Kranther v. Covey





















Filed 4/23/13 Kranther v. Covey CA2/4











NOT TO BE PUBLISHED IN THE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opinion has not been certified for publication or ordered published for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 FOUR












>

MICHAEL KRANTHER, Plaintiff and Respondent, v. NANCY S. COVEY et al., Defendants and Appellants.

B240631 (Los Angeles County Super. Ct. No. SP007979)

APPEAL
from an order of the Superior
Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County, Joseph Biderman, Judge. Affirmed.

The
Law Office of John Derrick and John Derrick for Defendants and Appellants.

Law
Offices of Andrea Lynn Rice and Andrea Lynn Rice for Plaintiff and Respondent.

>


Appellants
Nancy S. Covey and Sally Larimore, successor trustees of the Marguerite
Elizabeth Kelly 1999 Revocable Trust (trust), appeal a March 23, 2012 order granting the petition of
respondent Michael Kranther for reformation of the trust. We find no abuse of discretion, and thus we
affirm.



FACTUAL AND PROCEDURAL
BACKGROUND

I. The Kelly Trust

Kelly
created the trust on February 7, 1999. She executed a seventh and final amendment
(seventh amendment) to the trust on December
22, 2008. As relevant to the
present appeal, the seventh amendment provided as follows:

“D. The residue of the Trust shall be
distributed, free of trust (unless otherwise stated), as follows (the trust’s
original thirty (30) day condition of survivorship is now forty-five (45) days,
as appears below):

“1. Russell Richardson shall receive a 20%
share of the residue of the Trust. If he
does not survive settlor by forty-five (45) days, such share shall go to Sharon
Richardson. If she does not survive settlor
by forty-five (45) days, such share will go to Jesse E. Richardson or to his
issue by right of representation.

“2. Jesse E. Richardson shall receive a 5%
share of the residue of the Trust. If he
does not survive settlor by forty-five (45) days, such share shall go to Robert
Richardson.

“3. Kevin Rhodes shall receive a 5% share of
the residue of the Trust. If he does not
survive settlor by forty-five (45) days, his share will go to Christianne
Rhodes. If she does not survive settlor
by forty-five (45) days, said share will go to Delaney Rhodes and Regan Rhodes,
in equal shares, or to the survivor.

“4. Kelly Rhodes shall receive a 5% share of
the residue of the trust. If she does
not survive Settlor by forty-five (45) days, this gift will lapse [and] pass
with the residue of the trust.

“5. Marsha Bryson fka Marsha Jean Sirianni
shall receive a 30% share of the residue of the Trust. If she does not survive Settlor by forty-five
(45) days, having died without issue, her share shall be distributed free of
trust as follows:

“A
one-half share to her husband, James Bryson, if, at the time of Marsha’s death,
they are living together as husband and wife.
If they are not, then said one-half share shall be distributed, in equal
shares, to the National Muscular Dystrophy Association . . . and to
St. Jude Children’s Research Hospital
. . . .

“A
one-half share to the National Muscular Dystrophy Association
. . . .”

“.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .

“E. If any beneficiary of the residue of the
settlor’s trust fails to survive distribution of his/her share, the percentage
of the residue that said beneficiary was to have received will be added to the
other residuary beneficiaries’ shares of the trust’s residue in proportion to
the then percentages applicable to all beneficiaries entitled to the residue at
that time. This gift will therefore pass
to the other beneficiaries of the residue of the trust in proportion to their
other interests in the residue according to Probate Code section
21111(b).”

Prior
to signing the seventh amendment, Kelly had a recorded conversation with her
attorney, Bennett Kerns (Kerns). In relevant
part, that conversation (as transcribed) was as follows:

“Kerns: Okay.
Now you have already just signed the trust amendment and I notarized
it. Have you signed my notary book? Is that correct?

“Kelly: That is true.

“Kerns: And did you read the trust amendment before
you signed it?

“Kelly: I certainly did.

“Kerns: With your one good eye?

“Kelly: It was my one good eye.

“Kerns: And did you use a giant magnifying glass?

“Kelly: Yes.

“Kerns: You just showed it to me.

“Kelly: Right.

