Opinion
C078014
10-18-2017
MICHAEL KAST et al., Plaintiffs and Respondents, v. DEBORAH KAST, Defendant and Appellant.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. SCSCCVPB130000376)
A decedent's widow appeals from a probate court determination that the decedent's bequest of his separate investment property (the Linden property) to his adult children from a previous marriage was not adeemed (extinguished) by his lifetime sale of that property and use of its proceeds to purchase a different investment property (the Fairlane property; a trailer park). The court granted the petition filed by the adult children -- Michael Kast, Peter Kast, and Cynthia Dominguez -- under Probate Code section 17200. (Unless otherwise stated, statutory section references that follow are to the Probate Code.) The court found there was a mere "change in form" of the property, such that the normal presumption of ademption did not apply in the absence of proof that the testator intended the gift to fail, and the evidence showed Anthony did not intend the gift to fail. Accordingly, the children are entitled to the Fairlane property.
On appeal, widow Deborah E. Kast contends the probate court misinterpreted the law and the Trust language, and the evidence does not support the judgment. We affirm the judgment.
FACTS AND PROCEEDINGS
Anthony Kast committed suicide on September 18, 2012, at age 69. Because multiple parties to this action share the same surname, for clarity, we refer to them by their first name. (Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1136, fn. 1.)
Anthony met Deborah in July 1999, and they married in November 1999 (his third marriage), when she was 46 and he was 56 years old. Each had offspring from previous marriages. Deborah's children are not parties to this litigation.
In July 2003, Anthony and Deborah created the revocable Kast Family Trust, designating themselves as trustors and trustees. The stated purpose of the Trust was "to allow either of them who can continue to live independently in the community to retain sufficient assets and income to do so, in as much comfort as the resources permit and without impoverishment by the health care costs of an incapacitated spouse."
Anthony and Deborah transferred community property and separate property into the Trust, including real estate with warehouses in Burbank (the Linden property) that was Anthony's separate property.
The Trust contained a specific provision (Article V, Paragraph H) for distribution of specific assets if Anthony died before Deborah, including in subparagraph 1: "1. The [Linden Property] shall be held in a separate trust for the benefit of [Deborah], if she is then living, for a period of two (2) years. Such property may be sold or kept in Trust, in the discretion of the Trustee. Any income generated by such separate Trust during such two (2) year period shall be paid to Deborah. At the end of such two (2) year period (or, if sooner, upon the death of Deborah), the remaining Trust assets shall be distributed free of the trust to [Anthony's children], with the recommendation that such property be sold and the proceeds distributed equally to such named beneficiaries. In the event any one of such individuals is not then living, such deceased individual's share shall be distributed to his or her then living issue, or if there are none, shall be added to the other shares of such three named individuals who are then living or who have then living issue."
Subparagraph 2 stated Anthony's separate property, his retirement account held in a different trust, was to be divided into four equal parts for Anthony's three children and Deborah, "to the extent [the retirement account] names this [Kast Family] Trust as the beneficiary of such account" -- a condition that never happened. The account named only Anthony's three children as beneficiaries.
Subparagraph 3 gave Anthony's community property interest in the residence he shared with Deborah to his children whenever the residence was sold.
Subparagraph 4 gave remaining unspecified assets to Deborah.
An "information sheet" for the Trust stated they could add new assets without amending the Trust, unless they wanted to make a specific bequest of new assets.
Around 2008, income from Anthony's surveying business declined.
In September 2009, Anthony told his daughter Cynthia about the Trust. Before he sold the Linden property in Burbank and bought the Fairlane property in Yreka in 2010, he told Cynthia that he was just trading one investment property for another, closer to home. He expressed concern that if the economy drove his Burbank warehouse tenants out of business, he might have a hard time replacing them.
In February 2010, the Linden property was conveyed out of the Trust to Anthony as his sole and separate property, as allowed by the terms of the Trust, with a quitclaim deed signed by trustee Deborah.
Anthony sold the Linden property for $1.5 million. He placed the money with an intermediary and then, a month later, had the intermediary pay $1.2 million from that fund for Anthony to purchase the Fairlane property as his separate property. The excess $300,000 was spent, and the children are not claiming entitlement to it. Anthony conveyed the Fairlane property to the Trust, without modifying the Trust to make a specific bequest of the Fairlane property.
