Opinion
H049625 H049846
09-20-2023
In re 1984 VENUTI LIVING TRUST dated January 18, 1984, as amended. v. MARC VENUTI et al., Defendants and Respondents. ADRIAN VENUTI et al., Plaintiffs and Appellants,
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. 16PR180116
BROMBERG, J.
In 1984, Alexandre and Louise Venuti established a revocable inter vivos trust (the 1984 Trust or Trust) designed to minimize taxes upon their deaths and distribute their estate's assets to their children together, Marc and Michael, as well as to Alexandre's children from a previous marriage, Adrian and Odette. After Alexandre died in 1989, Louise executed two amendments to the 1984 Trust, the second of which made Marc and Michael the sole beneficiaries of a subtrust that contains Louise's separate property and her share of community property. After Louise died in 2016, Adrian and Odette learned of the 1984 Trust and this amendment, and they sued Marc and Michael, claiming among other things that the amendment was invalid.
Because all the individuals mentioned in this opinion are related and bear the same last name, for clarity and convenience we refer to them by their first names. In doing so, we intend no disrespect. (Fazzi v. Klein (2010) 190 Cal.App.4th 1280, 1282, fn. 1.)
Adrian and Odette (collectively, Appellants) now appeal from orders determining that the second amendment was valid. They also appeal from an order that denied without prejudice an ex parte application for an order to return trust assets used to pay attorney's fees in this litigation and to enjoin similar future payments.
As explained below, we affirm the orders finding the amendment valid because the 1984 Trust implicitly reserved to Louise the right to amend the subtrust at issue. However, we dismiss the appeal from the order denying the ex parte application for lack of appellate jurisdiction because that order did not reach the merits of Appellants' objection and permitted renewal of the objection in an appropriate procedural posture.
I. Factual and Procedural Background
A. The 1984 Trust
On January 18, 1984, Alexandre and Louise Venuti executed the 1984 Venuti Living Trust (the 1984 Trust). As "Trustors," Alexandre and Louise contributed community and separate property, which were described in attached schedules of separate and community property.
1. The Original Trust
Under the 1984 Trust, upon the death of either Alexandre or Louise, the remaining trustee-both were original trustees-was instructed to divide the trust estate into two separate trusts: the "Marital Trust" and the "Residuary Trust." The Marital Trust was to include "the surviving Trustor's share of community property held in the Trust" as well as "the surviving Trustor's separate property held in the Trust." In addition, if the deceased Trustor's separate property and share of the community property exceeded the marital deduction allowed for federal estate tax purposes, the Marital Trust was to include the excess (and thereby avoid federal tax liability). The Residuary Trust was to include the balance of the Trust estate-that is, the maximum permitted by the marital deduction for federal estate tax purposes. The 1984 Trust further stated that "[t]he Residuary Trust"-but not the Marital Trust-"shall be irrevocable after the death of the first spouse."
The 1984 Trust also provided for distribution of the Residuary Trust and the Marital Trust. It directed that the net income from the Residuary Trust be paid to the surviving Trustor, and it gave the trustee discretion to provide additional funds to the surviving Trustor if the Marital Trust was exhausted or "otherwise not reasonably available for distribution," and the surviving Trustor needed additional funds "for his or her proper health and maintenance" or to support "his or her accustomed standard of living." Upon the death of the surviving Trustor, the 1984 Trust also provided for division of the Residuary Trust "into as many equal shares as there are children of the Trustors then living and children of the Trustors then deceased but leaving issue then surviving" and for creation of separate trusts for each of them.
The 1984 Trust treated the Marital Trust somewhat differently. As with the Residuary Trust, the surviving Trustor was to receive the net income from the Marital Trust, and the trustee was to have discretion to provide additional funds for the surviving Trustor's "proper health, maintenance, and support." However, the 1984 Trust also gave the surviving Trustor the right to direct the trustee in writing "to apply for said survivor's benefit such amounts from or portions of the principal of the Marital Trust, up to the whole thereof, as the survivor may designate." Furthermore, the 1984 Trust stated that the trustee "shall comply with any such written directions and shall have no responsibility whatsoever to inquire into or determine for what purpose any such withdrawals are made." Finally, the 1984 Trust gave the surviving Trustor the right to appoint the person or persons to whom the Marital Trust would be distributed upon the Trustor's death.