“Kerns: Now, is this amendment that I have drafted
accurately reflecting the instructions you gave to us as far as the changes you
wanted to make?

“Kelly: Absolutely.
It’s absolutely correct.

“[Tape
off.]

“Kelly: That’s also true.

“Kerns: We just had a brief discussion. The tape is back on. I noted that Marsha, who was given 20 percent
of the trust residue under the fifth amendment, is now being given 30 percent. Is that correct?

“Kelly: Yes, that’s right.

“Kerns: And Russell is continuing to get 20 percent
of the [unintelligible]?

“Kelly: That’s right.

“Kerns: Okay.
Then you reduced some of the percentages of the residue that were going
to other relatives. Is that correct?

“Kelly: That’s true.

“Kerns: Okay.

“Kelly: . . . And I inserted a new name.

“Kerns: You added a new name indeed.

“Kelly: Right.

“Kerns: But to make sure, I can say that it took many
minutes for you to read the amendment.
But did you read all the pages that I gave you?

“Kelly: I did.

“Kerns: Okay.

“Kelly: All 3 I think it was.

“Kerns: Okay . . . small print. I charge by the word.

“Kelly: (Laughs.)
Go home. (Laughs.)

“Kerns: Okay.
Well then, are you satisfied that the amendment then reflects what your
wishes are?

“Kelly: Yes.
Exactly.”



II. Petition for
Reformation of Trust

Kelly
died on April 25, 2009. Upon her death, Kelly’s daughter, Marsha
Bryson, became the successor trustee.

On
July 3, 2009, Bryson
executed a will and trust known as the Marsha J. Bryson Living Trust. Among Bryson’s listed assets were her
expected distribution from her mother’s trust.


Bryson
died on July 25, 2009, just
three months after her mother’s death.
Upon Bryson’s death, Nancy S. Covey and Sally Larimore (trustees) became
the successor cotrustees to Kelly’s trust, and Kranther was nominated as
executor of Bryson’s estate and the successor trustee to her trust.

On
October 28, 2009, Kranther
filed a petition to reform Kelly’s trust.
The petition asserted that Kelly intended each of the beneficiaries
named in her trust to receive a specified share of the trust estate if he or
she survived Kelly by 45 days. This
intent was reflected in paragraph 1.D. of the seventh amendment. Paragraph 1.E. of the seventh amendment,
however, required a beneficiary not only to survive Kelly by 45 days, but also
to survive distribution of the estate.
The petition asserted that paragraph 1.E. had been included as a result
of a scrivener’s error, and it asked the court to reform the seventh amendment
to accurately reflect Kelly’s intent.
The petition asserted that Bryson’s estate had standing to bring the
petition because although Bryson survived Kelly by more than 45 days, she did
not survive the distribution of Kelly’s estate.


Trustees
filed an objection to the petition on December
2, 2009.



>III. Trial
and Decision

A. Trial

Margot
Erni testified at trial that she is a legal assistant to Bennett Kerns. She said that Kelly called Kerns’s office and
told Erni that she wanted to make some changes to the percentages beneficiaries
of her trust would receive. Erni jotted
down the beneficiaries’ names and percentages of the trust that Kelly wished
them to receive and gave her notes to Kerns.
Kerns asked Erni to draft the seventh amendment, which she did; Kerns
made further changes to the draft after she gave it to him. Kelly never told Erni why she wished to
change her trust and she never told Erni she wanted to require beneficiaries to
survive distribution of the trust.

Kerns
testified that he initially prepared trust documents for Kelly in 1999. He prepared seven amendments to the trust
over the following nine years, each of which changed the percentages to be
distributed to the beneficiaries. When
Kelly signed the seventh amendment, she was suffering from Parkinson’s disease,
had lost vision in one eye, and told Kerns she was losing vision in her other
eye. Kerns did not believe her mental
acuity had deteriorated, however, and he had no doubt that Kelly had testamentary
capacity.

Kerns
spent about an hour with Kelly before she signed the seventh amendment. During that hour, she read the documents he
gave her, but “I do not know if she read the entire document or understood
it.”

