Hurd v. Hurd

1

JEFFREY LAURENCE HURD, Plaintiff and Appellant, v. DAVID WILLIAM HURD, as Trustee, etc., Defendant and Respondent.

B309280

California Court of Appeals, Second District, Second Division

February 24, 2022

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of Los Angeles County Los Angeles County Super. Ct. No. 18STPB10655, Clifford L. Klein Judge.

Zarmi Law and David Zarmi for Plaintiff and Appellant.

Thomas Vogele & Associates, Thomas A. Vogele and Timothy M Kowal for Defendant and Respondent.

ASHMANN-GERST, Acting P. J.

The question in this case is whether a California court lacks personal jurisdiction over David William Hurd (respondent) trustee of The Hurd Family Trust (Hurd Trust), because he is domiciled in Colorado. Based on the facts of this case, we conclude that California has specific jurisdiction over respondent and the trial court erred when it granted respondent's motion to quash service of the summons in connection with the probate petition filed by Jeffrey Laurence Hurd (appellant). We reverse the trial court's order.

Because the trial court never ruled on respondent's motion to stay or dismiss based on the inconvenient forum doctrine, we remand the matter to the trial court to rule on that motion in the first instance.

FACTS

The Hurd Trust and the Hurd Family

William and Linda Hurd established the Hurd Trust on June 15, 1992 in Pasadena, California. It was funded with financial assets real property in California, and real property in Colorado. They were the original trustees as well as the settlors. Appellant and respondent are the children of the settlors.

During the joint lifetime of the settlors, the trustees were required to pay the settlors the entire income of their community estate at least once a quarter. If the income was insufficient, the trustees were required to apply as much of the principal of the trust as necessary for the settlor's health, maintenance, comfort, and welfare.

Upon the death of the first settlor, the living settlor was required to divide the trust estate into three separate trusts designated as Trust A, Trust B and Trust C. The trustee was obligated to utilize the interest and principal for the benefit of the living settlor, subject to certain general provisions common to each of the sub-trusts.

Upon the death of the living settlor, the successor trustee was required to pay funeral expenses as well as various debts and taxes, then combine the sub-trusts and divide them into as many equal shares as there were children of the settlors then surviving. The Hurd Trust specified that "[a]ny share allocable to a living child of Settlors shall be distributed to such living child, FREE OF TRUST."

Respondent was listed as the successor trustee if the settlors died or became incapacitated.

Upon Linda Hurd's passing in 1993, the Hurd Trust became irrevocable.

William Hurd's Promissory Note

William Hurd moved to Nevada in 2008 where he married a woman named Elaine and formed the Hurd-Starr Family Trust. He transferred $432, 740 from the Hurd Trust to the Hurd-Starr Family Trust in exchange for a promissory note in favor of the Hurd Trust.

The promissory note was secured by a deed of trust on real property owned by the Hurd Trust in Steamboat Springs, Colorado.

The Domiciles of Appellant and Respondent

While appellant lives in California, respondent is domiciled in Colorado.

Administration of the Hurd Trust After Respondent Becomes the Successor Trustee

Respondent became trustee of the Hurd Trust after William Hurd died in Nevada in 2016.

On January 7, 2017, respondent executed two certifications of trustee in Westminster, Colorado, one for Trust B and one for Trust C of the Hurd Trust. He filed a 2016 income tax return for the Hurd Trust with the Colorado Department of Revenue.

On September 6, 2017, respondent terminated the Hurd Trust's Pasadena, California attorneys, the law firm of Stone & Doyle. On March 2, 2018, respondent's trust attorneys in Colorado, Fairfield and Woods, filed Trust Registration Statements for "Marital Trust 'B' of the [Hurd Trust]" and "Family Trust 'C' of the [Hurd Trust]." They listed a Westminster, Colorado address for respondent and stated that the records of the Hurd Trust were being kept at the principal place of administration, which was also in Westminster, Colorado.

At some point, appellant and respondent entered an oral agreement to maintain property owned by the Hurd Trust in La Cañada Flintridge, California as income property until it was vacated by its current tenant. The tenant stated that he did not intend to vacate until his children graduate from school in 2027.

In 2018, respondent filed a 2017 Colorado income tax return for the Hurd Trust, mailed appellant a K-1 form from Colorado, and filed interim accountings in a Colorado court.

