 and 17206 both provide the court with discretion to make orders regarding trusts. ( Gregge v. Hugill (2016) 1 Cal.App.5th 561, 567, 204 Cal.Rptr.3d 842.) The court must exercise its discretion within the " ‘ "limitations of legal principles governing the subject of its action." ’ " ( Id. at p. 568, 204 Cal.Rptr.3d 842.) 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.’ " ( Conservatorship of Becerra (2009) 175 Cal.App.4th 1474, 1482, 96 Cal.Rptr.3d 910 ( Becerra ).)

Because the court dismissed the petition based solely on the pleadings, without an evidentiary hearing, we must accept the allegations of the petition as true. ( Chacon v. Union Pacific Railroad (2020) 56 Cal.App.5th 565, 572, 270 Cal.Rptr.3d 521.)

IITHE ESTATE HAD STANDING TO REQUEST AN ACCOUNTING

Maria contends that the Estate had no standing to petition for an accounting pursuant to section 17200 because the Estate was not a present beneficiary of the trust. She relies on section 24, subdivision (c), which states that a beneficiary is "a person who has any present or future interest, vested or contingent." The complete definition of a trust beneficiary under section 24, however, states: " ‘Beneficiary’ means a person to whom a donative transfer of property is made or that person's successor in interest ; and [¶] ... [¶] (c) As it relates to a trust, means a person who has any present or future interest, vested or contingent." (Italics added.)

In interpreting section 24, our Supreme Court has recently reminded us that "the Probate Code ‘ "was intended to broaden the jurisdiction of the probate court so as to give that court jurisdiction over practically all controversies which might arise between the trustees and those claiming to be beneficiaries under the trust." ’ [Citations.] ... [A]n expansive reading of the standing afforded to trust challenges under section 17200 ‘not only makes sense as a matter of judicial economy, but it also recognizes the probate court's inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust.’ [Citation.]" ( Barefoot v. Jennings (2020) 8 Cal.5th 822, 827–828, 257 Cal.Rptr.3d 629, 456 P.3d 447.) Construing the words of section 24 with these precepts in mind, and with general tenets of statutory interpretation (see People v. Salcido (2008) 166 Cal.App.4th 1303, 1310–1311, 83 Cal.Rptr.3d 561 ), persons with a present or future interest in a trust include those persons' successors in interest. The Estate, as successor in interest to Josephine's interest in the trust, can pursue an accounting for the time when Josephine was the beneficiary of the trust, i.e. during her lifetime.

The general rules of survivability apply to proceedings under the Probate Code.⁴ ( Code Civ. Proc., § 377.30⁵ ; Elliott v. Superior Court (1968) 265 Cal.App.2d 825, 831, 71 Cal.Rptr. 807 ( Elliott ).) The court in Elliott held that a beneficiary's cause of action against the trustee survives the death of the beneficiary. ( Id. at p. 831, 71 Cal.Rptr. 807.) The court relied on former section 573, which was repealed in 1992 and "restated without substantive change in Code of Civil Procedure sections 377.20(a) (survival of actions), [and] 377.30 (commencement of action decedent could have brought) ...." (Former § 573, repealed by Stats. 1992, ch. 178 (S.B. 1496) § 31, Law Revision Commission Comm.) The court said that the Legislature created "a comprehensive rule of survivability, and ... there are no longer any nonsurvivable causes of action." ( Elliott , at p. 831, 71 Cal.Rptr. 807.) Maria distinguishes Elliott because it involved the survivability of a cause of action when the beneficiary died while the action was pending. The Elliott court's legal interpretation of former section 573 applies to both of its two successors in the Code of Civil Procedure, sections 377.20 and 377.30, regarding survivability and commencement of actions respectively.

In sum, Josephine's right to request an accounting of the Marital Trust during her lifetime, when she was a beneficiary, continued after her death. The Estate, as the successor in interest to Josephine, was authorized to initiate this petition for an accounting from the trustee. ( Code Civ. Proc., § 377.30 ; Elliott, supra , 265 Cal.App.2d at p. 831, 71 Cal.Rptr. 807.)

IIIDISMISSAL OF PETITION AT CASE MANAGEMENT CONFERENCE

The probate court erred in dismissing the petition at a case management conference, without an evidentiary hearing or completion of discovery and without giving the Estate notice that the conference could result in dismissal of the petition.

When matters within the purview of the Probate Code are contested, "[t]he court shall hear and determine any matter at issue and any response or objection presented, consider evidence presented, and make appropriate orders." ( § 1046.) There was no hearing here, and no evidence was presented. The court relied on Maria's objection to the petition, which stated...