McCaslin v. >England>





















Filed 3/29/13 McCaslin v. England CA4/3















NOT TO BE PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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



FOURTH APPELLATE
DISTRICT



DIVISION THREE




>

MARK McCASLIN et al., Plaintiffs and Respondents, v. RICHARD A. ENGLAND, as Trustee, etc., Defendant and Appellant.

G046063 (Super. Ct. No. A216479) O P I N I O N

Appeal from an order of
the Superior Court
of Orange
County, Daniel Didier, Temporary Judge. (Pursuant to Cal.
Const., art. VI, § 21.) Affirmed.

Bidna & Keys, Howard
M. Bidna, Richard D. Keys and Jon A. Longerbone for Defendant and Appellant.

Nicora and Hespe, Albert
J. Nicora and Frand Hespe; Law Offices of Joel Franklin and Joel Franklin for
Plaintiffs and Respondents.





Richard
A. England (appellant), trustee of the Robert L. McCaslin Separate Property
Trust (the trust), appeals from the trial court’s order granting the “safe
harbor” petition (former Prob. Code, § 21320) of Mark McCaslin and Brett
Miller (respondents).href="#_ftn1"
name="_ftnref1" title="">[1] We affirm.



FACTShref="#_ftn2" name="_ftnref2" title="">[2]



Robert L. McCaslin,
executed the trust in June 1979. It was
amended and restated in its entirety on April
24, 1996 and partially amended in December 1999. McCaslin placed his partnership interests in
Triple Net Leasing and H.M.S. Company, shares of stock in TriCal, Inc., Western
Cascade, Inc., Soil Chemicals Corporation and Bolsa Research Associates, Inc.,
and a $3,500,000 promissory note
payable by TriCal, Inc. in the trust.

According to Article III
of the trust as amended, if Robert L. McCaslin’s second wife, Elsie J.
McCaslin, survived him, the trust estate was to be divided into two subtrusts,
a Qualified Terminable Interest Property Trust (QTIP) and a Unified Credit
Trust (UCT). Elsie J. McCaslin was
entitled to the net income from the QTIP distributed in monthly installments
for her lifetime. Upon her death, the
income of the QTIP was to be distributed to her estate, and the assets of the
QTIP were to be divided between the remainder beneficiaries as provided for in
the UCT. The UCT called for distribution
in equal shares to the remainder beneficiaries, designated as the five children
of Robert L. McCaslin’s first marriage, or the living issue of any of the
children who predeceased him.
Distribution was to occur “as soon as reasonably possible” after the
payment of certain specified expenses, including bona fide debts, funeral
expenses, estate taxes, and expenses incurred in the administration of the
estate.

Robert L. McCaslin was
the trustee during his lifetime. He
named appellant, his cousin and stockbroker, and First American Trust Company
to serve as successor co-trustees, although First American Trust Company
declined to serve. The purported reason
for appellant’s appointment was “dysfunction between the family members who are
beneficiaries of this trust . . . and . . . conflicts
of interest between certain members of the family.” The trust also designated Mark McCaslin,
Robert L. McCaslin’s son, as Special Trustee over the trust’s shares of stock
in TriCal, Inc. and Soil Chemicals Corporation with the sole right to vote the
shares of stock in these corporations.
The trust allowed for trustee fees according to the “usual and customary
fee for services” charged by a corporate trustee, or the equivalent amount to
appellant if he became the sole trustee.

The trust also contained
the following no contest clause: “Except
as otherwise provided in this Trust or in the Will of Trustor, Trustor has
intentionally omitted to provide herein for any of his heirs living at the date
of his death. If any heir or beneficiary
under this Trust or any other person in any manner directly or indirectly
contests or attacks this Trust or any of its provisions, or seeks an
adjudication in any proceeding in any Court that this Trust of any of its
provisions or that said Will or any of its provisions is void or that is designed
to thwart Trustor’s wishes as expressed in this Trust or in said Will or any
supplementary written ‘Instructions to Trustees’ any share or interest in this
Trust given to said contestant is revoked and shall be disposed of in the same
manner provided herein as if that contestant had predeceased the Trustor,
without issue. The Trustee is hereby
authorized to defend, at the expense of the Trust Estate, any contest or other
attack of any nature on this Trust or any of its provisions.”

