Fisher v. Fisher

1

TODD A. FISHER, Plaintiff and Appellant, v. KENT N. FISHER et al., Defendants and Respondents;

CRONAN FORREST FISHER et al., Defendants and Appellants.

D078019

California Court of Appeals, Fourth District, First Division

September 8, 2022

NOT TO BE PUBLISHED

APPEAL from orders of the Superior Court of San Diego County No 37-2017-00011505-PR-TR-CTL, Julia Craig Kelety, Judge. Affirmed.

Mazzarella & Mazzarella, Mark C. Mazzarella and E. Todd Trumper for Plaintiff and Appellant.

Beamer, Lauth, Steinley & Bond and Stephen A. Bond for Defendants and Appellants.

Van Dyke & Associates, Richard S. Van Dyke and Vincent J Russo for Defendants and Respondents.

HALLER, ACTING P. J.

Leonard Fisher drafted his trust so that, when viewed in isolation, it would leave the bulk of his estate in unequal portions to his four sons, with certain funds going to education and medical sub-trusts for his grandchildren and heirs. But Leonard coordinated the drafting of his trust with the drafting of his ex-wife Gale's trust. Although her trust, when viewed in isolation, would also leave their sons unequal portions, the two trusts when viewed together would collectively leave the sons roughly equal gifts. Leonard's and Gale's trusts were revocable and not legally binding on each other.

When Leonard died before Gale in 2014, his trust was missing significant anticipated assets, making it impossible to administer as written. Accordingly, one son, Kent, brought a petition in 2017 seeking instructions to liquidate its assets and use the proceeds to fund the sub-trusts and then divide the remaining funds equally among the four sons. Another son, Todd, then brought a petition seeking to delay administration of Leonard's estate until after Gale died so that their trusts could be administered together and the sons would receive roughly equal portions collectively from their parents' trusts (rather than equally from Leonard's estate). Todd also argued Kent's petition was an untimely trust contest because it was not brought within 120 days of notice of Leonard's death. (Prob. Code, § 16061.8.)^[1] The guardian ad litem for Leonard's grandchildren, who are beneficiaries under the education and medical sub-trusts, sided with Kent and favored the immediate distribution of trust assets and funding of the sub-trusts.

Following a bench trial in 2020, the probate court rejected Todd's untimeliness challenge, finding Kent's petition was not a trust contest, but rather, sought instructions on how to administer Leonard's trust. The court granted Kent's petition in part and ordered the trustee to liquidate the trust's assets and distribute the proceeds equally among the four sons. The court concluded that because the trust contained fewer assets than Leonard had anticipated, the specific gifts to the sons' portions would take priority over the general gifts to the sub-trusts such that the latter would abate and go unfunded.

Todd appeals, contending the probate court erred in finding Kent's petition was not an untimely trust contest, and exceeded its authority in liquidating and evenly distributing Leonard's trust assets. Neither contention has merit. As we will explain, the probate court and all parties agreed that unknown and unanticipated circumstances rendered Leonard's trust impossible to administer as written. Under the circumstances, the probate court properly found Kent's petition was not a contest, and the court acted within its authority in modifying the trust as it did.

The guardian ad litem, attorney Stephen Bond, also appeals. He maintains the probate court erred by classifying the sons' portions as specific gifts entitled to statutory priority over the general gifts to the sub-trusts, rather than as residuary gifts subordinate to the sub-trusts. We disagree. The probate court property classified Leonard's gifts to the sons' portions as specific gifts because they gave specific property to specific people. (§ 21117, subd. (a).) The court also properly applied the statutory order of abating gifts (§ 21402), which was not overcome by any clear contrary intent of Leonard (§ 21400).

Accordingly, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Leonard Fisher (Leonard) and Gale Fisher Ostlind (Gale) were married and had four sons together: Brittin, Todd, Kent, and Wade (who apparently died after trial). Kent has one child; Brittin has three children; and Todd and Wade have no children. Leonard and Gale divorced sometime before April 2014.

In April 2014, Leonard and Gale consulted the same attorney, Paul McEwan, to update their respective estate plans.

A. Leonard's Trust

On April 16, 2014 Leonard executed the Leonard F. Fisher Declaration of Trust dated February 20, 2014 (Leonard's Trust). Schedule A listed the trust's initial assets, which consisted of three pieces of real property, "[v]arious bank accounts," and a "United B Fund Account."^[2] Schedule B set forth how those assets were to be distributed upon Leonard's death.