Kerns
testified that he does not typically put a “divestor” clause such as paragraph
1.E. in his estate planning documents.
He put such a clause in the seventh amendment because “I made a
mistake.” He never discussed paragraph
1.E. with Kelly, and Kelly never asked him to provide for a divesting of a gift
to a residuary beneficiary. Indeed,
Kelly “wasn’t involved at all in the language of paragraph 1-E.” Kerns said he put the paragraph in to prevent
a gift from lapsing, but said the paragraph was superfluous. He explained:
“I just wanted to amplify in more formal language what I think the law
already provided. If I may put it this
way, I was being a little fancy. I had
stumbled across the language and I thought I would put it in just to duplicate
what I thought the effect of the language would have been anyway.”

Michael
Kranther testified that he and Bryson had been romantically involved in the
past and remained friends afterwards. He
was the successor trustee of her trust and the executor of her estate. Kerns originally represented Kranther as a
successor trustee of Bryson’s trust, but he no longer represented Kranther in
any capacity. Bryson’s trust was
basically insolvent.



>B. Order

The
court issued an order reforming the trust on March 1, 2012. It explained its order as follows:

“The
Petition is granted. The Court orders
paragraph 1(E) stricken from [the] Seventh Amendment to the Marguerite
Elizabeth Kelly 1999 Revocable Trust U/D/T February 19, 1999. All other provisions of the Seventh Amendment
remain in full force and effect.

“The
Court received no evidence that Marguerite Elizabeth Kelly (‘Kelly’) intended
to include paragraph 1(E) and materially change her Trust to require a
beneficiary to survive distribution of the Trust.

“Margot
Erni testified about a telephonic conversation she had with Kelly prior to
attorney Bennett Kerns (‘Kerns’) drafting the Seventh Amendment. That conversation only mentioned Kelly’s
desire to change percentage distributions to the beneficiaries, not a new
requirement that a beneficiary survive the distribution in order to receive
their share. Kerns met with Kelly after
he had two telephone conversations regarding the proposed modifications. According to Kerns, there was no mention by
Kelly of a desire to add the language of paragraph 1(E) to the Trust prior to
their meeting. The Court finds that both
Kerns and particularly Erni were credible witnesses.

“The
Court heard a recording (Exh. 12) of Kelly stating that she had read,
understood and was in agreement with all of the terms of the Seventh
Amendment. The material changes to the
Trust included differences in the percentage allocations to
beneficiaries—something that Kelly had done six prior times—as well as the
addition of the language of paragraph 1(E).
Although Kelly firmly stated that she agreed with all of the provisions
of the Seventh Amendment and while there is no challenge to her capacity, the
Court finds that Kelly did not agree to paragraph 1(E).

“Petitioner
seeks to discount Kerns’ testimony as he may have had a conflict in his
representation of Kelly, Margaret Bryson (‘Bryson’), and Petitioner
Kranther. However, while the Court
excluded testimony regarding Kerns’ fee arrangement with Bryson’s Trust and
Kranther, the Court is unable to conclude that Kerns would use any potential
remuneration to testify falsely or with omission of material facts. Even if the Court were to disregard Kerns’
testimony altogether, the inclusion of paragraphs 1[(D)] and 1(E) makes no
sense. If Kelly had wanted to limit
distributions only to beneficiaries who survive their own distribution, there
would have been no need to include paragraph 1[(D)].

“Kerns’
testimony that he had added paragraph 1(E) to take care of the possibility of
lapsed gifts was nonsensical. All
potentially lapsed gifts were covered elsewhere in paragraph 1. Nonetheless, petitioner’s argument that
Kelly’s intention (never stated to anyone) was to prevent Bryson’s husband from
receiving Bryson’s beneficiary interest is interesting speculation but without
evidentiary support. However, Bryson
herself took steps prior to her own death to prevent her husband from receiving
such interest in any event.

“Objector
seeks to have the Court speculate that Kelly had an undisclosed conversation
with Kerns in which she told him to draft language requiring a beneficiary to
survive distribution in order to receive it, while retaining language requiring
45 day survivorship, in order to prevent Bryson’s husband from receiving any of
the Bryson distribution if Bryson survived beyond 45 days but not as long as
the ultimate distribution. This is a
tortured and awkward argument.

