Steuber v. Steuber

Filed 2/10/10 Steuber v. Steuber CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO

APPEAL from a judgment of the Superior Court of Los Angeles County.

Joseph E. DiLoretto, Judge. Affirmed.

Russell L. Davis for Plaintiff and Appellant.

Bergkvist, Bergkvist & Carter and Paul J. Carter for Defendants and Respondents.

_________________________

Plaintiff and appellant Terri L. Steuber (Terri)^[1]appeals from a probate court judgment, finding that she is not entitled to distribution of her deceased husbands share of the Bernard W. Steuber and Loretta M. Steuber Family Trust (the Trust).

We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Family

As pertains to this litigation, this family consists of Bernard W. and Loretta M. Steuber (the parents), their four children (Michelle D. Steuber, Bernard W. Steuber II (Bernard II), Timothy L. Steuber, and Brent R. Steuber), Timothys wife Terri, and Timothys son from a prior marriage, Timothy Steuber, Jr. (Timothy Jr.).

2. The Trust

On April 7, 1997, Bernard and Loretta created the Trust. The Trust property originally consisted primarily of 36 parcels of real property.

Bernard and Loretta were named the Trust grantors and trustees. Michelle and Bernard II, respondents herein, were named as successor trustees.

Regarding distribution, the Trust provides at Article Six, in relevant part: Upon the death of both of the Grantors, and to the extent not provided for by appointment by the surviving Grantor as aforesaid, the Trustee shall pay and distribute the trust estate at that time remaining as follows: [] 1. [The Trust grants Michelle the medical practice of Bernard.] [] 2. The trustee shall divide the remaining trust estate into four equal shares. Each share shall be distributed as follows: [] 2.(a). The shares for Grantors children [Michelle, Timothy, and Bernard II] shall be distributed to each of them outright, free of trust. If [Michelle, Timothy, or Bernard II] shall not survive Grantors, or shall not survive distribution of their entire share of the trust estate, then their share or any remaining portion of their share, shall be distributed to his or her issue, outright, free of trust. The Trust directs that Brents share be held in a separate trust.

Regarding the powers of the trustees, the Trust provides at Article 12, in relevant part: In the administration of any property, real or personal, at any time forming a part of the trust estate, including accumulated income, and in the administration of any trust created hereunder, the Trustee, in addition to and without limitation of the powers provided by law, shall have the following powers to be exercised in the absolute discretion of the Trustee, except as otherwise expressly provided in this Agreement: [] (a) To retain such property for any period, whether or not the same is of the character permissible for investments by fiduciaries under any applicable law, and without regard to the effect any such retention may have upon the diversity of investments; []. . .  [] (d)  To render liquid the trust estate or any trust created hereunder in whole or in part, at any time and from time to time, and to hold unproductive property, cash or readily marketable securities of little or no yield for such period as the Trustee may deem advisable.

3. Deaths of Bernard and Loretta

Bernard passed away on February 12, 1999, and Loretta passed away on October 1, 1999.

4. Successor Trustees Failure to Provide Timely Information; Correspondence Between the Parties Regarding Partial Distribution of Trust Assets

In April 2000, Brent filed a petition to compel an accounting and for the removal of respondents as trustees. Subsequently, Timothy filed a response to Brents petition, concurring with Brents allegations. Michelle opposed Brents petition Apparently before the trial court held a hearing on the petition, in June 2000, Michelle provided Timothy, Brent, and the trial court with an accounting.

In October 2000, Michelle indicated that she wanted to either purchase or take as a distribution certain properties held in the Trust. Timothys counsel responded by advising her that he objected to the distribution of any properties to her or sales unless and until a fair value has been determined. Michelles attorney replied by encouraging Timothy to conduct his own appraisal to determine the subject properties fair market values. The letter also confirmed that a Cadillac (valued at $13,000) had been distributed to Timothy.

Nearly one year later, on August 23, 2001, Timothys counsel sent a letter to Michelles counsel regarding administration of the Trust and distribution of Trust assets. Timothy requested distribution of two vacant lots in Palmdale. He also demanded his share of a life insurance policy death benefit. Michelles counsel responded, advising that his request for the Palmdale properties should not be a problem. Attached to Michelles counsels letter was a print-out of various

e-mails, confirming prior distribution of certain Trust assets to Timothy.

Later, in April 2003, Timothy again requested a distribution. Michelle responded by sending him a distribution check for $20,000.

5. Timothys Death

Timothy passed away suddenly on October 7, 2003. Most of the Trust assets had not been distributed by the time of Timothys death.

6. Terris Petition to Determine to Whom Trust Assets Should be Distributed

On August 2, 2004, Terri filed a petition to determine to whom Trust property should be distributed. According to her first amended petition: Because [Timothy] died before full distribution of the residue of the Trust, [Michelle and Bernard II] have contended that [Timothy] forfeited his right to any further distributions in the Trust. [Michelle and Bernard II] contend that . . . any remaining trust distributions should be distributed to [Timothy Jr.]. In response, Terri alleged that because she and Timothy created the Steuber Family Trust on October 6, 2003 (the Timothy Trust), the Timothy Trust [was] entitled to receive any undistributed portion of the Trust.

