Rogers v. Sherman

Decision Date20 March 2012
Docket NumberB234621
CourtCalifornia Court of Appeals Court of Appeals
PartiesJAMES E. ROGERS, as Trustee, etc., et al., Plaintiffs and Respondents, v. SALLY SHERMAN, Defendant and Appellant.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. BP121949)

APPEAL from an order of the Superior Court of Los Angeles County, Mitchell L. Beckloff, Judge. Affirmed.

Gifford, Dearing & Abernathy and Henry H. Dearing for Defendant and Appellant.

Magasinn & Feldman, Vicki Fisher Magasinn and Amanda Morrison; Scheuer & Gillett and Keith Scheuer for Plaintiff and Respondent James E. Rogers.

Donald L. Scoggins, in pro. per. and for Plaintiffs and Respondents Patricia T.

et al.

I. INTRODUCTION

Objector, Sally Sherman, appeals from a probate court order determining she and eight other lifetime beneficiaries of the Kathryn Z. Grayson Revocable Trust, as amended, cannot invade the principal. We conclude the trust instrument is unambiguous and does not require invasion of the principal. Nothing in the trust allows the lifetime beneficiaries to invade the trust papers. We affirm.

II. BACKGROUND
A. The Trust

Ms. Grayson, the trustor, created the trust on August 23, 2004, and was the original trustee. The trust was amended three times. March 27 and October 26, 2006, and September 24, 2009. Section 4.1 of the trust authorized Ms. Grayson to make distributions to herself of the "net income of the trust . . . ." Sections 4.2, 4.3 and 4.4 allowed Ms. Grayson to distribute principal from the trust. The trust became irrevocable upon Ms. Grayson's death on February 17, 2010. Also upon her death, James E. Rogers became the trustee.

Section 6.1 makes provision for nine named individuals upon Ms. Grayson's death. The named nine lifetime beneficiaries are related to trustor as follows: Ms. Sherman (a friend); Patricia Kathryn Towers (the daughter); Robert Towers (a son-in-law); Jordan Towers (a grandson); Kristin Elizabeth Rowles (a granddaughter); and Kathleen Barnes, Madeline Day, Patricia Kiser and Maria Ritter (nieces).

Section 6.1 of the trust provides: "Disposition of Trust for Those Holding Life Estate. During the lifetime of [the nine lifetime beneficiaries], the trustee shall hold, administer, and distribute the assets of the Trust as follows: at any time or times during the trust term, the trustee shall pay to or apply for the benefit of each individual named above as much of the net income of the trust as the trustee deems proper for their health,education, support and maintenance. However, in making such determinations, the trustee shall take into consideration [trustor's] wishes that each individual named above is entitled to distribution from the assets of the Trust in the following proportions: [objector] is entitled to 25%, Patricia Kathryn Towers is entitled to 25%, Robert Towers is entitled to 12.5%, Jordan Christopher Towers is entitled to 12.5%, Kristin Elizabeth Rowles is entitled to 12.5%, [and] Kathleen Barnes, Madeline Day, Patricia Kiser and Maria Riter are entitled, collectively, to 12.5%. Upon the death of any of the above named individuals, their respective share shall be placed back into the trust and distributed in accordance with section 6.2 below. [¶] The trustee shall give the consideration that the trustee deems proper to all other income and resources that are known to the trustee and that are readily available to each individual for use for these purposes. In taking all of these factors into consideration, the trustee shall also consult with [objector] and it is [trustor's] wish that the opinion of [objector] shall be given substantial weight by the trustee. All decisions of the trustee, with the assistance of [objector] are within the trustee's discretion and shall be final and incontestable by anyone. The trustee shall accumulate and add to principal any net income not distributed."

Section 6.2 provides that upon the last death of nine lifetime beneficiaries, "the trustee shall hold, administer, and distribute trust property" to each of Ms. Grayson's great-grandchildren. Section 6.3 provides that each of the great-grandchildren's share shall be held, administered and distributed as a separate trust. Section 6.3 provides that the net income of the trust shall be paid to the great-grandchildren. The trustee is also authorized to pay the great-grandchildren or his or her issue "as much of the principal of the trust as is necessary for their proper health, education, support and maintenance." After the age of 35 years, the great-grandchildren have the power to withdraw all the remaining trust principal.