After Anthony committed suicide on September 18, 2012, Deborah transferred the Fairlane property to herself as her separate property.
Anthony's children in March 2013 filed a petition for determination that the exchange of the Linden property for the Fairlane property was a "change in form only" and did not adeem the specific gift.
A tax expert testified that the Linden-Fairlane transaction qualified as a mere "change in form" for purposes of a tax-deferred like-kind exchange under the Internal Revenue Code, 26 U.S.C. § 1031 (I.R.C. § 1031), i.e., a continuity of investment whereby the taxpayer retains equity but merely changes the form of the asset in which he is invested.
Son Michael testified Anthony said in the summer of 2012 that he wanted the trailer park to go to Michael, Peter, and Cynthia.
Teresa McCall, a resident of the mobile home park, saw Anthony there fixing a roof a few days before his death. She brought him a glass of water and asked why he "saddle[d]" himself with the trailer park when he should be out traveling the world. Anthony replied, "I bought this for my kids so that they would have something to fall back on."
Cindy French, the park's resident manager, saw Anthony at the mobile home park almost every day for two years and saw him working on a roof near McCall's trailer a few days before his death. At trial, Mrs. French and her husband refuted Deborah's claim that Anthony told them the mobile home park was Deborah's property. After Anthony died, Deborah had conflicts with and fired Mrs. French, who denied saying Deborah would be sorry.
In their case-in-chief, the children called Deborah as a witness to probe the basis for her contention that Anthony intended ademption. She acknowledged the Linden property was Anthony's separate property but said Anthony used community property (a joint checking account) to pay the $900 mortgage on the Linden property. She acknowledged the Linden property generated income of at least $8,000 per month, but she considered that income to be community property.
After Anthony died, Deborah transferred the Fairlane property to herself, because that is what the Trust said to do with unspecified assets, and she helped operate the mobile home park, and Anthony told park residents, "This is Deborah's trailer park." Anthony told her in the summer of 2012 that he wanted her to have the Fairlane property upon his death, and since he was not giving it to his children, he wanted Deborah to give up her one-quarter share of his pension plan (under the Trust provision that never took effect).
After presentation of the children's case-in-chief, Deborah made a motion for judgment under Code of Civil Procedure section 631.8, arguing the children failed to prove their case. The trial court denied the motion. The evidence showed Anthony changed one investment property for another investment property and wanted to provide for his children with the asset, not necessarily the Linden property, which had no sentimental value, and there was nothing about the sale itself that reflected an intent to extinguish that gift to his children.
The court did not consider "change in form" for tax purposes (I.R.C. § 1031) to mean that such exchanges are "change in form only" for nonademption purposes as a matter of law. But the court noted parallels and cited probate case law that a "change in form only" of a bequest will not effect an ademption in the absence of proof that the testator intended the gift to fail. In denying the motion for judgment, the court noted the burden of proof now shifted to Deborah to provide convincing evidence that Anthony intended the gift to fail.
The defense tax expert agreed the Linden-Fairlane transaction qualified as a "change in form only" for I.R.C. section 1031 tax purposes.
Deborah retook the witness stand, disparaged Anthony's children, and said he referred to Deborah's children as his kids. Anthony took medication for depression. For the two weeks before he died, he was in bed when she left for work (as a school teacher) and in bed when she arrived home. She saw no indication he had left the house while she was gone and did not think he would have been physically able to go to the mobile home park.
Deborah helped with all of Anthony's businesses. She went to the mobile home park every weekday for a few hours after her job as a school teacher. The manager said Deborah would be sorry for firing the manager.
Rich Cloutman, friend and business advisor to Anthony, testified they had conversations in which Anthony said he bought the mobile home park for his and Deborah's retirement. He did not say she would get it when he died. He said he set up his children with other money from the pension plan (which was never placed in the Trust).
Anthony's accountant testified Anthony set up the Linden-Fairlane transaction as a I.R.C. section 1031 like-kind exchange and saved on taxes.