Alternatively, Terri alleged that the 4 year time span between the date of death of [Loretta] and the date of Timothys death constitute[d] an unreasonable delay in distributing all trust assets. As a result of the unreasonable delay in distributing Trust assets, the right to receive distributions from the Trust vested in Timothy when the Trust assets could have or should have been distributed, which was sometime during the 4 year period preceding [Timothys] death.

Michelle and Bernard II, as successor trustees, responded to and opposed Terris petition.

7. Motions for Summary Judgment and Stipulation

On April 18, 2007, Michelle and Bernard II filed a motion for summary judgment and/or adjudication. Shortly thereafter, Terri filed a cross-motion for summary judgment or, in the alternative, summary adjudication.

Following the trial courts denial of both dispositive motions, the parties stipulated to have the matter submitted . . . for determination of all issues presented in Terris first amended petition in lieu of trial.

8. Trial Court Decision

On February 29, 2008, the trial court issued its decision against Terri and in favor of Michelle and Bernard II as cotrustees of the Trust. In its memorandum of decision, the trial court considered whether Timothys share vest[ed] prior to his death by virtue of [the cotrustees] undue delay in distribution. (Emphasis omitted.) After reviewing Estate of Taylor (1967) 66 Cal.2d 855 (Taylor), the trial court rejected Terris position. It found Taylor distinguishable, in part because it concerned distribution of an estate, not a trust. Moreover, the trial court noted that nothing [in Taylor] had prevented a timely distribution, and the Supreme Court vindicated a public policy for prompt distribution through probate. It was probate, not a trust with discretionary powers. The delay was attributable to dilatory conduct by attorneys. And, a trust is very different than probate of a will, and the public policy articulated in Taylor does not transfer overa trust, unlike probate, is not a public proceeding.

Furthermore, the trial court was not convinced by Terris contention that the four-year delay between the date of Lorettas death and the date of Timothys death was unreasonable. There was no unreasonable delay under the express terms of the trust. Article Twelve of the Trust entitled Powers of Trustee subdivision (a) provides specific power To retain such property for any period, whether or not the same is of the character permissible for investments by fiduciaries under any applicable law, and without regard to the effect any such retention may have upon the diversity of investments. [] Likewise[,] Article 12(b) provides the power to render the trust estate liquid in whole or in part, at any time and from time to time, and to hold unproductive property, cash or readily marketable securities of little or no yield for such period as the . . . trustee may deem advisable.

The trial court continued: But even assuming the rationale of Taylor can be applied to a trust, the conclusion that Article Six takes precedence over Article Twelve does not follow. An instrument must be construed in its entirety. If the trust mandated immediate liquidationthen why would Grantors include Article twelve which expressly allows the trustee to hold unproductive propertyi.e[.,] property with a current low market value that could improve over time?

The survivorship clause of the trust does not merely require a beneficiary to survive distribution but expressly mandates survival of the beneficiarys entire share of the trust estate. It is ironic that Terri insists the grantors intent must be derived exclusively from the trust instrument because she ignores the very terms that belies her argument about undue delay. The trustees were acting within their express powers and were not required to immediately liquidate any or all assets.

There is no evidence Timothy ever petitioned this court for distributions from the trust[Terri] cannot viably argue undue delay on his behalf when Timothy himself never complained of delay.

Even assuming Taylor did apply, it cannot be said as a matter of law that the delay, generally was unreasonable. The evidence reflects that [the] trustees appropriately planned to make distribution[s] over a period of years to capitalize on the most favorable market conditions. It is no more than opinion that distribution of 36 real estate parcels must be done within four years to be reasonable.

9. Judgment and Appeal

Judgment was entered, and this timely appeal ensued.

DISCUSSION

I. Standard of Review

Multiple standards of review govern this appeal. As the parties agree, the de novo standard of review applies to pure questions of law. (Crook v. Contreras (2002) 95 Cal.App.4th 1194, 1203; Topanga & Victory Partners, LLP v. Toghia (2002) 103 Cal.App.4th 775, 780.) To the extent that they are relevant, factual issues on appeal are governed by the substantial evidence standard of review. (Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 632.)

II. The Trial Court Properly Awarded Judgment Against Terri

In Taylor, supra, 66 Cal.2d 855, the California Supreme Court considered the effect of an executors delay in distributing estate assets. (Id. at p. 857.) First, the court summarized the trial courts findings, namely that (1) the executors delay was unreasonable, and (2) vesting cannot be postponed by unreasonable delay in preparing an estate for distribution and that when there is such delay contingent interests vest at the time distribution should have been made. (Id. at p. 858.) Then, our high court affirmed the trial courts decision, reasoning that unreasonable delay cannot defeat the beneficiarys interest. This conclusion promotes the established policy favoring prompt distribution of estates [citations] and carries out the presumed intent of the testatrix. In the absence of any indication to the contrary a testator contemplates prompt distribution. (Ibid.)

Terri argues that the trial court erred in refusing to apply Taylor, supra, 66 Cal.2d 855 to trust distributions. We need not decide this issue. Even if Terri is correct, her claim still fails.

