ANNEMARIE DONKIN et al., Plaintiffs and Respondents, v. RODNEY E. DONKIN, JR., et al. as Trustees, etc., Defendants and Appellants,
B293127
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE
Filed 4/3/20
CERTIFIED FOR PARTIAL PUBLICATION* (Los Angeles County Super. Ct. No. BP109463) APPEAL from an order of the Superior Court of Los Angeles County, David J. Cowan, Judge. Affirmed.
ROTHSCHILD, P. J.; BENDIX, J.; WHITE, J.*
Vicki R. Donkin, in pro. per., for Defendant and Appellant Vicki R. Donkin, as Trustee, etc.
Mark H. Boykin for Plaintiffs and Respondents Annemarie Donkin and Lisa B. Kim.
* Pursuant to
We agree with the trial court on both points. We further reject Beneficiaries’ contention that, because the Trustees represent themselves in their dispute with Beneficiaries regarding the interpretation of the trust, the Trustees engaged in the unauthorized practice of law. Accordingly, we affirm.
A. The Donkin Family Trust
In August 1988, Rodney E. Donkin (Rodney, Sr.)2 and Mary E. Donkin (Mary), a married couple, executed a revocable trust as part of their estate plan, which they then amended in 2002 (the trust document).3 According to the trust document, the primary beneficiaries of the trust after the death of both Trustors were their children: Rodney E. Donkin, Jr. (Rodney, Jr.); Lisa B. Kim (Lisa); and Annemarie N. Donkin (Annemarie). “Rodney Jr. and his wife Vicki R. Donkin were named as ‘[f]irst’ co-successor trustees, while Lisa and Annemarie . . . were relegated to the position of ‘[s]econd’ co-successor trustees.”4 (Donkin II, supra, B266036, at p. 4.)
The trust document provides that, upon the death of the first Trustor (the predeceasing spouse or decedent), “the Trustee shall divide the Trust Estate into two . . . separate shares“: (1) the “Survivor‘s Trust” (Trust A), consisting of the surviving spouse‘s interest in Trustors’ community property and
Upon the death of the surviving spouse, the trust document requires the trustee to further divide the decedent‘s marital share into decedent‘s Trust B and decedent‘s Trust C. The trustee is to include in Trust B only assets in an amount up to the maximum marital deduction from federal estate tax,5 and to allocate the remainder of the marital share to Trust C.
1. Revocability
“[T]he surviving spouse‘s Trust A remains revocable” after the predeceasing spouse dies. By contrast, “[u]pon the death of [the predeceasing] spouse . . . [d]ecedent‘s Trusts B [and] C . . . become irrevocable.” (Underlining omitted.) Other provisions in the trust describe Trusts B and C as becoming irrevocable “[u]pon creation of such Trust shares [B and C].” Given that the trust document obligates the trustee to create shares B and C “[u]pon the death of [the predeceasing] spouse,” however, these provisions effectively render Trusts B and C irrevocable upon the death of the predeceasing spouse. (Underlining omitted.)
“Upon the death of both [Trustors], the entire Trust becomes irrevocable.” (Underlining omitted.)
2. Allocation and distribution upon the death of the surviving spouse
The trust further provides that, “[u]pon the death of the Surviving Spouse, the Trustee shall hold, administer and distribute the Trust in the following manner.” The provisions that immediately follow do several things. First, they allow for the distribution of Trustors’ personal property per a separate memorandum Trustors may choose to execute. Second, they give the trustee discretion “[a]t any time prior to the division of the trust into shares as hereinbefore provided, or prior to distribution if divided,” to provide sums for “care and maintenance, medical needs, and education of any primary beneficiary” and to make “Extraordinary Distribution[s]”
At the conclusion of these provisions, the trust document identifies the primary beneficiaries and requires that “[w]hen the above conditions are satisfied, the debts and obligations of the Trust Estate have been paid, and any special bequests have been distributed, the Trustee shall allocate and divide [the] Trust Estate as then constituted into separate shares so as to provide one share for each of the designated Primary Beneficiaries living at the death of the Surviving Settlor.” (Italics added.) Finally, “the Trustee shall distribute the shares allocated to Primary Beneficiaries outright as soon as is practicable.” (Italics added.)
