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Pellegrini v. Fresno County

United States District Court, E.D. California

April 6, 2017

LILLIAN PELLEGRINI, Plaintiff,
v.
FRESNO COUNTY, et al., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING DEFEDANTS' MOTIONS TO DISMISS (Docs. 40, 42, 43, 44, 45, 46) MEMORANDUM DECISION AND ORDER DENYING BEVERLY PELLEGRINI'S REQUEST FOR INTERVENTION (Doc. 15)

          Lawrence J. O'Neill, UNITED STATES CHIEF DISTRICT JUDGE

         I. INTRODUCTION

         Pending before the Court are six motions to dismiss the complaint filed by Defendants Fresno County Superior Court ("FCSC") (Docs. 40, 42); Fresno County (erroneously sued as Fresno County Counsel representing Joshua Cochron and Fresno County Public Guardian (Doc. 43); UBS Financial Services ("UBS") and The Bank of New York Mellon ("BNY") (Doc. 44); Weintraub Genshlea Chediak Tobin & Tobin (erroneously sued as and herein referred to as "Weintraub Tobin") (Doc. 45); and Comerica, Inc. ("Comerica") (Doc. 46). Also pending is Beverly Pellegrini's ("Beverly") request to intervene. (Doc. 15.)

         Having reviewed the parties' briefs and all supporting documents, the Court found these motions suitable for decision without oral argument, and the hearing set for April 10, 2017, was vacated. For the reasons set forth below, Defendants' motions to dismiss are GRANTED, and Beverly Pellegrini's motion for intervention is DENIED.

         II. FACTUAL AND PROCEDURAL BACKGROUND

         This case stems from a trust administration dispute between Lillian Pellegrini ("Lillian") and her daughter, Marleen Merchant ("Marleen"), which was decided in a probate proceeding conducted by the FCSC, Case No. 10CEPR00683. Lillian appealed the FCSC judgment, and the Fifth District Court of Appeal (the "Fifth DCA") affirmed the FCSC judgment on October 31, 2016. Lillian filed a petition for review in the California Supreme Court, which was summarily denied on January 11, 2017. The FCSC judgment is now final.

         A. The 1999 Trust

         Angelo John Pellegrini (Angelo) and Lillian, as husband and wife, executed what the Fifth DCA termed a "fairly standard revocable living trust" on June 18, 1999. As described by the Fifth DCA,

[t]he Trust states that Angelo and Lillian (also referred to as the trustors) have two children - namely, their daughters Beverly Jean Pellegrini (Beverly) and Marleen - who would receive the remainder of the Trust estate in equal shares after Angelo and Lillian died. Angelo and Lillian, during their joint lifetimes, were the co-trustees of the Trust.
The Trust provides that on the death of the first spouse, the surviving spouse would continue to act as trustee. However, at that time, the Trust assets were supposed to be divided into separate trusts. As the Trust clearly states: "On the death of the Deceased Spouse, the Trustee shall divide the Trust Estate . . . into three separate trusts, designated as the 'Survivor's Trust, ' the 'Marital Trust, ' and the 'Family Trust.'" Here, Angelo died on March 27, 2008, at which time Lillian became the sole trustee and, according to the above language, was obligated to divide the Trust estate into separate trusts as provided in the Trust. . . .
On the Subject of amendment or revocation, the Trust provides that during their joint lifetimes, Angelo and Lillian were free to revoke or amend the trust. However, "[o]n the death of the Deceased Spouse, the Surviving Spouse shall have the power to amend, revoke or terminate the Survivor's Trust, but the Marital Trust or the Family Trust may not be amended, revoked, or terminated on the death of the Deceased Spouse."

