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Lund v. First Republic Tr. Co.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR
Jan 30, 2020
B302638 (Cal. Ct. App. Jan. 30, 2020)

Opinion

B302634 B302638 B302640 B302641 B302644

01-30-2020

BRADFORD D. LUND et al., Appellants, v. FIRST REPUBLIC TRUST COMPANY et al., Respondents.

The Pitet Firm, Joseph Peter Busch, for Appellants. Mitchell Silberberg & Knupp, Hayward J. Kaiser, Andrew C. Spitser for Respondents.


ORDER MODIFYING OPINION AND DENYING PETITION FOR REHEARING [NO CHANGE IN JUDGMENT] THE COURT:

It is ordered that the opinion filed herein on January 30, 2020, be modified as follows:

1. In the second paragraph, under the heading "Introduction," the first sentence should be deleted and replaced with the following language: Brad appealed the court's rulings, as did Sherry and Dew, who serve as co-trustees of one of the trusts at issue.

2. In the first paragraph of the following section, under the heading "Facts and Procedural Background" and the subheading "Background," the last sentence should be replaced with the following language: Sherry and Dew are currently co-trustees of the 1992 Trust.

The court has received and considered Appellants' Petition for Correction and/or Rehearing. The petition for rehearing is DENIED. /s/_________
WILLHITE, ACTING P. J. /s/_________
COLLINS, J. /s/_________
CURREY, J.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BP129814, BP129815, BP119204, BP119205, BP00545 ) APPEAL from a judgment of the Superior Court of Los Angeles County, David J. Cowan, Judge. Dismissed. The Pitet Firm, Joseph Peter Busch, for Appellants. Mitchell Silberberg & Knupp, Hayward J. Kaiser, Andrew C. Spitser for Respondents.

INTRODUCTION

These appeals arise out of a long-running dispute regarding several multi-million dollar trusts established for the benefit of appellant Bradford Lund, the grandson of Walt and Lillian Disney, and his siblings. Brad, along with appellants Sherry Lund (his stepmother) and financial advisor James Dew, entered into a settlement agreement with respondent trustees First Republic Trust Company (FRTC), L. Andrew Gifford, Robert Wilson, and Douglas Strode. The parties then petitioned the probate court to approve the settlement agreement and allow Brad to appoint trustees to replace respondents. The court issued rulings approving certain portions of the settlement agreement and detailing its concerns regarding the remainder of the agreement. The court continued the remainder of the petitions for further consideration and, on its own motion, appointed a financial expert and a limited guardian ad litem (GAL) for Brad, to assist in its determination whether the settlement and appointment of replacement trustees was in Brad's best interest.

We refer to members of the Lund family by first name for clarity because they share a surname; no disrespect is intended. Consistent with the convention adopted by both parties throughout the case, we refer to Bradford as "Brad."

Brad appealed the court's rulings, as did Sherry and Dew, who serve as co-trustees of two of the trusts at issue. Respondents moved to dismiss the appeals, contending that the trial court's rulings were not appealable. We agree, and therefore dismiss the appeals.

FACTS AND PROCEDURAL BACKGROUND

Background

This litigation encompasses five probate cases corresponding to the five trusts at issue. Respondents are co-trustees of two residuary trusts for the benefit of Brad and his sister, Michelle Lund; FRTC is also the trustee for the Lillian B. Disney Trust fbo Bradford D. Lund, and is the former trustee of two other trusts benefitting Brad (the 1992 Trust and the 1986 Trust). Sherry and Dew are currently co-trustees of the 1992 and 1986 Trusts.

In a prior appeal, Brad challenged the trial court's finding, following a bench trial, that the trustees reasonably exercised their discretion to withhold Brad's trust distributions based on concerns regarding his maturity and capacity to make financial decisions regarding his trusts. We affirmed the trial court's ruling in our prior nonpublished opinion, First Republic Trust Company v. Lund (Dec. 6, 2017, B258224) (nonpub. opn.). We also affirmed the trial court's determination that Brad had the capacity to exercise his trustee removal power and remove the trustees from the 1992 Trust.

Litigation over the trusts continued. In December 2018, the probate court issued orders to show cause (OSCs) as to whether it should (1) appoint a GAL for Brad; and/or (2) remove or suspend Sherry and Dew as co-trustees of the 1992 Trust. The parties filed responses to the OSCs and also engaged in mediation.

