IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Butte)
January 19, 2011
BERTHA WHITEHEAD AS TRUSTEE, ETC., PLAINTIFF AND RESPONDENT,
CAROL LADOUCEUR, DEFENDANT AND APPELLANT.
(Super. Ct. No. PR38678)
The opinion of the court was delivered by: Hull , J.
Whitehead v. Ladouceur
NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
This case centers on the interpretation of a trust, specifically, whether plaintiff Bertha Whitehead was entitled to the income from trust assets during her lifetime or whether these assets passed immediately to the ultimate beneficiary, defendant Carol Ladouceur, upon the death of the settlor. The trial court found that the trust provisions were ambiguous and held a hearing to determine the settlor's intent. The court concluded that plaintiff was entitled to the trust income during her lifetime and entered judgment accordingly. Defendant appeals. We affirm the judgment.
FACTS AND PROCEEDINGS
George Reagan (George) lived with plaintiff for approximately 18 years until his death in 2007 at the age of 90. Both plaintiff and George were widowed, but they did not marry because plaintiff would lose her deceased husband's pension. George owned a mobile home in Desert Hot Springs and plaintiff owned a mobile home in Riverside, and the couple spent time in each location.
George established a trust in October 1999, about 10 years after he and plaintiff began living together. George was named trustee and plaintiff was named as the successor trustee, with Heather Slupfel as the next successor trustee. This appeal centers on two paragraphs in article II, section C, outlining the disposition of trust assets after George's death.
Article II, paragraph C1 (paragraph C1) of the original trust provided, "The Trustee shall set aside all of the then remaining trust assets for the benefit of [plaintiff]. The Trustee shall pay to her all the income thereon, including interest, dividends and possession rights, for the duration of her lifetime."
Article II, paragraph C2 (paragraph C2) of the trust provided, "Upon the death of [plaintiff], or in the event that [plaintiff] has predeceased the Trustor, the Trustee shall distribute all of the then remaining trust assets to Heather Slupfel, free and clear of trust."
In August 2002, George amended his trust to remove Heather Slupfel as both successor trustee and trust beneficiary, and substituted Nelson Carter in her stead. All other provisions remained the same.
In February 2004, George executed a second amendment to his trust, removing Nelson Carter as successor trustee and beneficiary, and substituting defendant, his niece. Again, all other provisions remained the same, including paragraph C1 giving plaintiff a life interest in the estate assets.
A third amendment, appointing plaintiff and defendant as co-successor trustees, was drafted but it is unclear whether George ever executed this document.
On August 4, 2006, George executed a fourth amendment to the trust and changed his successor trustee to Bob Reagan. No modifications were made to paragraph C1, which gave plaintiff a life interest in the estate assets, but George amended paragraph C2 to provide: "Regardless of any prior designations as to distribution of the entire net Trust estate and all then remaining trust assets, this amendment shall control. Upon Settlor's death, and in accordance with all of the Trust provisions set forth in the Trust Document, the Trustee shall distribute all of the then remaining trust assets, free of trust to BOB REAGAN. In the event that BOB REAGAN predeceases the Settlor, then the Trustee shall distribute all of the then remaining trust assets, free of trust to BOB REAGAN'S son." Thus, under the language of paragraph C1, plaintiff had a life interest in the trust upon George's death; in accordance with paragraph C2, however, the trust assets passed immediately to the beneficiary on the settlor's death and "in accordance with all of the Trust provisions."
Three weeks later, on August 25, 2006, George executed a fifth amendment to the trust, removing Bob Reagan as trustee and again naming plaintiff in that capacity. George also amended paragraph C2 to change beneficiaries and give Bob Reagan and defendant, who was Reagan's "niece by marriage," equal shares of the trust assets. The rest of the language of paragraph C2 was unchanged, as was all of paragraph C1, which remained in its original form.
Finally, approximately two weeks later, on September 7, 2006, George executed the sixth amendment to his trust. It is this amendment that is at issue in this appeal. Although George purported to amend the provision for successor trustee to name plaintiff in that role, the provision is actually identical to that in the fifth amendment. Both provided that "George J. Reagan has been designated as Trustee hereof. In the event he should become incompetent or otherwise unable or unwilling to serve as Trustee hereof, then [plaintiff] shall serve as Successor Trustee. No bond shall be required of any Trustee or Successor Trustee nominated or appointed hereunder. [Paragraphs A., B., C., D., and E., of Article IV are unamended and unchanged by this amendment and remain in full force and effect][.]"