Merchant v. Pellegrini, No. F072656, 2016 WL 6426389, at * 1-2 (Oct. 31, 2016) (unpublished).[1]

         In her complaint before this Court, Lillian alleges a different operation of the 1999 Trust. After inheriting money from Lillian's siblings Mike and Gladyce, Lillian and her husband Angelo created the Angelo Pellegrini and Lillian Dorothy Pellegrini Revocable Living Trust on June 18, 1999 (the "1999 Trust"). (Cmplt., p. 62.)[2] In creating this Trust and "tax subtrusts, " if either spouse continued to live while the federal estate tax exemption was being increased, the tax subtrusts would not be necessary and would not be funded. (Cmplt., p. 12:17-20.) By the Trust's terms, all assets contributed to the trust would retain their same character and ownership interests and the settlor contributing the property would retain control of that property during his/her lifetime. Moreover, the Trust would remain subject to revocation during the survivorship period by the settlor contributing the property. (Cmplt., p. 12:21-23, p. 62, Exh. 3.) Lillian contributed her inherited separate property which comprised nearly all assets held in the Trust account. Other financial assets contributed to the Trust had been titled in joint tenancy and were transferred. The only other asset that was transferred to the Trust was residential property held by Angelo and Lillian as joint tenants.

         In 2004, Angelo and Lillian amended the distribution clause of the Family Trust on the surviving spouse's death permitting a life estate to Beverly in the Trust's residential property, if then unsold. (Cmplt., p. 63, Exh. 3.) Two amendments "left the Family Trust void of any beneficiary designation, rendering the Family Trust a nullity and an invalid trust." (Id.)

         In March 2008, Angelo died. Pursuant to the Trust terms, Lillian maintained unrestrained power of sale, and she sold the San Francisco real property within six months of Angelo's death, distributing the proceedings to her Survivor's Trust. Shortly after this sale in 2008, Lillian revoked the Trust. (Cmplt., p. 63, Exh. 3.) Lillian also claims that in 2008, a Marital and Survivor's trust were funded, which she claims implied that the Family Trust was not intended to be funded on the first spouse's death. (Cmplt., p. 14:5-11.) Lillian asserts subsequent amendments to the 1999 Trust were made in 2010, which rendered the Family Trust "void and a nullity for lack of any beneficiary designation on the Surviving Settlor's eventual death." (Cmplt., p. 16:17-20.)

         B. FCSC Proceedings

         In July 2010, Marleen successfully petitioned the FCSC for an order compelling Lillian to provide an accounting of assets as of the time of Angelo's death and to provide information on how the assets were allocated between the Survivor's Trust, the Marital Trust, and the Family Trust. Lillian filed a statement of trust assets as of March 27, 2008. Among the assets purportedly allocated to the Family Trust was one-half of the $800, 000 value of a San Francisco residence. The total value of assets that Lillian, through her attorney, represented to have been allocated to the Family Trust was $544, 386.91. In 2011, these representations regarding the Family Trust were repudiated by Lillian in a letter written by her in response to a request by Marleen's attorney for further information and accounting concerning the Family Trust. Lillian stated that there were no assets in the Family Trust and no assets were ever allocated or distributed to a Family Trust.

         Purportedly based on this letter, in July 2012, Marleen filed a petition to remove Lillian as trustee, appoint a successor trustee, and obtain other relief. On January 13, 2014, Marleen filed an additional petition seeking the recovery of property belonging to the Family Trust, for an award of double damages under Probate Code § 859, and for an award of attorney's fees.

         On June 17, 2014, the FCSC granted a motion to bifurcate the trial and determined two issues would be tried first: (1) whether the Family Trust was required to be funded after Angelo's death, and (2) whether the title to real property in San Francisco maintained its joint tenancy characterization after being transferred into the 1999 Trust. (See Doc. 44-2, pp. 170-72, Exh. 16.) On January 14, 2015, a trial was conducted on these two issues, and the FCSC determined by clear and convincing evidence that the Family Trust was required to be funded following the death of Angelo with a minimum of $544, 386.91. (Id.) The FCSC also found the San Francisco real property did not maintain its joint tenancy characterization after being transferred to the 1999 Trust. (Id.)