B. Mary‘s Efforts to Amend the Trust Document
In 2002, Rodney, Sr., died.
In 2004, shortly before her own death, Mary executed an amendment to the trust document (the contested amendment). The contested amendment “did two things. First, it substituted a new paragraph regarding the allocation of the trust assets after her death as the surviving spouse. Instead of directing an immediate allocation and division of the assets into separate shares for the beneficiaries, the new paragraph grants the successor trustees—which would initially be Rodney Jr. and Vicki—‘complete discretion’ after the death of Mary to retain the assets of the Family Trust intact and to continue to manage the property for the equal benefit of the primary beneficiaries.
In 2005, Mary died.
C. Litigation and Resulting Law of the Case Regarding the Trust Document‘s No Contest Provisions
The trust document contains a no contest clause. The contested amendment also includes a no contest clause, phrased slightly more broadly than that in the trust document. For several years beginning in 2008, Trustees and Beneficiaries litigated issues involving the no contest clauses and the effect of the contested amendment.
1. Beneficiaries’ 2010 petition for surcharge and to account
Primarily, Trustees and Beneficiaries litigated whether Beneficiaries would trigger either no contest clause by filing a petition seeking an order for surcharges and to account based on Trustees’ alleged failure to distribute the assets in Trusts B and C upon Mary‘s death (the 2010 petition). (See generally Donkin II, supra, B266036, at pp. 6-8.) Beneficiaries based the 2010 petition on their reading of the trust document provisions governing the distribution of decedent‘s Trusts B and C, and their view that Mary lacked authority to alter these terms through the contested amendment, because Mary executed it after Trusts B and C had become irrevocable. (See Donkin I, supra, 58 Cal.4th at pp. 435–436.)
Changes in the Probate Code sections regarding no contest clauses6 further complicated this dispute, resulting in a 2013 California Supreme Court decision. (See Donkin I, supra, 58 Cal.4th 412.) In the portions of that decision relevant to our current analysis, the Court held that, under either the new or the old law regarding the enforceability of no contest provisions, “the no contest clauses in the [trust document] are unenforceable against” the 2010 petition “challenging the conduct of the successor trustees under the asserted authority of the [contested] [a]mendment” (id. at pp. 415–416), because the 2010 petition does not constitute a “contest” as defined in
In further trial court proceedings on remand from the Supreme Court, Trustees filed a petition for instructions with the trial court (the 2014 petition). The 2014 petition raised two issues, only one of which is relevant to the current appeal. Namely, it sought instructions regarding “the proper interpretation of the allocation paragraph in the Trust as amended by the [contested] [a]mendment.” (Donkin II, supra, B266036, at p. 10.) This request tracked the Supreme Court‘s comment that “[i]t is up to the court or arbitrator to rule on the merits of the parties’ conflicting interpretation of the trust instrument in the future, if the beneficiaries choose to pursue their claims [in the 2010 petition].” (Donkin I, supra, 58 Cal.4th at p. 438.) The 2014 petition effectively asked the trial court to issue such a ruling.
4. The 2017 decision of this court (Donkin II)
The trial court‘s initial decisions regarding the 2014 petition and 2010 petition resulted in another appeal to this court. We reversed in part, because the trial court had refused to hear the 2014 petition, based on its incorrect conclusion that the petition presented only issues already decided by the Supreme Court in Donkin I. (Donkin II, supra, B266036, at p. 22.) We remanded for the trial court to hear and decide the 2014 petition. (Id. at p. 30.) It is the trial court‘s decision following such remand that is currently before us for review.
In minute orders dated October 27, 2017 and January 17, 2018, the court provided a detailed and thoughtful discussion of the September 2014 petition and, relatedly, certain issues involved in the 2010 petition.