Settlement Agreement

Appellants, respondents, and Michelle entered into a global settlement agreement on April 8, 2019. Under the terms of the settlement agreement, respondents agreed to resign as trustees and allow Brad to replace them. Further, respondents and Michelle agreed not to have any role in the selection of replacement trustees, and to "neither support nor oppose the Petitions to Appoint." Prior to their resignation, respondents were required to divide the joint assets held by the trusts for Brad and Michelle. The settlement agreement also provided for payment of a $14.5 million termination fee to respondents. The agreement also was "conditioned on and shall not become effective unless and until. . . . (c) the two pending Orders to Show cause regarding appointing a [GAL] for Bradford and removing Sherry/Dew as Co-Trustees of the 1992 Trust . . . are discharged. . . . [If the] OSCs are not discharged after the Approval Orders are entered and on or before the Effective Date, this Agreement shall be null and void."

Respondents filed a petition for approval of the settlement agreement. Appellants filed a joinder to the petition; they also filed a petition to approve replacement trustees following the resignation of FRTC.

Rulings by the Probate Court

In June 2019, the probate court held a hearing on the pending petitions and issued a tentative ruling (initial ruling), expressing many concerns with the proposed settlement. Specifically, the court identified the following key issues: "(1) whether the FRTC Trustees' total termination fees of $14,500,000 are reasonable; (2) what protections there are against strategic decanting of Bradford's trust assets" if the assets were moved into a trust in Nevada; "(3) whether the proposed successor trustees are qualified and suitable;" (4) the suitability of the proposed successor corporate trustee to FRTC; "(5) whether Bradford truly understands the Settlement and whether it is in his best interests; and (6) whether certain terms of the settlement are consistent with Bradford's interests or public policy of California." As the court concluded, "[i]n short, the agreement at issue is silent related to the suitability of the proposed management of the Trusts going forward of these very large amount of funds for a person with limited intellectual abilities." At the hearing, Brad's counsel stated that she would not consent to the appointment of a GAL and argued that such an appointment would void the settlement agreement. The court continued the matter to allow the parties to modify the settlement, consent to appointment of a GAL, or "persuade the court that its concerns were not justified."

The court held a second hearing on the petitions and OSCs on September 13, 2019. On September 27, 2019, the court issued a minute order with attached "further rulings." Initially, the court noted that although the parties engaged in an additional mediation session following the June 2019 hearing, they had not consented to appointment of a GAL, nor had they addressed the court's concerns raised in the initial ruling. The court found that the proposed settlement "neither resolves the contributing causes to this litigation nor ensures the safekeeping of those funds left in trust for the benefit of Bradford." Moreover, it found that the parties had failed to adequately explain why various conflicts of interest should not disqualify the proposed replacement trustees, nor had they addressed "the voluminous evidence on Bradford's disabilities and capacity."

The court also detailed at length its concerns with proposed trustees Sherry, Dew, and Doug Wiley, Sherry's former attorney.

The court found that the settlement agreement "improperly interferes with the administration of justice" by effectively preventing the court "from hearing any voice other than Sherry's on the fitness of the proposed successor trustees." The court further found multiple provisions of the settlement agreement contrary to public policy, citing the provisions preventing the court from hearing from other parties regarding the proposed successor trustees, and "apparently preventing the court from appointing a GAL without voiding the settlement." The court noted that the FRTC trustees "may have abandoned their fiduciary duties to Bradford in agreeing to this Settlement," as the trustees had "alleged that Sherry and others are manipulating Bradford." The court also found the settlement agreement's dispute resolution provision was unenforceable because it was unclear what the parties meant when agreeing to submit to "final and binding" resolution by a mediator.

The further rulings also included the following paragraph: "The Court grants-in-part the Petition for Approval insofar as the Settlement addresses the FRTC Trustees' termination fees, resignation of the FRTC Trustees . . . , and the plan to divide the entangled trust assets of Michelle and Bradford. The Court is satisfied by the extensive briefing by both sides on the reasonableness of, and bases for, the termination fees, and follows [the prior trial court ruling] that Bradford had capacity specifically to exercise his power to remove the trustees." The court noted that Brad had not disputed FRTC's proposed plan to disentangle assets. The court continued the petition to approve replacement trustees and "the balance of the" petition for approval, stating that "these petitions involve unresolved issues with the fitness of the proposed trustees, Bradford's capacity and best interests, and the terms of the Settlement, particularly those terms requiring silence and discharge of the OSC re: GAL. . . . [T]he Court must be assured that it will be acting in Bradford's best interests in approving the Settlement."