“Kelly
amended her Trust seven times. On each
occasion, she sought to change the beneficiary percentages. The Court finds that Kelly’s intention with
the seventh amendment was the same as on the prior six amendments, merely to
change the beneficiary percentages.
Kern[’]s error was just that—his own very sloppy mistake.

“The
Petition is Granted.”

On
March 23, 2012, the court ordered that “the Petition is granted. Paragraph 1(E) is stricken from the Seventh
Amendment to the Marguerite Elizabeth Kelly 1999 Revocable Trust U/D/T February
19, 1999. All other provisions of the
Seventh Amendment remain in full force and effect.” Notice of entry of the order was served on
March 30, 2012. Trustees timely
appealed.



>DISCUSSION

>

Trustees
concede that a court may reform a trust instrument if it is ambiguous or to
give effect to the settlor’s intentions.
They contend, however, that (1) the seventh amendment was not
ambiguous, and (2) the evidence does not support the trial court’s conclusion
that Kelly did not intend to require a beneficiary to survive distribution in
order to inherit. We consider these
issues below.



I. The Seventh Amendment
Is Facially Ambiguous

Trustees
contend that paragraph 1.E. is clear on its face and does not conflict with any
other provision, including paragraph 1.D.
For the following reasons, we do not agree.



>A. Applicable
Law

“‘“‘The
interpretation of a written instrument, including a . . . declaration of trust,
presents a question of law unless interpretation turns on the competence or
credibility of extrinsic evidence or a conflict therein. Accordingly, a reviewing court is not bound
by the lower court’s interpretation but must independently construe the
instrument at issue. [Citations.]’ [Citations.]”
(Scharlin v. Superior Court
(1992) 9 Cal.App.4th 162, 168.) “In
construing a trust instrument, the intent of the trustor prevails and it must
be ascertained from the whole of the trust instrument, not just separate parts
of it. [Citation.]” (Ibid.)

“‘In
interpreting a document such as a trust, it is proper for the trial court in
the first instance and the appellate court on de novo review to consider the
circumstances under which the document was made so that the court may be placed
in the position of the testator or trustor whose language it is interpreting,
in order to determine whether the terms of the document are clear and definite,
or ambiguous in some respect. (>Estate of Russell (1968) 69 Cal.2d 200,
208-210.) Thus, href="http://www.mcmillanlaw.com/">extrinsic evidence as to the
circumstances under which a written instrument was made is admissible to
interpret the instrument, although not to give it a meaning to which it is not
reasonably susceptible. (>Id. at p. 211.) On review of the trial court’s interpretation
of a document, the appellate court’s proper function is to give effect to the
intention of the maker of the document.
(Id. at p. 213.)

“. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“An ambiguity in a written
instrument exists when, in light of the circumstances surrounding the execution
of the instrument, ‘“the written language is fairly susceptible of two or more
constructions.” [Citations.]’ (Estate
of Russell[, supra,] 69 Cal.2d
[at p.] 211.)

“Where
a trust instrument contains some expression of the trustor’s intention, but as
a result of a drafting error that expression is made ambiguous, a trial court
may admit and consider extrinsic evidence, including the drafter’s testimony,
to resolve the ambiguity and give effect to the trustor’s intention as
expressed in the trust instrument. (>Lissauer v. Union Bank & Trust Co.
(1941) 45 Cal.App.2d 468, 472-473 . . . .)” (Ike v.
Doolittle (1998) 61 Cal.App.4th 51, 73-74 (Ike).)



B. Analysis

Trustees
contend that paragraph 1.E. is not ambiguous because “it is capable of only one
interpretation — namely that if a beneficiary fails to live to see the distribution
of the trust assets, then that beneficiary’s share goes back to the residue to
be shared among the other named beneficiaries.”
They also contend that paragraphs 1.D. and 1.E. are not in conflict
because they “serve distinct, not contradictory, purposes. Paragraph 1‑D deals with the
designation of contingent beneficiaries during the 45-day period after the
settlor’s death should a primary beneficiary die. Paragraph 1-E, on the other hand, is a
catch-all residuary clause to prevent gifts from lapsing should an originally
designated beneficiary fail to survive his or her final distribution.”

