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Boys and Girls Club of Petaluma v. Walsh

December 31, 2008

BOYS AND GIRLS CLUB OF PETALUMA ET AL., PLAINTIFFS AND RESPONDENTS,
v.
JAMES J. WALSH, AS COTRUSTEE, ETC., ET AL., DEFENDANTS AND APPELLANTS.



Superior Court of the County of Sonoma, No. SPR 74933, Elaine Rushing, Judge.

The opinion of the court was delivered by: Jones, P.J.

CERTIFIED FOR PUBLICATION

Subject to one exception, Probate Code section 15403, subdivision (a)*fn1 gives the probate court the authority to modify or terminate an irrevocable trust "if all beneficiaries . . . consent[.]" The exception to this general rule is found in subdivision (b), which provides that even if all beneficiaries consent, a court cannot modify or terminate a trust where "the continuance of the trust is necessary to carry out a material purpose of the trust" unless "the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust." (§ 15403, subd. (b).)

In this appeal we must interpret and apply section 15403 to a charitable trust (the Trust) created by Laurence Moore (Moore) in 1993. In the Trust, Moore designated five beneficiaries: The Salvation Army, Guide Dogs for the Blind, Hospice of Petaluma, Boys and Girls Club of Petaluma, and Face to Face of Sonoma County. Among other powers, the Trust gave the trustees broad discretion in two areas: (1) the "discretion to determine the relative amounts or percentages" given to these beneficiaries of the Trust, "including the power to . . . make [a] distribution to one or more of them to the exclusion of others;" and (2) the discretion to name additional beneficiaries and distribute the Trust to them.

Before his death in 2003, Moore named James J. Walsh and Michael E. Wood as successor trustees. After Moore's death, a contentious dispute arose regarding the successor trustees' discretion to identify beneficiaries of the Trust. Over the trustees' objection, the probate court modified the Trust in 2007 pursuant to section 15403. In ordering the modification without first deciding the trustees' petition to ascertain beneficiaries, the probate court gave effect to a settlement agreement reached by the beneficiaries listed in the Trust and a group of other charitable organizations referenced in a hand-written document Moore prepared after the execution of his Trust, and dated four days after his last amendment.

The successor trustees appealed.

There are two questions before us. The first question is whether "all beneficiaries" of the Trust consented to the modification in accordance with section 15403, subdivision (a). The answer to this question is yes. The second question before us is whether the broad discretion conferred upon the trustees constitutes a "material purpose" which would prevent a probate court from modifying the Trust pursuant to section 15403, subdivision (b). The answer to this question is no.

Accordingly, we affirm the probate court's order modifying the Trust.

FACTUAL AND PROCEDURAL BACKGROUND

Moore Creates the Trust

Moore created the Trust on March 8, 1993. The Trust was to "be organized and operated exclusively for charitable purposes" and its property was "irrevocably dedicated to charitable purposes[.]" Article V of the Trust provided as follows:

"A. Charitable Beneficiaries. The [T]rust shall terminate upon the later of the Grantor's death or ten (10) years from the date this [T]rust is executed. Upon termination [of the Trust], the Trustees shall distribute the entire remaining balance of the [T]rust in such proportions as the Trustees determine in their discretion to the following charitable organizations:

1. THE SALVATION ARMY (Northern California Division).

2. GUIDE DOGS FOR THE BLIND.

3. HOSPICE OF PETALUMA.

4. BOYS AND GIRLS CLUB OF ...


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