MELANIE CARNE, as Trustee, etc., Plaintiff and Appellant, v. NANCY A. WORTHINGTON et al., Defendants and Respondents.
No. D067756
Fourth Dist., Div. One.
Apr. 13, 2016.
246 Cal. App. 4th 548
AARON, J.
MELANIE CARNE, as Trustee, etc., Plaintiff and Appellant, v. NANCY A. WORTHINGTON et al., Defendants and Respondents.
HainesLaw, Laurence F. Haines and Will M. Smith for Plaintiff and Appellant.
Law Offices of Harvey M. Payne III and Harvey M. Payne III for Defendant and Respondent Dillon Hasting.
DiPaolo Law and Thomas F. DiPaolo for Defendant and Respondent Nancy A. Worthington.
OPINION
AARON, J.—
I.
INTRODUCTION
This case involves a dispute over the ownership of property formerly owned by decedent Kenneth Liebler. Liebler‘s daughter, appellant Melanie Carne, as putative successor trustee to the Kenneth Liebler Irrevocable Trust dated December 21, 2009 (the 2009 Trust), filed a second amended petition (the petition) to confirm the validity of the 2009 Trust, Carne‘s status as successor trustee of the 2009 Trust, and the assets of the 2009 Trust. In her
Liebler‘s grandson, defendant and respondent Dillon Hasting (Hasting), filed an opposition to the petition. Hasting was a beneficiary of the Liebler Revocable Declaration of Trust dated February 27, 1985 (the 1985 Trust). In his opposition, Hasting contended that the 2009 Trust was not a valid trust because Liebler had not properly transferred title to the only asset allegedly in the 2009 Trust, the Via Regla Property. Specifically, Hasting argued that Liebler had not effectively transferred the Via Regla Property into the 2009 Trust because Liebler had failed to execute a deed transferring the property to the trust. Hasting also argued that Liebler had not properly transferred the Via Regla Property to the 2009 Trust because Liebler was not the legal owner of the property at the time of the purported transfer to the 2009 Trust. In support of this contention, Hasting noted that Liebler held legal title to the Via Regla Property as trustee of the 1985 Trust, and the 2009 Trust contained no language indicating that Liebler was acting as the trustee of the 1985 Trust at the time of the purported transfer to the 2009 Trust. The trial court entered an order denying Carne‘s petition for the two reasons set out in Hasting‘s opposition.
On appeal, Carne contends that the trial court erred in denying her petition. We conclude that the language in the 2009 Trust quoted above is sufficient to convey the Via Regla Property to the 2009 Trust and that Liebler was not required to execute a separate deed in order to effectuate such conveyance. We further conclude that, because at the time the 2009 Trust was created, the 1985 Trust was a revocable inter vivos trust, and Liebler was the sole trustee who owned no interest in the Via Regla Property as an individual, Liebler‘s signature on the 2009 Trust was sufficient to “to convey good title” to the Via Regla Property from the 1985 Trust to the 2009 Trust. (Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, 1350 (Galdjie).) Accordingly, we reverse the order and remand for further proceedings.2
FACTUAL AND PROCEDURAL BACKGROUND
A. The 1985 Trust
Liebler executed the 1985 Trust on February 27, 1985. The 1985 Trust provides that Liebler is the trustor and the trustee and states that, during his lifetime, the trust is revocable in whole or in part. The 1985 Trust appoints Donald Ballman and Dee Ballman (or their survivor) as successor trustees. In May 1985, John W.F. Neim and Christine C. Neim transferred the Via Regla Property to the 1985 Trust by way of recorded deed.
Liebler amended the 1985 Trust in 1992. Among other changes, the 1992 amendment revised provisions of the 1985 Trust related to the distribution of the trust estate upon Liebler‘s death by removing Carne as a beneficiary and listing several of Liebler‘s grandchildren, including Hasting, as beneficiaries. In addition, the 1992 amendment provided that, upon the death of Liebler, the “Trustor‘s last legal residence, which is part of the trust estate,3 shall be reserved for the use of [Worthington],” under certain circumstances.
In 2003, Liebler amended the 1985 Trust for a second and final time. Among other changes, this amendment removed one of Liebler‘s grandchildren, Mark Curtis Hasting, as a beneficiary.
