CYNDI VANCE, Plaintiff and Appellant, v. DON BIZEK, Defendant and Respondent.
No. B243061
Second Dist., Div. Six.
Aug. 12, 2014.
228 Cal. App. 4th 1155
A petition for a rehearing was denied September 8, 2014.
Neil S. Tardiff and Shea S. Murphy for Plaintiff and Appellant.
Aspelin & Bridgman and John H. Aspelin for Defendant and Respondent.
OPINION
O‘DONNELL, J.*—This case turns on the trial court‘s misassignment of the burden of proof. The presumption created by
The trial court ruled that Gordon‘s disclaimer was void, finding that Gordon‘s use of WPB Trust funds before she filed her disclaimer demonstrated acceptance of her beneficial interest in the trust. In reaching this result, the trial court accepted Bizek‘s argument that the
FACTS
1. The WPB Trust
Wallace and Pearl Burt (settlors) executed the WPB Trust on January 13, 1992, and signed an amended version of the trust on January 25, 2006. The amended trust named Gordon, the biological child of Pearl Burt, and Linda Larsen, the biological child of Wallace Burt, as cotrustees. The amended trust required the consent of both cotrustees to any trust transactions. During the lifetimes of the settlors, the WPB Trust gave the cotrustees substantially unlimited power to disburse the income and principal of the WPB Trust for the “health, education, support, comfort, enjoyment, and welfare” of settlors, including the power to sell, invest and to mortgage trust property. Upon the death of both settlors, all remaining assets of the trust were to be distributed to Gordon and Larsen or their surviving issue.
On June 2, 2010, the probate court removed Gordon as cotrustee of the WPB Trust on Larsen‘s motion. Pearl Burt died on November 27, 2010, and Wallace Burt died a week later, on December 4, 2010.
The Pearl Burt Trust was a separate trust for the benefit of Pearl Burt. Gordon was the sole beneficiary of the Pearl Burt Trust and was also the sole trustee until her resignation on April 6, 2011. Gordon was trustee of the Pearl Burt Trust during the time she was a cotrustee of the WPB Trust.
3. Bizek‘s claims against Gordon
Gordon was at one time a trustee of a third trust, the Helen Trumm Trust (Trumm Trust). Respondent Don Bizek, a beneficiary and cotrustee of the Trumm Trust, sued Gordon for an accounting of the Trumm Trust and obtained a judgment against Gordon for $987,747. Bizek then filed a petition to enforce his judgment against Gordon‘s beneficial interest in the WPB Trust. The probate court granted Bizek‘s petition on April 6, 2011.
4. Gordon‘s disclaimer
On April 6, 2011, the same day the probate court granted Bizek‘s petition, Gordon executed a disclaimer of her entire beneficial interest in the WPB Trust. The disclaimer stated: “I, Sally J. Gordon, hereby disclaim any and all of my interest in the property to [sic] which I am otherwise entitled to take as a beneficiary of the Wallace and Pearl Burt Trust dated January 13, 1992 pursuant to Section 7.13 of the Restatement of the Wallace and Pearl Burt Declaration of Trust Dated January 25, 2006, and as provided in sections 275 et. seq. of the California Probate Code.”
5. The trial court proceedings
Vance filed a petition for instructions pursuant to
At the hearing, Bizek attempted to prove that Gordon mishandled WPB Trust funds to which she had access as trustee, using some of those funds for her own benefit. Bizek relied substantially on the testimony of Barbara Aspelin. Bizek did not attempt to establish Ms. Aspelin‘s expertise in trust accounting or any other field of expertise. His appellate brief identifies
Between March 2007 and July 2009, monthly transfers in the amount of $2,500 were made from a WPB Trust account to a Pearl Burt Trust account. These transactions totaled $72,500. The bank records did not specify the person who authorized the transfers. Gordon was a cotrustee of the WPB Trust at the time all the transfers were made. However, Gordon testified that her mother, Pearl Burt, authorized the transfers. The transfers were made without the consent of Gordon‘s cotrustee, Larsen.
Ms. Aspelin then described 13 other transactions, most reflecting transfers from Pearl Burt Trust accounts of which Gordon was a trustee to other Pearl Burt Trust accounts of which Gordon was a trustee and, finally, several transfers from Pearl Burt Trust accounts to personal accounts belonging to Gordon or Vance. The trial court found that:
(1) Aspelin‘s documentary evidence “traced” WPB Trust funds to Gordon‘s private accounts.
(2) Title to a mobilehome belonging to the WPB Trust was transferred to the Pearl Burt Trust in September 2008. The mobilehome was later sold for approximately $49,000. The proceeds of the sale were deposited into a Pearl Burt Trust account on which Gordon had signature authority as trustee. Ms. Aspelin opined that a portion of the proceeds later went into Gordon‘s personal account. Although the documentary evidence was not conclusive, the trial court credited Ms. Aspelin‘s testimony.
(3) Pearl Burt, accompanied by Gordon, personally withdrew $5,000 from a WPB Trust account in July 2009. The trial court found that this amount went directly to Gordon.
