Estate of Bennett

• Decision Date: 13 June 2008
• Docket Number: No. G038208.,G038208.
• Citation: 163 Cal.App.4th 1303,78 Cal. Rptr. 3d 435
• Parties: Estate of JACK HARRY BENNETT, Deceased. LU ELLA BENNETT et al., Petitioners and Respondents, v. SMITH HEAVY INDUSTRIAL TRANSIT CORPORATION et al., Claimants and Appellants.
• Court: California Court of Appeals

163 Cal.App.4th 1303

78 Cal. Rptr. 3d 435

Estate of JACK HARRY BENNETT, Deceased.

LU ELLA BENNETT et al., Petitioners and Respondents, v. SMITH HEAVY INDUSTRIAL TRANSIT CORPORATION et al., Claimants and Appellants.

No. G038208.

Court of Appeals of California, Fourth District, Division Three.

June 13, 2008.

Law Offices of Kent Vallette, Kent Leeds Vallette; Law Offices of Duff S. McEvers, Duff S. McEvers; Rutan & Tucker, Theodore I. Wallace, Jr., and Treg A. Julander for Claimants and Appellants.

Law Offices of Michael R. Lawler, Michael R. Lawler, Jr., Robert B. Houssels; Howard Rice Nemerovski Canady Falk & Rabkin, Bobbie J. Wilson, Sarah M. King and Christopher Kao for Petitioners and Respondents.

OPINION

RYLAARSDAM, Acting P. J.

Claimants Smith Heavy Industrial Transit Corporation and Advanced Development Holdings, Inc. (collectively Smith), appeal from a probate court order granting the motion of petitioners Lu Ella Bennett, Jack H. Bennett, Jr., and Louise Comer to set aside and rescind a settlement agreement and an assignment of their interests in the estate of Jack Harry Bennett (decedent). (Prob. Code, § 11604; all further statutory references are to the Probate Code unless otherwise indicated.) In addition, Smith filed a motion in this court to take evidence and make findings. (Code Civ. Proc., § 909; Cal. Rules of Court, rule 8.252.) In response to the latter request, petitioners filed a request for judicial notice. Finally, petitioners moved to strike portions of Smith's reply brief.

Smith attacks the probate court's ruling on several grounds. While we conclude that the court had jurisdiction to determine the enforceability of the settlement and assignment, we nonetheless agree with Smith's claim the court erred in denying its request for an evidentiary hearing and reverse the order on this ground.

FACTUAL AND PROCEDURAL BACKGROUND

Decedent was married to petitioner Lu Ella Bennett. The couple had several children, including petitioners Jack H. Bennett, Jr., and Louise Comer. They formally dissolved the marriage in October 1989. The next year, decedent married Dolores Caballero. He died in March 1992, but no estate proceedings were filed.

During the 1970's, decedent had acquired interests in several lots in Harbor City, California that are covered by oil leases with drilling operations currently conducted by a company named Brea Cañon Oil Company, Inc. In addition, Robert L. Pike and Richard C. Goodman obtained a $171,000 default judgment against decedent in 1984. Pike and Goodman renewed the judgment in September 1993.

In 2002, Pike and Goodman assigned the judgment to R&B Land Acquisition & Development, Inc. (R&B), an entity they jointly owned. R&B renewed the judgment a second time in July 2003.

Also in 2003, Smith entered into a written contract with R&B, agreeing to disclose to R&B "[o]pportunities that it has learned regarding ... property subject to the lien and foreclosure" of the judgment against decedent in return for one-half of "the net proceeds obtained from foreclosure under the ... [j]udgment ...." Under the agreement, "R&B ... ha[d] the right to approve whether or not any [o]pportunity ... presented by Smith ... shall be foreclosed on" and, if R&B rejected an "[o]pportunity" in writing, it would "revert to Smith" for "use as it [saw] fit ...."

That same year, R&B obtained a writ of execution against one of decedent's Harbor City lots. By then, the judgment exceeded $669,000. One year later, Smith purchased this lot at a sheriff's sale for $476,000. R&B assigned the judgment to Smith in 2005.

In December 2003, Smith sued petitioners and also recorded a notice of lis pendens against Lu Ella Bennett's Newport Beach home.

The verified complaint alleged Smith, "[f]rom and after April 2003, ... was, by assignment, the holder of" the judgment against decedent. The first count alleged decedent had "transferred or conveyed" the Newport Beach residence to a living trust and then to Lu Ella Bennett without payment of any consideration, and that she received title to the property "with knowledge" decedent "intended to hinder, delay, or defraud the collection of [Smith's] ... [j]udgment." A second count alleged a conspiracy between decedent and petitioners to transfer title of the Newport Beach residence to Lu Ella Bennett. The complaint sought to set aside "the transfer and conveyance" of the real property "to the extent necessary to satisfy [p]laintiff's [j]udgment," a determination that the judgment "be declared a lien on the real property," and for the property to be subject to attachment.

