Tuban v. Backhouse

Filed 1/17/08 Tuban v. Backhouse CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SIXTH APPELLATE DISTRICT

The beneficiary of a trust filed a petition seeking to vacate a prior order terminating the trust. The beneficiary asserted that the trustee had committed fraud. After the beneficiarys petition was taken off calendar, the trustee filed a petition seeking discharge. The trustees petition was granted, and the beneficiarys estate appeals. The estate claims that the court erred in discharging the trustee without holding an evidentiary hearing on the beneficiarys petition. We find that there is no appealable order before us regarding the beneficiarys petition and reject the estates remaining challenges to the courts order discharging the trustee.

I. Background

In 1987, Mark R. Tuban (Tuban) created a living trust. The purpose of the trust was to retain the family businesses . . . and eventually provide enduring principal assets for my grandchildren Trudi Tuban (Trudi), Susan Tuban (Susan), and Mark R. Tuban II (Mark). The trust provided that it was Tubans desire that Robert Bly, then Trudis husband, continue to manage all of the businesses, and Tuban gave Bly an option to purchase portions of two of the businesses. Tuban directed the trustees to retain all of the real property without selling same, for as long as possible. The trust provided for the trust assets to be divided into three equal shares at the time of Tubans death. Ten years from my death or at such time as the death tax liability is paid in full, whichever last occurs, this Trust shall terminate and TRUDIs share of the Trust shall be distributed free of Trust. The trust shares of Susan and Mark were to be placed in separate trusts for each of them and were to be distributed to them when they reached the age of 50.

The record does not disclose the ages of Susan and Mark. Tuban died in 1991. The corporate trustee resigned in December 1993, and Trudi served as the sole trustee thereafter.

In September 2003, Trudi filed a verified petition for termination of the trust. The exhibits to her petition identified the assets and liabilities of the trust. In her petition, she proposed that the trusts assets be transferred into a limited liability corporation called the Tuban Family LLC, which would be owned equally by Trudi, Susan and Mark, and managed by Trudi. Her petition was supported by consents to termination of the trust and waivers of their right to an accounting signed by Trudi, Susan and Mark. Trudi asked the court to confirm and approve her acts as trustee, order the distribution of the trusts assets to the LLC, and discharge her as trustee upon the distribution of the assets to the LLC.

In November 2003, the court issued an order terminating the trust and providing that the trusts assets were to be transferred into the LLC, which would be owned equally by Trudi, Susan and Mark, and managed by Trudi. The order provided that Trudi Tuban Bly is discharged as Trustee on distribution of the assets of the trust as set forth above.

On April 7, 2005, Susan filed a verified petition in which she asked the probate court to (1) set aside the order terminating the trust, (2) remove Trudi as trustee, (3) appoint a successor trustee, and (4) order an accounting. Susan claimed that the November 2003 order terminating the trust had been obtained by Trudi through a fraud on the Court.

Susan filed a declaration in support of her petition. She described how Trudi and Bly had discouraged her from inquiring about the administration of the trust by threatening her with the loss of her inheritance if she dared to raise any questions. Susan claimed that Trudi had engaged in a long series of self-dealing transactions involving trust assets to Susans detriment. In September 2003, Trudi had told Susan and Mark that they had to sign documents waiving an accounting and agreeing to termination of the trust in order to receive [their] inheritance[s]. Susan was unaware that she had a right to an accounting, and she signed the papers.

After the court issued its November 2003 order terminating the trust, Trudi admitted to Susan and Mark that she had been lying to us throughout her administration of the trust. Trudi told them that Bly had been in control of the trust and that the trusts books are all messed up. In March 2005, Trudi informed Susan that one of the family businesses was in dire straits, and it would be necessary for it to seek Chapter 7 bankruptcy protection. Trudi admitted mismanaging the trusts assets. Susan declared that she would never have signed the papers agreeing to waive an accounting and agreeing to the termination of the trust if she had known of Trudis mismanagement of the trusts assets. She claimed that Trudi had deliberately and fraudulently induced her to sign those documents.

In May 2005, Trudi filed an unverified opposition to Susans petition. She asserted that she should remain trustee because both she and Mark wanted her to remain trustee, which was the requisite majority under the trust. Trudi claimed that she had distributed over $840,000 from the trust to Susan and that she had provided an accounting of trust assets through 2002. Trudis opposition was supported by Trudis and Marks declarations. Mark declared that he was pleased with the job that Trudi had done as trustee, had confidence in her, and wished her to continue to be trustee. He also stated that he had been provided with an accounting by Trudi of trust assets through 2002. Trudi declared that she had competently administered the trust, had provided an accounting through 2002, and was working on an accounting for 2003 and 2004.

