Estate of Varone, A117532 (Cal. App. 5/29/2008)
| Decision Date | 29 May 2008 |
| Docket Number | A117532. |
| Court | California Court of Appeals Court of Appeals |
| Parties | Estate of LAUREN H. VARONE, Deceased. CONRAD WOODALL, Plaintiff and Appellant, v. AMERICAN HEART ASSOCIATION et al., Defendants and Respondents. |
Appeal from the Superior Court of Solano County, Nos. FPR 041763 & FPR 042170.
This appeal comes to us following orders by the trial court which sustained the demurrers of respondents, dismissed an amended petition filed by appellant, and entered a judgment in favor of respondents. Appellant claims that the trial court erred by interpreting trust and will instruments that convey title to real property to respondents. We conclude that the trial court's interpretation of the testamentary documents was correct, and affirm the judgment.
This litigation commenced in April of 2005, with a petition filed by appellant to compel redress for breach of trust, to impress a constructive trust, and to determine the validity of a conveyance of real property located at 219 Fair Oaks Drive in Vacaville (the real property) by Arthur Varone to respondents in accordance with the terms of a trust.2 Appellant filed a second petition in March of 2006 to establish ownership of the real property in the estate of Lauren, his grandmother, in accordance with the terms of her will, and for an order directing transfer of the property to that estate. After a first amended petition was filed in June of 2006, respondents demurred to the pleading. At the hearing on the demurrer on October 23, 2006, the actions were consolidated for the purpose of trial,3 and the parties agreed to submit a joint written statement of facts to the trial court for resolution of the case. The statement of stipulated facts filed on December 1, 2006, specified that the trial court was authorized to finally and conclusively resolve the actions based on the facts stated and the briefs submitted by the parties.
According to the stipulated facts, Arthur and Lauren owned the real property as joint tenants during their marriage. Arthur and Lauren did "not have any children together," although Lauren had a daughter Gisela Varone (Gisela) from a previous marriage, and two grandsons, appellant and Arthur Woodall.4
By the terms of a revocable trust executed by Arthur and Lauren in April of 1998 (the 1998 Trust), and an accompanying trust transfer deed, the real property was transferred into the trust as its sole asset. The real property retained its character in the 1998 Trust as community property of Arthur and Lauren. Arthur and Lauren were named the joint trustees and settlors of the 1998 Trust.
Article 3.2 of the 1998 Trust granted to the surviving settlor of the trust the power "at any time [to] amend, revoke, or terminate, in whole or in part, any trust created by this instrument other than the Disclaimer Trust," by written instrument signed by the surviving settlor.5 On the death of either settlor, interests in the trust estate vested as of the date of death, although the trustee was granted discretion to delay or defer division or distribution of any of the trust estate. Article 5.3 provided that the remaining trust estate after payment of taxes, debts and expenses was to be deposited into a Power of Appointment Trust to "be held, administered, and distributed according to the terms of the Power of Appointment Trust, as set forth in Article Six." The dispositive provisions of the Power of Appointment Trust in Article 6.1(c) directed the trustee to pay to the surviving settlor for life the entire net income of the trust and "as much of the trust principal as the surviving settlor may from time to time demand in a signed writing delivered to the trustee." Under a general power of appointment granted to the surviving settlor, the trustee was also required to distribute all of the property subject to the trust to any entities or persons directed by the surviving settlor's will. The trustee was mandated by Article 7.15 to retain any interest in the real property in the trust as a personal residence for the surviving settlor to occupy for "his or her lifetime," with the option given to the surviving settlor, however, to direct the trustee in writing "to sell it, or any interest therein." Under a default provision, if any property subject to the power of appointment trust was not effectively appointed during the life of the surviving settlor, it passed to the Disclaimer Trust, which upon the death of the surviving settlor was to be distributed to Gisela, or if she did not survive the surviving settlor to her issue, and if no issue survived to the St. Jude Children's Hospital.
