APPEAL from a judgment of the Superior Court of Imperial County, Jeffrey B. Jones, Judge. Reversed and remanded. (Super. Ct. No. ECU03368).
The opinion of the court was delivered by: Aaron, J.
CERTIFIED FOR PUBLICATION
Plaintiff Tammy King appeals from a judgment entered in favor of defendant Barbara Johnston. Tammy,*fn1 a beneficiary of the Arthur L. Gilbert Testamentary Trust, sued Barbara in a civil action, alleging that Barbara had unduly influenced the trustee, Lenora Gilbert, to breach the trust.*fn2 According to Tammy, Barbara induced Lenora to transfer a piece of trust property to herself, without consideration, after which Barbara induced Lenora to mortgage the property for a personal loan. The bank eventually foreclosed on the property, and Lenora lost title. Tammy also alleged that Barbara took money and rents that belonged to the trust and used them for her own personal benefit.
Tammy asserted, in the alternative, that Barbara had essentially taken over the role of trustee while Lenora was still alive but in failing mental and physical health, and that Barbara's actions during this period of time constituted a breach of trust. Tammy further alleged that after Lenora's death, Barbara acted as trustee and thus became a trustee de son tort,*fn3 and that Barbara breached her duties as trustee during that period of time by failing to properly care for and/or recover trust property.
After a bench trial, the trial court determined that Tammy should recover nothing from Barbara. Specifically, the trial court concluded that Tammy had failed to establish the existence of a conspiracy between Lenora and Barbara, that Tammy had not established that Barbara was a de facto trustee before Lenora died, and that Tammy, as a trust beneficiary, did not have standing to sue Barbara without joining the current trustee, Lloyd Gilbert, in the action.
The trial court also concluded that Barbara had unduly influenced Lenora to breach the trust, and that Barbara had "acted as trustee" after Lenora's death, before Lloyd accepted his role as trustee. Despite these findings, the court determined that because Tammy lacked standing to sue Barbara for Barbara's role as a third-party participant in Lenora's breach, Tammy could not recover under that theory. The court also declined to award Tammy any relief as to her claim that Barbara had acted as trustee after Lenora's death, because, the court noted, Lloyd was "actively recouping" the value of the trust rental income that Barbara had wrongfully retained by withholding her share of the trust distributions.*fn4
On appeal, Tammy contends that the trial court erred in denying her relief in the form of the value of the trust property that Lenora transferred out of the trust and lost after defaulting on her loan. Specifically, Tammy asserts that the court erred in concluding that she did not have standing to sue Barbara for Barbara's role as a third-party participant in Lenora's breach of trust. Tammy also contends that the trial court erred in failing to grant relief to make the trust whole by rejecting Tammy's argument that Barbara acted as a trustee de son tort during Lenora's tenure as trustee. Tammy further contends that the trial court erred in failing to make a determination as to whether Barbara became a trustee de son tort by acting as trustee after Lenora's death. If Barbara were found to have been a trustee de son tort, she may have been obligated to fulfill the same duties a trustee would be required to fulfill, including protecting and restoring trust property.
We conclude that the trial court erred in determining that Tammy did not have standing to sue Barbara for Barbara's role as a third-party participant in a trustee's breach. We also conclude that the court erred in failing to consider and make the necessary findings as to whether Tammy could recover from Barbara under a theory that after Lenora's death, Barbara became a trustee de son tort, and thus had duties to the trust beneficiaries, which she breached. We therefore reverse the judgment and remand the case.
II. FACTUAL AND PROCEDURAL BACKGROUND
Upon Arthur Gilbert's death in 1991, his widow Lenora became the trustee of the Arthur L. Gilbert Testamentary Trust. Upon Lenora's death, the trust estate was to be distributed as follows: (a) 15 percent to Tammy and 15 percent to Tammy's sister, Brenda Leifheit (representing an even split of the 30 percent that would have gone to their deceased father, one of Arthur's sons); (b) 30 percent to Lloyd, Arthur's other son; (c) 30 percent to Barbara, Arthur's stepdaughter; and (d) 10 percent to the Church of Christ.*fn5
During the distribution of Arthur's estate, Lenora, as trustee, received title to two parcels of land, "Parcel 21" and "Parcel 17," which are adjacent to each other. Mark Osterkamp rented both parcels for farming.