Based on Ms. Aspelin‘s testimony and the documents on which she relied, the trial court found that Gordon‘s disclaimer was void because she had received “benefit” from the WPB Trust before she disclaimed her interest in it. The court made the following findings:
“1. Because Gordon was the sole beneficiary of the Pearl Burt Trust she benefited herself from using funds from the Wallace and Pearl Burt Trust to pay Pearl Burt‘s expenses;
“3. Gordon benefited from the co-mingling of money of the two trusts and accepted the co-mingling benefits [sic] by receiving Wallace Burt funds when they were dispersed to Gordon from the Pearl Burt trust.”
DISCUSSION
1. Standard of review
Vance‘s petition for instruction asked the trial court to determine that Gordon‘s disclaimer of her beneficial interest in the WPB trust was valid pursuant to
2. Gordon had the capacity to accept a contingent interest.
The trial court based its finding that Gordon accepted her beneficial interest in the WPB Trust on three sets of transfers. Those transfers occurred between 2007 and 2009, and before the settlors died in 2010. Gordon contends that California law prohibited her from accepting her beneficial interest in the WPB Trust while the settlors were alive because her interest in the trust was contingent upon their deaths. She is incorrect.
The only California authority on this issue is a 1929 Court of Appeal decision stating, in dicta, that a contingent interest may not be accepted until it vests by occurrence of the contingency. (Meilink v. Gianelli (1929) 100 Cal.App. 615.) In Meilink, the beneficiaries executed a written disclaimer of their interest in stocks devised by their father and purported to grant their interest to the creditors of their father‘s corporation. The Court of Appeal concluded that the disclaimer had no effect because the father‘s estate had not been settled at the time the disclaimer was executed and that “there can be no effective acceptance until it has been determined that [the beneficiaries] are at least entitled to have the stock distributed to them....” (Id., at p. 617.)
Meilink was decided before
In In Re Kolb (9th Cir. 2003) 326 F.3d 1030, 1036 (Kolb), the Ninth Circuit Court of Appeals questioned Meilink‘s continuing viability: “We believe that Meilink is best interpreted as a pre-Code discussion of acceptance and disclaimer, now superseded by the enactments of the California [L]egislature.” We agree. Gordon was capable of accepting her beneficial interest in the WPB Trust during the lives of the settlors even though that interest was contingent on the settlors’ deaths.
3. Gordon‘s disclaimer was timely.
To be effective, a disclaimer must be “filed within a reasonable time after the person able to disclaim acquires knowledge of the interest.” (
4. Gordon did not accept her beneficial interest.
The beneficiary of an interest “may disclaim any interest, in whole or in part, by filing a disclaimer” of that interest. (
Bizek relies on
Because Bizek was not a beneficiary of the WPB Trust, Gordon did not owe him any fiduciary duty to abstain from self-dealing in the WPB Trust. The
In Conservatorship of Hume, the conservator filed a final inventory and appraisal of the conservatorship estate, as required by
Having determined that Gordon‘s contingent interest may be accepted and that Bizek has the burden of proving the disclaimer was void, we now determine whether Bizek met his evidentiary burden. He did not.
As relevant here,
In the absence of directly applicable California authority, both parties refer us to the opinion of the Ninth Circuit Court of Appeals in Kolb, supra, 326 F.3d 1030, which is instructive. In Kolb, a bankruptcy case, the father of debtor Theodore Kolb created a trust for the benefit of his wife, Theodore‘s mother. The trust gave the mother complete discretion to draw on the principal for living expenses. The father‘s will provided that upon the mother‘s death the remainder of the trust would go to Theodore. (Id., at pp. 1033-1034.) Theodore listed his future beneficial interest in the Kolb Trust in financial statements he submitted with a loan application. The mother gave Theodore power of attorney, including signature authority over bank accounts containing Kolb Trust funds, from which Theodore wrote checks for his mother‘s debts and occasionally for his own. Subsequently, in anticipation of filing for bankruptcy, Theodore disclaimed his interest in the Kolb Trust. A judgment creditor challenged the disclaimer. (Id., at p. 1034.)
The creditor also contended that, because funds from the Kolb Trust were transferred into the mother‘s personal accounts, Theodore‘s withdrawals from those accounts for his own use constituted acceptance of his interest in the Kolb Trust. (Kolb, supra, 326 F.3d at p. 1040.) The court rejected this argument, however, as “too attenuated to satisfy the definition of acceptance intended by the California [L]egislature. [Theodore‘s] withdrawals from [his mother]‘s personal accounts were executed under his power of attorney on behalf of [his mother], and with her permission. ... At most, Theodore exerted control over [his mother]‘s lifetime interest in the proceeds of the Kolb Trust. Accordingly, ... these withdrawals did not constitute acceptance.” (Id., at pp. 1039-1040.)