B. Mr. Rogers's Petition

On December 10, 2010, Mr. Rogers filed a petition for modification of the trust and instructions. As will be noted, Mr. Rogers later changed his position concerning the best way to manage the trust. The original petition alleged the following. The trust had assets of approximately $4 million which would be reduced by a capital gains tax of approximately $900,000. The trust assets consisted of stocks, bonds, mutual funds and a home described as the Bundy residence. The Bundy residence is held in trust for Ms. Grayson's granddaughter, Ms. Rowles.

The Santa Monica property, which was Ms. Grayson's primary residence, was sold by Mr. Rogers. It was alleged the principal of the trust was most likely lower than Ms. Grayson had anticipated. This was due to economic conditions in the housing market. In addition, the City of Santa Monica had recently taken actions to have the Santa Monica property declared as a historic landmark. This would reduce a potential buyer's use of the Santa Monica property. The petition also alleged Ms. Grayson had a reverse mortgage against her residence which caused monthly debt to meet her living expenses. Ms. Grayson originally drafted the trust with the expectation of a much larger principal balance. Certain provisions of the trust are impractical due to the changed circumstances.

Mr. Rogers also alleged that certain provisions are ambiguous and need modification. Mr. Rogers alleged that he believed Ms. Grayson intended to provide a steady stream of income to the nine lifetime beneficiaries in the percentages provided. Because of changed circumstances, the trust principal balance was low and the return on investments would be relatively low in the current economy. Mr. Rogers requested among other things a modification of Section 6.1 of the trust to create a unitrust for the nine lifetime beneficiaries rather than net income distribution. Mr. Rogers requested that the trust be modified to allow for a payment of five percent of its assets to be distributed annually to the nine lifetime beneficiaries and be divided into separate shares. Mr. Rogers alleged the proposed modification would ease administration and would beconsistent with Ms. Grayson's original intent. Mr. Rogers further alleged a willingness to relinquish his discretion in annually determining the amounts of distributions to each beneficiary.

C. The Objection And Modification Request

On February 14, 2011, Ms. Sherman, the objector, filed an objection to Mr. Rogers's modification petition. Ms. Sherman: argued that the unitrust modification as well as Mr. Rogers's willingness to relinquish his discretion was contrary to Ms. Grayson's intent; asserted Mr. Rogers's discretion was the means for dealing with changed circumstances; and requested the appointment of a guardian ad litem for living and unborn great-grandchildren. On March 18, 2011, Ms. Sherman filed a supplement to her February 14, 2011 objection. The supplement proposed the modification of Section 6.1 of the trust to allow Mr. Rogers to divide trust assets into proportionate shares for the nine lifetime beneficiaries. The proposed modification would also allow Mr. Rogers to distribute not only the net income but allow the nine lifetime beneficiaries to invade the trust principal.

D. The Amended Petition

On March 29, 2011, Mr. Rogers filed an amended petition. In the amended petition, Mr. Rogers withdrew the request to create a unitrust. Mr. Rogers responded to Ms. Sherman's proposed modifications. Citing section 6.1 of the trust, Mr. Rogers argued that only net income could be distributed to the lifetime beneficiaries but no principal. Rather, according to Mr. Rogers, section 6.1 indicates a precatory desire that net income be distributed. But according to Mr. Rogers, nothing in the trust language allows principal distributions to the nine lifetime beneficiaries. By contrast, he noted section 6.3 of the trust clearly provides for principal distribution to Ms. Grayson's greatgrandchildren.

E. The Guardian Ad Litem

On March 18, 2011, the probate court appointed Donald L. Scoggins, Esq., as guardian ad litem for the born and unborn great-grandchildren. On April 27, 2011, Mr. Scoggins filed a report. Mr. Scoggins asserted that: the plain language of the trust indicated the intent the principal be held as a "pot trust" for the life estate holders; Mr. Rogers has discretion to distribute trust income to the life estate holders for their support; Mr. Rogers's power to distribute income was in proportion to what he deemed appropriate; but, the trust principal was to be preserved and subsequently distributed to Ms. Grayson's great-grandchildren. Mr. Scoggins argued the language in Section 6.1 of the trust regarding "distribution from the assets of the trust" does not mean principal. Rather, Mr. Scoggins argued: the trust provides that the distributions are from as opposed to of the assets; the distinction illustrates the concept that income is generated "from" trust assets and not the corpus itself; ...

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