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1680 Property Trust v. Newman Trust

November 17, 2009


APPEAL from a judgment of the Superior Court of the County of Los Angeles, Terry A. Green, Judge. Affirmed in part, reversed in part, and remanded. (Los Angeles County Super. Ct. No. BC322141).

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



In the published portion of this opinion, we affirm the judgment in favor of the defendant and respondent Newman Family Trust*fn2 based on Code of Civil Procedure section 366.2 (section 366.2)-one-year period of limitations after death. We hold that the section 366.2 period of limitations is applicable to fraud claims based on statements of the decedent on behalf of a trust of which he was trustor and trustee, even though the action is against the successor trustee. In the unpublished portion of this opinion, we reverse the judgment in favor of other defendants.


Plaintiffs and appellants 1680 Property Trust, Michael L. Epstein Trust, Stephen Ellis Gordon and Linda S. Gordon Revocable Trust, and the Lamonica Family Trust*fn4 (collectively plaintiffs) are limited partners of Orange Mall Development Associates (OMDA) and Shoprop Associates (Shoprop), which entities were prior owners of Mall of Orange (the Mall), a retail center located in Orange, California. Prior to October, 1995, the general partners of OMDA and Shoprop consisted of Newman Family Trust and LeRoy H. Brettin. Harry Newman, Jr. (Newman) and Anne P. Newman were trustors of Newman Trust until Newman's death on October 19, 2001. Harry Newman and Anne P. Newman were co-trustees of Newman Trust and assigned all their rights in the partnership involved in this case to Newman Trust. After Newman's death, Anne P. Newman became the successor trustee of Newman Trust. The record does not contain the Declaration of Trust but does include an amendment to the Declaration of Trust. That amendment was pursuant to the Declaration of Trust and provides, "In the event the NEWMAN FAMILY TRUST dated November 17, 1993, is or becomes a General Partner of any partnership, then in that event HARRY NEWMAN, JR. shall be the only acting Trustee of the NEWMAN FAMILY TRUST dated November 17, 1993, for purposes of making any partnership decision." Thereafter, Harry Newman signed documents, "Harry Newman, Jr., Trustee and only Acting Trustee for purposes of making any partnership decision, the Newman Family Trust, General Partner."

In 1996, Newman Trust was a general partner in Sea-Tac Mall, a limited partnership that owned a mall near Seattle, Washington. Plaintiffs had no interest, direct or indirect, in the Sea-Tac Mall.

Defendant Laurence N. Strenger (Strenger) is a California attorney who was Newman's personal lawyer and who represented Newman in various business interests. Strenger is a shareholder of or principal in defendant Ampton Investments, Inc., a California corporation. (Strenger and Ampton are sometimes referred to as the Ampton defendants.) In October 1995, LeRoy H. Brettin assigned his interests in OMDA and Shoprop to Newman Shopping Center Developments, Inc., which became a general partner of both OMDA and Shoprop.

In 1997, Newman, on behalf of Newman Trust, informed plaintiffs of a refinancing of the Mall, with the lender being Nomura Asset Capital Corporation (Nomura). The Ampton defendants facilitated this transaction. In 2002, after Newman died and his wife, Anne P. Newman, became the trustee of Newman Trust, the Mall was sold.

In 2004, plaintiffs filed their complaint against defendants for breach of fiduciary duty and an accounting, alleging that in order to obtain their consent to the refinancing, leading ultimately to the distress sale of the Mall, defendants concealed from them vital information concerning the Nomura transaction, including that it was unnecessary; it was done to induce Nomura to refinance another mall-the Sea-Tac Mall-in which defendants, but not plaintiffs, had an interest; plaintiffs' equity interests would be diluted; Nomura was given certain buy-sell rights that jeopardized plaintiffs' interests; plaintiffs would lose certain voting rights; and the Ampton defendants were to be paid unnecessary and unreasonable fees. As a result, plaintiffs claim they lost substantial equity in the Mall, which ultimately was sold, with unfavorable consequences for plaintiffs.

Following discussions and an appeal to this court, Anne P. Newman (in her individual capacity), Shoprop, and OMDA were no longer parties to the action.*fn5 We held in that earlier appeal that plaintiffs did not allege facts showing that Anne P. Newman committed any breach of fiduciary duty or caused any damages. Plaintiffs proceeded against the Ampton defendants and Newman Trust on the third amended complaint for breach of fiduciary duty based on fraud. Those remaining defendants moved for summary judgment. The trial court granted summary judgment, holding that plaintiffs had no standing to challenge the alleged fiduciary breaches in 2002 and that plaintiffs' claims were barred by the statute of limitations-Code of Civil Procedure section 338, subdivision (d). The trial court did not rely upon section 366.2, which had been raised in the trial court. Plaintiffs timely appealed.


A. Standard of Review

"We review the grant of summary judgment de novo. (Szadolci v. Hollywood Park Operating Co. (1993) 14 Cal.App.4th 16, 19 [17 Cal.Rptr.2d 356].) We make `an independent assessment of the correctness of the trial court's ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.' (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222 [38 Cal.Rptr.2d 35].) A defendant moving for summary judgment meets its burden of showing that there is no merit to a cause of action by showing that one or more elements of the cause of action cannot be established or that there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2).) Once the defendant has made such a showing, the burden shifts back to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or as to a defense to the cause of action. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849, 853 [107 Cal.Rptr.2d 841, 24 P.3d 493].)" (Moser v. Ratinoff (2003) 105 Cal.App.4th 1211, 1216-1217.)