The 1984 Trust also contained several reservations of power. First, the Trust provided that, with the trustee's approval, either "[h]usband" or "wife"-that, is Alexandre or Louise-could add property to the Trust "before or after the death of either of the Trustors." Second, "[d]uring the joint lifetimes of the Trustors," the Trust gave the Trustors the right "jointly or individually in the case of community property," and "the grantor individually in the case of his or her separate property," to alter, amend, or revoke the trust agreement in whole or in part. Third, the Trust gave the Trustors, jointly or individually as to community property and individually as to separate property, authority to direct the trustee to retain specific investments.
Finally, the 1984 Trust granted the trustee various powers, including the power to prosecute claims for and against the trust, and to pay the ordinary and necessary expenses of administration, including attorney's fees.
2. The First Amendment
In 1990, a year after Alexandre's death, Louise amended the 1984 Trust (First Amendment) to comply with laws and regulations concerning non-citizens because at the time Louise was a Canadian citizen. The First Amendment divided the Marital Trust into two subtrusts: the "Survivor's Trust" and the "Qualified Domestic Trust" (QDT). The Survivor's Trust contained Louise's separate property and her share of the community property in the 1984 Trust. The QDT contained "such additional amount equal to the minimum amount that will entirely eliminate or reduce . . . the federal estate tax"-in other words, the amount that could not be included in the Residuary Trust without incurring federal tax liability.
During Louise's lifetime, the First Amendment required the trustee to distribute the principal of the Survivor's Trust as Louise designated but did not provide similar authority with respect to the QDT. Upon Louise's death, the First Amendment directed that the Survivor's Trust be distributed "to such person or persons . . . as the surviving Trustor shall appoint" or, if she failed to make such appointment, to the Residuary Trust (which would be distributed equally among all four children and their issue). However, the First Amendment provided for distribution of the QDT "according to the Residuary Trust distribution provisions."
The First Amendment reserved the right to amend or revoke its provisions. It also appointed Marc as co-trustee and designated citizen trustee of the QDT.
3. The Second Amendment
In February 1991, Louise executed another amendment to the 1984 Trust (Second Amendment). The Second Amendment revised one sentence in the First Amendment. The First Amendment had provided, in the absence of an appointment in Louise's will, for distribution of the Survivor's Trust to the Residuary Trust. The Second Amendment changed this provision to direct that, in the absence of an appointment, "all of the [Survivor's Trust] not so disposed of shall be distributed equally to MICHAEL R. VENUTI and MARC A. VENUTI or their issue by right of representation."
B. Louise's Death
In September 2011, Louise executed a new will and resigned as trustee of the Survivor's Trust and Residuary Trust and as co-trustee of the QDT. She appointed Michael as the sole successor trustee of all three trusts. Four and one-half years later, in February 2016, Louise died. Soon thereafter, Michael notified Appellants, as trust beneficiaries, of his intention to distribute the trusts, and they learned of the 1984 Trust for the first time.
C. Prior Proceedings
In December 2016, Michael filed a petition for instructions and orders to administer the 1984 Trust. The next month, Appellants filed their own petition, among other things, asserting financial elder abuse, seeking an accounting, and challenging the validity of the Second Amendment.
1. The Accounting Requests
In May 2017, the probate court granted Appellants' request for an accounting for the QDT and the Residuary Trust from September 1, 2011, but held that Appellants lacked standing to request accountings for earlier periods. On appeal, this court reversed and remanded to the probate court for further proceedings. (See Venuti v. Venuti (Sep. 16, 2020, H044922 [nonpub. opn.].)
In April 2021, Michael filed a first accounting of the QDT and the Residuary Trust for the period from September 1, 2011, through March 12, 2021. Attached to the accounting were a declaration and invoices for attorney's fees totaling more than $150,000 paid from the QDT and the Residuary Trust.
2. Attorney's Fees
After amending their petition, Appellants asserted that Michael and Marc should be removed as trustees and ordered to return trust assets used to pay attorney's fees, much of which were for defending against Appellants' accounting requests. Appellants subsequently filed an ex parte application for an order to suspend the trustees, require them to return trust funds, and surcharge Marc's and Michael's interests in the 1984 Trust. Appellants argued that Marc and Michael had improperly expended over $600,000 in Trust assets on interim attorney's fees during this litigation.