At the May 19, 2005 hearing on Susans petition, Trudis trial counsel asserted that Trudi was on the verge of fully terminating the trust. Susan suggested that Christine Backhouse be appointed the successor trustee of the trust. The following colloquy occurred at the hearing. THE COURT: Sounds like the case is either ripe for mediation or reference at this point, because [it] doesnt sound like youre going to agree on the accounting issue and the selection of a corporate trustee. [] MR. DWYER [Trudis trial counsel]: Ill agree to mediation. [] THE COURT: You want to see if you can pick one off the list downstairs? [] MR. DWYER: Sure. [] MR. HETTIG [Susans trial counsel]: The only question is, Im not sure what there is to mediate. [] THE COURT: Winding up this trust and seeing if you can cut through all these issues, the he said she said situation and get down to what actually has been done and what needs to be done in the future in order to get this trust terminated. [] MR. HETTIG: I want to remind the Court that the first issue that we have requested the Court to do this morning is to set aside the order terminating the trust from December 2, 2003. We cant proceed unless the Court vacates that order in order for us to proceed to anything, mediation, accounting and so forth. [] MR. DWYER: I would strongly disagree with that, Your Honor. That was stipulated to by all three parties. [] THE COURT: I can stay everything pending mediation if you would like to go to meditation. I cant force you to. [] MR. DWYER: Were willing. [] THE COURT: If that doesnt work, were back to a 638 reference or setting the matter for contested hearing, and then Ill have to find out what your time estimates are and see if I have time. If not, we will send you to the master calendar. [] MR. DWYER: We ask this be stayed, referred to mediation. If there is uncertainty as to whether the other side wants mediation, we ask this be stayed thirty days so we can come back here and further discuss it. [] THE COURT: Assuming everybody is acting in good faith and you can agree upon a mediator you are both happy with. We have a list. Maybe we should go out about forty-five days for status and see where you are. Even if you can narrow some of these issues and remove them from contention, that would certainly be worth the effort. [] MR. DWYER: Thank you, Your Honor. [] MR. HETTIG: Were happy to do that. The court set the matter for a status hearing on July 14, 2005.

Susans trial counsel thereafter made timely and repeated attempts to arrange for mediation, but Trudis trial counsel was unresponsive. In July 2005, Trudis trial counsel notified Susans trial counsel that all of the trusts assets except for one item of real property had been transferred to the Tuban Family LLC, and that the remaining item would be transferred soon. Trudis trial counsel expressed the belief that this transfer rendered Susans petition moot. Susans trial counsel, on the other hand, believed that the transfer of the trust assets violated what he understood to be the courts May 2005 stay of all actions in connection with the trust.

In July 2005, Susan filed a request for a decision on her petition. At the July 14, 2005 status hearing, Susans trial counsel argued that Trudi had violated the courts stay order, but the court questioned whether any stay had been ordered. Do we have an order staying? I dont recall that specifically. Ill have to pull the file and see if we have a minute order. The court set an evidentiary hearing on Susans petition for October 2005.

Susan died in September 2005, and the October 2005 hearing was taken off calendar. In May 2006, Trudi filed a verified petition seeking a court order discharging her as trustee. She asserted that all of the trusts assets had been transferred to the Tuban Family LLC. In August 2006, Susans estate filed a verified opposition to Trudis petition. It asserted that Trudi and her trial counsel were in contempt of the courts May 2005 Stay of further actions. Susans estate asked the court to deny Trudis petition, hold Trudi in contempt, sanction Trudi and her attorney, and set a trial date on Susans petition.

At the August 2006 hearing on Trudis petition, Susans estates trial counsel asked the court to set a trial date on Susans petition. He asserted that the LLC had never been properly established because there was no organizing agreement, although the LLC had been registered with the Secretary of State. Trudis trial counsel asserted that the proper forum for any claim against the LLC would be in civil court, not here.

Susans estates trial counsel argued that Trudi had violated the stay, but the court reviewed the minutes from the May 2005 hearing and found no record of a stay. Susans estates trial counsel conceded that the courts minutes controlled over the transcript, and the court concluded that there was no stay because none was reflected in the minutes.

Susans estates trial counsel continued to assert that Susans September 2003 waiver of an accounting had been fraudulently obtained, and sought a trial on that issue. The court granted Trudis petition and ordered Trudi discharged as the trustee of the trust. The courts October 2006 order said nothing about Susans petition. On December 6, 2006, Susans estate filed a notice of appeal from the Courts Order in this matter granting the Petition of Trustee Trudi Tubans . . . filed on October 5, 2006 . . . . The notice of appeal said nothing about any ruling on Susans petition.

II. Discussion

Susans estate contends that the court erred in (1) concluding that Susans petition to discharge Trudi as trustee and obtain an accounting was moot due to the transfer of the trusts assets to the LLC, (2) failing to vacate the November 2003 order, as sought in Susans petition, on the ground that Trudi obtained it through fraud, and (3) failing to find that Trudis conduct in transferring the trusts assets to the LLC violated the courts alleged May 2005 stay order. Susans estate seeks a remand for an evidentiary hearing on Trudis fraud and an accounting.

