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Rex E. Edwards, As Executor, Etc v. John Gillis

August 29, 2012

REX E. EDWARDS, AS EXECUTOR, ETC., PLAINTIFF AND APPELLANT,
v.
JOHN GILLIS, DEFENDANT AND RESPONDENT.



APPEAL from the Superior Court of Riverside County. Paulette Durand- Barkley, Temporary Judge. (Super.Ct.No. RIC474690)

The opinion of the court was delivered by: Miller J.

CERTIFIED FOR PUBLICATION

OPINION

(Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

INTRODUCTION

On December 8, 1988, Eileen P. Gillis (decedent) executed the Eileen Gillis 1988 Trust (hereinafter "the Trust") which named her daughter, Beverly Sims (Sims), as successor trustee and distributed the entire contents of the trust equally between her children Sharyn Christine Matriotti, Barbara Des-Rochers, Wayne Demmel, Kim Des-Rochers, and Sims, upon decedent's death. The Trust provided that the beneficiaries must survive distribution of the assets of the Trust to inherit or their shares would be distributed equally among the surviving beneficiaries. On December 30, 1991, decedent executed a "First Amendment to Declaration of Trust of Eileen Gillis 1988 Trust" (hereinafter "First Amendment") which removed Sims as both a beneficiary and successor trustee; the First Amendment named Kim Des-Rochers as successor trustee.

On September 5, 2001, decedent executed a "Second Amendment to Declaration of Trust of Eileen Gillis 1988 Trust" (hereinafter "Second Amendment"), which removed Kim Des-Rochers as the successor trustee and replaced her with defendant and respondent John T. Gillis, decedent's husband from whom she was legally separated. The Second Amendment provided, "Under no circumstances do I wish my eldest daughter, Beverly Sims, a.k.a., Beverly Edwards, to receive anything whatsoever from my estate or to have any control or influence over the administration or distribution of the estate."

Decedent died on February 22, 2007. On June 29, 2007, Sims filed a petition to void the trust amendments claiming decedent was ill and in a weakened physical and mental condition when she executed the amendments, and defendant used undue influence and unfair advantage to induce her to amend the Trust. Sims died on May 11, 2008. Defendant made a preliminary distribution to the beneficiaries of $24,000 each on July 22, 2008. Plaintiff and appellant Rex Edwards was substituted in as the special administrator and executor of Sims's estate. Defendant successfully moved for bifurcation of the trial to separately consider first whether plaintiff had standing to challenge the amendments because she predeceased distribution. After a bench trial, the court ruled plaintiff failed to demonstrate defendant had unreasonably delayed distribution of the Trust assets; therefore, plaintiff lacked standing to challenge the amendments because even if invalidated, she would not have stood to inherit from the trust. The court entered judgment for defendant.

On appeal, plaintiff maintains the court applied an incorrect rule of law in requiring plaintiff to bear the burden of proving defendant unreasonably delayed distribution of the trust assets. Instead, plaintiff contends the court should have applied a rule that would only have required plaintiff prove defendant could and should reasonably have made preliminary distributions of the Trust assets prior to Sims's death. We affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

The operative petition, after amendment, sustained demurrers, and plaintiff's own requests for dismissal, alleged causes of action for duress and undue influence exercised by defendant in inducing execution of the First Amendment (second cause of action) and duress and undue influence exercised by defendant in inducing execution of the Second Amendment (third cause of action). Sims testified at an expedited deposition due to her poor health that she received an anonymously sent letter from England after her mother's death, in which her mother wrote that she was "forced to remove you from my trust. I am writing this to let you know it was not my intention to take you out of my original trust and will. [¶] . . . [¶] Please don't feel that I did not appreciate all the work you did for me, and then for me to take you out of my will, that is not what I wanted."

Sims testified she later found another letter addressed to her from her mother behind a picture of her grandmother. In that letter, decedent wrote she "was forced by [defendant] to sign papers saying that if I should die, you are on notice to immediately demand through your attorney to rescind any written agreements. [¶] I was very ill at the time and not able to read the papers that [defendant] was forcing me to sign. [¶] I had a previous encounter years ago and was forced to sign something and was knocked to the ground which is on Police records as it was reported to them." Petitioner prayed for enforcement of the terms of the Trust as of the date it was originally executed on December 8, 1988.

At trial, Nora Teasley, the CPA hired by defendant on March 8, 2007, to conduct accounting and tax preparation for the Trust testified she had worked as a CPA since 1978. She had obtained both a Masters degree in business administration and a Masters degree in business taxation. She was an accredited estate planner, had taught accounting classes, and was an expert in trust administration. Teasley testified she had prepared approximately 180 fiduciary tax returns for trustees, 34 estate tax preparations, and approximately 50 trust accountings.

The Trust consisted of five real properties; $52,000 in cash; and "prepaid accounts, a small amount of household furnishings, a vehicle, and some clocks and figurines. That total amounted to $19,000." The Trust had debts upon decedent's death consisting of a mortgage of $27,637 immediately due upon her death, another debt based on a marital property settlement which was undeterminable at that time because it was based on a percentage of the proceeds from a prospective sale, and three liens on properties amounting to $34,000. The marital property debt was later determined to be $122,940.36.

One of the real properties, a residence in Newport Beach, was appraised for $2.9 million, but eventually sold for $4 million. The Trust realized $3.6 million in proceeds from the sale, which closed on November 5, 2007. A home in Alta Vista appraised for $350,000, but sold on February 7, 2008, for $242,068.13; the marital property settlement of $122,930.36 was paid from the proceeds of the sale of the Alta Vista home. Federal estate taxes on the trust in the amount of $728,152.65 were paid from the sale of the Newport Beach home. Teasley prepared and timely filed the estate tax return.

Defendant sought Teasley's advice regarding the making of preliminary distributions of the Trust assets after the sale of the Alta Vista home; he "was anxious to distribute as soon as he possibly could." Defendant never indicated any desire to delay distribution. Teasley advised against the distribution. As of March 1, 2008, "there was no independent indication from the Internal Revenue Service what any possible judgment on that US estate tax return that had been filed would be. We did not receive the . . . IRS closing document until 15 months after the filing of the US form 706. . . . We also did not know at that time what ...


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