On November 22, 2021, after a hearing, the probate court denied the ex parte application without prejudice. As the court explained at the hearing, it denied the application because the situation had "not yet reached an exigency level," and there was no "urgency to the decision." The court also noted that the request was premature because it required the court to make a finding about the outcome of the case, which it could not do at that stage.
3. Validity of the Second Amendment
In November and December 2021, the probate court held a bifurcated hearing at which it considered the validity of the Second Amendment. In the first part of the hearing, the court addressed whether the Second Amendment was invalid as a matter of law. Appellants argued that, because it was executed prior to July 1, 1987, the 1984 Trust is governed by former Civil Code section 2280, and under that section a multisettlor trust cannot be unilaterally amended or revoked. Alternatively, citing to the provision of the 1984 Trust permitting the Trustors to revoke or amend the Trust in the case of separate property or community property during the "joint lifetimes" of the Trustors, Appellants argued that the 1984 Trust did not permit any amendments of the Trust after the death of one of the Trustors. In a December 21, 2021 order, the probate court disagreed. In addition to noting that Appellants did not challenge the First Amendment, the court found it significant that the 1984 Trust stated that the Residuary Trust, but not the Marital Trust, "shall be irrevocable." The trial court therefore concluded that the Second Amendment was not invalid as a matter of law.
The probate court subsequently held the second part of the hearing, at which it addressed Appellants' claims that the Second Amendment was invalid due to revocation or undue influence. At the close of the hearing, the court rejected these claims. On April 18, 2022, the probate court issued a final statement of decision and order finding that Appellants had not proven either undue influence or revocation of the Second Amendment. Accordingly, the court granted a motion from Marc and Michael for judgment under Code of Civil Procedure section 631.8.
D. The Notices of Appeal
Appellants initially filed a notice of appeal on November 24, 2021, after the probate court found that the Second Amendment was not invalid as a matter of law but before it issued a written order or conducted a hearing on Appellants' undue influence and revocation claims. Appellants also filed a notice of appeal on February 25, 2022, after the court concluded the bifurcated hearing but prior to the court issuing its statement of decision. We deemed the first notice of appeal filed as of December 21, 2021, the date of the probate court's order concerning the validity of the Second Amendment, and the second notice of appeal filed as of April 18, 2022, the date of the statement of decision. We subsequently ordered the two appeals considered together for briefing, oral argument, and disposition.
II. Discussion
Appellants challenge the probate court's determination that the Second Amendment was valid under the 1984 Trust. Although the court's orders on this issue are interlocutory, we have jurisdiction to review them because the Code of Civil Procedure confers jurisdiction over appeals authorized by the Probate Code (Code Civ. Proc., § 904.1, subd. (a)(10)), and the Probate Code authorizes appeals from final orders under section 17200 of the Code (Prob. Code, § 1304, subd. (a)), which includes proceedings "[d]etermining the validity of a trust provision." (Id., § 17200, subd. (b)(3).) Appellants also argue that the trial court erred in denying their request for an order barring the trustee from using trust assets to pay attorney's fees. As shown below, we lack jurisdiction over this aspect of the appeal.
A. Validity of the Second Amendment
Because the 1984 Trust was executed before the Probate Code was adopted, former Civil Code section 2280, as the "prior law" in place when the Trust was executed, governs the validity of the Second Amendment. (Prob. Code, § 15401, subd. (e); see Huscher v. Wells Fargo Bank (2004) 121 Cal.App.4th 956, 960-961, 963 (Huscher).) Appellants challenge the validity of the Second Amendment on two grounds: they argue that "[u]nder former [Civil Code] section 2280, a multi-settlor revocable trust cannot be revoked or amended by less than all joint settlors" and that the 1984 Trust did not permit amendments concerning the Marital Trust. We need not address Appellants' first challenge because it is indisputable that, even if former Civil Code section 2280 did not authorize unilateral revocation of multi-settlor trusts, settlors could "by mutual agreement provide for other modes of revocation [or amendment] than those provided for by operation of law." (Estate of Khan (1985) 168 Cal.App.3d 270, 274.) Moreover, reviewing the interpretation of the Trust de novo (see, e.g., Pena v. Dey (2019) 39 Cal.App.5th 546, 551), we conclude that Alexandre and Louise agreed to make the Marital Trust unilaterally revocable (and, thus, amendable).
