Dudek v. Dudek

Citation246 Cal.Rptr.3d 27,34 Cal.App.5th 154
Decision Date10 April 2019
Docket NumberD073491
CourtCalifornia Court of Appeals
Parties David DUDEK, as Trustee, etc., Appellant, v. Anne Kebisek DUDEK, Individually and as Trustee, etc., et al., Respondents.

The Stone Law Group, Kenneth H. Stone, San Diego, and Phillip J. Szachowicz for Appellant.

Green Bryant & French and Joel R. Bryant, San Diego, for Respondents.

AARON, J.

I.INTRODUCTION

Petitioner David Dudek (David)1 appeals from a judgment entered after the trial court sustained the demurrer of respondents Anne Kebisek Dudek,2 Tiffany Guzman, Jeanette M. Kebisek, Mary J. Kebisek, Guillermo Andrade, Maria Sanchez, Ora H. Day, Tonya Courtney, and Michael Quinn (the respondents) to David's petition (the Petition), filed pursuant to the Probate Code, to recover money distributed to the respondents in accordance with the beneficiary designation of Genworth Life Insurance Policy #5804946 (the Policy), which covered the life of J.D. Dudek (J.D.), the Petitioner's brother.

According to David, in late 2009, J.D. created and executed the J.D. Dudek Life Insurance Trust (the Trust), an irrevocable life insurance trust that named David as the trustee. David asserts that the Policy is listed as an asset of the Trust, to be held and administered in accordance with the Trust's terms. According to the Petition, the Trust designates David and his sister, Sharon Van de Grift, as the residual beneficiaries of the Trust who, pursuant to the terms of the Trust, would be entitled to the proceeds of the Policy.

According to the allegations of the Petition, J.D. prepared and submitted to the life insurance company the forms required by that company to change the ownership and beneficiary designations on the Policy in order to establish David, as trustee, as the sole owner and named beneficiary of the Policy.3 David was unaware that not long after J.D. submitted the forms, the insurance company rejected the ownership and beneficiary designation forms because J.D. had altered some of his entries without initialing the changes. David was also unaware that J.D. had failed to file corrected forms with the life insurance company after he was notified of the insurance company's rejection of his submitted forms. Further, David did not know that approximately six years later, in 2016, J.D. submitted a new form to the life insurance company in which he purported to alter the beneficiary designation on the Policy to name the respondents as the beneficiaries of the Policy, instead of naming David, as trustee of the Trust, as the beneficiary. The form that J.D. submitted in 2016 naming the respondents as beneficiaries of the Policy was accepted by the life insurance company.

After J.D. died, David produced the Trust to the life insurance company and sought to obtain the proceeds of the policy. However, the life insurance company distributed the proceeds of the policy to the beneficiaries that it had on file, pursuant to the beneficiary designations that J.D. submitted in 2016.

David subsequently filed the Petition in this case, seeking an order directing the respondents to transfer the proceeds of the Policy to him as the trustee of the Trust. In ruling on the respondents' demurrer, the trial court concluded that the Trust had not been funded, and therefore, had not become a valid trust, as a result of J.D.'s failure to file documents with the life insurance company to change the ownership and beneficiary designations to correspond with the terms of the Trust document. In other words, the trial court concluded that no trust was ever created because J.D. never effectively placed the Policy into the Trust.

On appeal, David contends that the trial court erred in concluding that the allegations of the Petition cannot support a finding that a valid irrevocable trust was created when J.D. executed the Trust document in 2009 and transferred ownership of the Policy to David as trustee through that document. David further contends that the allegations of the Petition support an order requiring the respondents to convey the life insurance proceeds to him, as trustee of the Trust.

We agree with David that the trial court erred in sustaining the respondents' demurrer to the Petition; the Petition alleges facts that could support a finding that the execution of the Trust document created an irrevocable trust and constituted an effective inter vivos donative transfer of the Policy to David as trustee of the Trust. Given the irrevocable nature of the Trust and the language in the Trust document demonstrating J.D.'s intention to immediately transfer ownership of the Policy to David, upon execution of the Trust document, the Policy irrevocably became Trust property. As a result, J.D. would have had no ability to effectuate any further transfer of the trust property to other parties. Thus, David, as trustee, may petition the court for, and be entitled to, an order requiring the respondents to transfer the proceeds of the Policy to him in his capacity as trustee of the irrevocable Trust. We therefore reverse the judgment.