The sixth amendment did not alter paragraph C1, which remained as originally executed to provide that, after the death of the trustor, the trustee was to "set aside all of the then remaining trust assets for the benefit of [plaintiff]. The Trustee shall pay to her all of the income thereon, including interest, dividends and possession rights, for the duration of her lifetime."
George amended paragraph C2 to remove Bob Reagan as a beneficiary and name defendant as the sole beneficiary to provide: "Regardless of any prior designations as to distribution of the entire net Trust estate and all then remaining trust assets this amendment shall control. Upon Settlor's death, and in accordance with all of the Trust provisions set forth in the Trust Document, the Trustee shall distribute all of the then remaining assets, free of trust, to [DEFENDANT] . . . . In the event that [DEFENDANT] predeceases the Settlor, then the Trustee shall distribute that deceased beneficiary's share of the remaining trust assets, free of trust, to [PLAINTIFF's] issue by right of representation."
George died August 22, 2007.
A dispute arose between plaintiff and defendant as to whether plaintiff was entitled to the trust assets during her lifetime. Plaintiff asserted that she was, under paragraph C1 of the trust. Defendant, on the other hand, argued that the assets passed directly to her by virtue of paragraph C2.
The trial court concluded that the trust provisions were ambiguous and held a hearing to determine George's intent. As described in greater detail later in this opinion, several witnesses testified, including the attorney who drafted the documents.
The court concluded that George intended that plaintiff receive all income from the trust during her lifetime. Defendant appeals from the ensuing judgment.
Defendant asserts that the court erred in permitting extrinsic evidence because paragraph C2 of the sixth amended trust was clear: trust assets were to be distributed to defendant upon George's death. We disagree.
Paragraph C2 stated that distribution was to occur "[u]pon Settlor's death, and in accordance with all of the Trust provisions set forth in the Trust Document." (Italics added.) Paragraph C1 of the trust, which remained unchanged from its original language, gave plaintiff the enjoyment of the trust assets during her lifetime, and only upon her death were the trust assets to be distributed to defendant. Given these conflicting provisions, the trial court properly concluded that the sixth amendment to the trust was ambiguous, and that extrinsic evidence was admissible to determine George's intent.
In interpreting a trust document, a court must focus on the trustor's intent as revealed in the document as a whole. (Estate of Powell (2000) 83 Cal.App.4th 1434, 1440.) "'"The interpretation of a written instrument, including a . . . declaration of trust, presents a question of law unless interpretation turns on the competence or credibility of extrinsic evidence or a conflict therein. . . . [Citations.]" [Citation.]'" (Wells Fargo Bank v. Marshall (1993) 20 Cal.Appp.4th 447, 452-453, italics added; see also De Anza Enterprises v. Johnson (2002) 104 Cal.App.4th 1307, 1315.) If there are credibility questions or conflicting evidence, the factual dispute is to be resolved by the finder of fact. (Wolf v. Walt Disney Pictures and Television (2008) 162 Cal.App.4th 1107, 1127.)
"In interpreting a document such as a trust, it is proper for the trial court in the first instance . . . to consider the circumstances under which the document was made so that the court may be placed in the position of the testator or trustor whose language it is interpreting, in order to determine whether the terms of the document are clear and definite, or ambiguous in some respect. [Citation] Thus, extrinsic evidence as to the circumstances under which a written instrument was made is admissible to interpret the instrument, although not to give it a meaning to which it is not reasonably susceptible. [Citation.] On review of the trial court's interpretation of a document, the appellate court's proper function is to give effect to the intention of the maker of the document. [Citation.]" (Wells Fargo Bank v. Marshall, supra, 20 Cal.Appp.4th at p. 453.)
An ambiguity in a written instrument exists when, in light of the circumstances surrounding the execution of the instrument, "'"the written language is fairly susceptible of two or more constructions." [Citations.]' [Citation.] [¶] Where a trust instrument contains some expression of the trustor's intention, but as a result of a drafting error that expression is made ambiguous, a trial court may admit and consider extrinsic evidence, including the drafter's testimony, to resolve the ambiguity and give effect to the trustor's intention as expressed in the trust instrument." (Ike v. Doolittle (1998) 61 Cal.App.4th 51, 74.)