B. The 2009 Trust
In 2009, Liebler executed the 2009 Trust. As noted in part I. ante, among other provisions, the 2009 Trust expressly transfers the property listed in Schedule A to the trust, and lists the Via Regla Property in Schedule A. The 2009 Trust also provides that, upon Liebler‘s death, “My Trustee shall distribute the remaining trust property to my descendants, per stirpes outright, free of trust.”4 The 2009 Trust is signed by Liebler as grantor and Worthington and Castle as cotrustees. In addition, the 2009 Trust provides that if Worthington and Castle cease to serve as trustees, “I name Melanie Carne to serve as successor Trustee.”
Liebler died on October 3, 2012.5
Shortly after Liebler‘s death, Dee Ballman executed a document accepting the position of successor trustee to the 1985 Trust. Dee Ballman then executed a document resigning as successor trustee to the 1985 Trust and appointing Worthington as successor trustee to the 1985 Trust.6
With respect to the 2009 Trust, shortly after Liebler‘s death, Castle executed a document refusing to serve as trustee to the 2009 Trust. Worthington resigned as trustee to the 2009 Trust in April 2013. Shortly thereafter, Carne executed a document indicating her acceptance of the position of successor trustee to the 2009 Trust.
D. The second amended petition
In September 2014, Carne filed a second amended petition to confirm the validity of the 2009 Trust, Carne‘s status as successor trustee of the 2009 Trust, and the assets of the 2009 Trust. In the petition, Carne described the 1985 Trust and the 2009 Trust as summarized above.
Carne contended that Liebler had intended to transfer legal ownership and title to the Via Regla Property to the trustee of the 2009 Trust and that he had “only failed to execute a deed of transfer through ignorance, oversight or negligence.” Carne supported this contention by stating that, shortly after executing the 2009 Trust, Liebler moved to an assisted living facility where he remained until his death. In addition, Carne contended that deposition testimony from both Worthington and the attorney Liebler hired to prepare the 2009 Trust, Richard Stewart, supported a finding that Liebler intended to transfer the Via Regla Property into the 2009 Trust in order to avoid Medi-Cal liens being placed on the property after his death.
Carne filed a brief in support of her petition in which she argued that Liebler “during [his] life, as trustee of the 1985 Trust created the 2009
E. The objections
Hasting filed an objection to the petition. In his objection, Hasting contended that the 2009 Trust was not a valid trust because there “was never a transfer of property during the owner‘s lifetime to another person as trustee.” In support of this contention, Hasting argued: “No deed whatsoever was signed by [Liebler] which would have irrevocably transferred the [Via Regla Property] to the third party trustees of his 2009 Trust. Without the deed, there is no trust created over the real property in question and the trust fails in its entirety because there is no other res in the [2009 Trust].”
Hasting also argued that Liebler had not effectively transferred the Via Regla Property to the 2009 Trust because Liebler “did not own the [Via Regla Property] at the time the 2009 [T]rust was formed.” Hasting contended that “the owner of the [Via Regla Property] is the trustee of the 1985 [T]rust,” and argued that Liebler “had no ability, as an individual, to transfer trust property he did not own from himself to third party trustees, as the language of the 2009 [T]rust purports to do.”
Hasting also maintained that Liebler had not intended for Carne to inherit the Via Regla Property, and supported this contention with various factual allegations pertaining to the circumstances surrounding the execution of the 2009 Trust.7 Hasting supported his objection with his own declaration as well as Stewart‘s deposition testimony and documents from Stewart‘s file related to the 2009 Trust, among other documents.
Worthington also filed an objection to the petition and joined in Hasting‘s objection.8 Along with her objection, Worthington filed a declaration in which she described Liebler‘s relationship with Carne in a manner that suggested that Liebler had not intended for Carne to gain ownership of the Via Regla Property.
