Smith v. Wilmington Trust
Filed 1/28/14 Smith v. Wilmington Trust CA/5
OFFICIAL REPORTS
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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.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
SECOND APPELLATE DISTRICT
DIVISION FIVE
CANDACE
CALDWELL SMITH, as Trustee, etc.,
Plaintiff and Respondent,
v.
WILMINGTON TRUST,
etc.,
Defendant and Appellant;
WILLIAM
CALDWELL et al.,
Respondents.
B248042
(Los
Angeles County
Super. Ct. No.
BP065024)
APPEAL
from an order of the Superior Court of Los
Angeles County, Michael I. Levanas, Judge.
Affirmed.
Mitchell
Silberberg & Knupp, Allan B. Cutrow and Nahla B. Rajan for Defendant and
Appellant.
Glaser
Weil Fink Jacobs Howard Avchen & Shapiro, Barry E. Fink and Joel N.
Klevens; and Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg and
Dorothy Wolpert for Plaintiff and Respondent Candace Caldwell Smith.
Finestone
& Richter, William Finestone, Eric F. Edmunds, Jr., and Stacey N. Knox for
Respondents William Caldwell V., Blake Caldwell and Tyler Caldwell.
I. INTRODUCTION
Plaintiff, Wilmington Trust, N.A.,
appeals from an order granting summary
adjudication in favor of defendants, William M. Caldwell V, Blake
Caldwell and Tyler Caldwell. On September 6, 2011, plaintiff was appointed administrator with will annexed of the
estate of William M. Caldwell IV (“William IVâ€
William IV. On May 31, 2012, defendants moved for summary adjudication. Defendants argued William IV’s share of
the Caldwell Living Trust (“the trustâ€) belongs to his subtrust, not his
erred. Plaintiff asserts William IV
had exercised his right to remove assets
from the trust, which thereby belong to his estate. We affirm the order.
II. BACKGROUND
A. Summary Adjudication Motion, Opposition And
Reply
Defendants
are beneficiaries of the trust. Defendants are the
dispute with the trust. Plaintiff
asserted William IV’s wife believed her husband had exercised his power to
withdraw his interest in the trust.
On
May 31, 2012, defendants moved for summary adjudication pursuant to Code of
Civil Procedure section 437c. Defendants
argued the assets from the trust for the benefit of William IV should be
distributed to his subtrust. Defendants
asserted William IV’s assets were never withdrawn from the subtrust. Defendants also argued William IV never
exercised his appointment power over his assets from the subtrust. On October 18, 2012, plaintiff filed its opposition.
Plaintiff argued William IV’s subtrust came into existence upon
William M. Caldwell III’s (“William IIIâ€) death. William III was the settlor of the
trust. Plaintiff asserted William IV
had exercised his power to withdraw assets. Plaintiff concedes William IV did not
exercise any appointment power. On October 26, 2012, defendants filed their reply.
Defendants argued no withdrawal occurred because William IV’s subtrust
did not have any assets to withdraw.
B. Undisputed Facts
1. Formation of the trust and pertinent provisions
William III
established the trust on August 17, 1988. The trust was amended and restated on July 21, 2000. The trust contains real
estate, stock, money and personal property.
The trust became irrevocable on September 24, 2000, when William III died.
The
trust sets forth the division of the remaining balance of the estate after William III’s
death: “Within a reasonable time after
my death . . . the Trustee shall divide the entire
remaining balance of the trust estate into shares for my descendants who
survive me, according to the principle of representation. A child of mine shall be deemed to have
predeceased me if such child fails to survive me by 90 days.†The trust provides three subtrusts for William III’s
children: William IV; Craig E.
Caldwell, Sr., (“Craig, Sr.); and Candace Caldwell Smith. The trust estate was distributed to William III’s
children in the form of subtrusts, not outright. Each of William III’s children received
a lifetime power of withdrawal from, and testamentary power of appointment
over, their respective subtrust. William IV
did not exercise his power of appointment.