Here, paragraphs C1 and C2 created a patent ambiguity about the distribution of trust assets upon George's death. Under paragraph C1, the trust was to set aside the remaining assets for the benefit of plaintiff and pay her the income for the duration of her life. Under paragraph C2, however, the trust was to distribute the trust assets to defendant, free of trust, "[u]pon Settlor's death, and in accordance with all of the Trust provisions set forth in the Trust Document." The trust language was fairly susceptible to two different meanings: either George intended that plaintiff retain her life interest in the trust assets, which would be distributed to defendant upon plaintiff's death (the position taken by plaintiff), or George intended to have trust assets distributed to defendant immediately upon his own death (the position taken by defendant). Given these conflicting interpretations, the court properly admitted extrinsic evidence of the circumstances surrounding the execution of the trust amendments in order to resolve this ambiguity and give effect to George's intent. (Ike v. Doolittle, supra, 61 Cal.App.4th at p. 76.) Defendant's claim that extrinsic evidence should not have been admitted is meritless.
Likewise, we cannot agree with defendant's assertion that the court resolved this ambiguity incorrectly. Substantial evidence supports the trial court's determination that George intended plaintiff to enjoy the trust assets during her lifetime.
"We review the trial court's factual finding to determine whether it is supported by substantial evidence. Conflicts in the evidence are resolved in favor of the prevailing party, and all reasonable inferences must be drawn to uphold the trial court's decision." (In re Marriage of Steinberger (2001) 91 Cal.App.4th 1449, 1458; see also De Anza Enterprises v. Johnson, supra, 104 Cal.App.4th at p. 1315.)
The attorney who prepared George's trust amendments testified that George never intended to cut plaintiff out of a life interest in the trust assets. The fourth, fifth and sixth amendments to the trust were executed within a one-month period in 2006, and each used exactly the same phrasing in paragraph C2. The attorney stated that he used this language only to clarify that prior amendments were void and of no effect, and that this paragraph was to be read in conjunction with the entire trust. The attorney acknowledged that the drafting was not as clear as it might have been. While he did not have specific recollections of conversations with George, the attorney said that had George wanted to eliminate plaintiff's life interest, he would have amended paragraph C1. George never said he wanted to do so. The attorney testified that he would have remembered if George had expressed such a desire because it would have been a "significant change" and the attorney would have wanted to know why the change was being made. Rather, at the time of the fourth amendment (the first time the problematic language was used), George told his attorney that he wanted the trust assets to go to Bob Reagan, subject to a life interest in plaintiff. Subsequent amendments changed only the ultimate beneficiary of the trust.
Contrary to defendant's characterization, the attorney's testimony did not focus on the attorney's intent, but instead on George's. As we have noted, when a drafting error creates ambiguity between clauses, extrinsic evidence, including the drafter's testimony, can resolve the ambiguity and give effect to the settlor's intent. (See Ike v. Doolittle, supra, 61 Cal.App.4th at pp. 77-79.)
Evidence also included George's handwritten notations on the trust documents to indicate the changes on paragraph C2 he wanted his lawyer to make. In one instance, George crossed out the name of a beneficiary in paragraph C2 and added the notation, "See 5th amendment 8-25-06." The fifth amendment to the trust already included the conflicting provisions in paragraphs C1 and C2. Although George made this notation on paragraph C2, he wrote nothing on paragraph C1, which appeared on the same page, just above the amended provision. These notations, and lack thereof, further support the trial court's determination that George intended to maintain the provision giving plaintiff the interest from the trust assets during her lifetime.
Moreover, plaintiff's daughter described the relationship between George and plaintiff. She recalled a conversation with George a few months before his death in 2007, in which George told her, "I want you to know that I have it set up that your mother will not have any needs for finances for the rest of her life." That statement was made after the changes to paragraphs C2 had been executed, again indicating that despite these changes, George intended plaintiff to have a life interest in the trust assets.
Defendant's case attacked the credibility of plaintiff's witnesses, especially George's attorney. Defendant also testified that in November 2006, George sent her the trust documents and wrote a note to tell her to be sure that she understood that the sixth amendment to the trust was the effective one. On the day that George died, plaintiff looked at her and said, "Well, it's all yours now." Defendant asserted this demonstrated that George intended the trust assets to pass immediately to her. However, the trial court was entitled to disbelieve defendant's testimony.
The trial court weighed the evidence and concluded that George intended plaintiff to benefit from the trust during her lifetime and that defendant would become the beneficiary of the trust assets upon plaintiff's death. Substantial evidence supports that conclusion.
The judgment is affirmed. Plaintiff is awarded her costs on appeal.
We concur: NICHOLSON, Acting P. J. SCOTLAND , J.*fn1