Robert L. McCaslin died
in November 2000.href="#_ftn3" name="_ftnref3"
title="">[3] Elsie J. McCaslin died nine years later in
November 2009. After her death,
$6,162,250 in estate taxes became due.
As of June 2010, the trust had assets in excess of $18 million.

In November 2010,
respondents filed a safe harbor petition for declaratory relief pursuant to
former section 21320. They sought the
immediate suspension of appellant’s powers as successor trustee for breach of
his fiduciary duties and an order prohibiting the payment of attorney fees for
opposing the petition. The petition
alleged the trust had assets of approximately $14,700,000 in cash, investment
accounts, and interest in partnerships and closely held corporations, but that
a disagreement had arisen concerning the management of the trust. The beneficiaries argued appellant had
breached his fiduciary duty by paying himself approximately $1 million in fees
while managing only $6 million of the trust’s assets, failing to communicate or
cooperate with them, adopting a distribution plan that called for between three
and 10 years to pay the estate tax liability, and by deciding to adopt an
investment strategy that virtually ensured he would continue to charge in
excess of $100,000 annually in administration fees during that time period.

Respondents also
submitted a verified proposed petition for removal (removal petition) that
contained essentially the same allegations as the safe harbor petition. The removal petition included a schedule of
assets and liabilities that reflected a total gross estate of $16,586,569 and a
balance due in estate taxes of $4,320,089.

Appellant asserted the
safe harbor petition, although “styled in the form of an attack” on his
management, was in substance an attack on the trust and an attempt to thwart
the intent of the trustor. He explained
that the beneficiaries and the court had approved eight separate accountings
for the years 2000 through 2009, and they had an inherent conflict of interest
due to Mark McCaslin’s control over TriCal, Inc. and Soil Chemicals
Corporation.

Appellant’s trial brief
asserted, “While carefully crafted in the form of a petition to remove and
surcharge the Trustee, the substance of the Proposed Petition violates the no
contest clause contained in section 7.9 of the Trust as an attack on the Trust
provisions and an effort to thwart the Trustor’s intent as to payment of estate
taxes, timing of asset distribution, selection of trustee and trustee
compensation.” It further alleged the
safe harbor petition and the removal petition were “frivolous and contrary to
Court orders approving the Trustee’s first eight annual accountings.” Moreover, appellant claimed the removal
petition was “contrary to the terms of the Trust” and designed to “take control
of the Trust from the independent trustee . . . who has
been serving as trustee for more than a decade, in order to distribute the
mostly illiquid trust assets without paying the $3.5 million in outstanding
estate taxes (for which the Trustee could be personally liable).”

The matter came on for
hearing in September 2011. The court
issued a tentative ruling to grant the safe harbor petition, stating “it
appears, in looking at the petition and the statute, that there’s not a contest
here; that the petition appears to be challenging the discretion of the trustee,
not really challenging the [trust] document at all. So the tentative would be to grant the
petition.”

When questioned by the
trial court, appellant’s attorney stated, “It is a contest because the trustor
– the trustor intended to grant, in this case Mr. England,
certain discretion, discretion regarding payment of taxes. We don’t think so clearly [>sic] discretion vis-à-vis the timing of
distribution of the assets. But when the
trustee exercises its discretion within the meaning of the – within the discretion
given him by the trust instrument, a challenge to that is in fact a challenge
and an attack on the trust and its provisions.”
Counsel also argued the removal petition constituted a “judicial
proceeding which would thwart the trustor’s intent. And the trustor’s intent in this case was
that the taxes – state [sic] taxes be
paid before there be a distribution. [¶]
If we look at what is really at issue and – now this has been a tough case to
get our arms around, in large part because the petitioners have done a very
crafty job of trying to take what is in fact an attack on the trust and what is
in fact an attack on the trustor’s intent and tried to turn that into something
that wouldn’t look like a contest.”