Specifically, the trial court concluded that, following the death of Rodney, Sr., in 2002, the decedent‘s Trust B became irrevocable, meaning that Mary lacked authority after that point to “alter the terms of the Trust as they pertain to Trust B.” As such, Trusts B and C were to be distributed on the terms set forth in the trust document, not the contested amendment.
The court further concluded that the trust document provisions, when read together, required the “Trustees . . . to have distributed to Beneficiaries their share of what Trustees should have allocated to Trust B upon Mary passing.” In reaching this conclusion, the court rejected Trustees’ arguments that trust document provisions granting the Trustees discretion with respect to “Support and Education” and “Extraordinary Distribution” rendered the entire trust a “continuing conditional discretionary, spendthrift trust that did not require the assets to be distributed immediately upon Mary‘s death.” (Underlining omitted.) “That Trustees have certain discretionary powers and have general powers do not in and of themselves give them discretion to disregard specific provisions of the Trust. Discretion does not include just doing whatever Trustees wanted.”
The court based its analysis on its interpretation of the trust‘s allocation, distribution and revocability provisions, considering them in the context of the larger trust document. The court rejected Trustees’ argument that it should consider
Having determined that the trust obligated the Trustees to allocate and distribute the assets in Trusts B and C to Beneficiaries upon Mary‘s death, the court continued the 2010 petition for surcharge “for further hearing to determine whether Trustees are liable or not, and if so, in what amount, for the alleged surcharge in view of the [court‘s] decision . . . and in connection with accountings for the relevant time periods.” Such continuance was necessary, the court explained, because it needed to determine what “amounts or assets . . . should have been distributed on Rodney‘s death and what was not,” and, in turn, “what should have been distributed when Mary died.”
Finally, the court rejected Trustees’ argument that the 2010 petition is barred by the statute of limitations set forth in
The court issued a June 25, 2018 order, which incorporated by reference its October 2017 and January 2018 orders and the reasoning provided therein. Trustees timely appealed.
A. Trustees’ Arguments and Standard of Review
We can discern two primary arguments from Trustees’ briefing on appeal. First, Trustees contend the trial court erred in concluding that the statute of limitations for “action[s] contest[ing] [a] trust” was inapplicable to Beneficiaries’ claims. (
Second, Trustees argue that, even if the contested amendment did not amend the terms of the trust document regarding Trusts B and C, Trustees were not required to distribute the assets in these trusts upon Mary‘s death, and may instead continue to manage them as part of a continuing discretionary spendthrift trust. They argue the trial court erred in rejecting this interpretation of the trust document and permitting Beneficiaries to proceed with their 2010 petition.
These arguments challenge the trial court‘s interpretation of the Probate Code and the trust document. We review both types of questions de novo.7 (Brown v. Labow (2007)
Based on our independent review of the applicable law and the trust document, we conclude that none of Trustees’ arguments has merit, and find no error in the trial court‘s order.
B. The Trial Court Correctly Interpreted the Trust Document and Correctly Rejected Trustees’ Statute of Limitations Argument
1. The trial court correctly concluded that the contested amendment had no effect on Trusts B and C
A threshold issue in the court‘s decision below is whether, after Rodney, Sr.‘s death, Mary had authority to amend the terms of the trust document regarding Trusts B and C, and whether, as a result, the contested amendment governs the distribution of the assets in these trusts.