In April 2004, the parties, through counsel, settled the lawsuit with Smith "dismiss[ing] with prejudice" the pending lawsuit and withdrawing the lis pendens in return for petitioners' agreement "to assign [to Smith] any and all rights as heirs and beneficiaries to" decedent's estate. Petitioners also executed an irrevocable assignment of their interests in decedent's estate to Smith. The validity of the settlement and assignment and the probate court's order invalidating them is the subject of this appeal.

In late 2005 and early 2006, Smith, petitioner Lu Ella Bennett, and Caballero filed separate petitions to probate decedent's estate. The probate court chose Caballero to be the administrator.

Petitioners filed a motion under section 11604 to set aside and rescind the April 2004 settlement agreement and assignment of their interests in decedent's estate. They argued Smith obtained the settlement and assignment without giving adequate consideration and through fraud or duress, and that they executed these documents under a mistake of fact. Petitioners supported the motion with their declarations that included the following assertions: (1) Decedent and petitioner Lu Ella Bennett separated in April 1983; (2) petitioners believed Smith's representation that Smith "had been assigned th[e] judgment against [decedent]"; (3) each petitioner "was positive" decedent "did not own any property when he ... divorced" Lu Ella Bennett or "when he died"; and (4) Smith also represented to them that decedent "did not own any property."

In opposing the motion, Smith argued the Probate Code did not permit the court to rule on the motion "without a trial or evidentiary hearing on the merits," and petitioners' motion "bespeaks nothing but factual issues which require determination after [a] full evidentiary hearing during which documentary evidence and testimony will have to be presented." The opposition was supported by four declarations and numerous exhibits, which made the following factual assertions: (1) Caballero testified in a deposition that decedent began living with her during the 1960's and never returned to Lu Ella Bennett; (2) in her deposition, Lu Ella Bennett admitted decedent moved out of their home in 1977, returning only for a six-month period in late 1982 and early 1983; (3) she also admitted never speaking to anyone at Smith, was positive decedent did not own real property when they divorced, and signed the settlement and assignment because she was sure he did not own any property; (4) in late 2001, a Smith representative spoke with one of Lu Ella Bennett's children and a realtor Lu Ella Bennett knew, and offered to purchase her interest in Harbor City properties, but was told that, for personal reasons, she was not interested in completing the sale; (5) during negotiations over the settlement and assignment, neither Smith's officers nor its attorney spoke directly to any of the petitioners; and (6) its attorney did not make any representations to petitioners' counsel about decedent's property interests.

Richard C. Jones, Smith's owner, submitted a declaration claiming the written agreement with R&B "authorized [Smith] to use the [j]udgment owned by R & B ...." Citing the oil leases, Jones asserted he could not "put any realistic value on the Harbor City properties." Finally, Jones claimed a 1987 deed transferring decedent's interests in the Harbor City properties to a person named John Tuttle had recently been recorded, and "[i]f that [d]eed is otherwise valid, it could mean ... there are no properties of [decedent] remaining to be probated and the [e]state might end up with no assets."

Petitioners also filed a reply containing a declaration by Steven L. Stern, the attorney that represented them in the Smith action. Stern claimed Duff McEvers, Smith's attorney, represented that "Smith ... was not aware of any ... assets" decedent owned before his divorce or at his death, and that "Smith ... did in fact hold a judgment against [decedent]." Each party filed evidentiary objections to the opposing party's supporting declarations.

At the hearing on the motion, Smith's attorney repeated his contention "this has to be done by [an] evidentiary hearing[]," noting "[a]ll you have [are] declarations where everybody contradicts each other ...." After listening to argument, the court took the matter under submission. Subsequently, it granted the motion by minute order.

DISCUSSION

1. The Lack of an Evidentiary Hearing

Smith's first claim is that "[t]he evidence before the trial court created material issues of fact on each of the[] alleged grounds of the [r]escission [m]otion," and therefore the court "erred in failing to accord ... an evidentiary hearing where live witnesses would testify." Citing section 11604's authorization of a motion to challenge the validity of a transfer or agreement, and Code of Civil Procedure section 2009's authorization of the use of declarations "upon a motion," petitioners contend the probate court properly decided this matter on the parties' declarations. We conclude the probate court erred in failing to conduct an evidentiary hearing.

(1) It has long been the rule that in probate matters "affidavits may not be used in evidence unless permitted by statute. [Citation.]" (Estate of Fraysher

(1956) 47 Cal.2d 131, 135 .) Consequently, "when challenged in a lower...