F. The trial court‘s ruling
After further briefing and a hearing, the trial court entered an order on January 29, 2015, denying Carne‘s petition on two grounds. First, the court
Second, the court ruled that Liebler could not have transferred the Via Regla Property to the 2009 Trust because at the time of the execution of the 2009 Trust, Liebler did not own the Via Regla Property as an individual, and there was no evidence that he had transferred the Via Regla Property in his capacity as trustee of the 1985 Trust. The court reasoned in part: “[Carne] argues Liebler transferred the [Via Regla Property] to the [2009 Trust] by creating the trust, listing the [Via Regla Property] as a trust asset and stating the property was transferred to the [2009 Trust]. [Citation.] Even if these actions constituted an inter vivos transfer of the property, Liebler cannot transfer property he does not own. [Citation.] Liebler did not personally own the [Via Regla Property]. Rather, he owned the property as the trustee of the 1985 [T]rust. There is no evidence Liebler created the 2009 [T]rust as the trustee of the 1985 [T]rust or was acting as the trustee of the 1985 [T]rust when he attempted to transfer the property to the 2009 [Trust].”9
G. Carne‘s appeal
Carne timely appeals the trial court‘s January 29 order denying her petition. The order is appealable. (See
III.
DISCUSSION
A. The trial court erred in concluding that Liebler was required to execute a separate deed in order to transfer the Via Regla Property to the 2009 Trust
Carne claims that the trial court erred in concluding that Liebler was required to execute a separate deed in order to transfer the Via Regla Property to the 2009 Trust. Carne‘s claim raises a question of law, which we review de novo. (See Ukkestad v. RBS Asset Finance, Inc. (2015) 235 Cal.App.4th 156,
1. Governing law
a. Applicable statutory provisions
i. Probate Code provisions
“Subject to other provisions of this chapter, a trust may be created by any of the following methods: [¶] . . . [¶]
“(b) A transfer of property by the owner during the owner‘s lifetime to another person as trustee.”
Where a trust contains real property,
ii. Evidence Code section 662
According to the ” ‘form of title’ presumption, the description in a deed as to how title is held is presumed to reflect the actual ownership interests in the property.” (In re Marriage of Brooks & Robinson (2008) 169 Cal.App.4th 176, 184–185.)
“California trust law is essentially derived from the Restatement Second of Trusts. Over a number of years, the Restatement Second of Trusts has been superseded by the Restatement Third of Trusts. [Citation.] As a result, we may look to the Restatement Third of Trusts for guidance.” (Lonely Maiden Productions, LLC v. GoldenTree Asset Management, LP (2011) 201 Cal.App.4th 368, 379.)
Comment b to section 16 of the Restatement Third of Trusts is entitled, “Intended inter vivos transfer to another as trustee: effective or ineffective?” (Rest.3d Trusts, § 16, com. b, p. 229.) The comment discusses the circumstances under which property is effectively transferred from a trustor to a third party trustee by way of the trust agreement itself, without the execution of a separate deed: “Good practice certainly calls for the use of additional formalities and the taking of appropriate further steps, such as changes of registration, or the execution and recordation of deeds to land. Nevertheless, a writing signed by the settlor, or a trust agreement signed by the settlor and trustee, manifesting the settlor‘s present intention thereby to transfer specified property (such as all property listed on an attached schedule) is sufficient to create a trust. See Illustration 5.” (Id., pp. 229-230, italics added.)
Illustration 5 of section 16 of the Restatement Third of Trusts provides an example of such a transfer. “5. The owner of certain property executes and signs a writing stating that he thereby transfers that property to T in trust for B for life, with remainder thereafter to B‘s issue, and delivers the writing to T. In the absence of applicable statutory provisions requiring additional formalities, a trust is created.”14 (Rest.3d Trusts, § 16, com. b, illus. 5, p. 229.)