1. Education Sub-trust

Paragraph 1 of Schedule B provided for the establishment and partial funding of a sub-trust "for the educational benefit" of Leonard's grandchildren (the Education Sub-trust). This paragraph directed the trustee to "set aside assets with a total value of . . . $300,000," to be derived from a "one-third (1/3) interest in [a $900,000] Promissory Note to be created" in connection with the division of Leonard's remaining estate among his sons. Paragraph 1 further stated that "[i]t is anticipated that an additional . . . $250,000 from the estate of [Gale] will be added to this trust at the time of her demise."

2. Medical Sub-trust

Paragraph 2 of Schedule B provided for the establishment and funding of a sub-trust "for the catastrophic medical care and health needs" of all of Leonard's issue. This paragraph directed the trustee to "set aside the sum of . . . $550,000," to be derived from $250,000 from the United B Fund and $300,000 from the $900,000 promissory note to be created in connection with the division of Leonard's remaining estate among his sons.

3. The Four Portions

Paragraph 3 of Schedule B directed that, "[a]fter the [Education and Medical Sub-trusts] have been established, . . . the Trustee shall divide the remaining assets to be disposed of under . . . Schedule 'B' into four . . . separate portions."^[3] Paragraph 3 continues, "Each of the four . . . separate portions shall contain the assets specified below."

The four portions are summarized as follows: Portion 1:

• 100% interest in a duplex on Island Ct.;

• $50,000 in cash; and

• 50% interest in the United B Fund.^[4]

Portion 2:

• 50% interest in Leonard's bank accounts;^[5] and

• One-third interest in the $900,000 promissory note payable by the recipient of Portion 4.

Portion 3:

• 100% interest in real property on Coast Blvd.; and

• 100% interest in a duplex on Isthmus Court.

Portion 4:

• 50% interest in Leonard's bank accounts; and

• 100% liability on a new $900,000 promissory note payable by the recipient of Portion 4 in equal parts to the Education Subtrust, the Medical Sub-trust, and the recipient of Portion 2.

It is undisputed that these portions, in isolation, were unequal in value when Leonard prepared his trust. According to the Spreadsheet, Portion 1 was worth $587,300; Portion 2 was worth $400,000; Portion 3 was worth $1,659,000; and Portion 4 was worth negative $800,000.

Paragraph 4 of Schedule B specified that each of the four sons was to receive one of the four specified portions.^[6] Paragraph 5 provided that the assignment of portions to sons was to be determined by drawing numbered straws, unless straws had already been drawn under Gale's trust, in which case the portion numbers assigned by that drawing would similarly apply to the numbered portions in Leonard's Trust.

B. Gale's Trust

Two days after Leonard executed his trust, Gale executed "Amendment No. 2 to the Gale B. Fisher Ostlind Trust [formerly known as the Gale B. Fisher Trust] dated April 17, 1997" (Gale's Trust).

As with Leonard's Trust, Schedule A to Gale's Trust set forth the trust's initial assets, which included two residences, two commercial properties, a farm in Illinois, unimproved real property in Oregon and Nevada, "[v]arious cash accounts," and "[v]arious securities accounts." Also as with Leonard's Trust, Schedule B to Gale's Trust set forth how those assets were to be distributed upon Gale's death.

Paragraph 1 directed the trustee to "distribute securities with a value of . . . $250,000" to the Education Sub-trust established under Leonard's Trust.

Paragraph 2 mirrored the provision in Schedule B to Leonard's Trust providing for the division of remaining assets into four separate portions.

The four portions are summarized as follows:

Portion 1:

• 100% interest in a residence on Harbor View Drive;

• 100% interest in a residence in Indian Wells;

• 100% interest in the Illinois farm;

• 10% interest in Gale's securities accounts; and

• 100% interest in the Oregon and Nevada properties.

Portion 2:

• 100% interest in commercial real property on Lincoln Avenue in San Rafael.

Portion 3:

• 100% interest in Gale's cash accounts; and

• 90% interest in Gale's securities accounts.

Portion 4:

• 100% interest in commercial real property on 4th Ave. in San Rafael.

It is undisputed that these portions, in isolation, were unequal in value when Gale prepared her trust. According to the Spreadsheet, the estimated value of Portion 1 was $1,655,000; Portion 2 was $1,900,000; Portion 3 was $550,000; and Portion 4 was $3,100,000.

Schedule B to Gale's Trust also mirrored the provisions in Schedule B to Leonard's Trust with respect to designating their four sons as...