The trial court issued a statement of decision, finding there was no ademption. The sale of Linden and purchase of Fairlane was a "change in form only." Anthony had no sentimental attachment to the Linden property and was not concerned that his children receive that actual parcel as opposed to its value, as evidenced by the fact that the Trust specifically said the trustee could sell the Linden property during the two-year period its income was to go to Deborah. Nothing about Anthony's sale of Linden reflected an intent to extinguish the bequest; he just rolled it over to Fairlane which, like Linden, generated income during Anthony's life and had value that could be passed to his children.
The trial court found: "While the court is not compelled to find there was a 'change in form only' for purposes of resolving the question of ademption solely on the basis that there was a 'change in form only' [for tax purposes], there certainly are parallels. [¶] For example, the mechanics of a 1031 exchange require that the money to be protected from immediate taxation be held by an intermediary, making it clearly traceable to the proceeds from the previously owned property. [¶] Traceability of the property is essential to a determination that an ademption has not occurred. [Citation.] [¶] Here, all of the money used to acquire the FAIRLANE PROPERTY was clearly traceable to the LINDEN PROPERTY."
The court cited case law that, while a testator's disposition of property that is the subject of a specific bequest is presumed to reflect an intent to extinguish the gift, a mere "change in the form" of the property will not effect an ademption in the absence of proof that the testator intended that the gift fail. The court found "the intent of Anthony under the circumstances of the TRANSACTION was to merely 'change the form' of the real estate investment that was the subject of the BEQUEST."
The court stated: "Having concluded that the TRANSACTION effectuated a mere change in the form of the real estate investment that was the subject of the BEQUEST, the court's next task was to determine whether there was evidence presented at trial that is clearly indicative of Anthony's intent to revoke the BEQUEST. [¶] . . . [¶] The court exercised great caution when considering the testimony from the parties, since in each instance it [was] self-serving and uncorroborated, and goes to the essence of the core issue before the court. . . ."
The court concluded "Deborah did not satisfy her burden of showing that Anthony intended to revoke the BEQUEST . . . ." There was no evidence of any change in circumstance that might have led Anthony to no longer wish to leave the bequest to his children. Anthony and Deborah both contributed to management of the Fairlane property, and both shared in its profits.
The court did not find credible Deborah's claim that she gave up a quarter-share of Anthony's retirement account in exchange for the Fairlane property. She was never entitled to the quarter-share mentioned in the Trust, because that provision was conditioned on a contingency that never happened, i.e., naming the Trust as beneficiary of the retirement account.
The trial court found: "Deborah's testimony is undercut somewhat by her own witness, Rich Cloutman, although the court found his testimony to be vague on a number of points. [¶] Specifically, Mr. Cloutman testified that in 'maybe the summer of 2012-ish,' Anthony talked to him about 'the pension plan' and 'some kind of a split arrangement. I believe about three quarters to the adult kids, I believe.' [Citation to transcript.] [¶] The testimony of Mr. Cloutman, if true, would suggest that in the summer of 2012 Anthony may have believed that only three quarters of the Pension would go to [his children], contrary to Deborah's testimony regarding a conversation she claims to have had with Anthony around the same point in time. [¶] The court does not find credible Deborah's testimony that she allowed the Pension to go in its entirety to the [children] just to carry out Anthony's purported verbal statement of his intent. [¶] Since Anthony never named the TRUST as a beneficiary of the Pension (which was a requirement for the provisions of Paragraph H.2. to apply), it is clear that Deborah never had any claim to the Pension under the terms of the TRUST."
The trial court found: "Mr. Cloutman's testimony regarding Anthony's intentions for the FAIRLANE PROPERTY was also vague, and did not support a conclusion that Anthony wanted the FAIRLANE PROPERTY to pass exclusively to Deborah upon his death."
The trial court found credible the testimony of Teresa McCall that she had a conversation with Anthony at the Fairlane property a few days before his death, during which he said bought the Fairlane property for his children.
The trial court did not find credible Deborah's testimony suggesting Anthony stayed in bed for two weeks before he died. During that period Anthony made at least six purchases at G&G Hardware for which there were invoices with his signature. Also, an email message indicated Anthony's plan to go to the Fairlane property during this time period, and witnesses testified they saw him there a few days before his death.