II.FACTUAL AND PROCEDURAL BACKGROUND4

On July 5, 2001, J.D. initiated coverage under a life insurance policy for a $1,000,000 death benefit. At that time, J.D. designated David and Ora H. Day, in their individual capacities, as beneficiaries of the life insurance policy.5

In 2003, J.D. was diagnosed with acute lymphoblastic leukemia

. According to the petition, "[i]n an effort to aid in Decedent's treatment, Petitioner agreed to act as a donor in two separate bone marrow transplants [,] which prolonged Decedent's life."

On December 31, 2009, J.D. executed the J.D. Dudek Life Insurance Trust, naming David as trustee and beneficiary.6 The operative terms of the Trust included the following relevant provisions:

"A. ... It is the Grantor's intent in creating this trust that all gifts made to this trust be both complete and gifts of present interests for federal gift tax purposes, and that the assets of this trust, including any life insurance proceeds, be excluded from his gross estate for federal estate tax purposes. All provisions of this trust shall be construed in such a manner as best to affect [sic ] these intents.
"B. The Grantor transfers to the Trustee the property listed in Schedule A, to be held and administered according to the terms of this trust. ... The Grantor retains no right, title, or interest in any trust property.
"[¶] ... [¶]
"This trust and all interests in it are irrevocable, and the Grantor has no power to alter, amend, revoke, or terminate any trust provision or interest."

Schedule A of the Trust lists two assets to be held in the Trust: (1) one hundred dollars, and (2) the Policy.

David signed the Trust, with a notary verifying his signature, on January 20, 2010.

Approximately one month after executing the Trust documents, on January 29, 2010, J.D. "executed a ‘Certification of trustee powers' and ‘Ownership, beneficiary and payee designation request,’ " which he submitted to the insurance company, requesting that the owner and beneficiary of the Policy be changed to David, as trustee of the Trust. These forms were signed not only by J.D., but also by David as the trustee and new owner of the Policy.

In completing the forms, J.D. handwrote the information requested on the forms. In doing so, he made two errors, which he sought to correct by interlineating his original responses and then writing his corrected responses next to the interlineations.7 A copy of the forms attached to the Petition demonstrates that J.D. did not initial next to either of his corrected responses.

According to the Petition, J.D.'s insurance agent faxed to Genworth Life Insurance Company (Genworth) the forms that J.D. had completed. However, on February 16, 2010, "Genworth rejected Decedent's change of ownership form, stating that the form was altered and that changes must be initialed by the policyholder."8

The Petition alleges that J.D. failed to resubmit to Genworth the change of ownership forms with the changes initialed.

Six years later, J.D. executed new beneficiary change forms and submitted them to Genworth. The Petition attaches a letter dated November 11, 2016, in which Genworth notified J.D. that it had "received [his] request to change the beneficiary on this contract(s)," and said that its "records now show" that the respondents were the primary beneficiaries of the Policy.

J.D. died on December 7, 2016.

Between December 7, 2016 and January 12, 2017, David was informed via telephone that another beneficiary claim had been made on the Policy. David sent a letter to Genworth informing them of his contention that he was entitled to the proceeds of the Policy pursuant to the Trust. In a separate letter sent January 14, 2017, David again informed Genworth of the existence of the Trust, notified Genworth of his intent to contest the November 11, 2016 beneficiary designation based on the execution of the irrevocable trust document, and requested that Genworth not make any distributions from the Policy at that time.

On February 7, 2017, Genworth notified David that it would not withhold distribution of the proceeds of the Policy, and that it intended to distribute the proceeds to the respondents.

On April 8, 2017, David sent letters to the respondents notifying them that they had received the proceeds from the Policy to which they were not legally entitled because those proceeds were the property of the Trust. David asked the respondents to deliver to him, as trustee of the Trust, the Policy's death benefits. David did not receive payment from any of the respondents.

On June 30, 2017, David filed his Petition in the trial court, seeking the following: (1) an order directing the transfer of Trust property from respondents to David, as trustee, pursuant to Probate Code section 850 ; (2) an order determining the proper beneficiaries of the Trust's assets pursuant to Probate Code section 17200 ; (3) a determination that the...

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