Former Civil Code section 2280 stated, in relevant part, "[u]nless expressly made irrevocable by the instrument creating the trust, every voluntary trust shall be revocable by the trustor by writing filed with the trustee." (Stats. 1986, ch. 820, § 7, p. 2730.)
Although Appellants assert that multi-settlor agreements must expressly allow unilateral amendment or revocation, none of the cases that they w2sqazacite recognize such a requirement, and former section 2280 stated only that voluntary trusts must be "expressly made irrevocable." (Stats. 1986, ch. 820, § 7, p. 2730, italics added.)
Article IV.A of the 1984 Trust implicitly recognized that the surviving spouse, or "Trustor," may unilaterally revoke or amend the Marital Trust. Upon the death of one of the Trustors, Article IV.A instructed the trustee to divide the remaining Trust estate into "the 'Marital Trust' and 'Residuary Trust.'" After detailing this division-essentially by assigning the property contributed by the surviving spouse to the Marital Trust and the property of the deceased spouse to the Residuary Trust with a transfer from the latter to avoid estate taxes-Article IV.A stated that the "Residuary Trust . . . shall be irrevocable after the death of the first spouse." Article IV.A did not make a similar statement that the Marital Trust shall be irrevocable. As a consequence, it is natural to infer that Alexandre and Louise intended that the Residuary Trust would be irrevocable and the Marital Trust revocable.
This conclusion is supported by the structure of the 1984 Trust and the control it gave the Trustors over the property that each contributed. "During the joint lifetimes of the Trustors," Article II.B reserved the power to alter, amend, or revoke the trust agreement "to the Trustors jointly or individually in the case of community property" and "to the grantor individually in the case of his or her separate property," thereby enabling Alexandre and Louise to unilaterally (or independently) amend the agreement with respect to the property each contributed. After the death of one of the Trustors, Article IV put the deceased Trustor's separate property and share of community property (to the extent permitted by tax law) into the Residuary Trust and made that trust "irrevocable," thereby ensuring any arrangements for that property made by the deceased Trustor would be honored. Article IV, however, continued the surviving Trustor's control over the property he or she contributed. Article IV.D.3 gave the surviving Trustor the power for the rest of his or her life to invade the principal of the Marital Trust, which contained the surviving Trustor's separate property and share of community property, "for said survivor's benefit . . . up to the whole thereof." And Article IV.D.4 gave the surviving Trustor the power to appoint in her or his will "such person or persons" to whom whatever remains in the Marital Trust are distributed. Thus, the 1984 Trust gave the surviving Trustor control over the property he or she contributed from the execution of the trust, through the death of the other Trustor, and even after the surviving Trustor's death.
In light of the control given the surviving Trustor over the property he or she contributed, it is natural to infer that Alexandre and Louise intended the Marital Trust to be revocable and amendable so that the surviving Trustor could exercise this control flexibly and efficiently. Indeed, the First Amendment underscores the importance of such flexibility. As Appellants admit, Louise amended the Trust to divide the Marital Trust into two subtrusts and put Alexandre's property into a subtrust outside of Louise's control (the QDT) to avoid taxes that otherwise would have been incurred due to a change in the tax laws made after the Trust was executed. We see no reason to believe that, after giving the surviving Trustor control over the use and distribution of the Marital Trust, Alexandre and Louise intended to deprive the trustor of the flexibility to make such modifications easily and efficiently.
In urging us to interpret the 1984 Trust otherwise, Appellants largely ignore Article IV.A's statement concerning the irrevocability of the Residuary Trust as well as the control given the surviving Trustor over the Marital Trust. Instead, Appellants focus on Article II.B, which they contend "provides [that the Trust] can be amended only 'during the joint lifetimes of' Alexandre and Louise." We are not persuaded.