Although it is not entirely clear from their briefing, Trustees do not appear to be challenging the trial court‘s ruling in this regard. Instead, Trustees seem to want to ignore the issue by arguing that, “whether Mary did or did not have the right to
It is axiomatic, however, that an amendment Mary had no legal authority to execute can have no legal effect. We agree with the trial court that, following Rodney, Sr.‘s death, Mary lacked the authority to alter the terms of the trust document governing Trusts B and C. The plain language of the trust document provides Trusts B and C became “irrevocable” at that point, meaning Mary “was not at liberty to change that planned distribution after [Rodney, Sr.‘s] death.” (Aguilar v. Aguilar (2008) 168 Cal.App.4th 35, 40; see Heaps v. Heaps (2004) 124 Cal.App.4th 286, 291–292 [attempts to transfer assets from irrevocable trust to different trusts constituted conversion]; see also
That Trusts B and C became irrevocable and were not subject to amendment following Rodney, Sr.‘s death is also consistent with the “Donkins’ clear intent to establish an estate plan that minimizes estate taxes.”8 (Donkin I, supra, 58 Cal.4th at p. 418, fn. 3.) ” ‘To avoid federal estate tax inclusion in the surviving spouse‘s estate, the bypass trust [here, Trust B,] must be irrevocable and unamendable on and after the first spouse‘s death.’ ” (Id. at pp. 416–417, quoting 2 Drafting Cal. Revocable Trusts (Cont.Ed.Bar 4th ed. 2003), Revocation and Amendment, § 20.6, p. 20–14 (rev. 9/13).) Thus, Mary‘s inability to amend
Thus, the trial court correctly concluded that Trusts B and C should be distributed according to the original terms of the trust document, not the terms of the contested amendment. This key conclusion guides our analysis of Trustees’ arguments, which we discuss below.
2. The trial court correctly determined the Beneficiaries’ claims in the 2010 petition are not a “contest” and thus are not time-barred
As discussed above, the trust document, not the contested amendment, governs Trusts B and C. The 2010 petition requesting distribution of Trusts B and C in accordance with the terms of the trust document, rather than the contested amendment, is thus not an action contesting a trust, but an action requesting timely execution of a trust‘s provisions. To the extent the 2010 petition seeks to enforce a particular
Moreover, ” ‘[w]hether there has been a “contest” within the meaning of a particular no-contest clause depends upon the circumstances of the particular case and the language used.’ ” (Burch v. George (1994) 7 Cal.4th 246, 254–255 (Burch); see
3. The trust document required distribution of Trusts B and C as soon as is practicable after Mary‘s death
Trustees argue that, even if the contested amendment did not alter the terms applicable to Trusts B and C, the trust document creates a “continuing conditional discretionary spendthrift Trust that did not terminate and did not require immediate distribution upon Mary‘s death.” (Boldface omitted.) Trustees point to various provisions throughout the trust document that create trustee discretion to manage certain types of distributions at certain times. Consistent with basic canons of trust interpretation, we do not read these provisions
In interpreting a trust, courts seek to ascertain the trustor‘s intent, which requires that “we look first to the terms of [the] trust.” (Burch, supra, 7 Cal.4th at pp. 256, 258.) “The words of an instrument are to be given their ordinary and grammatical meaning unless the intention to use them in another sense is clear and their intended meaning can be ascertained.” (
Here, the only way to give effect to all terms of the trust document regarding Trusts B and C is to interpret the provisions Trustees cite as granting Trustees discretion for a brief period following Mary‘s death, during which the Trustees may need to handle various tasks in preparation for final distribution.
Namely, in the section “Allocation and Distribution of Trust Assets” (all capitalization omitted), the trust document first requires that “[u]pon the death of the Surviving Spouse, the Trustee shall hold, administer and distribute the Trust in the following manner.” The sections that immediately follow set forth various tasks that may be necessary prior to the distribution of the trust assets, such as disposing of Rodney, Sr.‘s, and Mary‘s personal property as required in a separate memorandum, should one exist, deducting the amount of any loans or gifts from a beneficiary‘s share, and establishing, if necessary, a special needs trust for any incompetent beneficiaries. Among these sections are also the provisions on which Trustees rely, which create trustee discretion to distribute
The provisions addressing distribution thus speak in mandatory terms and plainly do not contemplate Trustees retaining control over Trusts B and C after Mary‘s passing for any longer than is necessary to address any applicable administrative tasks the trust documents designate as conditions precedent to division and distribution. This reading of the trust document uses the ordinary meaning to the phrase “as soon as is practicable,” while also giving effect to all provisions discussing the Trustees’ discretion following Mary‘s death. The interpretation Trustees urge, by contrast, would render meaningless the requirement that distribution take place “as soon as is practicable” and be “outright” to the Beneficiaries.
