28 Cal. App. 5th 678
Cal. Ct. App. 5th2018Background
- Walter Permann created a trust (1999) that conditioned bequests to three employees (Schwan, Ostrosky, Johnson) on being "employed by Control Master Products, Inc. at the death of Trustor and his spouse;" gifts would lapse otherwise and augment remaining beneficiaries.
- Walter sold the assets of Control Master Products in 2008 to IEWC, which required termination of employees; Schwan and Johnson were rehired by IEWC the day after the sale; Ostrosky retired in 2007 for health reasons and later did limited paid work for Walter's subsequent business (Custom Model Products).
- The trust named drafter Walter C. Youngman as a beneficiary; a certificate of independent review was executed by another attorney at signing.
- Plaintiffs (the three employees) filed to determine beneficiary status and challenged Youngman under Probate Code section 21380; on remand after an initial interlocutory appeal the probate court excused Schwan and Johnson from the employment condition (impossibility), denied excuse for Ostrosky, and disqualified Youngman based on defective certificate/authority.
- This appeal reviews: (1) whether the employment condition was ambiguous or should be excused due to impossibility or modified; (2) whether Ostrosky’s post-retirement work satisfied the condition; and (3) whether Youngman’s bequest is invalid.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the employment condition is ambiguous or admits extrinsic evidence | Plaintiffs argued the condition should be excused (impossibility) or construed to avoid lapse when sale made literal performance impossible | Morris argued the trust language is unambiguous and cannot be rewritten; Walter could have amended the trust after the sale | Court: "employed by Control Master Products, Inc." is unambiguous; but extrinsic evidence properly considered to decide if impossibility excuses performance |
| Whether sale of the company excused continued employment requirement (impossibility) | Schwan/Johnson: sale made literal performance impossible; they had complied until sale; testator didn’t anticipate sale so gifts should vest | Morris: Walter voluntarily sold company and could have amended trust; cannot excuse condition; reliance on repealed statute is improper | Court: Impossibility doctrine remains; substantial evidence supports excusing Schwan and Johnson because the sale (testator’s act) made further performance impossible and decedent’s intent favored vesting |
| Whether Ostrosky’s retirement/post-sale work satisfied or should be excused/modified | Ostrosky: health made continued employment impossible; she performed some work for Custom Model Products and thus was effectively employed by Walter at death; alternatively trust should be modified | Morris/Trustee: retirement was volitional/non-fault of third party; Walter likely anticipated retirement; no modification warranted | Court: Remanded for factfinding whether Ostrosky’s work for Custom Model Products satisfied the Trust’s requirement to be employed by "Control Master Products, Inc."; trial court’s finding that retirement (not sale) caused noncompliance was supported but open factual issue remains |
| Whether Youngman’s bequest is invalid because he drafted the trust | Plaintiffs: drafter-beneficiary presumption under Probate Code 21380 disqualifies gift; certificate of review defective under amended law | Youngman: plaintiffs lack standing if gifts to Schwan/Johnson fail; challenges to retroactivity and certificate | Court: Gift disqualified due to defective certificate under the later statutory scheme as applied; Schwan/Johnson have standing, so Youngman’s appeal on standing fails |
Key Cases Cited
- Estate of Simoncini, 229 Cal.App.3d 881 (Cal. Ct. App. 1991) (rules on will interpretation and giving effect to testator's expressed words)
- Estate of Dye, 92 Cal.App.4th 966 (Cal. Ct. App. 2001) (latent ambiguity must be in the instrument; extrinsic evidence cannot rewrite unambiguous language)
- Estate of Pelletier, 221 Cal.App.2d 347 (Cal. Ct. App. 1963) (liberal construction favoring employee beneficiaries where liquidation made continued employment impossible)
- In re Bridge's Estate, 41 Wash.2d 916 (Wash. 1953) (excusing employment condition when testator’s retirement/liquidation made literal performance impossible and testator likely did not contemplate the contingency)
- Estate of Hilton, 199 Cal.App.3d 1145 (Cal. Ct. App. 1988) (recognition that courts disfavor strict conditions precedent and favor vesting)
- Estate of Canfield, 256 Cal.App.2d 647 (Cal. Ct. App. 1967) (courts may not rewrite wills to reflect hypothetical later intent)