The court also appointed a GAL for Brad, citing its duty to ensure that the settlement was in Brad's best interest and its concerns as to Brad's limited capacity, and pursuant to its OSC. Specifically, the court ordered the GAL appointed for the following limited purposes: "first and foremost, facilitating a new settlement agreement that this Court can approve consistent with public policy and which is in Bradford's best interests. The GAL should also look into whether the Court can grant Bradford's request to appoint Sherry as trustee." Additionally, if "it proves impossible to broker a new agreement, the GAL should provide the Court with a report on how to streamline future litigation."

On its own motion, the court also appointed a financial expert under Evidence Code section 730. The court directed the financial expert to provide an opinion on the suitability of the proposed successor corporate trustee. The court entered its further rulings in each of the five pending trust cases.

Appellants' Challenges to the Rulings

In early October 2019, appellants filed notices that the settlement agreement was null and void due to the court's rulings. They also filed objections to the initial ruling and the further rulings.

Between October and December 2019, appellants filed multiple petitions for writ of mandate with this court challenging (1) the probate court's appointment of the GAL; 2) the probate court's order striking statements of disqualification against it; and (3) the probate court's authority to grant the settlement in part under the terms of the settlement agreement. We denied these petitions.

In November 2019, appellants filed five appeals, one for each trust at issue, from the court's September 27, 2019 further rulings. In the probate court, appellants also filed a notice of automatic stay on November 22, 2019, as well as a motion to disqualify the GAL.

The five appeals have not yet been consolidated, but the parties agree that each is based upon the same grounds. The parties submitted substantively identical filings in support of and in opposition to the motion to dismiss in each appeal. Accordingly, our discussion here applies to all five appeals.

The probate court held a hearing on December 4, 2019 and denied appellants' motion to disqualify the GAL, ordering the GAL to submit her report by January 21, 2020. The court also rejected the notice of automatic stay and denied Brad's oral request for a stay. According to the court, "there doesn't appear at this time to be a final appealable order as to the merits so as to give rise to stay." The court reasoned that possibly apart from the order appointing the GAL, the other rulings "by definition are not final orders, and contemplate further hearings." When Brad's counsel argued that the court's order was an appealable order under the Probate Code, the court responded "I didn't make any such order." Brad's counsel then pointed out the court's language granting in part the petition for approval. The court reiterated that was "not a final order. . . . Right now all it is is it's continued for further hearing. I indicated some parts of it should be approved. I actually haven't approved it because there is no order approving it. All I have is a further ruling."

On December 12, 2019, respondents moved to dismiss the appeals, arguing that the court's further rulings were not final orders on the petition to approve the settlement, and therefore not appealable. Appellants opposed. As they did in their notices of appeal, appellants cited Probate Code sections 1304 and 1300, subdivision (c) (1300(c)) as the bases for the appeal. They contended that by granting in part the petition for approval, the court issued an appealable order on the settlement agreement.

Respondents also claimed that the appeals should be dismissed based on equitable principles and because they were patently frivolous. We do not reach these claims.

All further statutory references are to the Probate Code unless otherwise indicated.

Appellants also filed a petition for writ of supersedeas seeking to enforce an "automatic stay" during the pendency of the appeal. That petition remains pending. --------

DISCUSSION

Respondents challenge the appealability of the court's further rulings. They argue that the court's further rulings constituted only interim, not final, orders regarding the settlement agreement and that the court's partial "grant" of the petition was effectively commentary "on which portions of the settlement it was inclined to approve." Further, respondents contend that the only orders issued by the court as part of the further rulings were the orders appointing a GAL and a financial expert, neither of which is appealable. Appellants contend the trial court's further rulings are final, appealable orders under sections 1304 and 1300(c). We conclude the court's further rulings contain no appealable orders and therefore dismiss the appeals.

"Generally, rulings in probate proceedings are not appealable unless expressly made appealable by statute." (In re Estate of Martin (1999) 72 Cal.App.4th 1438, 1442, citing Varney v. Superior Court (1992) 10 Cal.App.4th 1092, 1098.) Thus, "[a]ppeals which may be taken from orders in probate proceedings are set forth in . . . the Probate Code, and its provisions are exclusive." (Estate of Stoddart (2004) 115 Cal.App.4th 1118, 1125-1126; see also Code Civ. Proc., § 904.1, subd. (a)(10) [appeal may be taken from "an order made appealable by the provisions of the Probate Code"].)