         In May 2015, after holding a hearing, the trial court ordered the removal of Lillian as trustee of the Family Trust for failing to fund it after Angelo's death, and it appointed the Fresno County Public Guardian as the successor trustee. (Doc. 44-2, pp. 42-43, Exh. 2.) The May 2015 order also directed Lillian to fund the Family Trust in the amount of $544, 386.91, and to pay this amount to the Public Guardian. (Id.) As to all remaining issues, a one-day court trial was set for August 25, 2015. (Id.)[3]

         On trial of the remaining issues in August 2015, the trial court found that Lillian wrongfully and in bad faith took assets belonging to the Family Trust, and double damages were awarded pursuant to California Probate Code § 859 which Lillian was ordered to pay to the Public Guardian. (Doc. 44-2, pp. 45-47, Exh. 3.) Lillian was also ordered to pay Marleen's attorney's fees through the Public Guardian. In total, Lillian was ordered to pay $1, 528, 271.44 to the Public Guardian. (Id.)

         On October 14, 2015, Lillian filed a document in the U.S. District Court for the Eastern District of California entitled "Request for Transfer to Federal Court 28 U.S.C. § 1441, " which was construed as a notice of removal of the trial court proceedings over which this Court determined it had no jurisdiction; the case was remanded to the FCSC sua sponte less than one week later. (Doc. 44-2, pp. 49-84, Exh. 4; 1:15-cv-01564-LJO-EPG, Doc. 1.)

         On October 19, 2015, the Public Guardian filed an ex parte application seeking to enforce FCSC's order requiring Lillian to fund the Family Trust and pay Marleen's attorney's fees through the Public Guardian and to freeze Lillian's UBS accounts. (Doc. 44-2, pp. 159-60, Exh. 13.)

         On October 20, 2015, FCSC granted the Public Guardian's motion, froze Lillian's accounts at UBS until further order, and required UBS to transfer the sum of $1, 528, 271.44 to the Public Guardian. (Doc. 44-2, pp. 156-57, Exh. 12.) Lillian then appealed the trial court's orders to the Fifth DCA on November 15, 2015. (Doc. 44-2, p. 93, Exhibit 6). On November 16, 2015, FCSC issued an ex parte order granting full authority to the Public Guardian to liquidate assets from Lillian's UBS accounts. (Doc. 44-2, p. 162 (Exh. 14).)

         C. Proceedings Before the California Fifth District Court of Appeal

         On November 16, 2015, Lilian filed a "Request for Writ of Supersedeas [], " and the Fifth DCA issued a temporary stay of FCSC's October 20, 2015, and November 16, 2015, ex parte orders in the underlying case. (Doc. 44-2, p. 93 (Exhibit 6).) On December 4, 2015, the Fifth DCA issued an order clarifying FCSC's October 20, 2015, ex parte order "freezing accounts held in the name of Lillian Dorothy Pellegrini at UBS Financial Services, Inc." remained enforceable "insofar as it directs that 'no transfers or withdrawals shall be made from the [specified] account[s] until further order of the Court.'" (Id.)

         On December 19, 2015, Lillian filed a "Request to Respond to Answer, " and on January 6, 2016, Lillian filed a "Motion to Decide Writ of Prohibition." (Id. at pp. 96-97.) On January 19, 2016, the Fifth DCA issued the following order regarding Lillian's motions:

The "Request to Respond to Answer" filed on December 10, 2015, and the "Motion to Decide Writ filed on January 6, 2016, are granted. The "Request for Writ of Supersedeas or the Alternative Writ of Prohibition . . ., " filed on November 16, 2015, is denied. This court's November 18, 2015, stay order, and December 4, 2015, clarifying order are vacated and the temporary stay is lifted.

(Doc. 45-2, p. 8.)

         On October 31, 2016, the Fifth DCA issued an order affirming FCSC's judgment. (Doc. 45-2, p. 10-45.)

