Fox v. Hughes

Filed 5/27/08 Fox v. Hughes 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NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

(Sacramento)

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In this case we conclude the superior court cannot remove a trustee under Probate Code^[1]section 17200 without first determining whether the trust in question ever came into existence. Because the superior court here expressly declined to make this foundational determination before it removed defendant Brandon J. Hughes^[2]as the trustee of a trust for the benefit of his sister, we will reverse the order of removal and remand the case for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

In March 2007, plaintiff Warren Fox, the temporary conservator of the estate of Diana Gay Hughes, filed a petition under sections 17000 and 17200 to have defendant removed as the trustee of an irrevocable trust Fox claimed had been established for Dianas benefit, alleging (on information and belief) various misdeeds by Brandon.^[3] According to documents filed with Foxs petition, the trust had been funded with assets listed in a schedule attached to the trust document. That schedule, however, did not list any assets.

Brandon objected to the petition for his removal on the ground that because the trust was never funded, the court could not remove him as trustee.

Dianas court-appointed attorney filed a declaration in response to Brandons objections, asserting on information and belief that the trust had been funded, albeit by means other than the listing of assets in the schedule attached to the trust document. She attached some documents to her declaration to support her assertion of funding, but she did not attest to having personal knowledge of what those documents were, and she did not properly authenticate them.

Fox filed a similar document claiming the trust had been funded, but that document, although entitled a Declaration, was not signed under penalty of perjury.

Brandon filed additional objections, adhering to his position that the trust was never funded.

Following what appears to have been a law and motion hearing (rather than a trial), the court issued a minute order that provided in pertinent part as follows: The Court makes no finding as to whether a valid trust has been created for the benefit of Diana Hughes (sole income and principal beneficiary). Nevertheless, under the circumstances presented, the court grants the Petition for Removal of Brandon Hughes and hereby appoints Warren Fox as the successor trustee.

Brandon filed a timely notice of appeal from the minute order and another timely notice of appeal from a subsequent formal order after hearing.^[4]

DISCUSSION

As Brandon points out, A trust is created only if there is trust property. ( 15202.) To the creation of a trust, a trust-res or subject matter is a sine qua non. . . . In order for trusts to exist there must be an estate to vest in the trustee, and the property must be clearly and definitely pointed out. (Balian v. Balians Market (1941) 48 Cal.App.2d 150, 156.) Brandon contends the Superior court specifically did not rule on either the issue of Trust Property or the existence of the Trust, and in the absence of a finding that the trust actually existed, the court had no authority to remove him as trustee.

Fox acknowledges that [t]o create an express trust there must be . . . trust property . . . . He also appears to acknowledge that the superior court could not remove Brandon as trustee of Dianas trust without first determining that such a trust actually existed. Where he disagrees with Brandon is on whether the superior court made such a finding. According to Fox, In reviewing the trial courts order, this Court must invoke the doctrine of implied findings and assume the trial court made a factual finding that the trust was funded.^[5] He further contends there is substantial evidence to support such an implied finding and therefore the removal of Brandon as trustee must be upheld.

In the end, the parties dispute over whether the superior court made the requisite finding of the existence of the trust turns on the intended meaning of the courts statement that it was making no finding as to whether a valid trust has been created for the benefit of Diana Hughes. In Brandons view, this statement means the court was expressly declining to make a finding as to the existenceof the trust. In Foxs view, on the other hand, this statement has nothing to do with the existence of the trust. He contends [t]he validity of a trust is not the same as the existence of a trust, and the trial courts statement related to the former not the latter. At the same time, however, he argues that [t]he validity of the trust as to whether it contained sufficient special needs language to comport to a proper Special Needs Trust was not an issue before the court. Thus, Fox would have us conclude that the superior courts express refusal to make a finding on whether a valid trust has been created related to the validity of the trust only -- an issue that was not before the court -- rather than to the creation of the trust -- an issue that was before the court. This interpretation of the courts statement would then open the door for us to conclude, under the doctrine of implied findings, that the court implicitly found the trust was funded and in existence.

We cannot accept Foxs strained interpretation of the superior courts order. The only substantive issue raised by Brandons objections to Foxs petition was whether the trust existed. While Brandon also argued that he did not commit any of the acts alleged as grounds for his removal, that argument, too, turned on the existence of the trust, because he expressly asserted that [i]n the absence of [any trust] property, Brandon Hughes, cannot be held to have committed any act alleged in the Petition nor could those acts be cause for removal. (Italics added.) Thus, the only reasonable interpretation of the courts statement that it was not making a finding on whether a valid trust has been created is that the court was expressly declining to find whether the trust was ever funded. Instead, the court decided to remove Brandon as trustee without first determining whether the trust existed.

This was error. Sections 17000 and 17200 give the superior court the power to remove a trustee as part of the courts jurisdiction over proceedings concerning the internal affairs of trusts. ( 17000, subd. (a), 17200, subd. (b)(10).) If no property has actually been placed into trust, then no trust exists, there are no internal affairs over which the superior court can exercise jurisdiction, and the court lacks the power to remove the trustee. Indeed, technically there is no trustee of an unfunded trust, only a potential trustee of a potential trust contemplated by a trust document.

We cannot review for substantial evidentiary support (as Fox would have us do) a finding the superior court never made and indeed expressly declined to make. The power to make the requisite finding as to whether the trust was ever funded rests with the superior court in the first instance. Accordingly, we must reverse the order removing Brandon as trustee. On remand, the superior court must first determine whether the trust was funded (and thereby came into existence) before the court can determine whether Brandon should be removed as trustee. If the trust was not funded (or Fox fails to produce sufficient proof that the trust was funded), then the petition to remove Brandon as trustee must be denied because the superior court cannot remove the trustee of a trust that does not exist.

DISPOSITION

The order removing Brandon as trustee is reversed, and the case is remanded to the superior court for further proceedings. Brandon shall recover his costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

ROBIE , J.

We concur:

NICHOLSON , Acting P.J.

BUTZ , J.

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^[1] All further statutory references are to the Probate Code unless otherwise indicated.

^[2] We mean no disrespect to the parties; however, for ease of identification, we will refer to Brandon Hughes and Diana Gay Hughes by their first names.

^[3] Section 17000 gives the superior court exclusive jurisdiction of proceedings concerning the internal affairs of trusts ( 17000, subd. (a)), and section 17200 provides that [p]roceedings concerning the internal affairs of a trust include the power to remov[e] a trustee ( 17200, subd. (b)(10)).

^[4] Brandon contends the second order was invalid. Inasmuch as the second order adds nothing substantive to the prior minute order, and Brandon timely appealed from both orders, we find no need to distinguish between the two orders.

^[5] The doctrine of implied findings requires the appellate court to infer the trial court made all factual findings necessary to support the judgment. [Citation.] The doctrine is a natural and logical corollary to three fundamental principles of appellate review: (1) a judgment is presumed correct; (2) all intendments and presumptions are indulged in favor of correctness; and (3) the appellant bears the burden of providing an adequate record affirmatively proving error. (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 57.)