California Court of Appeals, Second District, Sixth Division
Superior Court of San Luis Obispo County, No. PR110031, Jac A. Crawford, Judge.
[Copyrighted Material Omitted]
Neil S. Tardiff and Shea S. Murphy, for Plaintiff and Appellant.
Aspelin & Bridgman and John H. Aspelin for Defendant and Respondent.
O'DONNELL, J. [*]
This case turns on the trial court's mis-assignment of the burden of proof. The presumption created by section 16004 of the Probate Code that a trustee who commingles trust funds with her own funds violates her fiduciary duty to the trust applies only to the relationship between a trustee and trust beneficiaries. Here, the trial court applied the presumption for the benefit of a creditor of the trustee, not a beneficiary of the trust. This was error.
The beneficiary of a trust may disclaim the beneficial interest as long as she has not already accepted that interest. Sally Gordon was both a trustee and a beneficiary of the Wallace and Pearl Burt Trust (WPB Trust). Respondent Don Bizek, who is a stranger to the WPB Trust, obtained a judgment against Gordon in an unrelated case and sought to execute his judgment against Gordon's beneficial interest in the WPB Trust. In response, Gordon filed a disclaimer of her beneficial interest in the WPB Trust. If the disclaimer is valid, it caused Gordon's beneficial interest to descend to appellant Cyndi Vance, Gordon's daughter and successor beneficiary. If the disclaimer is void, Bizek may attach Gordon's beneficial interest in the WPB Trust.
The trial court ruled that Gordon's disclaimer was void, finding that Gordon's use of WPB Trust funds before she filed her disclaimer demonstrated acceptance of her beneficial interest in the Trust. In reaching this result, the trial court accepted Bizek's argument that the section 16004 presumption imposed on Gordon the burden to prove that her commingling of WPB Trust funds with her own funds did not demonstrate her acceptance of her beneficial interest in the WPB Trust. We disagree. Bizek was not entitled to the section 16004 presumption and thus had the burden to prove that Gordon's use of WPB Trust funds demonstrated acceptance of her beneficial interest in the Trust. He failed to meet that burden. We reverse and remand.
1. The Wallace and Pearl Burt Trust
Wallace and Pearl Burt (settlors) executed the Wallace and Pearl Burt Trust on January 13, 1992, and signed an amended version of the Trust on January 25, 2006. The amended trust named Gordon, the biological child of Pearl Burt, and Linda Larsen, the biological child of Wallace Burt, as cotrustees. The amended trust required the consent of both cotrustees to any Trust transactions. During the lifetimes of the settlors, the WPB Trust gave the cotrustees substantially unlimited power to disburse the income and principal of the WPB Trust for the "health, education, support, comfort, enjoyment, and welfare" of settlors, including the power to sell, invest and to mortgage Trust property. Upon the death of both settlors, all remaining assets of the Trust were to be distributed to Gordon and Larsen or their surviving issue.
On June 2, 2010, the probate court removed Gordon as cotrustee of the WPB Trust on Larsen's motion. Pearl Burt died on November 27, 2010 and Wallace Burt died a week later, on December 4, 2010.
2. The Pearl Burt Trust
The Pearl Burt Trust was a separate trust for the benefit of Pearl Burt. Gordon was the sole beneficiary of the Pearl Burt Trust and was also the sole trustee until her resignation on April 6, 2011. Gordon was trustee of the Pearl Burt Trust during the time she was a cotrustee of the WPB Trust.
3. Bizek's claims against Gordon
Gordon was at one time a trustee of a third trust, the Helen Trumm Trust (Trumm Trust). Respondent Don Bizek, a beneficiary and cotrustee of the Trumm Trust, sued Gordon for an accounting of the Trumm Trust and obtained a judgment against Gordon for $987, 747. Bizek then filed a petition to enforce his judgment against Gordon's beneficial interest in the WPB Trust. The probate court granted Bizek's petition on April 6, 2011.
4. Gordon's disclaimer
On April 6, 2011, the same day the probate court granted Bizek's petition, Gordon executed a disclaimer of her entire beneficial interest in the WPB Trust. The disclaimer stated: "I, Sally J. Gordon, hereby disclaim any and all of my interest in the property to [sic] which I am otherwise entitled to take as a beneficiary of the Wallace and Pearl Burt Trust dated January 13, 1992 pursuant to Section 7.13 of the Restatement of the Wallace and Pearl Burt Declaration of Trust Dated January 25, 2006, and as provided in sections 275 et. seq. of the California Probate Code."
5. The trial court proceedings
Vance filed a petition for instructions pursuant to section 17200, subdivision (a), asking the court to confirm that Gordon's disclaimer of her beneficial interest in the WPB trust was valid and thus caused that interest to descend to Vance. Bizek filed a Petition for Declaratory Relief seeking a declaration that Gordon's disclaimer was void. The trial court tried the opposing claims together.
At the hearing, Bizek attempted to prove that Gordon mishandled WPB Trust funds to which she had access as trustee, using some of those funds for her own benefit. Bizek relied substantially on the testimony of Barbara Aspelin. Bizek did not attempt to establish Ms. Aspelin's expertise in ...