California Cases August 30, 2021: McAbee v. Bueno

Case Description

NOT TO BE PUBLISHED

Appeal from an order of the Superior Court of San Benito County, No. PR1900008 Jose Omar Rodriguez, Judge. Affirmed.

Rusconi, Foster & Thomas and John C. Clark for Defendant and Appellant.

Christine O. Breen for Plaintiffs and Respondents.

OPINION

O'LEARY, P. J.

This probate case concerns the interpretation and application of a family trust. Married couple Larry L. Haas and Rose Haas established the Haas Family Trust (Trust) in May 2007. Larry and Rose did not have any children together. Larry had two daughters from a previous marriage, Denise McAbee and Gena Fillhardt (collectively referred to as Respondents). The primary trust asset was a single-family home (residence). Rose had one daughter from a previous marriage, Bobbi Bueno.

After Larry died, Rose amended the Trust. It provided Bueno and her husband with a conditional life estate in the residence. After Rose's death, the three daughters became successor trustees. Respondents filed a petition under Probate Code section 17200, asserting the amendment was invalid because the Trust became irrevocable upon Larry's death. The probate court granted the petition, holding Rose had no power to amend the trust without creating and funding specific sub-trusts, which did not occur. On appeal, Bueno reasserts the amendment was valid. Her arguments lack merit, and we affirm the probate court's order.

FACTS

I. Trust Language

The following articles of the Trust inform our review. Article eight names the three daughters as equal, successor beneficiaries of the Trust, with each receiving one-third of the Trust following the death of both trustors. Article 15 names the three daughters as successor trustees, and requires they act “in concert.”

Article seven sets forth the creation of sub-trusts after the first spouse dies. It provides the Trustee “may divide the entire trust estate into as many separate trusts as is required to minimize the estate taxes....” It specifically addresses the creation of three sub-trusts: Survivor's Trust ‘A,' Decedent's Trust ‘B,' and Qualified Trust ‘C.' Survivor's Trust ‘A' states in pertinent part, “If a division into separate trusts is necessary, Survivor's Trust ‘A' shall consist of the separate property of the Surviving Trustor and the Surviving Trustor's share of any community property....” Article 7 expressly states, “The Surviving Trustor retains the right to change the beneficiaries of Trust ‘A.'”

As for Decedent's Trust ‘B,' article seven provides, “If a division into separate trusts is necessary, Decedent's Trust ‘B' shall consist of a one-half (1/2) interest in the community property of the trust estate and the separate property of the Decedent. Decedent's marital share shall be placed into Decedent's Trust ‘B.' Upon creation of such Trust share, Decedent's Trust ‘B' is irrevocable.”

Qualified Trust “C” states as follows: “If a division into separate trusts is necessary, Qualified Trust ‘C' shall consist of that portion, if any, of the trust estate which exceeds the total of the amounts thereof allocated to Survivor's Trust ‘A' and to Decedent's Trust ‘B.' Upon creation of such Trust share, Qualified Trust ‘C' shall be irrevocable.”

Article Nine provides in pertinent part, “The Trustors may at any time during their joint lifetimes amend any terms of this trust by written instrument signed by both Trustors and delivered to the Trustee.... [¶] On the deceased spouse's death, the Surviving Trustor may amend, revoke, or terminate the Survivor's Trust ‘A,' but Decedent's Trust ‘B' and the Qualified Trust ‘C' may not be amended, revoked, or terminated....”

II. Amendments

In 2016, prior to Larry's death, Rose attempted to amend the Trust to grant a life estate in the residence to Bueno and her husband. Larry refused to sign the amendment, stating he did not want to grant the life estate. Bueno concedes the attempted 2016 amendment was invalid because this amendment was not signed by Rose and Larry.

Larry died on November 19, 2016. After Larry died, Rose attempted to make the same amendment to the Trust. On August 15, 2017, Rose signed an “Amendment to a Revocable Trust, ” which granted a life estate in the residence to Bueno and her husband. Rose did not allocate the separate property and community property of the trustors into sub-trusts. Rose died on September 15, 2017.

III. Probate Court Proceedings

In 2019, Respondents petitioned the probate court pursuant to section 17200, to interpret the Trust and rule upon the validity of the attempted 2017 amendment. Without holding an evidentiary hearing, the court determined the proposed amendment invalid and ordered the assets divided pursuant to the original Trust terms. Bueno moved for reconsideration on grounds she was entitled to an evidentiary hearing, which the court granted.

At the evidentiary hearing, the paralegal who prepared the Trust testified. The paralegal stated he presented an earlier proposed amendment to the Trust purporting to give Bueno a life estate in the residence. Larry refused to sign the amendment, stating it was not his intention to give Bueno a life estate in the residence.