Arthur and Lauren also concurrently executed joint and mutual wills in which they bequeathed all of their property to the trustee of the 1998 Trust, to add to the trust principal and distribute in accordance with the terms of the trust. In the event the 1998 Trust had been "revoked, terminated or declared invalid," the residue was given to the executor — Arthur, in the case of Lauren's will — as trustee to distribute under the terms of a trust "identical to the terms" of the 1998 Trust. Lauren further expressed in her will that if she predeceased her husband she revoked any consent given in her lifetime to "any nonprobate transfer" of her "community property interest in any asset," to "anyone other than [her] husband," and instead gave to Arthur her "community property interest in any assets affected by this revocation of consent." The revocation of consent was expressly made subject to an exception for any community property included in any express trust of which she was a settlor or cosettlor, which continued "to be governed by the terms of the applicable trust instrument."6
Lauren died on May 11, 1999, whereupon Arthur became the surviving settlor of the 1998 Trust. On July 20, 1999, Arthur signed a written revocation of the 1998 Trust, and executed the "Arthur Varone Living Trust" (the 1999 Trust), in which he appointed himself sole grantor and trustee.7 He retained the right to all of the income, profits and control of the trust assets — that is, the real property — until his death. The 1999 Trust specified that upon the death of Arthur the trust property was to be distributed by the successor trustee to three designated beneficiaries in equal shares: The American Heart Association; The American Cancer Association; and St. Jude Children's Research Hospital in Memphis, Tennessee. Arthur executed a Grant Deed on August 20, 1999, in which he conveyed the real property to himself as trustee of the 1999 Trust. By an amendment to the 1999 Trust, respondent William Evers became successor trustee.
Following the death of Gisela, Arthur executed a Last Will and Testament (the Will) on February 12, 2004. The Will provided for the real property to be given to the successor trustee of the 1999 Trust, to hold, administer and distribute in accordance with the provisions of that trust. In the will, Arthur declared that he had no children, and neither Gisela nor Lauren's "grandchildren [were to] be deemed [his] heirs for purposes of this Will." Respondent Evers was appointed executor of Arthur's estate.
Arthur died on April 7, 2004. After attempting without success to notify appellant and Arthur Woodall of Arthur's death, respondent Evers sold the real property on August 1, 2004, and in December of 2004, made a preliminary distribution of the proceeds from the sale to the three charitable beneficiaries listed in the 1999 Trust — in the amount of $60,000 to each beneficiary. No assets remain in the 1999 Trust.
The trial court concluded after considering the Stipulated Facts8 that the 1998 Trust authorized the surviving spouse, Arthur, to "invade and take all of the trust principal," and revoke or terminate the trust after the death of Lauren. The court further found that Lauren's concurrently executed will in which she expressed her objective to grant Arthur "full power to dispose of all community property assets," reaffirmed her "intent that the 1998 Trust and all of its terms govern the disposition of property she retained" or which may in the future arguably revert to her. The court therefore determined "that the parties intended to allow the surviving spouse to modify, terminate or revoke the distributive terms of the 1998 Trust, to allow the surviving spouse to use the trust assets and direct a different distribution as he saw fit." The demurrers of respondent were "sustained, without leave to amend, effectively resulting in the denial of the petition itself" by order filed on February 8, 2007.
Appellant subsequently moved to vacate the judgment and for a new trial. On April 5, 2007, the trial court denied the motion, dismissed the action with prejudice, and entered a judgment in favor of respondents. This appeal followed.
Appellant argues that the trial court erred by failing to award him, as the intended ultimate beneficiary of Lauren's estate, her one-half community property interest in the real property placed in the 1998 Trust. Appellant's position is that Arthur had no authority to dispose of Lauren's one-half community property interest in the trust, which upon her death vested in her estate and was transmuted into her separate property. Appellant acknowledges that as successor trustee Arthur had "the right to revoke the 1998 Trust following Lauren's death in 1999," and the right to a life estate in the real property, but claims the "revocation did not defeat Lauren's estate plan," which called for the "residue of her estate after expiration of Arthur's life estate" to be distributed to appellant and Arthur Woodall — in the event her daughter Gisela failed to survive Arthur. He therefore maintains that Arthur's attempt to convey "Lauren's interest in fee" according to the terms of the 1999 Trust was "void as to Lauren's interest," and effective only to ...
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