The trial court stated: "Deborah's untruthful testimony regarding Anthony being in bed and in a depressed state during the two weeks prior to his death [citation to transcript] appears calculated to discredit the testimony of Teresa McCall [citation to transcript], and reveals a readiness on her part to color her testimony to her advantage without regard for the whole truth. [¶] Deborah's uncorroborated testimony on all issues is therefore substantially compromised in the court's view. (See, Evid. Code § 780(j) and 1-100 CACI 107 [falsus in uno, salsus in omnibus].)"
The court concluded: "Taking into consideration all of the foregoing, the court finds that Respondent [Deborah] failed to establish, even by a preponderance of the evidence, that Anthony intended by the TRANSACTION, or by any other act or statement occurring after the Declaration of Trust was signed, to adeem the BEQUEST."
The court entered judgment that the children were entitled to the Fairlane property, but the court denied their request for punitive damages.
DISCUSSION
I
Standard of Review
Deborah contends the standard of review is de novo because there is no conflict in relevant extrinsic evidence and no issue of credibility. But there were conflicts in properly-admitted extrinsic evidence, and the trial court did make credibility determinations.
Interpretation of a testamentary instrument, including a trust, is a question of law reviewed de novo unless the interpretation turns upon the credibility of extrinsic evidence. (Ike v. Doolittle (1998) 61 Cal.App.4th 51, 73 (Ike); Ammerman v. Callender (2016) 245 Cal.App.4th 1058, 1072 (Ammerman).) California law allows the admission of extrinsic evidence to establish that such instrument is ambiguous and to clarify ambiguities. (Estate of Duke (2015) 61 Cal.4th 871, 867 (Duke).)
Where extrinsic evidence is properly received to construe a testamentary instrument, and such evidence is conflicting, the appellate court will accept or adhere to the interpretation adopted by the trial court provided that interpretation is supported by substantial evidence. (Estate of Ehrenfels (1966) 241 Cal.App.2d 215, 222, citing Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866.) As to questions of law, however, our review is de novo. (Ike, supra, 61 Cal.App.4th at p. 73; Ammerman, supra, 245 Cal.App.4th at p. 1072.)
II
Trust Interpretation
"The intention of the transferor as expressed in the instrument [will, trust, etc.] controls the legal effect of the dispositions made in the instrument." (§ 21102, subd. (a); see also, § 21101 ["Unless the provision or context otherwise requires, this part applies to a will, trust, deed, and any other instrument"].) "[W]here the intention of the transferor is not indicated by the instrument," the Probate Code's rules of construction apply. (§ 21102, subd. (b).) "Nothing in this section limits the use of extrinsic evidence, to the extent otherwise authorized by law, to determine the intention of the transferor." (§ 21102, subd. (c).)
The Legislature added subdivision (c) to section 21102 pursuant to the recommendation of the California Law Revision Commission that language be added to make clear that section 21102 does not restrict the circumstances in which extrinsic evidence is admissible. (Stats. 2002, ch. 138, § 11, p. 721; Duke, supra, 61 Cal.4th at p. 884.) The Commission stated that " '[l]anguage in Section 21102 suggests that the rules of construction may only be overridden by an expression of contrary intention in the instrument itself. However, existing law allows extrinsic evidence of a testator's intent to rebut the presumptive effect of the rules of construction.' [Fn. and citation omitted.] The Commission further stated that, 'although the intention of a donor "as expressed in the instrument" controls the legal effect of dispositions made in the instrument, expressions in the instrument are not the exclusive means by which a donor's intention may be ascertained.' " (Duke, supra, 61 Cal.4th at p. 884.)
III
Specific Gift & Ademption Principles
Anthony transferred the Linden property into the Trust as an "at-death transfer," i.e., "a transfer that is revocable during the lifetime of the transferor . . . ." (§ 21104.) For at-death transfers, a "specific gift is a transfer of specifically identifiable property." (§ 21117, subds. (a).) Thus, "transferor" in the statutes refers to Anthony's transfer of the Linden property into the Trust, not Anthony's transfer of the Linden property in exchange for the Fairlane property.