We
do not agree with trustees that paragraphs 1.D. and 1.E. are not in
conflict. Under paragraph 1.D., Bryson
was entitled to a share of the residue of her mother’s estate if she survived
her mother by 45 days. Under paragraph
1.E., however, even if Bryson survived her mother by 45 days, she would not be
entitled to a share of her estate unless she also survived the distribution of the estate. Thus, in the circumstances presented here,
where Bryson survived her mother by 45 days but did not survive final
distribution of her estate, paragraphs 1.D. and 1.E. require inconsistent
outcomes: Paragraph 1.D. requires
distributing Bryson’s 30 percent share to her estate, while paragraph 1.E.
requires distributing it to Kelly’s other named beneficiaries.href="#_ftn1" name="_ftnref1" title="">[1] We therefore conclude that the seventh
amendment is ambiguous on its face.



>II. The
Trial Court Did Not Abuse Its Discretion by Reforming the Seventh Amendment to
Eliminate Paragraph 1.E.

Trustees
concede that a court may reform a trust instrument to give effect to the
settlor’s intentions. They contend,
however, that the record did not support the trial court’s conclusion that
Kelly intended her beneficiaries, including Bryson, to receive a distribution
from her trust so long as they survived her by 45 days. We do not agree.



A. Standard of Review

Because
reformation of a trust invokes a trial court’s equity powers, we review an
order of reformation for abuse of discretion.
(E.g., City of Barstow v. Mojave
Water Agency (2000) 23 Cal.4th 1224, 1256.)href="#_ftn2" name="_ftnref2" title="">>[2]

“‘The
abuse of discretion standard is not a unified standard; the deference it calls
for varies according to the aspect of a trial court’s ruling under review. The trial court’s findings of fact are
reviewed for substantial evidence, its conclusions of law are reviewed de novo,
and its application of the law to the facts is reversible only if arbitrary and
capricious.’ (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-712, fns.
omitted.)” (In re Marriage of Walker (2012) 203 Cal.App.4th 137, 146.)

In
reviewing the trial court’s findings of fact for substantial evidence, “[i]t is
not our task to weigh conflicts and disputes in the evidence; that is the province
of the trier of fact. Our authority
begins and ends with a determination as to whether, on the entire record, there
is any substantial evidence,
contradicted or uncontradicted, in support of the judgment.” (Howard
v. Owens Corning (1999) 72 Cal.App.4th 621, 630-631.) This is true even where, as here, much of the
evidence is undisputed or uncontradicted:
“[I]f two or more different inferences can reasonably be drawn from the
evidence this court is without power to substitute its own inferences or deductions
for those of the trier of fact, which must resolve such conflicting inferences
in the absence of a rule of law specifying the inference to be drawn. We must accept as true all evidence and all
reasonable inferences from the evidence tending to establish the correctness of
the trial court’s findings and decision, resolving every conflict in favor of
the judgment. [Citations.]” (Ibid.)href="#_ftn3" name="_ftnref3" title="">[3]



B. Trial Court’s Equitable Authority to
Reform a Trust

California
courts have long had the equitable power to modify the terms of a trust where
modification is necessary to preserve the trust or serve the original
intentions of the trustor. (>Ike, supra,
61 Cal.App.4th at p. 79.) “‘If, due to a
mistake, the trust does not contain the terms that were intended by the
settlor, the settlor or other interested party may maintain a suit in equity to
have the instrument reformed so that
it will contain the terms that were actually agreed upon or that reflect the
testator’s actual intent. The more
common type of . . . error, which may be made by the settlor or the
scrivener, is a drafting error that is referred to as a mistake in
expression.’ (Radford et al., The
Law of Trusts and Trustees (3d ed. 2006) § 991, pp. 130-132, italics added,
fns. omitted, followed in Bilafer v.
Bilafer (2008) 161 Cal.App.4th 363, 370; see 161 Cal.App.4th at pp.
368-369.) [¶] ‘Equity may intervene to correct a mistake in
a trust whether it is an inter vivos trust or a testamentary trust, and may >reform an inter vivos trust even after
the settlor is dead.’” (>Giammarrusco v. Simon (2009) 171
Cal.App.4th 1586, 1603.)href="#_ftn4"
name="_ftnref4" title="">[4]