Respondent's California Probate Petition

In 2017, respondent discovered that the Hurd Trust held a promissory note made by the Hurd-Starr Family Trust in the amount of $432, 740. His Long Beach, California attorney filed a petition to open probate and a creditor claim in the Los Angeles Superior Court. The creditor claim stated: "William J. Hurd transferred assets while trustee of the [Hurd Trust] to his own account or to the Hurd-Starr Family Trust[] contrary to law and in breach of his fiduciary duties and the terms of the [Hurd Trust] during the time period of October 1993 through November 17, 2016[, ] in the sum of $432, 740.00[.]" The petition stated: "The [Hurd Trust] is administered at 225 S. Lake Ave., Ste. 300, Pasadena, CA 91101." Respondent signed the petition on November 16, 2017.

Respondent withdrew the probate petition and creditor claim after realizing William Hurd's probate needed to be opened in Nevada instead.

Assets of the Hurd Trust

The property in Steamboat Springs was sold in October 2017. The La Cañada Flintridge property became the sole asset of the Hurd Trust.

Disagreement Between Appellant and Respondent

Respondent believed, as a fiduciary, that he had to pursue recovery of the Hurd Trust's assets by trying to collect on the promissory note. Appellant was opposed to having the Hurd Trust pursue legal action. Respondent was willing to forego legal action, but only if appellant legally absolved respondent of his duty to pursue trust assets. Appellant refused to absolve respondent.

The Nevada Litigation; Respondent's Loan of $100, 000 to the Hurd Trust

On behalf of the Hurd Trust, respondent sued the Hurd-Starr Family Trust in Nevada to enforce the promissory note.

By December 2017, the litigation had depleted the Hurd Trust's cash. Counsel for the Hurd Trust wrote to appellant explaining that the trust had expended all the proceeds in Trust B from the sale of the Colorado property in Steamboat Springs to pursue the litigation. It needed to raise at least $100, 000 to continue the litigation or it would have to dismiss the action. Counsel wrote: "[Y]our options are either to (1) sign the indemnification so [respondent] can drop the claims or (2) send [respondent], as Trustee, $50, 000 to pursue the claims." Appellant did not respond.

On April 19, 2018, respondent loaned $100, 000 to himself as trustee of the Hurd Trust, Trust C. The loan was secured by a deed of trust on the La Cañada Flintridge property. The deed of trust stated that the respondent, as trustee of the Hurd Trust, Trust C, promised to pay the debt with interest in regular periodic payments, and to pay the debt in full by April 2028.

Respondent recorded the deed of trust with the Recorder's Office of Los Angeles County.

Appellant's California Probate Petition

In November 2018, appellant filed a petition in probate court.

Per the petition, appellant and respondent met in 2016 to discuss the La Cañada Flintridge property. They orally agreed to hold the property in the Hurd Trust and split the rental income until their tenants moved out. They anticipated that the tenants would stay for seven more years until their children finished school. In reliance on respondent's promises, appellant allowed respondent to stay on title to the property without distribution under the Hurd Trust.

Respondent breached the oral agreement and his fiduciary duties to appellant when he borrowed $100, 000 to fund the litigation in Nevada and secured the loan with the La Cañada Flintridge property by executing a deed of trust. Additionally, respondent breached his fiduciary duties by: demanding that appellant either contribute $50, 000 to the Nevada litigation or sign an indemnification agreement and release in exchange for respondent dropping the Nevada litigation; failing to provide an accounting of the $100, 000; converting trust assets to his own use; distributing trust assets to himself and others; allowing others to use or obtain trust assets; and failing to avoid conflicts of interest in trust transactions.

Appellant sought the following relief: (1) an accounting, (2) an order surcharging respondent for his breaches of fiduciary duty; (3) an order imposing a constructive trust on all trust property to which appellant is entitled but is in respondent's possession; (4) either an order compelling respondent to distribute an unencumbered 50 percent interest in the La Cañada Flintridge property to appellant or an order appointing appellant or a third party as a temporary trustee to take possession of the property and administer the trust; and (5) an award of double damages for the wrongful taking, concealing and disposing of property.

Appellant filed a lis pendens.

Respondent's Challenge to Jurisdiction and Forum

Respondent filed a motion to quash the service of summons or alternatively, to stay or dismiss the action based on the inconvenient...