2. Application
It is undisputed that record title to the Via Regla Property is held by the trustee of the 1985 Trust. Thus, we must consider whether Carne satisfied her burden to demonstrate by clear and convincing evidence that Carne is the
The 2009 Trust is signed by Liebler as grantor and Worthington and Castle as trustees. The 2009 Trust states, “I transfer to my Trustee the property listed in Schedule A, attached to this agreement.” Schedule A lists the Via Regla Property by its legal address.16 Thus, the 2009 Trust is “a trust agreement signed by the settlor and trustee, manifesting the settlor‘s present intention thereby to transfer specified property,” and as such is sufficient to transfer the Via Regla Property to the 2009 Trust. (Rest.3d Trusts, § 16, com. b, pp. 229-230.) Respondents do not cite, and our own research has not uncovered, any statutory provisions requiring additional formalities in order to convey real property in California.17
While Hasting asserts that “because Liebler did not sign a deed over to the third party trustees, there was no trust created in the Via Regla [P]roperty,” he fails to identify any element of a deed that is missing in the 2009 Trust, or any provision of California law requiring that a conveyance of real property occur only by way of a formal deed. (See
Estate of Heggstad (1993) 16 Cal.App.4th 943 (Heggstad), which Carne and Hasting discuss at length in their briefing, is legally inapposite. Heggstad noted that “two methods for creating a trust are codified in [Probate Code] section 15200: ‘(a) A declaration by the owner of property that the owner holds the property as trustee,’ and ‘(b) A transfer of property by the owner during the owner‘s lifetime to another person as trustee.’ ” (Id. at p. 948.) Relying on subdivision (a) of section 15200, and related provisions of the Restatement Second of Trusts and a treatise, the Heggstad court concluded “that a written declaration of trust by the owner of real property, in which he names himself trustee, is sufficient to create a trust in that property, and that the law does not require a separate deed transferring the property to the trust.” (Heggstad, supra, at p. 950.)19 The Heggstad court rejected the respondent‘s argument that “in order to uphold the trust, we must view the trust document as a valid conveyance of the property to the trust.” (Heggstad, at p. 950.) The Heggstad court reasoned, “This argument misses the point that a declaration of trust is sufficient to create a trust, without the need of a conveyance of title to the settlor as trustee.” (Id. at pp. 950-951.)
In this case, section 15200, subdivision (a), upon which Heggstad is based, has no applicability. Liebler did not execute a declaration stating that he held the Via Regla Property as trustee in the 2009 Trust. Thus, we reject Carne‘s argument that the facts of “the Heggstad ruling are directly applicable.” However, because, for the reasons discussed above, we do “view the trust document as a valid conveyance of the property to the [2009 Trust]” (Heggstad, supra, 16 Cal.App.4th at p. 950, italics added), we conclude that there was a transfer of property that complied with section 15200, subdivision (b).20 Thus, Heggstad is analogous only in that, as in this case, no separate deed was required in order for real property to become subject to a trust.21
We are not persuaded by Hasting‘s arguments in support of his claim that the language in the 2009 Trust failed to effectuate a conveyance.22 Hasting argues that recognizing the legality of the transfer in this case where “no deed conveying the property exists, would sanction creditor fraud.” In that regard, Hasting argues: “To allow the Heggstad rule to be extended to an irrevocable trust with third parties as trustees would turn the concept of trust law on its head and otherwise create a method to defraud creditors. A main reason for establishing an irrevocable trust with separate third party trustees is creditor protection for the settlor. In order to gain creditor protection, one must irrevocably relinquish ownership of the asset by delivering ownership of the asset to the third party trustees. If all that is needed is an irrevocable trust with a declaration of intent to transfer without actual delivery, then a settlor can create an irrevocable trust document and pull the wool over creditors[‘] eyes by producing the irrevocable trust only as necessary, yet secretly maintain the ability to dispose of the property, encumber the property, or do whatever the settlor wants with the property while keeping creditors at bay, if there is no actual irrevocable transfer to a third party trustee.”
To begin with, we are not extending the ”Heggstad rule,” and this case does not involve “a declaration of intent to transfer.” (Italics added.) As discussed above, while Heggstad involved a “declaration of trust” (Heggstad, supra, 16 Cal.App.4th at p. 950) under section 15200, subdivision (a), this case involves a transfer of property under section 15200, subdivision (b). More fundamentally, we emphasize that this opinion says nothing about the validity of Liebler‘s transfer of the property to the 2009 Trust vis-à-vis third parties. Thus, nothing in this opinion will “sanction creditor fraud,” since we do not conclude that the transfer in this case was effective as to Liebler‘s creditors. We conclude only that Liebler was not required to execute a separate deed in order for there to be a valid transfer between Liebler (as transferor) and the trustees of the 2009 Trust (as transferees).23 As the Restatement Third of Trusts, section 16 notes, “formalities prescribed for the creation of a recordable document, or otherwise for protection of or from third parties, need not be satisfied in order to make a valid donative transfer, that is, one that is effective as between the transferor and the transferee(s).”