The Ninth Circuit Court supported its analysis with decisions from four states that have disclaimer statutes similar to California‘s. In each decision, a disclaimer was held to be void because, in essence, the beneficiary‘s use of trust assets “portend[ed] immediately tangible results” that served his/her interests (Sagal, supra, 89 Cal.App.3d at p. 1014). (See Badouh v. Badouh Hale (2000) 22 S.W.3d 392, 396-397 [beneficiary who pledged expectancy in mother‘s home could not disclaim interest in mother‘s estate]; Niklason v. Ramsey (1987) 233 Va. 161 [353 S.E.2d 783, 784] [beneficiary who entered into a contract to dispose of his mother‘s estate prior to executing disclaimer was not permitted to disclaim his interest in the estate]; Estate of Lyng (S.D. 2000) 2000 SD 44 [608 N.W.2d 316, 320] [disclaiming beneficiary accepted payments from life insurance and annuity contracts and directed disposition of disclaimed property, thus retaining control over the property sufficiently to invalidate the purported disclaimer]; Leipham v. Adams (1995) 77 Wn.App. 827 [894 P.2d 576] [widow who registered property with broker under her own Social Security number and used it to trade securities accepted her husband‘s interest in the account and could not disclaim that interest].)
5. Gordon‘s use of WPB Trust funds to pay Pearl Burt‘s expenses
The trial court found that “[b]ecause Gordon was the sole beneficiary of the Pearl Burt Trust she benefited herself from using funds from the Wallace and Pearl Burt Trust to pay Pearl Burt‘s expenses.” This conclusion contains two errors. The first is based on the trial court‘s failure to apply the proper burden of proof. Although Gordon undoubtedly used funds in the Pearl Burt Trust accounts to pay Pearl‘s expenses, Bizek failed to prove that the funds Gordon used for that purpose were WPB Trust funds. The trial court apparently assumed that, because funds from both trusts were commingled in Pearl Burt Trust accounts, Gordon had the burden of proving that the funds she used to pay Pearl Burt‘s expenses were not WPB Trust funds. That burden of proof would be proper if Bizek were a beneficiary of the WPB Trust challenging Gordon‘s management of it. Gordon would then have the burden of proving, under
The trial court also erred in finding that Gordon was the sole beneficiary of the Pearl Burt Trust and thus stood to benefit from using WPB Trust funds to pay Pearl‘s expenses. The evidence showed that Pearl, not Gordon, was the
6. Larsen‘s loss of control
The trial court also found that, “[o]nce the funds came to rest within the Pearl Burt trust, Larsen lost all control of the funds as cotrustee of the Wallace and Pearl Burt trust.” This legal conclusion is incorrect. Gordon‘s transfer of funds from the WPB Trust to the Pearl Burt Trust did not divest Larsen of all control over those funds. As a cotrustee and a future contingent beneficiary of the WPB Trust, Larsen was empowered to demand an accounting of the WPB Trust from Gordon and could sue Gordon for malfeasance in connection with the WPB Trust.5 Larsen‘s failure to exercise these powers does not signify that Gordon‘s fund transfers deprived her of them.
Even if Larsen did lose control over WPB Trust funds that were transferred to Pearl Burt Trust accounts, the benefit to Gordon was not direct, but attenuated. Unlike Theodore Kolb, who immediately and tangibly benefitted from listing his future beneficial interest in the Kolb Trust on a loan application, thus accepting his beneficial interest in the Kolb Trust, Gordon‘s “benefit” from Larsen‘s diminished control over the WPB Trust assets is too tangential and speculative to constitute acceptance by Gordon of her beneficial interest.
7. Gordon‘s receipt of WPB Trust funds
Finally, the trial court‘s finding that Gordon benefited “by receiving Wallace Burt [WPB Trust] funds when they were dispersed to Gordon from the Pearl Burt Trust” is unsupported by the evidence once the correct burden of
Ms. Aspelin‘s evidence showed only that funds were transferred from a WPB Trust account of which Gordon was a trustee into a Pearl Burt Trust account of which Gordon was a trustee, that some funds were then transferred into other Pearl Burt Trust accounts of which Gordon was a trustee, and, finally, that some funds were transferred from those Pearl Burt Trust accounts to Gordon‘s personal accounts. Ms. Aspelin assumed that the funds that ended up in Gordon‘s accounts were WPB Trust funds, and the trial court accepted her conclusion. The evidence does not support that inference, however, because cash is fungible. Without the benefit of the
Gordon‘s conduct is akin to that of Theodore Kolb, who, with his power of attorney, used funds in his mother‘s personal account that contained Kolb Trust funds to pay his own debts. The Ninth Circuit Court explained that in so doing “Theodore did not exercise direct control over the Kolb Trust for his own benefit. At most, Theodore exerted control over [his mother‘s] lifetime interest ... in the Kolb Trust.” (Kolb, 326 F.3d at pp. 1039-1040, italics added.) Likewise, without the benefit of the
DISPOSITION
We reverse and remand with instructions to the trial court to enter a new judgment granting Vance‘s petition for instructions and denying Bizek‘s
Gilbert, P. J., and Yegan, J., concurred.