Lenora personally received title to two other parcels of land, the Gilbert residence, and a property identified as "Parcel 6." Parcel 6 sits directly west of Parcel 21 and directly north of Parcel 17. Osterkamp also rented Parcel 6 from the Gilbert family.
Arthur's probate closed in 1993.
In December 1995, Lenora suffered a seizure and spent approximately two weeks in the hospital. In January 1996, Lenora told her niece by marriage that she had been sick and that Barbara was taking care of her finances.
In the summer of 1997, Lenora was living at a residence that she owned on Dahlia Lane in Imperial, California. Barbara lived approximately seven and a half or eight miles from Lenora, on James Road. That summer, Lenora transferred Parcel 17 out of the trust without consideration, and used Parcel 17 and the Dahlia Lane property as security for a personal loan from Ford Consumer Finance. The escrow officers who handled the transaction stated that a woman who identified herself as Barbara Johnston had directed that any mail concerning the transaction be sent to Barbara's James Road address.
Lenora's physical and mental health continued to decline. After Lenora was diagnosed with dementia, Barbara opened a joint savings account with Lenora. Osterkamp's rent checks were deposited into this account. Over a number of months, thousands of dollars in rental income belonging to the trust was withdrawn from the joint account. During this time, Lenora could not drive and had difficulty walking.
Around March of 2000, Barbara began endorsing Osterkamp's rent checks by signing Lenora's name. That year, Barbara entered into a lease with Osterkamp. The lease included Parcel 17. Barbara signed both Lenora's name and her own name on the lease agreement.
Lenora failed to make payments on the personal loan that was secured by the property that she had transferred out of the trust. The lender eventually foreclosed and took title to Parcel 17 and the Dahlia Lane residence. Lenora then moved in with Barbara and Barbara's husband.
Lenora died on March 26, 2002. After Lenora died, Barbara told Osterkamp to make his rent checks out to her as trustee.*fn6 Osterkamp's first rent check after Lenora's death was made payable to "Barbara Johnston -- Trustee Arthur L. Gilbert Trust," and was dated March 27 ─ the day after Lenora died. Osterkamp asked Barbara to show him the trust documents, and then asked her about Lloyd. Barbara told Osterkamp that she did not know where Lloyd was, and said she did not know how to get in touch with him.*fn7 Osterkamp continued to pay his rent to Barbara, as trustee, for a number of months. Barbara endorsed and deposited the checks, despite the fact that she had seen Lloyd at Lenora's funeral in late March 2002, and knew that he was the named successor trustee. Barbara claimed that she believed that Lloyd did not want to have anything to do with the trust because he had said, "[t]ake care of things or something along those lines" to her at the funeral.
In December 2002, an attorney for Lloyd wrote to Barbara and inquired about the trust property. Barbara did not respond to the letter. In May or June 2003, another attorney for Lloyd contacted Barbara. Barbara claimed at trial that she "had no information regarding the trust" to give to Lloyd's attorney at that time. On August 7, 2003, Lloyd recorded a document entitled "Affidavit of Succession Trustee." Barbara did not provide either Lloyd or Tammy with financial information about the trust.*fn8 Barbara testified that she had burned receipts and money orders that could have shown how she spent the rental income from Osterkamp after Lenora's death.
Tammy presented evidence that Lenora could have used her own personal property, namely Parcel 6, as security for the personal loan.*fn9 Barbara stood to inherit 100 percent of Lenora's personal property upon Lenora's death, but was to inherit only a 30 percent share of the trust property, which included Parcel 17. An expert appraised Parcel 17 to be worth $429,000 at the time of trial, but adjusted the value of the property to ...