Neither of the two cases from other jurisdictions on which Hasting relies in his brief is contrary to the reasoning of this opinion. In Dahlgren v. First National Bank (1978) 94 Nev. 387 [580 P.2d 478], the only issue before the Nevada Supreme Court was whether a certain handwritten note constituted a holographic will such that the decedent‘s property could pass pursuant to the provisions in the note. (See id., 580 P.2d at p. 479 [“The sole issue confronting us is whether the trial court erred in finding the hand-written instrument to be a holographic will.“].) In the course of its opinion, the Dahlgren court did note that, during her lifetime, the decedent had entered into a trust agreement with a bank that provided “that upon the death of trustor, her condominium together with a cash sum was to be distributed to Mamie Gilson.” (Id. at p. 478.) The Dahlgren court also stated, “[T]he record is clear, and the [trial] court so found, that at no time was the condominium ever deeded to respondent, and it therefore did not become a part of the trust estate.” (Id. at p. 479.) However, unlike in this case, there is nothing in Dahlgren that suggests that the trust agreement at issue in that case contained a provision expressly transferring the real property from the trustor to the trustees.24 Thus, the Nevada court‘s dicta in Dahlgren is not contrary to the reasoning in this opinion.
Hasting‘s reliance on Tyson v. Henry (1999) 133 N.C.App. 415 [514 S.E.2d 564] (Tyson) is unpersuasive for the same reason. In Tyson, the trust agreement recited that $5 had been provided to the trustee and “further provided that other properties described therein may later be delivered to the trust.” (Id., 514 S.E.2d at p. 565Tyson court concluded that a trust had not been created, for the following reasons: “[T]he instant instrument can not qualify as an inter vivos trust because the decedent never transferred his property interest to the designated trustee, Taylor. [Citation.] In his unverified answer, Taylor admitted that he never received any cash or property from Tyson. Therefore, Tyson never disposed of his property to the trustee, Taylor. As a result, Taylor was never given full legal title or equitable ownership of Tyson‘s real property. Based on the aforementioned evidence, we are compelled to hold that an inter vivos trust was not created.” (Id. at p. 566.)
Finally, we acknowledge that in Cate-Schweyen v. Cate (2000) 2000 MT 345 [303 Mont. 232, 15 P.3d 467] (Cate),25 the Supreme Court of Montana concluded that the trust document at issue in that case was “insufficient to serve as an instrument of conveyance” even though, according to the Cate court, the property was “clearly identified in the handwritten [trust] document.” (Ibid.)26 The court reasoned, “[W]e concluded under the similar circumstances described in [McCormick v. Brevig (1999) 1999 MT 86 [294 Mont. 144, 980 P.2d 603]] that in order for a trust document to serve as an instrument of conveyance, the person executing the trust document must subsequently redeliver, confirm, ratify, or adopt the transfer.” (Cate, supra, at p. 473.)
In McCormick, an exhibit that contained a list of the trust assets “was not attached to the document at the time the trust was executed.” (McCormick v. Brevig, supra, 980 P.2d at p. 613 (McCormick).) The McCormick court stated, “Because there was no proper description of the property within the document itself, or attached as Exhibit A, the trust failed to convey the property at its execution.” (Ibid., italics added.) The McCormick court further concluded that even assuming that appellant could present evidence that the trustor had attached exhibit A to the trust agreement “sometime after he executed the trust” (id., 980 P.2d at p. 613, italics added), the “attachment of such an exhibit could have validated the trust document as an instrument of conveyance of the real property only if the person executing the trust document were to have redelivered, confirmed, ratified, or adopted the transfer.” (Ibid.)