Article
VII of the trust encompasses the provisions concerning William IV’s subtrust. Article VII, paragraph A of the trust provides,
“A trust for BILL, IV shall be established by the Trustee at such time as the
Trustee first receives any distribution of assets allocated to BILL, IV.†Article VII, paragraph D of the trust governs
the power to withdraw trust principal:
“At any time or times during BILL, IV’s lifetime, BILL, IV shall have
the power to withdraw all of any part of the principal of the trust for any
purpose. Such power of withdrawal shall
be exercisable only by a written instrument signed by BILL, IV and delivered to
the then acting Trustee of the trust.â€
In
the event William IV died, the trust describes the distribution of assets
in article VII, paragraph F: “Within a
reasonable time after BILL, IV’s death, the Trustee first shall pay or make
provisions for the payment of all estate, inheritance, or other death taxes
attributable to the assets of BILL, IV’s trust and payable as a result of BILL,
IV’s death. Next, the Trustee shall
distribute the entire remaining balance of the trust estate in such manner as
BILL, IV has appointed effectively.
Finally, the Trustee shall divide any portion of the remaining balance
of the trust estate over which BILL, IV has not exercised such power of
appointment effectively into shares for BILL, IV’s then living descendants,
according to the principle of representation.â€
The trust defines “descendants†as follows, “As used in this instrument,
the term[] . . . ‘descendants’ . . . shall
be interpreted as provided by California law, except that the parent-child relationship shall not include
persons adopted after attaining majority.â€
William IV’s living descendants are defendants. William IV died on December 13, 2010.
2. Craig, Sr., and son’s lawsuits
On
November 28,
2000, Craig, Sr., challenged the
distribution of the trust, arguing that a writing amended the trust to provide
him with a greater share. Following a
six-day trial, the probate court denied Craig, Sr.’s petition. We affirmed the probate court’s order denying
Craig, Sr.’s petition. (
14, 2005, B179385) [nonpub. opn.].)
Pursuant
to a no contest provision in the trust, the trustee at the time, Retired Judge
Edward M. Ross, moved for judgment on the pleadings to disinherit Craig,
Sr. On December 14, 2005, the probate court granted the motion. We affirmed the probate court’s order. (
20, 2006, B189273) [nonpub. opn.].)
On
July 7, 2006, the probate court ordered the trustee to distribute Craig, Sr.’s
forfeited share of the trust to William IV and Ms. Smith, each a one-half
interest. Craig, Sr., appealed the
order. We affirmed the order under
review. (
26, 2007, B197707) [nonpub. opn.].) Judge Ross did not allocate any trust
property for distribution to the subtrusts.
On January
20, 2009, Judge Ross resigned as
trustee. The court appointed as
successor trustees William IV and Ms. Smith.
Craig
Caldwell, Jr., (“Craig, Jr.â€) later pursued his own lawsuits challenging Craig,
Sr.’s disinheritance with respect to his descendants. On September 14, 2007, Craig., Jr., appealed an order denying his motion to vacate the
probate court’s July 7, 2006 order. (Ross
v. Caldwell (B202368, May 28, 2008) [nonpub.
opn.].) We dismissed the appeal for lack
of standing. (Ibid.) On March 10, 2010, Craig, Jr., petitioned to set aside void orders and determine
construction of the trust. The probate
court denied Craig, Jr.’s petition. We
affirmed the probate court’s order. (
19, 2011, B228395) [nonpub. opn.].) The decision became final on November 21, 2011. During the entirety of both
Craig, Sr. and Craig, Jr.’s lawsuits, up to this appeal, the trust held all
properties in the trust’s name and possession.
The trust, not the subtrusts, filed income tax returns and paid taxes
related to income generated by the trust.