At the outset, we must separate those issues that Susans estate may raise in this appeal from those issues which are not before us because they relate to Susans petition, which the court has never ruled upon, and which goes unmentioned in Susans estates notice of appeal.

It is elementary that an appeal from a portion of a judgment brings up for review only that portion designated in the notice of appeal. (Glassco v. El Sereno Country Club, Inc. (1932) 217 Cal. 90, 92.) Our jurisdiction on appeal is limited in scope to the notice of appeal and the judgment or order appealed from. (Polster, Inc. v. Swing (1985) 164 Cal.App.3d 427, 436.)

The superior court has never made any appealable ruling on Susans petition. (Prob. Code, 1300, 1304.) It did not grant, deny, dismiss, or strike her petition. Her petition has never even been heard. It was set for hearing in October 2005, but that hearing was taken off calendar by Susans trial counsel after Susans death. Susans petition was never again set for hearing. Indeed, at the August 2006 hearing that resulted in the October 2006 order, Susans estates trial counsel asked the court to put Susans petition back on calendar. [W]e would still like to have [Susans petition] set for trial. Nothing has been resolved. That issue has not been tried or resolved. The court never ruled on this request.

The courts October order resolved only Trudis petition and the issue of whether there had been a stay in May 2005. The only order mentioned in Susans estates notice of appeal was the courts ruling on Trudis petition. Consequently, the only issues that we may address in this appeal are contentions regarding the courts ruling on Trudis petition. This means that we cannot address the primary contentions in Susans estates appellate brief regarding both the merits of Susans petition and the question of whether her petition was moot.[1] Those issues were not the subject of the only appealable order that is before us in this appeal.

Susans estate claims that the issues raised in Susans petition were before the court at the August 2006 hearing on Trudis petition because the estate raised these issues in its opposition to Trudis petition. Not so. Susans estates three-page opposition to Trudis petition did not restate Susans petition but merely asked the court to set a trial date on Susans petition. The opposition was accompanied by no declarations, and it contained no allegations about Trudis alleged fraud. It simply asked the court to now set a new date for that trial [on Susans petition]. The inclusion of this request in Susans estates opposition to Trudis petition did not transform the courts order granting Trudis petition into an appealable ruling on Susans petition. The fact that Susans estate never obtained any ruling by the court on this request precludes the estate from pursuing appellate relief.

A couple of Susans estates contentions are before us in this appeal. Susans estate claims that the court erred in allowing the transfer of the assets to the LLC. While this issue could have been raised in an appeal from the November 2003 order, which directed the transfer to the LLC, it cannot be raised in this appeal. The courts October 2006 order made no ruling on the validity of the transfer of the assets to the LLC. Moreover, although Susans estate argues that this transfer violated the trust by depriv[ing] or delay[ing] distribution of the trusts assets to the beneficiaries, it plainly did not. Each of the beneficiaries owned an equal share of the LLC, so the transfer of the assets to the LLC was a distribution of all of the trusts assets to the beneficiaries.

Susans estates only other contention that concerns the courts ruling on Trudis petition is her claim that the court erroneously concluded that there had been no stay in May 2005. Although the court said at the May 2005 hearing that it can stay everything pending mediation if you would like to go to meditation, and the parties agreed to go to mediation, the court never actually imposed a stay either orally or in writing. (Italics added.) Neither the clerks minutes of the hearing nor the reporters transcript of the hearing show that a stay was ordered. Hence, the record supports the courts finding that no stay was ever in effect.

As Susans estate makes no other contentions regarding the courts October 2006 order granting Trudis petition, the only order which is before us in this appeal, the courts order must be affirmed.

III. Disposition

The order is affirmed.

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Mihara, J.

WE CONCUR:

_____________________________

Bamattre-Manoukian, Acting P.J.

_____________________________

Duffy, J.

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Analysis and review provided by San Diego County Property line attorney.

[1] Susans estate contends that Susans consent to termination of the trust and her waiver of an accounting were obtained by Trudi through fraud. It claims that the evidence of Trudis fraud was undisputed because Trudis opposition to Susans petition was unverified. Probate Code section 1021 requires a response to a petition to be verified, and the record does not reflect that Trudis opposition was verified. However, an objection to the absence of a verification is forfeited if it is not raised below. (Zavala v. Board of Trustees (1993) 16 Cal.App.4th 1755, 1760-1761.) The record does not reflect that Susan challenged Trudis opposition on this ground below. Hence, it would appear that the question of whether the consent and waiver were obtained by fraud was not undisputed.

Susans estate asserts that the court erred in failing to hold an evidentiary hearing on Susans petition. A court may set aside a final probate order only upon a showing of extrinsic fraud or extrinsic mistake. (Estate of Sanders (1985) 40 Cal.3d 607, 614 (Sanders).) Fraud and concealment by a fiduciary may constitute extrinsic fraud. (Sanders, at pp. 615-618.) The only order that is before us in this appeal does not resolve whether Susans petition should be set for an evidentiary hearing. Therefore, we express no opinion on this contention.