There is no controlling Probate Code provision adeeming a specific bequest if the testator sells the property before his death. Rather, ademption is a common law concept, though the Probate Code offers protection against ademption in specified, non-exhaustive circumstances not at issue here. (§§ 21133-21139.)
" ' "Ademption of a specific legacy [such as the Linden property] is the extinction or withdrawal of a legacy in consequence of some act of the testator equivalent to its revocation, or clearly indicative of an intention to revoke. The ademption is effected by the extinction of the thing or fund bequeathed, or by a disposition of it subsequent to the will [or trust] which prevents its passing by the will [or trust], from which an intention that the legacy should fail is presumed." ' " (In re Estate of Mason (1965) 62 Cal.2d 213, 215 (Mason); accord, Brown v. Labow (2007) 157 Cal.App.4th 795, 808 [sale of assets of corporation while settlor was incapacitated did not adeem specific gift of stock].) Ademption takes place when the specific property has been disposed of by the testator "and cannot be traced to other property in the estate." (Mason, at p. 216.)
If, however, the extinction or disposition of property is a mere "change in form," there is no presumed ademption. "A change in the form of property subject to a specific testamentary gift will not effect an ademption in the absence of proof that the testator intended that the gift fail. [Citations.]" (Mason, supra, 62 Cal.2d at p. 215.) "In absence of proof of an intent that the gift fail, there should be no ademption. [Citations.]" (Estate of Austin (1980) 113 Cal.App.3d 167, 174 (Austin).)
"In determining whether the change is in form only, California courts have . . . tended to avoid strict rules of ademption; rather they look to the inferred or probable intent of the testator under the particular circumstances." (Austin, supra, 113 Cal.App.3d at p. 173.) Because of the harsh effects of ademption, California courts try to avoid its application whenever possible. (Estate of Worthy (1988) 205 Cal.App.3d 760, 765 (Worthy).)
IV
Deborah's Claims of Legal Error
Deborah argues we must do three things: (1) determine whether the probate court correctly applied a presumption and allocated the burdens of proof, (2) interpret the written Trust to ascertain Anthony's intent, and (3) decide whether the sale for tax purposes under I.R.C. section 1031 effectuated a mere change in form for ademption purposes as a matter of law. Deborah characterizes this appeal as a case of first impression, but we see existing legal authority supporting the judgment. She claims the trial court, upon concluding the children proved the transaction was a change in form only, misallocated to her the burden of proof to show Anthony intended an ademption. Deborah thinks the trial court improperly allowed extrinsic evidence of Anthony's intent on the "change in form" question, instead of deciding that question based solely on the Trust instrument and sale/purchase contracts.
Her contentions lack merit, and we see no basis for reversal.
Deborah cites section 21133 as requiring that gifted property be owned by the transferor at the time of death. Since Anthony did not own the Linden property when he died, Deborah argues the specific bequest was adeemed (extinguished), and she is entitled to the Fairlane property under the Trust's residuary clause (§ 21117, subd. (f)), which gives her all property remaining in the Trust after all specific and general gifts have been satisfied.
However, section 21133 does not call for ademption. Rather, it protects against ademption in certain circumstances: "A recipient of an at-death transfer of a specific gift has a right to the property specifically given, to the extent the property is owned by the transferor at the time the gift takes effect in possession and enjoyment, and all of the following:" -- any unpaid balance of purchase price owing from a purchaser to the transferor by reason of sale of the property, any unpaid eminent domain award or insurance proceeds, and any property the testator acquired by foreclosure of a security interest for a specifically given obligation. (§ 21133.)
Moreover, section 21139 expressly states, "The rules stated in Sections 21133 to 21135 [e.g., devisee has right to money if specific property was sold by conservator for incapacitated principal], inclusive, are not exhaustive, and nothing in those sections is intended to increase the incidence of ademption under the law of this state."