Following the hearing, the probate court again held the purported 2017 amendment invalid and ordered the assets divided pursuant to the original terms of the Trust. The court explained, “Article [nine] states by which the [T]rust can be amended. And there's no evidence before me that that method was followed.” It continued, “So I'm going to go ahead and I'm going to grant the petition and find that the attempted amendments by the - [T]rust, both the second and third amendment, the September 20, 2016, and August 15, 2017, attempts to amend the trust are invalid, and the co-trustees are ordered to distribute the trust assets according to the terms of the [T]rust as executed on May 15, 2007, in equal shares to... Bueno [and Respondents].”

“In particular, just to provide parties with some guidance, Articles both [seven] and [nine] seem to be controlling. [¶] And in terms of Article [seven] of that initial [T]rust, it states: [¶] In the administration of this [T]rust, the trustee shall take such steps and exercise such elections, options, and choices in such a manner in the trustee's sole discretion. [¶] It goes on to indicate that the purpose is to minimize the effect of taxes upon the estate. [¶] This is a -- because of the word ‘shall,' it's a mandatory act.” “[T]he only method of making an amendment upon the death of one of the trustors is by creating this -- the separate trust.”

DISCUSSION

Bueno asserts the probate court improperly determined the 2017 amendment invalid because the Trust “is silent as to the surviving settlor's power to amend the Trust where there has not been a requirement to allocate assets to sub-trusts for tax purposes.” We disagree.

“The paramount rule in construing such an instrument is to determine intent from the instrument itself in accordance with applicable law. [Citations.]” ( Brown v. Labow (2007) 157 Cal.App.4th 795, 812.) The settlor's intent ‘““must be ascertained from the whole of the trust instrument, not just separate parts of it.” [Citations.]' [Citation.]” ( Estate of Cairns (2010) 188 Cal.App.4th 937, 944.) In ascertaining the settlor's intent, “‘the court is not limited to determining what is meant by any particular phrase, but may also consider the necessary implication arising from the language of the instrument as a whole.' [Ctiations.]” ( Ammerman v. Callender (2016) 245 Cal.App.4th 1058, 1074.)

We review a claim of interpretation of the Trust de novo. ( Estate of Stoddart (2004) 115 Cal.App.4th 1118, 1130.) When interpreting a trust, it is proper for the trial court in the first instance and the appellate court on de novo review to consider the circumstances under which the document was made so that the court may be “placed in the position of the [trustor] whose language [it] is interpreting, [citation]” in order to determine whether the terms of the document are clear and definite, or ambiguous in some respect. (See Estate of Russell (1968) 69 Cal.2d 200, 208-210.)

Construing the Trust as a whole, as we must, articles seven and nine clearly and unambiguously address the methods and means of revocation and amendment of the Trust by a surviving spouse, as well as for tax purposes. Specifically, the allocation of assets into sub-trusts is a prerequisite for a surviving spouse to revoke or amend the Trust. For example, article seven states, “[i]f a division into separate trusts is necessary, ” without mention of limiting such a division for tax purposes only. Similarly, article nine states upon the deceased spouse's death, “the Surviving Trustor may amend, revoke, or terminate the Survivor's Trust “A”, but the Decedent's Trust ‘B' and the Qualified Trust ‘C' may not be amended, revoked, or terminated.” The qualifying language of these subsections would be rendered inoperative by Bueno's interpretation.

Here, the clear language of the Trust mandates assets be allocated into sub-trusts if the Trust is to be amended or revoked after the deceased spouse's death. The Trust expressly renders Decedent's Trust “B” and the Qualified Trust “C” irrevocable, and not subject to amendment, following a spouse's death. Article nine explicitly outlines the circumstances and means by which a valid amendment to the Trust could be made by the surviving spouse. The purported amendment Rose executed in August 2017 did not comply with those requirements, and thus was invalid.

Furthermore, even assuming the Trust language was ambiguous, evidence presented at the hearing demonstrated Larry was aware Rose wanted to amend the Trust to give Bueno a life estate in the residence. Larry objected to this type of amendment. It is consistent with Larry's intent the Trust limited the scope of any amendment by the surviving spouse to assets allocated to Survivor's Trust ‘A.'

DISPOSITION

The order is affirmed. Respondents shall recover their costs on appeal.

WE CONCUR: FYBEL, J., GOETHALS, J.

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Notes:

We refer to the Haases by their first names for ease of reference and intend no disrespect.

All further statutory references are to the Probate Code.

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