Although “extrinsic evidence is admissible to ascertain the meaning of the trust and the intent of the trustor” (Safai v. Safai (2008) 164 Cal.App.4th 233, 244, citing Burch, supra, 7 Cal.4th at pp. 256, 258), the only extrinsic evidence relating to intent of either Trustor in drafting the trust document is an estate
In sum, the trial court correctly interpreted the terms of the trust documents as requiring distribution of Trusts B and C to Beneficiaries “as soon as is practicable” after Mary‘s death, as the Beneficiaries argued below. The trust document does not permit the Trustees to continue to administer Trusts B and C as spendthrift trusts for any longer after Mary‘s death than is necessary to address the special scenarios discussed above (none of which Trustees argue applies), calculate the Beneficiaries’ various shares, and prepare the trust assets for distribution to the Beneficiaries.12
Trustees represent themselves. Beneficiaries argue that such self-representation constitutes an unauthorized practice of law.13 We disagree.
In Ziegler v. Nickel (1998) 64 Cal.App.4th 545 (Ziegler), Division Three of this court concluded that “[a] non-attorney trustee who represents [a] trust in court is representing and affecting the interests of the beneficiary and is thus engaged in the unauthorized practice of law. [Citation.]” (Id. at p. 549.) Ziegler did not involve probate proceedings, but rather a lawsuit between a mobilehome park and a trust—appearing, as a trust necessarily does, through its trustee. (See Powers v. Ashton (1975) 45 Cal.App.3d 783, 787 [a trust can only be a party to litigation through a trustee].) In concluding the trustee could not represent himself in prosecuting the trust‘s lawsuit against the mobilehome park, Ziegler explained that ” ’ a trustee‘s duties in connection with his or her office do not include the right to present argument [while representing himself] in courts of the state, because in this capacity such trustee would be
Ziegler‘s rationale is that the trustee was effectively speaking for the interests of the trust beneficiaries in the lawsuit against the mobilehome park and, as a nonlawyer, improperly representing those beneficiaries. (Ziegler, supra, 64 Cal.App.4th at pp. 548–549; cf. Aulisio v. Bancroft (2014) 230 Cal.App.4th 1516, 1519–1520 [a self-represented trustee does not engage in the unauthorized practice of law under Ziegler when he is also the sole beneficiary, and thus is not representing the interests of another].)
This reasoning is closely connected with the specific facts in Ziegler. Namely, in non-probate litigation between a trustee and a third party (as in Ziegler), the trustee is acting as a fiduciary for the benefit of the beneficiaries.14 But the same
The decision of Division Six in Finkbeiner v. Gavid (2006) 136 Cal.App.4th 1417 (Finkbeiner) is instructive here. Finkbeiner concluded that, in probate litigation between a trustee and beneficiaries, the trustee was not engaging in the unauthorized practice of law by representing herself when filing a petition to modify and terminate the trust. (Id. at p. 1421.) The court distinguished Ziegler on the basis that the trustee in
Like the court in Finkbeiner, we conclude that the reasoning in Ziegler does not apply to the matter before us. As in Finkbeiner, the instant matter is between trustees and trust beneficiaries in the context of probate proceedings, not between trustees and a third party in non-probate litigation. Of course, unlike in Finkbeiner, neither statute nor fiduciary duty required Trustees to file the petition for instructions at issue or to oppose Beneficiaries’ petition for surcharge and to account. Nevertheless, like a trustee filing a petition pursuant to a statutory mandate, Trustees here are seeking judicial clarification on how to interpret a trust document and not acting on behalf of the beneficiaries. Rather, Trustees and Beneficiaries are litigating a dispute about what precisely the trust requires. Therefore, as in Finkbeiner, Trustees may represent themselves in this dispute without engaging in the unauthorized practice of law.
We note, however, that Trustees have wasted both the court‘s and Beneficiaries’ resources and time trying to relitigate issues already decided by the California Supreme Court in this
The trial court‘s order is affirmed. Respondents are awarded their costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION.
ROTHSCHILD, P. J.
We concur:
BENDIX, J.
WHITE, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.