3. Candace and William IV’s agreement and joint
petition
On
September 16,
2008, William IV and Ms. Smith
entered into an agreement regarding distribution of the trust once they became
co-trustees. William IV and Ms. Smith
agreed to the following, “Notwithstanding anything contained in the Caldwell
Living Trust to the contrary, each of the parties shall be deemed to have
exercised his or her power of appointment, appointing the assets of his or her
subtrust to himself or herself, as the case may be, outright and free of
trust. Bill [IV] and Candace, as
Co-Trustees of the Caldwell Living Trust, shall distribute the Caldwell Living
Trust, outright and free of trust, so that each party receive[s] assets equal
in value to fifty percent of the value of the balance of the Caldwell Living
Trust . . . .â€
Prior
to the resolution of Craig, Jr.’s lawsuit, Ms. Smith and William IV
filed a joint petition with the probate court on September 2, 2010, concerning distribution of the trust. The trustees alleged, “In accordance with the
provisions of the Caldwell Living Trust, each of Bill [William IV] and
Candace has exercised the lifetime power of withdrawal given to them under
Section D of Article VII and Section D of Article IX of the Trust,
respectively, and elected to withdraw all of the assets of their respective
subtrusts.†Following the distribution
of other assets, the trustees requested, “The remaining balance of the trust
estate, including the Remaining Reserve, shall be distributed to Bill [William IV]
and Candace, in equal shares, in accordance with the provisions of the Caldwell
Living Trust.†There was no decree of
distribution of any assets to their respective subtrusts.
D. Hearing And Probate Court Order
On
December 26,
2012, the hearing on the summary
adjudication motion was held. On January 31, 2013, the probate court issued its statement of decision, granting
defendants’ summary adjudication motion.
The probate court found the moving party had met its initial burden of
production under the terms of the trust.
(Code Civ.Proc.,§ 437c, subd. (p); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826,
848-852.) The probate court concluded
the subtrusts were not in existence because no property had been allocated or
distributed from the trust. The probate
court found plaintiff’s argument concerning a vested interest was irrelevant. On February 22, 2013, plaintiff filed a mandate petition. (
opn.].) We denied the writ petition because
the probate court’s order was appealable.
(Ibid.) On April 5, 2013,
plaintiff filed its notice of appeal.
III. DISCUSSION
A.
Overview
Our Supreme
Court has held: “The interpretation of a
will or trust instrument presents a question of law unless interpretation turns
on the credibility of extrinsic evidence or a conflict therein. [Citations.]â€
(Burch v. George (1994) 7
Cal.4th 246, 254; see Tunstall v. Wells
(2006) 144 Cal.App.4th 554, 561 [same]; see Prob. Code
intention of the transferor as expressed in the instrument controls the legal
effect of the dispositions made in the instrument.â€].) Under section 21122, “The words of an
instrument are to be given their ordinary and grammatical meaning unless the
intention to use them in another sense is clear and their intended meaning can
be ascertained.†Our Supreme Court has
held: “Extrinsic evidence is ‘admissible
to interpret the instrument, but not to give it a meaning to which it is not
reasonably susceptible’ [citations], and it is the instrument itself that must
be given effect. [Citations.] It is therefore solely a judicial function to
interpret a written instrument unless the interpretation turns upon the
credibility of extrinsic evidence.†(
62 Cal.2d 861, 865; Gardenhire v.
Superior Court (2005) 127 Cal.App.4th 882, 888.) The Court of Appeal has held, “[W]here the
evidence is undisputed and the parties draw conflicting inferences, [the
appellate court] will independently draw inferences . . . .â€
(City
of El Cajon v. El Cajon Police Officers’ Assn. (1996) 49 Cal. App.4th 64,
71, citing Parsons v. Bristol Development
Co., supra, 62 Cal.2d at p. 866,
fn. 2.)
The
summary adjudication order was appealable because it decided internal trust
matters, including establishing a right to distribution of its assets. (Code Civ. Proc., § 904.1, subd.
(a)(10); §§ 1304, subd. (a), 17200, subds. (a)-(b)(2).) We review questions of law and orders
granting summary adjudication de novo. (
Casualty Ins. Co. (2005) 37 Cal.4th 406, 414; Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 860.) Plaintiff contends: William IV’s subtrust was funded prior
to his death; William IV was not required to survive until his subtrust
was funded; defendants stipulated that William IV’s interest in the trust
was vested; and William IV exercised his power of withdrawal. We disagree.