Here, the Trust itself was ambiguous as to what would happen if Anthony sold the Linden property during his lifetime. But the Trust provision for the Linden property did express his intent that sale of the Linden property not adeem the gift if, as expressly allowed by the Trust, the trustee sold the Linden property after Anthony's death (during the two years that Deborah was to receive any profits from the warehouse business). At the end of the two-year period, "the remaining Trust assets shall be distributed free of trust to [the children]."
Deborah argues the word "remaining" means she as trustee could sell the Linden property and spend as much of the proceeds as she liked and only had to give Anthony's children anything she had left over at the end of the two years. However, the Trust clause specified she was entitled only to any "income" generated by the property during those two years, i.e., warehouse rent or interest income earned on proceeds.
Moreover, that provision is for sale after Anthony's death. The Trust does not expressly indicate Anthony's intent if he himself were to sell the property during his lifetime, as he did. So we look to the rules of construction.
We are nevertheless mindful that, while a presumption arises that a testator intended a specific devise to fail when he disposes of that property during his lifetime, "[t]here is a stronger presumption that the testator intends some benefit to a beneficiary in any event since the motives that ordinarily move testators in selecting beneficiaries are their feelings of regard, and the presumption is that their feelings continue. [Fn. omitted.] To make the effectiveness of an intent to benefit a beneficiary dependent on the contingency of the testator's property's remaining unchanged, instead of on the continuation of the feelings that in the first instance prompted the selection of the beneficiary, such conditioned intent must be expressed by clear language. [Fn. omitted.]" (64 Cal.Jur.3d (2014) Wills, § 590, pp. 666-667, citing Estate of Sullivan (1954) 128 Cal.App.2d 144, and Estate of Cooper (1051) 107 Cal.App.2d 592, 598.)
According to Deborah, the trial court misallocated the burden of proof. She notes the sale of the Linden property gave rise to a presumption of ademption, impacting the burden of proof rather than merely the burden of production (Evid. Code, §§ 605-606), and requiring Anthony's children to prove that he intended a mere "change in form." She claims the trial court made no mention of the applicable presumption but instead incorrectly assigned to her the burden to disprove the incorrectly-drawn inference that Anthony intended a mere change in form of the Linden property. She refers to the court's statement of decision that there was no evidence that Anthony had sentimental attachment to the Linden property, and nothing about the sale reflected an intent to extinguish the gift.
We see nothing wrong with the probate court's analysis. As Deborah acknowledges and the probate court noted, California courts in determining whether the change is in form only, "look to the inferred or probable intent of the testator under the particular circumstances." (Austin, supra, 113 Cal.App.3d at p. 173.)
Moreover, the children did prove change in form only for ademption purposes (not just for tax purposes) and Anthony's intent not to extinguish the gift.
Deborah quotes from In re Estate of Goodfellow (1913) 166 Cal. 409, 415, that ademption is effected by extinction of the thing bequeathed, or by a disposition of it subsequent to the testamentary instrument which prevents its passing by the instrument, from which an intention that the legacy should fail is presumed. However, Mason, supra, 62 Cal.2d at page 215, quoted that language but immediately added: "A change in the form of property subject to a specific testamentary gift will not effect an ademption in the absence of proof that the testator intended that the gift fail. [Citations.]"
Deborah notes the trial court, in denying her motion for judgment (Code Civ. Proc., § 631.8) stated the burden shifted to Deborah. The court was correct. In ruling on such motion after presentation of the plaintiff's case-in-chief, the trial court as trier of fact weighs the plaintiff's evidence and grants judgment only if it finds the plaintiff failed to sustain its burden of proof such that there is no need for the defendant to produce evidence. (Roth v. Parker (1997) 57 Cal.App.4th 542, 549.) Here, the children met their burden, and the burden shifted to Deborah.
To the extent Deborah suggests the court improperly relied on its finding of "change in form" for tax purposes, we disagree. The court clearly understood it was "not compelled to find there was a 'change in form only' for purposes of resolving the question of ademption solely on the basis that there was a 'change in form only' for purposes of qualifying the TRANSACTION under Internal Revenue Code § 1031," though the court noted parallels.