         D. Proceedings Before This Court

         Prior to the Fifth DCA's October 2016 decision, Lillian filed suit in August 2016 in the U.S. District Court for the Northern District of California naming as defendants Fresno County, Fresno County Counsel, Fresno County Public Guardian, FCSC, UBS, BNY, Comerica, and "Weintraub Tobin." Lillian alleges the probate proceedings before FCSC were void for lack of jurisdiction, various Defendants committed fraud on the court because they knew no Family Trust ever existed, FCSC denied Lillian due process by failing to provide her notice of hearings and an opportunity to be heard; and the Public Guardian, Weintraub Tobin, UBS, Comerica, and BNY were all complicit with and participated in the fraudulent conveyance and conversion of Lillian's trust assets held in UBS accounts. Lillian also alleges UBS breached her privacy in providing information to the Public Guardian without her consent.

         On August 30, 2016, the Northern District sua sponte determined venue was improper there and transferred the case to the Eastern District where it determined venue was proper, finding that Lillian's claims arose out of events that occurred in Fresno, California. (Doc. 9.)

         On October 31, 2016, Lillian filed a document entitled "Motion to Notify Court of a Conflict of Interest by Lillian Pellegrini" - construed as seeking disqualification of the undersigned - and a second document was filed by Lillian's daughter, Beverly Pellegrini, entitled "Notice - Federal Jurisdiction Under Federal Rule of Civil Procedure 60; Intervenor by Right Under Federal Rule of Civil Procedure 24; Joinder Under Federal Rules of Civil Procedure 19." (Docs. 14, 15.)

         On November 3, 2016, Lillian was ordered to serve the complaint, and Beverly's motion entitled "Notice - Federal Jurisdiction Under Federal Rule of Civil Procedure 60; Intervenor by Right Under Federal Rule of Civil Procedure 24; Joinder Under Federal Rules of Civil Procedure 19" ("request to intervene") was held in abeyance until such time as the Defendants were served and the motion was properly re-noticed. (Doc.16.) Between December 27, 2016, and January 9, 2017, each Defendant filed a motion to dismiss. (Docs. 40, 42, 43, 44, 45, 46.)

         On January 12, 2017, Lillian filed a motion for venue change and a motion to stay the proceedings. (Docs. 53, 54.) On February 14, 2017, the Court denied Lillian's motions to transfer venue, stay the proceedings, and to disqualify the undersigned. (Doc. 76.) The Court did not reach Beverly's October 2016 request to intervene as it had never been re-noticed for a hearing and was not properly before the Court.

         On February 24, 2017, Beverly filed a "notice of appeal" seeking immediate appeal of the Court's refusal to reach her request to intervene. (Doc. 80.) As Beverly's motion was never properly re-noticed or set for a hearing and no order had therefore been issued regarding the matter of intervention that could be appealed, the Court construed Beverly's "notice of appeal" as a motion for an order on her request to intervene. (Doc. 81.) The Court set a hearing on this request, supplied the parties with a briefing schedule, and continued Defendants' motions to dismiss to be heard concurrently with Beverly's request to intervene. (Doc. 81.)

         III. JUDICIAL NOTICE

         Defendants UBS, Weintraub, and Fresno County each seek judicial notice of various court documents. (Docs. 43-2, 44-2, 43-2, 57, 97.)

         UBS and Bank of NY Mellon's Request (Doc. 44-2):