B. William IV’s Sub-Trust Was Not
Established
Defendants,
the living descendants of William IV, argue his subtrust was not
established prior to his death. Defendants
produced evidence indicating no distribution of property from the trust to William IV’s
subtrust has occurred. The trust
continues paying the taxes for the trust property. The trust maintains title and possession over
the trust’s properties. Neither Judge
Ross, William IV nor Ms. Smith have distributed any assets to the subtrusts.
Defendants met their initial production
burden of demonstrating William IV did not exercise his power to withdraw
assets from his subtrust.
Plaintiff
does not dispute the material facts, only their characterization. Plaintiff argues William IV’s power to withdraw
existed when William III died. The trust
states, “A trust for BILL, IV shall be established by the Trustee at such time
as the Trustee first receives any distribution of assets allocated to BILL,
IV.†William IV’s subtrust is
established, or brought into existence, when the trustee receives any
distribution of assets allocated to William IV.
Plaintiff
argues William IV’s subtrust became established as soon as he received any
interest in the property, including a future interest. Plaintiff relies on the following language in
Estate of Sigourney (2001) 93
Cal.App.4th 593, 603: “The concept of
property in California is extremely broad. ‘“The
term ‘property’ is sufficiently comprehensive to include every species of
estate, real and personal, and everything which one person can own and transfer
to another. It extends to every species
of right and interest capable of being enjoyed as such upon which it is
practicable to place a money value.â€â€™ [Citations.]â€
(See Yuba River Power Co. v.
Plaintiff
argues it is irrelevant whether specific assets from the trust were legally transferred
to William IV’s subtrust. However,
the provisions of the trust require a distribution of assets from the trust for
the subtrust to exist. “Distribution of
assets†here would ordinarily mean passing of property held by the trust to the
trustee for William IV. Plaintiff
contends the transferred property included William IV’s interest in the
property. Plaintiff’s argument does not
reconcile with the express trust language.
William IV’s potential interest in his allocated property is not a
trust asset for purposes of distribution.
Black’s Law Dictionary (9th ed. 2009), at page 134, column 1, defines
“assets†as, “All the property of a person ([especially] a bankrupt or deceased
person) available for paying debts or for distribution.†(See In
re Estate of Kemp (Ohio App. 2010) 937 N.E. 2d 1102, 1104.) Whether William IV had property because
of his trust interest is not relevant for establishing his subtrust. The assets necessary to establish William IV’s
subtrust were William III’s property.
As noted, there has been no distribution of assets. Thus, the subtrust was not established at the
time of William III’s death.
Alternatively,
plaintiff contends William IV’s subtrust was funded on January 30, 2008. On that date, the probate
court’s order that the trustee distribute the trust assets to William IV
and Ms. Smith became final. Plaintiff
refers to the order issued July 7, 2006, in which the
probate court ordered distribution of Craig, Sr.’s forfeited share to William IV
and Ms. Smith. As noted, Craig, Sr.,
appealed the July
7, 2006 order. We affirmed the order, and our decision
became final on January 30, 2008. (
26, 2007, B197707) [nonpub. order].) Plaintiff’s argument is unpersuasive. As noted, no actual distribution of trust
assets has occurred. The July 7, 2006 order addressed the sole issue of what should be done with Craig,
Sr.’s share. Our opinion did not order
the distribution of trust assets to William IV or Ms. Smith.
Plaintiff
argues the trust provided William IV with the power to withdraw assets
that he could, and did, use during his lifetime. Plaintiff cites to the September 16, 2008 agreement between Ms. Smith and William IV and their
joint petition filed September 2, 2010. Though the September 16, 2008 agreement referred to a power of appointment, plaintiff argues William IV
and Ms. Smith actually meant power of withdrawal. Plaintiff’s argument is without merit. As noted, William IV’s withdrawal power
is found at Article VII, paragraph D of the trust. William IV’s withdrawal power was
directly related to the existence of the subtrust. Article VII of the trust is entitled “WILLIAM
M. CALDWELL, IV TRUST.†The next
paragraph provides, “After my [William III] death, the WILLIAM M.
