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Ruth Dunmore, As Trustee, Etc v. Sidney B. Dunmore

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Placer)


January 30, 2012

RUTH DUNMORE, AS TRUSTEE, ETC., PLAINTIFF AND RESPONDENT,
v.
SIDNEY B. DUNMORE, DEFENDANT AND APPELLANT.

(Super. Ct. No. SPR-5452)

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

Dunmore v. Dunmore

CA3

NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Defendant Sidney B. Dunmore appeals from the trial court's determination that his mother, trustee of various family trusts, may assign to his brother, Steven Dunmore, legal claims the trusts have against his, Sidney B. Dunmore's, sons. Rejecting defendant's arguments, we conclude the assignment is supported by sufficient consideration and does not constitute a breach of fiduciary duties. We affirm the judgment.

FACTS

Our statement of facts is derived from the verified petition which initiated this matter.

Plaintiff Ruth Dunmore is the trustee and surviving grantor of the Dunmore Family Trust (Family Trust), a trust she and her now deceased husband, George Dunmore, created in 1977. Following George's passing in 2007, and according to the terms of the Family Trust, Ruth allocated the estate into separate trusts. She allocated 50 percent of the trust's assets and liabilities to a Survivor's Trust, and the remaining 50 percent of the assets and liabilities to three other trusts the parties refer to collectively as the Decedent's Trusts.

Ruth is the trustee for all of the trusts. The Survivor's Trust is fully revocable by her. The Decedent's Trusts are irrevocable.

During their lifetimes, Ruth and George guaranteed various bank loans made to their grandsons, Sidney D. Dunmore and Jeremy Dunmore, and the grandsons' company, GSJ Company, LLC (GSJ). The grandsons and GSJ defaulted on more than $12,000,000 to $15,000,000 worth of these loans. Ruth has settled some of these loans but is being sued by various banks for payment of the other loans. The banks' claims, seeking the recovery of millions of dollars, far exceed the value of the Family Trust assets.

Ruth asserts she and the trusts have legal and equitable claims against the grandsons and GSJ. Ruth alleges that, although she and George guaranteed some of these loans, some of the guarantees contain forged signatures, and other guarantees they signed due to undue influence by their grandsons.

Ruth, however, is not in a position to pursue these claims. She was 86 years old when she filed this action in 2009. And she could find no attorney who would enforce the claims on a contingent fee basis. She desires to assign these claims to her son, Steven Dunmore. To effect this assignment, and remembering the Family Trust's interest in these claims was split evenly between the Survivor's Trust and the Decedent's Trusts, Ruth agreed to sell both the Survivor's Trust's interest in the claims and the Decedent's Trusts' interests in the claims to Steven.

Because the Survivor's Trust is revocable and she has full control over that trust's assets, Ruth may sell that trust's interest in the claims against her grandsons and GSJ on whatever terms she deems appropriate.

This action concerns Ruth's attempt to sell the Decedent's Trusts' interests in the claims against the grandsons and GSJ to Steven. Ruth filed in the trial court a Petition for Order Instructing the Trustee pursuant to Probate Code section 17200, subdivision (b)(6), seeking court authority to sell the Decedent's Trusts' interests in the claims to Steven. The trial court originally denied the petition because it was not verified by Ruth and because there was no consideration for the assignment.

Ruth filed the present petition, seeking authority to execute a revised assignment of claims agreement. Under the revised assignment, Ruth, as trustee of the Decedent's Trusts, agrees to sell the legal claims to Steven for one dollar plus 55 percent of any recovery Steven obtains from enforcing the claims, less Steven's out-of-pocket expenses. Additionally, the agreement requires Steven to initiate legal action on the claims within three months of executing the agreement. Otherwise, Ruth may revoke the assignment.

Defendant Sidney B. Dunmore objected to the proposed transfer of claims. He is another son of Ruth's and the father of the debtor grandsons. He claimed the assignment lacked consideration and constituted a breach of Ruth's fiduciary duties. He also argued that an alternate offer for the assignment had been made by an entity known as Canyon Falls Group, LLC, on more favorable terms.

The trial court granted Ruth's petition. Ruth had verified this petition, and the revised assignment was supported by adequate consideration. The court also stated the alternate offer proposed by Sidney was suspect. Canyon Falls Group was affiliated with one of the grandsons, who would not pursue the Decedent's Trusts' claims against himself.

Sidney appeals from the trial court's judgment. He asserts the assignment of the Decedent's Trusts' claims against his sons to his brother Steven lacks consideration and is a sham transaction, and it constitutes a violation of Ruth's fiduciary duties as trustee.

DISCUSSION

I

Adequacy of Consideration

Sidney claims the assignment is void for lack of consideration and is a sham transaction. He argues the purchase price is inadequate consideration. He also claims Ruth's ability to revoke the assignment if Steven does not initiate legal proceedings within three months renders the agreement illusory. We disagree and conclude the assignment is supported by adequate consideration.