First, in violation of well-established principles of interpretation (see Prob. Code, § 21220), Appellants' interpretation would render Article IV.A's statement concerning irrevocability superfluous and, indeed, inexplicable. As noted above, Article IV.A stated that "[t]he Residuary Trust . . . shall be irrevocable after the death of the first spouse." If, as Appellants assert, Article II.B permitted amendment only during the joint lifetimes of the Trustors, this statement would be superfluous because the Trust did not provide for creation of the Residuary Trust until one of the Trustors died and the joint lifetimes were over. Indeed, Appellants' interpretation renders inexplicable Article VI.A's statement that the Residuary Trust is irrevocable. Under their interpretation both the Marital Trust and the Residuary Trust are irrevocable. But, as noted above, Article IV.A stated that the Residuary Trust is irrevocable without making a similar statement about the Marital Trust, thereby indicating that the Marital Trust is revocable. Thus, under Appellants' interpretation, Article IV's statement concerning irrevocability becomes misleading as well as superfluous. We decline to interpret the 1984 Trust in such a manner.
Second, Appellants read more into Article II.B than it can bear. Appellants contend that Article II.B described the sole method for amending the Trust and therefore precluded any amendment after the joint lifetimes of the Trustors. However, Article II.B did not explicitly say that it provided the exclusive method for amending the Trust, and its provisions were not "so specific and detailed that they implicitly preclude[d] resort to any other method." (Huscher, supra, 121 Cal.App.4th at p. 961.) Indeed, far from providing a comprehensive method for amending the 1984 Trust, Article II.B focused on community and separate property and specified how the Trustors could amend the provisions concerning such property: "jointly or individually in the case of community property" and "individually in the case . . . of separate property." (Italics added.) Appellants note that property is the ultimate subject of the Trust. While that may be true, it does not follow that, in specifying how to amend the provisions concerning community property and separate property, Alexandre and Louise meant to create a rule governing all amendments to the Trust. To the contrary, most of the 22 articles in the Trust did not deal directly with community or separate property and thus were not covered by Article II.B's amendment provisions, and we see no reason to believe that Alexandre and Louise intended to lock into stone most of the Trust's provisions by barring amendment of them. As a consequence, we decline to interpret Article II.B as implicitly precluding amendments not authorized by it.
Third, Appellants give too much weight to the Trust's goal of providing equally for the children of Alexandre and Louise. They assert that Alexandre and Louise intended the Trust "to establish an estate plan that provided equally for the four children yet took full advantage of the ability to reduce federal estate taxes." Providing for Alexandre' four children was a purpose of the Trust: Upon the death of the surviving Trustor, Article IV.E required the trustee to divide the Residuary Trust into "as many equal shares as there are children of the Trustors then living." However, providing for the children was not the Trust's only purpose or even its overriding purpose. To the contrary, as shown above, the Trust also was structured to give each Trustor control over the property her or she contributed. Moreover, Article IV.D.4 instructed the trustee to "distribute the balance of the [Marital] Trust . . . to such person or persons . . . as the surviving Trustor shall appoint" in his or her will. Thus, with respect to the Marital Trust, the goal of providing each Trustor with control over the property he or she contributed to the Trust overrides the goal of providing equally for the children.
In sum, Appellants have failed to offer any persuasive reason to adopt their interpretation and ignore the natural inference created by Article IV.B's statement that the Residuary Trust, but not the Marital Trust, is irrevocable, and the overall structure of the Trust. Accordingly, we conclude that the 1984 Trust gave the surviving Trustor authority to amend the provisions of the Trust concerning the Marital Trust and that the Second Amendment was valid.
B. The Ex Parte Application Concerning Attorney's Fees
In addition to the probate court's order ruling the Second Amendment to the 1984 Trust valid, Appellants appeal the court's denial of their ex parte application for an order to return trust funds used to pay attorney's fees in this suit and enjoin similar future payments. Appellants contend that this ruling is appealable under the Probate Code because it had the effect of approving the trustee's past use of trust funds to pay attorney's fees in this case and authorizing similar future payments. We are not persuaded. The probate court denied Appellants' application on procedural grounds without addressing the merits of the challenged payments and without prejudice to renewal of the challenge in a noticed motion. While the Probate Code authorizes appeals from numerous orders, it does not authorize appeals from such preliminary procedural rulings.