CALDWELL, IV TRUST shall be held, administered, and distributed as set forth
below.†As noted, the William IV subtrust
is established at such time as the trustee receives a distribution of
assets.
Section
21121 provides, “All parts of an instrument are to be construed in relation to
each other and so as, if possible, to form a consistent whole.†(See Newman
v. Wells Fargo Bank (1996) 14 Cal.4th 126, 154.) William IV’s withdrawal power was a part
of the trust section concerning his subtrust.
The most reasonable interpretation of the trust language is William IV’s
withdrawal power over his subtrust exists only when his subtrust is first
established. As noted, no asset
distribution has occurred to establish his subtrust. Accordingly, his subtrust does not yet
exist. William IV had no withdrawal
power until his subtrust was established.
Whether William IV intended to withdraw from his subtrust does not
demonstrate he did use his withdrawal power during his lifetime. He could not exercise a power he did not yet
have.
Defendants
met their burden of production in favor of summary adjudication. (Code Civ. Proc., § 437c, subd. (p)(2);
25 Cal.4th at p. 849.) Plaintiff did not
raise a triable issue of material fact. As
a matter of law, William IV did not exercise his withdrawal power over any
property in his subtrust. William IV’s
subtrust is not yet established. The
probate court did not err by granting defendants’ summary adjudication motion.
IV. DISPOSITION
The
probate court’s order is affirmed.
Defendants, William M. Caldwell V, Blake Caldwell and Tyler
Caldwell, are awarded their appeal costs from plaintiff, Wilmington Trust, N.A.
NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS
TURNER,
P. J.
I concur:
KRIEGLER,
J.
>
Rothschild, J., dissenting:
On
July 7, 2006, the superior court ordered the distribution of Craig Sr.’s
forfeited one-third share of the trust assets to William IV and Ms. Smith. Our decision affirming that order became
final on January
30, 2008.
On September
16, 2008, William IV and Ms. Smith executed
a written agreement providing that they were withdrawing all of the assets of
their subtrusts. William IV died on December 13, 2010.
In
my view, the order concerning distribution of Craig Sr.’s forfeited share to
William IV and Ms. Smith was sufficient to create the subtrusts, regardless of
whether the trustee failed to comply with the order before William IV
died. In Estate of Newman (1964) 230 Cal.App.2d 158, the testator directed
that upon the death of his wife, certain shares of his estate were to be
distributed to certain beneficiaries unless they were “‘not living at the time
of said distribution.’†(See
died but before any assets were actually distributed. (Id.
at p. 161.) The trial court ruled, and
the Court of Appeal affirmed, that the deceased beneficiary’s share should pass
to his estate rather than being divided among the surviving beneficiaries. The court reasoned that the “‘date of
distribution’†was the date of the wife’s death, “not the date when, all of the
sundry mechanical problems involved in the transfer of record title having been
accomplished, physical delivery of the trust assets could be accomplished. Instruments of conveyance must be drawn,
executed and recorded, stock certificates must be endorsed, delivered to
corporate transfer agents and registrars, and returned, checks must be drawn
and receipts prepared. If the death of a
remainderman in the midst of this process were to divest his interest, the
process might well become incredibly repetitious. While a testator or trustor may legally
direct such result, it should not be assumed that he so intended except in the
light of the most explicit and positive language; no such language faces us
here.†(Id. at pp. 164-165.)
Here,
the trust instrument expressly tied the creation of William IV’s subtrust to
the “distribution of assets allocated to BILL, IV.†The superior court’s order of July 7, 2006, directed such a distribution and became final on January 8, 2008, well ahead of William IV’s express written withdrawal of his
assets from the subtrust. I conclude
that Estate of Newman is not
materially distinguishable and that the trustee’s failure to comply with the
distribution order before William IV died should not be allowed to defeat the
express written intent of both William III and William IV. I would accordingly reverse the order of the
superior court in the case now before us, and I therefore respectfully dissent.
ROTHSCHILD,
J.
a number of the litigants share a common surname, we will refer to them by their
first names, after initially introducing them by their full names. Of course, no disrespect is intended.
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Except as noted, all statutory
references are to the Probate Code.