California Supreme Court Records: California Supreme Court Docket in Case No. S238760 (Doc. 44-2, Exh. 7).
Fifth DCA Records: (1) an October 31, 2016, order in Merchant v. Pellegrini, Case No. F072656 (Doc. 44-2, Exh. 1); and (2) the Docket (Register of Actions) in Case No. F072656 (Doc. 44-2, Exh. 6).
FCSC Records and Filings, Case No. 10CEPR00683:
• March 3, 2014, Memorandum of Points and Authorities in Support of Motion of Petitioner Marleen Merchant to Enforce Subpoenas (Doc. 44-2, Exh. 8)
• April 4, 2014, Further Reply of Petitioner Marleen Merchant to Opposition to Motion to Enforce Subpoenas (Doc. 44-2, Exh. 9)
• June 17, 2014 Order granting the Motion of Petitioner Marleen Merchant to Enforce Subpoenas (Doc. 44-2, Exh. 10)
• August 8, 2014, FCSC Order Directing Compliance with Subpoenas (Doc. 44-2, Exh. 11)
• January 21, 2015, Finding and Order After Trial (Doc. 44-2, Exh. 16)
• May 15, 2015, Order Removing Lillian D. Pellegrini as Trustee and Appointing Successor Trustee; Order Directing Lillian D. Pellegrini to Fund a Family Trust in the Amount of $544, 386.91 (Doc. 44-2, Exh. 2)[4]
• September 4, 2015, Findings and Order After Trial (Doc. 44-2, Exh. 3)
• October 20, 2015, Ex Parte Order Freezing Accounts Held in the Name of Lillian Dorothy Pellegrini at UBS Financial Services Inc. (Doc. 44-2, Exh. 12)
• October 20, 2015, Ex Parte Order Directing UBS Financial Services Inc. to Pay $1, 528, 721.44 to the Fresno County Public Guardian as Successor Trustee of the Family Trust in Satisfaction of Court Orders (Doc. 44-2, Exh. 13)
• November 16, 2015, Ex Parte Order Granting Full Authority to the Fresno County Public Guardian, as Successor Trustee, as to Liquidation of Family Trust Assets (Doc. 44-2, Exh. 14)[5]
• A January 22, 2016, Notice to Court and All Parties filed by UBS (Doc. 44-2, Exh. 15) Eastern District of California Orders and Filings in Case No. 1:15-cv-01564-LJO-EPG: (1) an October 14, 2015, document filed by Lillian Pellegrini entitled "Request for Transfer" (Doc. 44-2, Exh. 4); and (2) an October 20, 2015, Order of Remand (Doc. 44-2, Exh. 5).

         Weintraub Tobin's Request (Doc. 45-2, Doc. 57):

         California Supreme Court Records: California Supreme Court Order issued January 11, 2017, denying Lillian's petition for review of the Fifth DCA's October 31, 2016, order (Doc. 57, Exh. A)

         Fifth DCA Records: (1) a November 18, 2015, Order (Doc. 45-2, Exh. A); (2) a December 4, 2015, Clarifying Order (Doc. 45-2, Exh. B); (3) a January 19, 2016, order denying writ of supersedaes and dissolving temporary stay (Doc. 45-2, Exh. C); and (4) an October 31, 2016, order in Merchant v. Pellegrini, Case No. F072656 (Doc. 45-2, Exh. D).

         Fresno County's Request (Doc. 43-2, 43-4):

         Fifth DCA Records: (1) a January 19, 2016, order denying writ of supersedaes and dissolving temporary stay (Doc. 43-4, Exh. A); (2) a October 31, 2016, order in Merchant v. Pellegrini, Case No. F072656 (Doc. 43-4, Exh. B).

         Eastern District of California Orders and Filings in Case No. 1:15-cv-01564-LJO-EPG: (1) an October 14, 2015, document filed by Lillian Pellegrini entitled "Request for Transfer" (Doc. 43-4, Exh. C); (2) an October 14, 2015, document filed by Lillian Pellegrini entitled "Motion to Dismiss" (Doc. 43-4, Exh. D); (3) an October 14, 2015, document filed by Lillian Pellegrini entitled "Motion for Confidentiality" (Doc. 43-4, Exh. E); and (4) an October 20, 2015, sua sponte order of the Eastern District of California, remanding Lillian Pellegrini's case to the FCSC (Doc. 43-4, Exh. F).

         Under the Federal Rules of Evidence, "[a] judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b). "The court . . . must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed.R.Evid. 201(c)(2).

         Rule 12(d) provides that if "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed.R.Civ.P. 12(d). However, there are two exceptions to this rule: a court may consider material (1) which is properly submitted as part of the complaint, or (2) matters of public record ...


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