"Although resolution of a statute of limitations defense normally poses a factual question reserved to the trier of fact, summary adjudication will nonetheless be proper `if the court can draw only one legitimate inference from uncontradicted evidence regarding the limitations question.' (City of San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 582 [35 Cal.Rptr.2d 876]; FNB Mortgage Corp. v. Pacific General Group (1999) 76 Cal.App.4th 1116, 1126 [90 Cal.Rptr.2d 841].)" (Marin Health Care Dist. v. Sutter Health (2002) 103 Cal.App.4th 861, 871.) Whether a party is barred by the one-year limitations period applicable to claims of creditors against a decedent's estate is a legal issue subject to de novo review. (Embree v. Embree (2004) 125 Cal.App.4th 487, 491.)

B. Section 366.2-Newman Trust

Section 366.2, subdivision (a), provides, "If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply." "`The overall intent of the Legislature in enacting Code of Civil Procedure former section 353 [(now § 366.2)] was to protect decedents' estates from creditors' stale claims. [Citations.] "[T]he drafters of former Code of Civil Procedure section 353 and current Code of Civil Procedure section 366.2 believed the limitation period the statute imposes serves `the strong public policies of expeditious estate administration and security of title for distributees, and is consistent with the concept that a creditor has some obligation to keep informed of the status of the debtor.' (Recommendation Relating to Notice to Creditors in Estate Administration [(Dec. 1989)] 20 Cal. Law Revision Com. Rep. (1990) p. 512.)"'" (Levine v. Levine (2002) 102 Cal.App.4th 1256, 1263-1264, quoting Collection Bureau of San Jose v. Rumsey (2000) 24 Cal.4th 301, 308 (Rumsey).)

Newman Trust contends that section 366.2 bars the claims against it. There is no dispute that plaintiffs' cause of action accrued more than one year prior to the filing of this action in 2004. Any claims against Anne P. Newman, as successor trustee for acts after Newman's death in 2001, are foreclosed by this court's earlier opinion concluding that plaintiffs had failed to allege facts showing any wrongdoing by Ms. Newman or damages from any of her acts. Section 366.2 imposes a one- year limitations period on claims against a decedent. Plaintiffs assert that the claims are not against Newman, but against Newman Trust, and therefore section 366.2 is inapplicable.

Although the application of section 366.2 was raised before the trial court, the trial court did not resolve that issue. Nevertheless, we may affirm the summary judgment on a ground that was not the basis of the trial court's ruling. We are not bound by the trial court's stated reasons for its summary judgment ruling. Instead, we examine the facts before the trial court and then independently determine their legal effect. (Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1143.)

Newman and Anne P. Newman were the trustors and trustees of Newman Trust, an inter vivos trust, denominated as a family trust, and into which they transferred their property interests. They had the power to and did amend Newman Trust to provide that Newman would be the only acting trustee of Newman Trust for purposes of decisions involving the partnerships owned by Newman Trust. Newman's communications that are the subject of this action were made as trustee of Newman Trust and on its behalf. When Newman died, Ms. Newman became the successor trustee, and the trust was then irrevocable, whether or not it had been prior to Newman's death. Anne P. Newman, as successor trustee, succeeded to all of "the rights, duties, and responsibilities of [her predecessor, Newman]." (Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1131.)

"Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee . . . `A trust . . . is simply a collection of assets and liabilities. As such, it has no capacity to sue or be sued, or to defend an action.'" (Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, 1343.) The trust estate can be reached for tortious acts of the trustee on behalf of the trust. (Prob. Code, § 18004 ["A claim based . . . on a tort committed in the course of administration of the trust may be asserted against the trust by proceeding against the trustee in the trustee's representative capacity, whether or not the trustee is personally liable on the claim"]; Galdjie v. Darwish, supra, 113 Cal.App.4th at p. 1349; 13 Witkin, Summary of Cal. Law (10th ed. 2005) Trust, § 248, p. 827; see also 4 Scott and Ascher on Trusts (5th ed. 2007) § 26.5, p. 1897.)

The California Law Revision Commission in discussing proposed Probate Code section 18004 prior to its enactment stated, "The third person should not have to be concerned with the source of the fund that will be used to pay the claim. (Fn. omitted.) The proposed law adopts this position. Hence, a third person with a claim against the trust or trustee may assert the claim against the trust by bringing an action against the trustee in the trustee's representative capacity. (Fn. omitted.) The question of ultimate liability as between the trust estate and the trustee may then be determined in proceedings concerning the internal affairs of the trust or may be settled informally among the parties to the trust. (Fn. omitted.)" (Recommendation Proposing the Trust Law (1985) 18 Cal. Law Revision Com. Rep. p. 592.)

There is no meaningful distinction between the liability of the decedent trustee who committed a tort as trustee and the successor trustee in her capacity as trustee, except that the decedent trustee's estate might also be liable. Plaintiffs attempt to draw a distinction between the decedent trustee, on the one hand, and the trust (which, as noted, is not an entity or proper party) and successor trustee, on the other ...

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