Rauschenberg v. Rauschenberg, B277474

CourtCalifornia Court of Appeals
Writing for the CourtFEUER, J.
PartiesKRISTA RAUSCHENBERG et al., Plaintiffs and Respondents, v. LAUREN RAUSCHENBERG, as Trustee, etc., Defendant and Appellant.
Docket NumberB277474
Decision Date11 September 2019

KRISTA RAUSCHENBERG et al., Plaintiffs and Respondents,
v.
LAUREN RAUSCHENBERG, as Trustee, etc., Defendant and Appellant.

B277474

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

September 11, 2019


NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BP134482)

APPEAL from an order of the Superior Court of Los Angeles County, David J. Cowan, Judge. Affirmed in part; reversed in part and remanded.

Wershow & Cole and Jonathan A. Wershow for Defendant and Appellant.

Fuller & Fuller, Bruce P. Fuller and Joshua Maldonado for Plaintiffs and Respondents.

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Lauren Rauschenberg appeals from an order adjudicating ownership of trust property, finding Lauren breached her fiduciary duties, and removing her as trustee of an inter vivos trust, the Justice Family Trust (Trust). The Trust was established by Lauren's mother, France Justice (Fran),1 and her stepfather, Paul Justice. The Trust named Lauren and her sisters, Krista Rauschenberg and Nisa Rauschenberg, as beneficiaries. The probate court removed Lauren as trustee following a trial on Krista and Nisa's petition to remove and surcharge the trustee. Lauren contends the probate court erred in finding the Missouri real property owned by Fran and Paul and Fran's individual retirement account (IRA) are Trust property.

We reverse the probate court's order to the extent it finds Lauren breached her fiduciary duty as to the IRA, ordered a constructive trust on the IRA fund and proceeds from the sale of the Missouri property, and surcharged Lauren her profit from the IRA. In all other respects, we affirm the probate court's order and remand for further proceedings consistent with this opinion.

FACTUAL AND PROCEDURAL HISTORY

Fran had three children from her first marriage with Fred Rauschenberg—Nisa, Lauren, and Krista.2 Shortly after Fred died in 1975, Fran married Thomas Kamph. They divorced in or about 1985. In 1991 Fran married Paul. Fran and Paul lived

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together in a home they owned at 475 Columbus Road, Forsyth, Missouri (Missouri property).

In 2006 Fran had kidney vasculitis, but she later recovered from the illness. In March 2007 Fran was diagnosed with pancreatic cancer. Paul suffered from dementia.

On April 2, 2007 Fran executed an IRA adoption agreement naming Lauren as sole beneficiary of Fran's AG Edwards IRA account.3 Fran signed the designation in front of Lauren, and Paul signed as the spouse. Lauren testified Fran said "she wanted [Lauren] to have it." According to Lauren, Krista and Nisa were estranged from Fran. Lauren denied telling her then-husband, Jeffrey Slott (Jeff),4 in early 2009 that Fran had intended to leave her IRA of almost $350,000 to all three daughters equally, and that Lauren convinced Fran to leave the entire amount to her with a promise that Lauren would share it with Krista and Nisa. Jeff testified that in 2003 Fran told him she intended to leave her IRA to her three daughters, but Fran reconsidered her original plan and later gave the IRA to Lauren. Nisa testified that when she visited Fran at her home for three or four days in April 2007, a week before Fran passed away, Fran told her she wanted Nisa, Lauren, and Krista to share equally in Fran's estate.5 Krista testified Fran held an IRA in excess of

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$300,000 from Fred's pension with May Company. According to Krista, Fran said Krista, Lauren, and Nisa would share the IRA when Fran died.

On April 4, 2007 Fran and Paul added Lauren as a signatory to their U.S. Bank checking account. They also added Lauren as a signatory to their checking and savings accounts at Ozark Mountain Bank.

A. Establishment of the Inter Vivos Trust

On April 10, 2007 Fran and Paul, as trustors, and Lauren, as trustee,6 executed a revocable inter vivos trust agreement to establish the Trust.7 Fran and Paul's Missouri attorney had

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drafted their wills and the Trust documents some time earlier. Because the documents were old and torn, Jeff had them retyped and gave them to Lauren to bring to the hospital. Article VIII of the Trust contains a choice-of-law clause: "This Trust has been accepted by the Trustee in the State of Missouri and its validity, construction and all rights hereunder shall be governed by the laws of that State."