When appellant’s counsel
sought to introduce expert testimony
and numerous exhibits, the court stated, “this is not dissimilar, in my
opinion, from a judgment on the pleadings.
I look at the no-contest provision.
I look at the petition. It’s not
a contest. I’m not going to be digging
down beneath. I’m not going to hear
testimony. This is law and motion.”

Appellant’s counsel then
argued respondents could not litigate the validity of prior accountings. The court agreed “there might be other res judicata,
and there might be a lot of reasons, but I don’t think the terms of the trust
necessarily are involved there. I don’t
think there’s anything that they’re challenging that requires a voiding of the
language in the trust. It’s not
challenging the terms of the trust.”href="#_ftn4" name="_ftnref4" title="">[4] After additional argument, the court
concluded, “this is a garden-variety boilerplate no-contest clause. It’s not anything that you don’t usually see,
and I quite frankly say it again:
There’s not a contest. I mean you
are valiantly advocating your position here, but quite frankly, counsel, it is
not compelling.”



DISCUSSION



Former section
21320 stated, in pertinent part, “(a) If an instrument containing a no contest
clause is or has become irrevocable, a beneficiary may apply to the court for a
determination of whether a particular motion, petition, or other act by the
beneficiary, including, but not limited to, creditor
claims . . . would be a contest within the terms of the no
contest clause. [¶] name="IN_3SP_a83b000018c76">(b) A no contest clause is not enforceable
against a beneficiary to the extent an application under subdivision (a) is
limited to the procedure and purpose described in subdivision (a). [¶] (c) >A determination under this section of
whether a proposed motion, petition, or other act by the beneficiary violates a
no contest clause may not be made if a determination of the merits of the
motion, petition, or other act by the beneficiary is required. [¶] (d) A
determination of whether Section 21306 or 21307 would
apply in a particular case may not be made under this section.name="SA_CRE">” (Italics added.)

name="sp_999_3">A no contest clause creates a
condition on the gifts and provisions of the trust. (Burch
v. George (1994) 7 Cal.4th 246, 254.)
Consequently, the beneficiary’s right to take the share provided under such
an instrument is conditioned upon that beneficiary’s agreement to acquiesce to
its terms. (Ibid.) Thus, any direct or
indirect attack on the trust which seeks to void the trust or any of its
provisions, or that is designed to “thwart the Trustor’s wishes as expressed in
this Trust,” revokes the beneficiaries’ share or interest in the trust.

Where
there is no conflict of evidence or question of credibility regarding extrinsic
evidence, interpretation of a trust is a question of law subject to our independent
review. (Fazzi v. Klein (2010)
190 Cal.App.4th 1280, 1285.) Whether
there is a contest within the meaning of a specific no contest clause depends
upon the factual circumstances of the case and the language of the trust
clause. (Cook v. Cook (2009) 177
Cal.App.4th 1436, 1442.) It is the
trustor’s intentions that control. (>Ibid., see also Newman v. Wells Fargo
Bank (1996) 14 Cal.4th 126, 134.)

No
contest clauses are favored by the policy of discouraging litigation, but
disfavored by the policy against forfeiture.
(Jacobs-Zorne v.
Superior Court (1996) 46 Cal.App.4th 1064, 1073.) Consequently, no contest clauses are strictly
construed and may not be extended beyond their plainly intended function. (Johnson v. Greenelsh (2009) 47
Cal.4th 598, 604.)

Appellant contends the
safe harbor petition should have been denied because respondents failed to meet
their burden of proof to establish (1) the safe harbor petition and the removal
petition do not violate the trust’s no contest clause, (2) the safe harbor
petition and the removal petition are not frivolous, and/or (3) the safe harbor
petition cannot be determined without ruling on the merits of the removal
petition. We disagree with each
contention.