Although in civil actions appeals are generally permitted only after a final judgment resolving all issues in the case (see, e.g., Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 697), as noted earlier, section 904.1 of the Code of Civil Procedure authorizes appeals from some interlocutory orders as well, including those "made appealable by the Probate Code." (Code Civ. .Proc., § 904.1, subd. (a)(10).) The Probate Code in turn permits appeals from a number of orders, including those "[f]ixing, authorizing, allowing, or directing payment of compensation or expenses of an attorney" (Prob. Code, § 1300, subd. (e)), or, conversely, "[s]urcharging, removing, or discharging a fiduciary" (id., § 1300, subd. (g)). The Probate Code also authorizes appeals from orders "approving or confirming the acts of a fiduciary" and "allowing payment of the compensation or expenses of a fiduciary." (Id., § 1300, subds. (e), (f).)
Appellants contend that the trial court's denial of Appellants' ex parte application is appealable under these Probate Code provisions because it "had the effect of approving Trustee's past use of Trust assets to fund the accounting litigation and of authorizing pendente lite fees to fund the Second Amendment litigation and litigation concerning Appellants' claims of Trustee malfeasance." We disagree. The probate court denied Appellants' ex parte application "without prejudice." Moreover, in so doing, the court explained that Appellants had failed to show the "urgency" needed to justify ex parte relief, and that the request was premature because it asked the court to make a "finding about the outcome of the case," which it "can't do at this stage." Thus, far from approving of the past payments of attorney's fees or authorizing future ones, the trial court declined to consider those issues on procedural grounds, leaving open the possibility that it would consider the merits of Appellants' challenges in the future.
Appellants fail to cite any authority permitting an appeal from such a preliminary procedural ruling. In their opening brief, Appellants relied primarily on People ex rel. Harris v. Shine (2017) 16 Cal.App.5th 524 (Shine). In that case, however, the probate court did not deny an ex parte application on procedural grounds. Instead, it granted a petition to instruct the trustee to use trust assets to pay for past and future defense costs. (Id. at pp. 530-532.) Thus, unlike this case, Shine involved an order expressly "authorizing . . . or directing payment of compensation or expenses of an attorney," which fell squarely into one of the categories of orders made appealable under the Probate Code. (See Prob. Code, § 1300, subd. (e).) Zahnleuter v. Mueller (2023) 88 Cal.App.5th 1294 is similarly inapposite. The order challenged in that case granted a petition to surcharge and ordered repayment of the "trust assets . . . expended on attorney fees." (Id. at p. 1303.) As a consequence, unlike here, the order in Zahnleuter fell within the authorization of appeals from orders "[s]urcharging . . . a fiduciary." (Prob. Code, § 1300, subd. (g).)
Citing a 1945 Supreme Court decision, Steen v. Board of Civil Service Comrs. (1945) 26 Cal.2d 716 (Steen), Appellants argue that it is irrelevant that the trial court denied their ex parte application "without prejudice." This decision is also inapposite. In Steen, the appellant did not seek to appeal an order denying an ex parte application. Instead, the appellant sought to appeal the denial of his petition for reinstatement of employment. (See id. at pp. 718, 728.) Moreover, even though the trial court in Steen stated that it was denying the petition without prejudice, it did not encourage the appellant to renew his challenge. To the contrary, as the Supreme Court observed, "[n]o further order was contemplated." (Id. at p. 727.) Topa Ins. Co. v. Fireman's Fund Ins. Companies (1995) 39 Cal.App.4th 1331, is likewise distinguishable. While the dismissal in that case was without prejudice, it contemplated that the party in question might bring another action in the future "based on . . . new facts" (id. at p. 1336), not a properly raised request in the same action.
In short, the probate court's ruling that Appellants' request for ex parte relief was premature is not an appealable order, and Appellants' arguments concerning the use of trust funds for past and future litigation should be raised on remand so that the trial court may consider them on the merits in the first instance.
III. Disposition
The probate court's December 21, 2021 and April 18, 2022 orders determining the validity of the Second Amendment, which are the subjects of case nos. H049625 and H049846, are affirmed, and the appeal from the November 22, 2021 order denying the ex parte application, which is a subject of case no. H049625, is dismissed. The parties shall bear their own costs on appeal.
WE CONCUR: BAMATTRE-MANOUKIAN, ACTING P.J., DANNER, J.