The
court applied these principles to reform a trust in Ike, supra, 61
Cal.App.4th 51. There, trustors Virgil and Jeannette Ike
married at ages 65 and 75, respectively.
Both had been previously married; Virgil had two children by a prior
marriage. (Id. at p. 58.) After their
marriage, the Ikes created a revocable inter vivos trust, funded with separate
and community property, which provided that the property would retain its separate
or community character. The same day
they executed the trust, however, the Ikes also executed a property agreement
that appeared to indicate they had agreed to transmute all separate property
into community property. (>Id. at pp. 59-60.)

The
trust provided that on the death of the first trustor to die, the trust would
be divided into two separate trusts—the “survivor’s trust” and the “decedent’s
trust”—each of which would hold the trustors’ separate property and his or her
half of the community property. (>Ike, supra,
61 Cal.App.4th at p. 60.) Jeannette and
Virgil apparently intended that the proceeds of the survivors’ and decedents’
trusts would be distributed to their beneficiaries upon the second spouse’s
death, regardless of which spouse died first; however, because of a drafting
error, the trust’s language appeared to indicate that Jeannette’s share of the
trust estate would be distributed to her beneficiaries only if she survived
Virgil. (Id. at p. 63.)

Jeannette
predeceased Virgil. After Virgil’s
death, his son Mark filed a petition for construction of the trust, contending
that because Jeannette died first, none of the trust assets should be
distributed to her designated beneficiaries.
Jeannette’s principal beneficiary, Doolittle, filed his own petition,
arguing that the trust contained an ambiguity and that Jeannette and Virgil
intended that, no matter who died first, the portion of the trust estate that
had consisted of Jeannette’s separate property and her share of the community
property would be distributed to her beneficiaries. (Ike,
supra, 61 Cal.App.4th at p. 66.) The trial court concluded that Jeannette and
Virgil believed the trust would dispose of their respective separate and
community property to their designated beneficiaries, and it reformed the trust
accordingly.

Mark
appealed, contending that the trial court improperly rewrote the trust. (Ike,
supra, 61 Cal.App.4th at p. 79.) The Court of Appeal disagreed and
affirmed. It explained that the trial
court had “ample equitable and statutory power to modify or reform” the
distributive sections of the trust consistent with the trustors’ intent. (Id.
at p. 87.) Further, it said, the
court properly exercised its power to reform the trust because “substantial
extrinsic evidence, including the drafter’s testimony, established that
Jeannette and Virgil intended that upon the death of the survivor Jeannette’s
separate property and her interest in the community property would be
distributed to the beneficiaries she designated in section 2 of article nine,
and Virgil’s separate property and his interest in the community property would
be distributed to the beneficiaries he designated in section 1 of article
nine.” (Ibid.) Substantial extrinsic
evidence also established that the expression of the trustors’ distributive
intent “was rendered ambiguous by the drafting attorney’s admitted multiple
drafting errors,” including failing to make the decedent’s trust irrevocable
after the death of the first spouse. (>Ibid.)
Thus, the court concluded, because the trial court’s findings were
supported by substantial evidence, the court properly reformed the trust. (Id.
at pp. 87-88.)



C. The Trial Court Did Not Abuse Its
Discretion by Reforming the Seventh Amendment to Eliminate Paragraph 1.E.

The
trial court found that when Kelly amended her trust for the seventh and last
time, she did not intend to require her beneficiaries to survive distribution
in order to receive their share of the trust proceeds. That conclusion was supported by substantial
evidence, including the following:

● The original trust documents and the
first six amendments thereto provided that the named beneficiaries would
recover specific percentages of the trust residue if they survived Kelly for a
fixed number of days—30 days in the original trust document and the first two
amendments, and 45 days thereafter. Only
the seventh amendment included the language of paragraph 1.E.