The holding in Taylor is premised upon the notion that that the testator contemplates prompt distribution of the estate. (Taylor, supra, 66 Cal.2d at p. 858.) If applied to trusts, then there must be unequivocal evidence that the trust grantors contemplated prompt distribution of trust assets. According to Terri, that evidence is found in Article Six of the Trust, which provides for distribution of the Trust upon the death of the grantors. The trial court found otherwise, and applying the proper standard of review, we must affirm.

The Trust itself allows the trustee, in his or her absolute discretion, to retain Trust property for any period. The Trust also allows the trustee(s) to hold unproductive property. Given this express Trust language, Michelle and Bernard II had the discretion to hold the Trust assets and delay their distribution. (Estate of Parrette (1985) 165 Cal.App.3d 157, 161.)

Terri attempts to refute this unavoidable conclusion by arguing that the trial court misconstrued applicable portions of the Probate Code that govern the duties of a trustee. She claims that pursuant to Probate Code sections 15407, subdivision (b) and 15410, subdivision (c), the duties of the trustees here (Michelle and Bernard II) were limited to winding up the affairs of the Trust. Presumably, Terri believes that winding up the Trust included prompt distribution of Trust assets.

We cannot adopt Terris strained reading of the Probate Code. Probate Code section 15407 governs termination of a trust. Subdivision (a) delineates when a trust terminates, including when the term of the trust expires, when the trust purpose is fulfilled, when the trust purpose becomes unlawful, when the trust purpose becomes impossible to fulfill, and when the trust is revoked. (Prob. Code, 15407, subd. (a).) Subdivision (b) of that statute follows: On termination of the trust, the trustee continues to have the powers reasonably necessary under the circumstances to wind up the affairs of the trust. This statute means what it says. But, it has no bearing on the events that occurred in this case because the Trust had not terminated before Timothys death.

Similarly, Probate Code section 15410 governs distribution of trust property upon trust termination. The statute provides, in relevant part: At the termination of a trust, the trust property shall be disposed of as follows: [] . . .  [] (c) In any other case, as provided in the trust instrument or in a manner directed by the court that conforms as nearly as possible to the intention of the settlor as expressed in the trust instrument. In other words, trust property must be distributed as provided for by the trust document upon termination of the trust. Setting aside the fact that the Trust here had not yet terminated, that is exactly what occurred.

Moreover, ample evidence supports the trial courts finding that even if Michelle and Bernard II delayed the distribution of Trust assets, that delay was not unreasonable. The Trust originally consisted of 36 parcels of property. As Michelle pointed out to the trial court, it was in the best interest of the Trust that various parcels of real property be held until such time as they would command a higher sales price. Furthermore, respondents presented evidence that a problem with the Trusts income tax returns and an IRS audit contributed to the delay in the distribution of Trust assets.

Significantly, there is no indication that Timothy ever demanded distribution of Trust assets.^[2] While no such petition may have been required (see, e.g., Taylor, supra, 66 Cal.2d at p. 859), its absence supports the trial courts inference that Timothy was not dissatisfied with Michelle and Bernard IIs management of the Trust and its assets.

At oral argument, Terris counsel pointed to correspondence exchanged between counsel and argued that Timothy did request distribution of Trust assets. We have reviewed those letters, and we conclude that they do not support Terris position that respondents unreasonably delayed distribution of the Trust. At most, those letters confirm that Timothy requested periodic distribution payments from the Trust. And, he received them. At a minimum, he was given various monetary distributions from Michelle and a Cadillac; and Michelle did not object to his request for the Palmdale properties. These letters do not compel the conclusion that Timothy objected to any delay in total trust distribution.

Terri asserts that Michelle and Bernard II did not treat all the beneficiaries impartially, favoring themselves over Timothy. At the risk of sounding redundant, we repeat: The Trust allows Michelle and Bernard II to retain Trust assets for any period in their discretion. While some assets may have been distributed and others were not, the trustees had the discretion to make those decisions.

Finally,^[3]Terri argues that an independent trustee would have and could have either distributed the trust properties to the beneficiaries or sold them within four years after Loretta died. Terris unfounded speculation, unsupported by any legal authority or concrete evidence, provides no grounds for reversal.

DISPOSITION

The judgment of the probate court is affirmed. Respondents are entitled to costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

______________________________, J.

ASHMANN-GERST

We concur:

__________________________, Acting P. J.

DOI TODD

__________________________, J.

CHAVEZ

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^[1] For convenience, we refer to the parties by their first names. (In re Marriage of Smith (1990) 225 Cal.App.3d 469, 475, fn. 1.)

^[2] The petition filed by Brent in 2000, to which Timothy filed a response, was for an accounting. Respondents provided that accounting shortly after Brents petition was filed. There is no indication that the parties wanted anything else as the matter was then apparently dropped.

^[3] In their respondents brief, Michelle and Bernard II respond to an argument that Terri raised below, namely whether the creation of the Timothy Trust has any bearing on their duties to distribute Trust assets. Because Terri does not broach this subject in her opening brief, neither do we.