To the extent Deborah suggests the court improperly entered judgment based only on a finding of "change in form," we disagree. Early in the trial, the court in ruling on evidentiary objections noted: "If we get beyond the issue of change in form only, in other words, if it's concluded that this was a change in form only, then the issue of intent is going to be paramount. And . . . we already have heard a lot of what would ordinarily be considered hearsay statements about that. And that's without objection, so they are coming in. [¶] But the credibility of those statements is going to be critical for the Court to evaluate. And I think circumstances that are related to Mr. Kast's intention for providing for his children that are considered in the trust, even though they are not the Linden . . . property or the mobile home park, I think those are relevant to the issue of his intent."
Deborah argues the Trust language was the only dispositive evidence. She then says the court found "change in form" based only on the Trust language, the tax expert, and the fact the money to buy Fairlane was traceable to the sale of Linden. However, extrinsic evidence of intent of the testator is part and parcel of the "change in form" inquiry, because a mere change in form does not adeem a specific gift absent evidence the testator intended an ademption. The court properly allowed the children to adduce evidence that Anthony did not intend an ademption.
Contrary to Deborah's contention, extrinsic evidence need not be limited to the time when Anthony signed the Trust or the sale/purchase documents, even when the court is considering the testator's intent at the time of execution of the testamentary instrument. "A declaration by a decedent concerning an instrument already executed may show testamentary intent. Declarations of a testator 'whether made at, before, or after the execution of the instrument are admissible, if offered for the purpose of ascertaining the intent with which the instrument was executed [citations]' " (Estate of Geffene (1969) 1 Cal.App.3d 506, 515-516.)
Additionally, in determining whether a testator's lifetime alienation of property subject to a specific bequest adeems the gift, we may consider extrinsic evidence of the testator's intent at the time of alienation of the property. (Mason, supra, 62 Cal.2d at p. 215; Estate of Holmes (1965) 233 Cal.App.2d 464, 468.) Whereas interpretation of testamentary instruments focuses on the testator's intent at the time of executing the document (Ike, supra, 61 Cal.App.4th at p. 73), ademption raises questions about actions and intentions when a testator alienates specific property after creation of the trust. In such cases, California courts may look to intent at the time of alienation of the property. (Mason, at p. 215; Holmes, at p. 468.)
Though not mentioned by the parties, we observe Worthy, supra, 205 Cal.App.3d at pages 767-768, indicated courts could no longer look at intent at the time of alienation after a "clear mandate" in 1985 legislation (former § 6165) that " 'The rules of construction in this article apply where the intention of the testator is not indicated by the will.' (Italics added.) The last three words limit the scope of inquiry. If the testator fails to anticipate future changes in the assets given to particular beneficiaries, and therefore fails to spell out in the will how such changes affect the gifts, the law will determine the result by resort to these sections of the code." (Worthy, supra, 205 Cal.App.3d at p. 768.) In Worthy, the instrument made a specific gift of real property. The testator sold it but the sale did not close until three days after her death. The appellate court held that, absent a will provision that an incomplete sale of the land would cause an ademption, Probate Code statutes applied to protect the devisees' interest in the land and in proceeds, and evidence as to change of intent was irrelevant. (Id. at pp. 764-769.)
Thus, in Worthy, there were controlling statutes (predecessors to § 21133; Stats. 1994, ch. 806, § 41; Stats. 2002, ch. 138, § 34) that applied to preserve the gift. (consistent with the policy of avoiding the harsh effects of ademption). Here, there are no controlling statutes commanding ademption.
We thus see no problem in the trial court allowing, as it did, extrinsic evidence on the questions whether the Linden-Fairlane transaction was a "change in form only" and whether Anthony intended at the time of that transaction to adeem the Trust gift.
Deborah fails to show any legal error by the trial court.
V
Substantial Evidence
The evidence credited by the trial court, after determining Deborah lacked credibility, supports the conclusion that there was a change in form only and no intent to adeem the bequest, including the following: A few days before his death, Anthony told Ms. McCall that the Fairlane property was for his children. The proceeds from $1.5 million sale of the Linden property were traceable to the $1.2 million Fairlane property (except for the few hundred thousand that Anthony spent, which is not being claimed by the children). The Linden property represented Anthony's separate assets before he married Deborah. She agreed to its being his separate property when he sold it and bought the Fairlane property. He intended the transactions to be, and they were, a mere change in form for tax purposes. He also intended a mere change in form for ademption purposes. He effectively swapped one investment property for another. He placed the Fairlane property in the Trust and told people shortly before he died that he wanted his children to have it.