● Kerns testified that “the 45-day
survivorship period had always been discussed by us, Betty and I, with the
understanding that if a beneficiary survived the 45‑day period then it
would be up to the beneficiary to do what he or she wanted to do thereafter, so
that’s why it was limited to the 45 days.”
He continued: “I can only go back
to the beginning of my relationship with Betty Kelly where we discussed this
concept from the beginning as to what she wanted in her trust. After the initial period of survivorship
being required — in the beginning in the trust it was 30 days, then it became
45 days — and our prior — giving you a long answer, I am sorry. But our prior conversations had to do with
the fact that Betty said the beneficiaries can do their own estate plan at any
time and provide for their own distribution thereafter.” Further, “[t]he 45-day period was intended to
apply to all residuary beneficiaries.
From the beginning of my drafting documents for Betty Kelly, at least in
the beginning specifically, and I think two times thereafter in the years it
happened. She said after the initial
survivorship period the beneficiary can do what the person wants to do with her
or his own estate plan, and she’ll leave it up to them to make their own
decisions.”

● Margot Erni, Kern’s legal assistant,
testified that she spoke to Kelly on the telephone about the seventh
amendment. Kelly said she “wanted to
make some changes in the percentage of the distribution.” Erni and Kelly did not discuss “any concept
of [a] beneficiary having to survive distribution.”

● Kerns testified that with regard to the
seventh amendment, he and Kelly discussed only “the change in percentage, the
adding or deletion of names.” They “did
not discuss the language of paragraph 1-E.
I recall specifically we did not discuss divesting of any residuary
. . . beneficiaries’ interest after 45 days.” He specifically testified that Kelly never
asked him to include such a clause.

● Kerns testified that he does not
typically put in his estate planning documents a clause divesting beneficiaries
of their interests in a trust if they do not survive distribution of the trust
estate. He added paragraph 1.E. to the
seventh amendment “to amplify the language in the trust document and limit it
to what happens if somebody did not survive the 45 days and there was no
alternate beneficiary designated.” He
testified: “If I may put it this way, I
was being a little fancy. I had stumbled
across the language and I thought I would put it in just to duplicate what I
thought the effect of the language would have been anyway.”

Taken
together, the foregoing is substantial evidence that when Kelly executed the
seventh amendment, she intended her beneficiaries to receive a share of the
trust proceeds so long as they survived her by 45 days—without regard to
whether they also survived distribution.
The trial court did not err in so concluding and reforming the trust
accordingly.

Trustees
urge that the evidence did not support reformation of the trust because the
undisputed evidence was that Kelly was mentally competent and diligently read
the seventh amendment before she signed it.
We agree that the evidence was undisputed that Kelly read the seventh
amendment and was mentally competent. We
cannot agree, however, that the trial court therefore was bound to conclude
that Kelly appreciated the legal significance of paragraph 1.E. As we have said, the issue for our review is
not whether there is some evidence supporting trustees’ theory of the case—it
is, instead, whether there was substantial evidence supporting the trial
court’s conclusions. The fact that Kelly
read the trust before she signed it may be a significant piece of evidence, but
it is hardly dispositive of her intent.

Trustees
also urge that the trial court committed legal error by “in effect
. . . switch[ing] the burden of proof.” They explain:
“[E]ven if there had not been any evidence that Betty had endorsed the
substance of paragraph 1-E (a concession that is not made), that would not be a
basis for granting the petition. For the
court to properly grant the petition, Kranther had to have provided evidence
that Betty hadn’t intended to approve
paragraph 1-E when she signed the seventh amendment; it was not for the
successor trustees to prove the opposite.”
While we agree with trustees that Kranther bore the burden of proof, we
do not agree that the trial court believed to the contrary. We also do not agree, as trustees suggest, that
there was a “complete absence of . . . evidence” that Kelly did not
intend to include paragraph 1.E. in her amended trust. Rather, as we have said, we believe there was
substantial evidence supporting the trial court’s conclusions.

In
light of the trial court’s finding, supported by substantial evidence, that
Kelly did not intend to include a paragraph divesting beneficiaries of their
shares if they did not survive distribution, the court was well within its
broad equitable discretion to strike paragraph 1.E. of the seventh
amendment.



>DISPOSITION



The
order granting the petition for reformation of trust is affirmed. Kranther shall recover his appellate costs.



NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS







SUZUKAWA,
J.



We concur:







WILLHITE,
Acting P. J.







MANELLA, J.