Article I of the Trust provides, "The Trustor has transferred and delivered or will transfer and deliver to the Trustee, without consideration, the property described in Schedule 'A' attached hereto, the contents of which are incorporated herein by this reference. Also, the Trustor may hereafter designate the Trustee as beneficiary under any pension, profit sharing or other forms of employee benefit plans in which the Trustor has a beneficial or assignable interest. Additional property, real or personal, or any interest therein, acceptable to the Trustee, may be transferred to this Trust by the Trustor or any other person. The Trustee acknowledges receipt of some or all of the property or title to the property described in Schedule 'A,' and agrees to hold, manage and distribute the property described in Schedule 'A,' and all other property hereafter received, as hereinafter provided." The Trust identified Fran and Paul collectively as "Trustor." Article V, paragraph 5.08 requires the trustee to perform an accounting annually "or at other reasonable intervals as determined by the Trustee, to the beneficiaries of the Trust."

Schedule A of the Trust provides in relevant part, "1. All real estate now owned or hereafter acquired, wherever situated

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and whether or not title reflects the name of the Trustee or this Trust so long as Trustor's name is reflected on the title thereof including, but not limited to that certain family residence located at 475 Columbus Road, Forsyth, Missouri 65653 and that certain parcel of land owned by Trustor adjacent to the above-described family residence. [¶] . . . [¶] 4. All stocks, bonds, bank accounts, investment accounts, deposits, cash, retirement accounts, IRA accounts, savings accounts, checking accounts, pension accounts, social security benefits, health insurance proceeds and benefits and all intangible rights of any nature whatsoever whether or not the foregoing assets are in the name of the Trustor, the Trustee or this Trust." Schedule A provides further in paragraph 6 that "[a]ll of the property described in Items 1 through 5 above are princip[al] of this Trust even if such assets have not been formally transferred to the Trustee or this Trust and regardless of whether the Trust has been funded with such assets."

The Trust became irrevocable upon the death of either trustor: "From and after the death of the first Trustor to die, this Trust may not be amended or revoked by any person." (Trust, art. II, ¶ 2.02.) Article III, paragraph 3.02.5 provides for distribution of the Trust assets to the beneficiaries: "Upon the death of the first Trustor this Trust shall immediately thereupon become irrevocable, and the Trustee shall as soon thereafter as reasonably practical distribute all trust principal and undistributed income equally to the Trustor's beneficiaries whereupon the Trust shall terminate. The Trustor's beneficiaries are . . . Lauren Rauschenberg-Slott, Nisa Rauschenberg and Krista Rauschenberg. All trust principal and undistributed income shall be distributed to the beneficiaries after deducting all expenses associated with administration of the Trust. Within the sole and exclusive discretion of the Trustee, the Trustee may

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apply so much of the principal and/or undistributed income of the Trust to the health needs, care, living expenses and maintenance of the surviving Trustor to the extent such needs are not otherwise covered by insurance, Medicare, family support or other similar resources. . . ."8

Fran died two days later on April 12, 2007.9 Lauren and Krista attended the memorial service in Missouri that was held two days later. Nisa did not attend. Of Fran's three daughters, only Lauren attended the funeral held a few days later in Alabama.

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B. Events After Fran's Death

A few weeks after Fran's death, Paul moved to live with his sister Evelyn Caillier in Newport Beach, California because he was suffering from dementia and was unable to live on his own. Lauren testified she attempted to have Paul take the necessary steps to transfer the Missouri property into the Trust because he was on the title to the property. Lauren consulted with three Missouri estate planning attorneys, Chauncey Parks,10 Thomas Motley, and a third unnamed attorney, concerning the Trust assets. On May 12 or 13, 2007 Lauren consulted with Parks, who told her the only Trust assets were the U.S. Bank and Ozark Mountain Bank accounts. According to Lauren, Parks stated the Missouri property was not Trust property because it was required to have been in the Trust when Fran died, or Paul as the trustor must sign an assignment of trust to transfer the Missouri property to the Trust. Both Parks and Motley told Lauren she needed Paul's cooperation to put the Missouri property into the Trust because Paul was the trustor. Lauren testified all three Missouri attorneys told her any property placed into the Trust had to be transferred by a written instrument, such as an assignment or declaration.

After speaking with Parks, Lauren contacted Paul and asked if he wanted to assign the Missouri property to the Trust. Paul indicated he did not. Paul never signed a deed or assignment to transfer the Missouri property to Lauren as trustee. Neither did Lauren bring an action to recover the Missouri property for the Trust.

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In June or July 2007 Paul granted Caillier his power of attorney, and he...

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