Estate v. Eimers

• Court: California Court of Appeals
• Writing for the Court: STRATTON, J.
• Citation: Estate v. Eimers, 49 Cal.App.5th 97, 262 Cal.Rptr.3d 639 (Cal. App. 2020)
• Decision Date: 15 May 2020
• Docket Number: B295609
• Parties: ESTATE OF Timothy W. EIMERS, Deceased. Caryn Saletta and Charles Saletta, Petitioners and Appellants, v. James N. EIMERS, as Trustee, etc., Objector and Respondent.

49 Cal.App.5th 97

262 Cal.Rptr.3d 639

ESTATE OF Timothy W. EIMERS, Deceased. Caryn Saletta and Charles Saletta, Petitioners and Appellants,

v.James N. EIMERS, as Trustee, etc., Objector and Respondent.

B295609

Court of Appeal, Second District, Division 8, California.

Filed May 15, 2020

John F. Mounier, Jr. and Elder Protection Attorneys for Petitioners and Appellants.

Law Offices of Jeffrey A. Coleman and Jeffrey A. Coleman for Objector and Respondent.

STRATTON, J.

INTRODUCTION

One who owns property may confer a power of appointment upon persons, the powerholders, to whom the owner gives property. Under the power of appointment, the powerholders may then designate who will receive the original owner’s property at some point in the future. ( Sefton v. Sefton (2012) 206 Cal.App.4th 875, 882, 142 Cal.Rptr.3d 174.) Sometimes a trustor will create a trust conferring a power of appointment on trust beneficiaries, empowering them to designate to whom they want to give their shares of the trust. Sometimes a trustor will also require trust beneficiaries to specifically exercise and refer to the power of appointment in any will they create in order to designate who should get their trust shares. This appeal poses the following question: Where a trust beneficiary creates a will that gives away his trust shares without also specifically referring to the power of appointment as required by the trust, may the court amend or reform that will to include a "specific reference" phrase so as to preserve the validity of the gift? The trial court answered no. So do we.

Reforming a will to conform to the testator’s true intent is permissible if extrinsic evidence establishes that true intent. However, we cannot do so in this case because reformation would achieve a work-around of the requirements of Probate Code ¹ sections 630, 631, and 632, effectively nullifying them. These sections, taken together, do not excuse noncompliance. We therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Family Trust

On September 11, 1991, Norbert Theodore Eimers established the Norbert Theodore Eimers Family Trust (Family Trust). The Family Trust provides that when Norbert and his wife both died, the trust assets would be divided equally among their children then living. The Family Trust also puts restrictions on how the children could designate who would get their trust shares at their deaths. The Family Trust reads as follows:

"Upon the death of a child, any share held in trust for the child’s benefit ... shall be distributed to or for the benefit of such one or more persons or entities, and on such terms and conditions, either outright or in trust, as said child may provide and appoint by will specifically referring to and exercising this power of appointment . If or to the extent that said child shall have failed to exercise this power of appointment, or an attempted exercise of this power shall have been invalid or ineffective for any reason, or said child shall have released or renounced this power, the property subject to it shall be distributed to or retained in trust for the benefit of the issue of the child .... Should no such issue be then living, such share shall be divided into as many equal parts as there are children of the Trustor then living and children of the Trustor then deceased who have issue then living." (Italics added.)

Norbert died in1992 and his wife died in 2011. Timothy William Eimers (decedent) is one of Norbert’s children and a beneficiary of the Family Trust.

B. Decedent’s Holographic Will

On February 8, 2013, decedent wrote out a two and one-half page holographic will. It provided, in relevant part:

"I Timothy William Eimers am writing this document as my Last Will and Testament. I am doing this of my own free will and of sound mind and body.

"To Charles J. Saletta and Caryn Saletta I hereby leave my shares of the Norbert Theodore Eimers Family Trust. I also leave all my other property and any funds I have." (Italics added.)

Decedent died four months later on June 22, 2013 in Burbank.

C. Probate Proceedings in Los Angeles and Sonoma Counties

On August 15, 2013, in the Los Angeles Superior Court, Charles and Caryn Saletta (the Salettas) filed a petition to probate decedent’s holographic will.

On September 10, 2014, the court admitted the holographic will to probate and on November 4, 2014, the court issued the order for probate.