First, with respect to
the respondent’s burden to prove the removal petition does not violate the no
contest clause, we note the no contest clause at issue here prohibits actions
against any of the trust provisions, or those “designed to thwart Trustor’s
wishes as expressed in this Trust . . . .” But respondents attacked appellant’s
management of the trust, not any of the specific trust provisions. The removal petition does not challenge
Robert L. McCaslin’s selection of a successor trustee, only the selected
trustee’s performance of his fiduciary duties.
We disagree with appellant’s characterization of the removal petition as
“an effort to thwart the Trustor’s intent as to payment of estate taxes, timing
of asset distribution, selection of trustee and trustee compensation.” To the contrary, the removal petition seeks
to ensure the trustee will timely pay estate taxes and distribute the trust’s
assets “as soon as reasonably possible” in accordance with the trustor’s
wishes.

Second, the question of
whether respondent’s safe harbor petition is frivolous involves a factual
determination, and an examination of the facts underlying the safe harbor
petition would be improper for a section 21320 proceeding. (Estate
of Ferber (1998) 66 Cal.App.4th 244 (Ferber), citing Genger v.
Delsol (1997) 56 Cal.App.4th 1410, 1428.)
In Ferber, the beneficiary of
an estate sought a determination under section 21320 that several proposed
actions, including a petition to remove the executor, would not violate the
“no-contest” clause in the decedent’s will.name=F00222017407634>

In reaching its
decision, the appellate court weighed two competing public policies. First, the court recognized, “name="SR;1592">No contest clauses
that purport to
insulate executors completely
from vigilant beneficiaries
violate the public
policy behind court
supervision.” (Ferber, supra, 66 Cal.App.4th at p. 253.) However, the court also acknowledged that no
contest clauses are “‘favored by name="SR;1630">the public policies
of discouraging [unnecessary]
litigation and giving
effect to the
purposes expressed by
the testator.’ [Citation.]” (Id. at p. 254.) After balancing the competing policy
interests involved, the appellate court name="SR;1804">concluded the enforcement of no contest clauses should apply
only against beneficiaries who attempt to oust an executor based on frivolous
grounds. (Ferber, supra, 66 Cal.App.4th at pp.
254-255; see also Fazzi, supra,> 190 Cal.App.4th at p. 1289, fn.
omitted [“‘no contest’ clauses
barring removal actions are enforceable only as to frivolous attempts to oust
an executor or trustor.’”) Here, the
safe harbor petition is not frivolous on its face, although it may be proved
otherwise during proceedings on the underlying removal petition. (See Fazzi,> supra, 190 Cal.App.4th at p.
1289.)

Finally, with respect to
appellant’s third contention, the merits of the safe harbor petition can be
adjudicated without a ruling on the merits of the removal petition. The trial court was not required to determine
the merits of respondent’s claims, only that their attempt to adjudicate these
claims would not violate the trust’s no contest clause. name=SearchTerm> name="SDU_4">name="citeas((Cite_as:_2008_WL_4801646,_*4_(Ca">The beneficiary of a trust must be
able to petition the courts to determine whether a trustee is properly carrying
out his or her fiduciary duties toward the beneficiary without fear of
forfeiture. (See Estate of Miller
(1964) 230 Cal.App.2d 888, 908-909; Estate of Bullock (1968) 264
Cal.App.2d 197, 201.) As noted in >Fazzi, “name="SDU_6">Case law
holds that, absent a specific provision barring a challenge to the trustee, a
removal action does not violate the ‘no contest’ clause. [Citations.]”
(Fazzi, supra, 190
Cal.App.4th at pp. 1288-1289.)

The
trust here does not contain a provision barring any challenge to the
trustee. “Moreover, even if the ‘no
contest’ clause at issue here specifically prohibited any action to remove the
trustee, that provision would be unenforceable.” (Fazzi,> supra, 190 Cal.App.4th at pp. 1289.)
Consequently, respondents may pursue their challenge to appellant’s
administration of the trust with respect to the payment of estate taxes and
distribution of trust assets without jeopardizing their interests under the
trust. To hold otherwise would be to
insulate the trustee from any scrutiny of the manner in which he has discharged
his duties under the trust.



DISPOSITION



The
order is affirmed. Plaintiffs are
entitled to costs on appeal.







THOMPSON,
J.



WE CONCUR:







O’LEARY, P. J.







ARONSON, J.