"[A]ny benefit conferred or agreed to be conferred upon the promisor to which he is not lawfully entitled, or any prejudice suffered or agreed to be suffered other than that which a person is lawfully bound to suffer, is a good consideration for a promise. (Civ. Code, § 1605.) A written instrument is presumptive evidence of a consideration (Civ. Code, § 1614); the burden of showing a want of consideration sufficient to support an instrument is upon the party seeking to invalidate or avoid the instrument. (Civ. Code, § 1615.)" (Swanson v. Skiff (1979) 92 Cal.App.3d 805, 809.)

Here, the written assignment recorded a benefit the parties agreed to give to Ruth, as trustee, which she was not otherwise lawfully entitled to receive. Ruth promised to assign to Steven her legal claims against her grandsons in exchange for Steven paying Ruth one dollar now and 55 percent of all he recovers on the claims less his expenses, and for Steven agreeing to initiate legal action within three months of executing the assignment; otherwise Ruth could revoke the assignment. This was sufficient consideration to support the assignment's validity.

Sidney claims the assignment is illusory because Ruth may, but need not, revoke the assignment if Steven does not initiate legal action within three months. An unqualified right to cancel, where one party reserves the right to withdraw from an agreement at his pleasure, creates an unenforceable illusory contract. (See 1 Witkin, Summary of Cal. Law, Contracts (10th ed. 2005) § 231, p. 266.) Ruth's right, however, is not unqualified. It is restricted for a period of three months. Where a right to cancel is restricted in some way, consideration exists. (Id. at § 234, p. 268.)

The assignment thus is not illusory, and sufficient consideration supports it. The trial court did not err in reaching that conclusion.

II

Alleged Breach of Fiduciary Duties

Sidney asserts Ruth's assigning the Decedent's Trusts' claims against his sons to his brother, Steven, constitutes a breach of Ruth's fiduciary duties as trustee. He claims the assignment breaches Ruth's fiduciary duties because the assignment (1) is not solely in the interests of all of the trust beneficiaries; (2) does not deal impartially with all of the trust beneficiaries; and (3) exceeds the trustee's powers granted by the trust. We disagree and conclude the assignment is not a breach of fiduciary duties.

We address Sidney's third argument first. Both the terms of the Family Trust and the Probate Code authorize Ruth to assign the Decedent's Trusts' claims. The trust instrument gives Ruth authority to purchase, exchange, or sell any kind of property. It also gives her the authority to release any claim belonging to the trust to the extent the claim in her opinion is uncollectible. The assignment falls within the scope of authority granted by these trust provisions.

In addition, the Probate Code gives Ruth the authority to assign the claims. Section 10205 of the Probate Code authorizes her to sell a chose in action in the same manner as personal property. And section 16242 of the Probate Code authorizes her to release, in whole or in part, any claim belonging to the trust.

Because the trust and the Probate Code vested in Ruth the discretionary authority to assign the claims, the issue before us is a narrow one: were Ruth's action's an abuse of discretion. (See Estate of Genung (1958) 161 Cal.App.2d 507, 512.)

This issue subsumes Sidney's other two arguments: the trustee's fiduciary duties to administer the trust for the benefit of the beneficiaries and to deal impartially with the beneficiaries. (Prob. Code, §§ 16002, 16003.) The evidence in the record demonstrates Ruth acted well within her discretion and for the benefit of all beneficiaries when she assigned the claims to Steven.

Ruth acted to protect the trust. The trust has limited assets that are being depleted due to immense demands placed upon it by the grandsons' creditors. Because Ruth has been unable to secure the services of an attorney on a contingent fee basis to enforce the claims against her grandsons, those claims are non-performing assets. Assigning the claims to the only credible person available to her allows her the potential to recover something for the trust on those claims which she otherwise could not do.

Moreover, at present time the primary beneficiary with whom Ruth must concern herself is herself. She is the sole income beneficiary of the Decedent's Trusts. Indeed, the principal from those trusts is to be used to provide for her needs if the Survivor's Trust's assets are insufficient. The trust instrument intends that all assets are to be used to support Ruth for the remainder of her life. As trustee, she is obligated to ensure the trusts fulfill that purpose. Whether there are any assets remaining in the trust upon her death is a secondary issue.

Ruth also did not violate her duty to deal impartially with all beneficiaries. The assignment did not render Steven first among equals, as Sidney argues. It has no effect on the eventual distribution of trust assets. Any remaining assets will be distributed according to the terms of the trust. Steven will not receive a greater share of assets from that distribution as a result of the assignment.

Under these facts, we conclude Ruth did not abuse her discretion or violate any fiduciary duty she owes to the other trust beneficiaries by entering into the assignment of claims.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to plaintiff. (Cal. Rules of Court, rule 8.276(a).)

We concur: RAYE , P. J. DUARTE , J.

20120130

© 1992-2012 VersusLaw Inc.



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