Meanwhile, on December 12, 2013, the trustee of the Family Trust, decedent’s brother James N. Eimers (trustee) filed a petition in Sonoma County, where the Family Trust was administered. In the petition, trustee asked for instructions on whether he could distribute decedent’s share of the Family Trust to the Salettas. Trustee took the position that decedent had not validly exercised the power of appointment in the holographic will, because he failed to specifically refer to this power in the will as required by the terms of the Family Trust. The court held a two-day bench trial on the petition. At trial, trustee acknowledged decedent’s will "made a reference to the Norbert Theodore Eimers ... Family Trust," which while "sufficient to identify that he was talking about the September 11th, 1991 trust ... certainly wasn’t sufficient to be a specific reference [¶] ... [¶] [t]o a power of appointment." Counsel for trustee remarked to the court, "I think that we all could see what he was trying to do, he just didn’t do it correctly. And by law, there’s no excuse for his non-compliance."

The Sonoma County Superior Court found the holographic will did not comply with the Family Trust’s specific reference requirement, and so did not qualify as a valid exercise of the power of appointment pursuant to sections 630, 631, subdivision (b), and 632. The court instructed the trustee not to distribute decedent’s shares of the Family Trust to the Salettas. The Salettas appealed.

In November 2018, the First District Court of Appeal affirmed the trial court’s order, concluding decedent’s will did not comply with section 632 ’s requirements: "The Probate Code ... does not allow for substantial compliance when a donor requires a powerholder [decedent] to specifically refer to the power of appointment as a condition of exercising the power."²

D. Underlying Petition to Amend Holographic Will

On June 13, 2018, the Salettas filed their first amended petition in the Los Angeles County case to amend and reform decedent’s holographic will "to clarify the intended testamentary directive" because decedent’s "reference to giving his shares of the Norbert Theodore Eimers’ Family Trust ... necessarily refers to and incorporates the ‘power of appointment’ buried deep i[n] that trust’s 30 plus pages." The Salettas asked the court to reform the holographic will and add what they called a "technical phrase":

"To Charles J. Saletta and Caryn Saletta I hereby leave my shares of the Norbert Theodore Eimers’ Family Trust under the power of appointment . I also leave all my other property and any funds I have."

On October 30, 2018, trustee filed a demurrer to the first amended petition pursuant to Code of Civil Procedure section 430.10, subdivision (e). He alleged sections 631, subdivision (b) and 632 prohibited addition of the requested phrase. He asked the trial court to sustain the demurrer without leave to amend.

E. Trial Court’s November 28, 2018 Ruling

After argument on November 28, 2018, the trial court sustained trustee’s demurrer to the Salettas’ petition to amend the holographic will, without leave to amend.³

This appeal followed.

DISCUSSION

On appeal, the Salettas contend it is proper to reform decedent’s will to add the phrase "under the power of appointment" so as to clarify decedent’s testamentary intent. We disagree.

A. Standard of Review

We review de novo a trial court’s ruling on a demurrer. ( Dudek v. Dudek (2019) 34 Cal.App.5th 154, 163, 246 Cal.Rptr.3d 27 ( Dudek ).) When reviewing an order sustaining a demurrer, we accept as true the material facts alleged in the complaint or petition, but not contentions, deductions, or conclusions of fact and law. ( Ibid. ; Estate of Holdaway (2019) 40 Cal.App.5th 1049, 1052, 253 Cal.Rptr.3d 659.)

B. Powers of Appointment

As stated above, trustors often include powers of appointment in trust documents. These powers allow a trustor to control to whom and how the trust property can be further devised after the trustor’s death. This appeal involves the interplay of three sections of the Probate Code, which address powers of appointment.

First, Section 630, subdivision (a), provides that if the creating instrument "specifies requirements as to the manner, time, and conditions of the exercise of a power of appointment, the power can be exercised only by complying with those requirements." ( § 630, subd. (a).)

Section 632 goes further in discussing the significance of a specific condition included in some types powers of appointment: "If the creating instrument expressly directs that a power of appointment be exercised by an instrument that makes a specific reference to the power or to the instrument that created the power, the power can be exercised only by an instrument containing the required reference ." ( § 632, italics added.)

The Law Revision Commission comment on section 632 states: "This section permits a donor to require an express reference to the power of appointment to ensure a conscious exercise by the donee. In such a case, the specific reference to the power is a condition to its exercise. This condition precludes the use of form wills with ‘blanket’ clauses exercising all powers of appointment owned by the testator. The use of blanket clauses may result in passing property without knowledge of the tax consequences and may cause appointment to unintended beneficiaries." (Relocation of Powers of Appointment Statute (Sept. 1991) 21 Cal. Law Revision Com. Rep. (1991) p. 109.)

The third section, section 631, addresses when a court can and cannot excuse compliance with the terms of a power of...