According to Deborah, critical facts prove Anthony did not intend to save the gift -- he removed the Linden property from the Trust and put the Fairlane property in the Trust without amending the Trust to specify an at-death transfer of the Fairlane property to his children. Deborah claims these facts prove Anthony "undeniably and deliberately" left the Fairlane property subject to the Trust's residuary clause. Not so. The absence of an amendment to the Trust is equally consistent with Anthony's intent that swapping Linden for Fairlane was a change in form only that did not adeem the gift.
Deborah "does not deny that most of the sale proceeds were traceable to the purchase of the Mobile Home Park Property." She selectively cites Estate of Hagberg (1969) 276 Cal.App.2d 622 (Hagberg), that mere tracing of proceeds will not in and of itself avoid the rule of ademption by extinction. Hagberg stated in full: "We know of no authority to support the theory that a mere tracing of the proceeds of a sale of devised property will, at least without evidence that the testator intended the new investment to be a substitute for the devise, avoid the general rule of ademption by extinction." (Id. at p. 628.) Here, we do not rely solely on the traceability of the proceeds, and there was evidence Anthony intended the Fairlane property to be a substitute for the devise of the Linden property.
We reject Deborah's argument that Hagberg and other cases found ademption on similar facts, compelling reversal in this case. First, in ascertaining the intention of a particular testator, decisions in other cases are seldom controlling. (Austin, supra, 113 Cal.App.3d at p. 173.) "Of this class of questions it may be said, with more truth, perhaps, than of any other, that each case depends upon its own peculiar facts, and that precedents have comparatively small value." (In re Estate of Henderson (1911) 161 Cal. 353, 357; Austin, supra, 113 Cal.App.3d at p. 173.)
Second, Hagberg is not on point. The testator sold real property, received cash and promissory notes, and used the cash to buy other real property that was not "of the same character." (Id. 276 Cal.App.2d at p. 628.) The court took no extrinsic evidence. (Ibid.) We are not persuaded by Deborah's argument that the mobile home park was an "active investment" that was not of the same character as a "passive investment" in a warehouse. Moreover, Hagberg -- and other cases cited by Deborah as having comparable facts -- predated the legislative amendment of section 21102 affirming the admissibility of extrinsic evidence. (Duke, supra, 61 Cal.4th at pp. 884-885.)
Deborah says the trial court acknowledged it would be unable to find a "change in form only" if Anthony used the Linden profits for the benefit of both himself and Deborah. Deborah argues the court "lost sight of undisputed evidence" that Anthony sold the Linden property so he and Deborah could both run it due to the failure of Anthony's surveying business. Deborah claims the court ignored an email message from Anthony that he was thinking about forming a limited-liability company to operate the mobile home park business.
However, nothing in the cited evidence said anything about giving Deborah an interest in the mobile home park business or the Fairlane property (as opposed to her sharing in the profits of the business before the property passed to the children). The email from Anthony to his accountant dated February 15, 2010, said "I am going" (italics added) into escrow on the I.R.C. section 1031 exchange, and "with the help of my wife, I am hoping that we will be able to muddle through for a few months while we get organized without making too many costly errors." Anthony asked if he should form a limited liability company (LLC). The accountant thought not.
None of this evidence says anything about Deborah acquiring a property interest. That she "helped" him was fair insofar as they both enjoyed the profits from the trailer park business during Anthony's lifetime. Moreover, Deborah clearly did not acquire a property interest, because Anthony took title to the Fairlane property in his name as his separate property.
We conclude Anthony's children are entitled to the Fairlane property.
DISPOSITION
The judgment is affirmed. Respondents on appeal (Anthony's children) shall recover their costs on appeal. (Prob. Code, § 1002; Cal. Rules of Court, rule 8.278.)
HULL, Acting P. J. We concur: MAURO, J. MURRAY, J.