Section 1304, subdivision (a) provides for the appeal of the grant or denial of "[a]ny final order under Chapter 3 (commencing with Section 17200)," with exceptions not relevant here. Here, the petition for approval of the settlement was filed pursuant to section 17200, subdivision (a). Thus, appellants contend that the court's order granting the petition in part "created an appealable order regarding a ruling" on that petition. But appellants cannot show that the court's further rulings included a "final" order on the petition for approval of the settlement. Indeed, the probate court expressly continued the remainder of the petition for further consideration. It also continued the hearing on the petition to approve replacement trustees. Appellants contend that the probate court's refusal to approve the remainder of the settlement was an effective denial of those portions. They cite no authority for this proposition and we do not find it supported by the record. The further rulings set forth in detail the court's concerns with the settlement agreement and its finding that it needed further information to ensure that the settlement was in Brad's best interest. The court did not reject the settlement agreement, but continued all pending matters to allow the parties and the court, with the assistance of the GAL and financial expert, to attempt to reach a satisfactory resolution. Although Brad argued that appointment of the GAL rendered the settlement void, the court made no finding on that issue. As such, the further rulings are not final orders and therefore are not appealable under section 1304.

Appellant also argues that the court's further rulings are appealable pursuant to section 1300(c), which provides: "In all proceedings governed by this code, an appeal may be taken from the making of, or the refusal to make, any of the following orders. . . . (c) Authorizing, instructing, or directing a fiduciary, or approving or confirming the acts of a fiduciary." Appellants assert that this subdivision applies to the court's further rulings because the court directed respondents, as fiduciary trustees, to "pay themselves $14.5 million in termination fees [and] also instructed them to divide entangled trust assets." We disagree.

Appellants focus on the court's language "granting in part" the petition as key to their argument that the court issued appealable orders. However, "the appealability of an order of the probate court is determined not from its form, but from its legal effect." (In re Estate of Martin, supra, 72 Cal.App.4th at p. 1442.) In the context of the court's full discussion, the court's further rulings did not operate as a final order, but rather as a statement of the portions of the settlement it was inclined to approve. For example, the court found that the proposed termination fees were reasonable and adequately supported, that respondents could resign as trustees, and that the parties agreed to the plan to disentangle trust assets. It did not, as appellants contend, "direct" respondents to proceed with dividing assets or paying themselves the termination fees. Nor could it, as the court continued the hearing to later address the remainder of the petition to approve the settlement agreement as well as the petition to approve replacement trustees. Tellingly, the effectiveness of the settlement agreement was expressly conditioned on the court approving both the settlement agreement and the appointment of replacement trustees.

In fact, there is no evidence that any of the parties has taken the position in the probate court that the further rulings should operate as an order authorizing the trustees to act. Appellants argued that the settlement agreement is void and respondents claimed that the probate court simply continued the pending petitions.

Our conclusion is further supported by the court's subsequent statements that it unequivocally did not intend to issue any final orders approving or denying the settlement. In addition to the statements the court made at the December 4, 2019 hearing, the order striking appellants' disqualification statements observes that "the overall effect of the Court's rulings has been for additional facts and argument to be presented to the Court by the GAL and the Section 730 expert to assist the Court in making an ultimate decision on the petitions still pending before it." Similarly, the court later reiterated that "In approving parts of the Settlement Agreement and continuing the issue of approval regarding remaining issues . . . [the Court] provides an opportunity for further analysis before a final determination." The court's repeated insistence that it did not intend to make any final determinations on the petition for approval, together with the circumstances of the court's further rulings, persuade us that the rulings do not fall within the scope of appealable orders under section 1300(c).

Finally, we note that the parties appear to agree that the order appointing the GAL is not appealable. Appellants' arguments on appealability focus on the portions of the further rulings granting in part the petition for approval. We have concluded that none of those rulings is appealable. We therefore must dismiss the appeals.

DISPOSITION

The appeals are dismissed. Respondents are awarded their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COLLINS, J. We concur: WILLHITE, ACTING P.J. CURREY, J.


Summaries of

Lund v. First Republic Tr. Co.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR
Jan 30, 2020
B302638 (Cal. Ct. App. Jan. 30, 2020)
Case details for

Lund v. First Republic Tr. Co.

Case Details

Full title:BRADFORD D. LUND et al., Appellants, v. FIRST REPUBLIC TRUST COMPANY et…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

Date published: Jan 30, 2020

Citations

B302638 (Cal. Ct. App. Jan. 30, 2020)

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