In this case, unlike in McCormick, it is undisputed that the 2009 Trust contains a “proper description of the property” (McCormick, supra, 980 P.2d at p. 613), within an attached Schedule A and that Liebler expressly stated in the 2009 Trust, “I transfer to my Trustee the property listed in Schedule A, attached to this agreement.” Thus, there is no reason to consider whether Liebler could have effectuated a conveyance and “validated the trust document” (McCormick, at p. 613), by attaching an exhibit to the trust after the trust‘s execution listing the Via Regla Property. However, to the extent Cate may be read to stand for the proposition that, even where the conveyance is clearly stated in the trust document, the trustor must “redeliver, confirm,
Accordingly, we conclude that the trial court erred in determining that Liebler was required to execute a separate deed in order to transfer the Via Regla property to the 2009 Trust.
B. The trial court erred in concluding that Liebler failed to transfer the Via Regla Property to the 2009 Trust because he did not “personally own the property” and he did not transfer the property as trustee of the 1985 Trust
Carne claims that the trial court erred in concluding that Liebler failed to transfer the Via Regla Property to the 2009 Trust because Liebler did not “personally own the property” and he did not transfer the Via Regla Property as trustee of the 1985 Trust.
Carne‘s claim raises a question concerning the proper interpretation of the 2009 Trust. Since our resolution of this claim does not turn on a conflict in the extrinsic evidence, we apply the de novo standard of review. (See Burch v. George (1994) 7 Cal.4th 246, 254 [“The interpretation of a will or trust instrument presents a question of law unless interpretation turns on the credibility of extrinsic evidence or a conflict therein.“].)
1. Governing law
In Galdjie, supra, 113 Cal.App.4th 1331,27 the Darwishes appealed from a judgment that awarded Galdjie specific performance of a real estate agreement between Galdjie and the Barbara Kramer Darwish and David Darwish Revocable Living Trust. The Galdjie court considered “whether [Galdjie‘s] failure to name the Trust as defendant or to specify that [the Darwishes] were being sued in their capacity as trustees means that the judgment is against the wrong parties and cannot be enforced.” (Galdjie, at p. 1337.) In considering this issue, the Galdjie court noted, “[I]t is clear that . . . one who wishes to ensure that trust property will be available to
However, despite Galdjie‘s failure to name the Darwishes in their capacity as trustees, the Galdjie court concluded that this omission did not require reversal of the judgment. The Galdjie court reasoned:
“Courts have held that where a trustee signs a contract of sale or deed without reference to his or her representative capacity, the contract or deed is enforceable against the trust. [Citations.]
“In a similar vein, a California court has held that a contract of sale signed by a beneficiary of a revocable inter vivos trust who held the power to direct the trustee to purchase or sell real estate was enforceable in an action for specific performance against the trust. [Citation.] The court pointed out that a revocable inter vivos trust is a probate avoidance device, but does not prevent creditors of the settlors—who are often also the trustees and the sole beneficiaries during their lifetimes—from reaching trust property. [Citations.]
“The evidence before us establishes that the Trust is a revocable inter vivos trust, that appellants are the sole trustees and, that as beneficiaries, they have the power during their lifetimes to direct the sale of the real property owned by the trust. In view of the above authorities, their signatures as individuals on the title deed as required by the judgment entered herein is sufficient to convey good title from the Trust.” (Galdjie, supra, 113 Cal.App.4th at pp. 1349-1350, italics added.)
2. Application
It is undisputed that, at the time of the execution of the 2009 Trust, the 1985 Trust was a revocable inter vivos trust, Liebler owned the Via Regla Property as the sole trustee of the 1985 Trust, and Liebler had the power during his lifetime to transfer the real property owned by the 1985 Trust. Under these circumstances, Liebler‘s signature on the 2009 Trust was “sufficient to convey good title” from the 1985 Trust to the 2009 Trust. (Galdjie, supra, 113 Cal.App.4th at p. 1350.)
Accordingly, we conclude that the trial court erred in determining that Liebler failed to transfer the Via Regla Property to the 2009 Trust because he did not “personally own the property” and he did not transfer the property as trustee of the 1985 Trust.
DISPOSITION
The trial court‘s January 29, 2015 order is reversed and the matter is remanded for further proceedings consistent with this opinion. Respondents are to bear costs on appeal.
McConnell, P. J., and Huffman, J., concurred.