Opinion
A145987
12-23-2016
PATRICIA POWER, Plaintiff and Respondent, v. MARK POWER, Defendant and Respondent; DIANE ZIMMERMAN et al. as Trustees, Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SCV252844)
Appellants Diane Zimmerman and Julie Patiskas, the trustees of a spendthrift trust established for their brother, Mark Power, contend the trial court erred when it ordered the trust to satisfy a spousal support award to Mark's estranged wife. The court followed and applied Probate Code section 15305 in making the award and its discretionary rulings are supported by the record, so we affirm.
Further statutory citations are to the Probate Code.
BACKGROUND
Patricia Power brought this action in Sonoma County Superior Court to enforce a spousal support judgment issued in the couple's Napa County Superior Court divorce. Her estranged husband Mark is the primary beneficiary of the Mark R. Power 2007 trust (the Trust), which has a 1/6 interest in a limited partnership (PVLP Limited Partnership) valued at about $3.5 million. In a 2013 court-approved accounting, the Trust was valued at $760,314. Section 8.04 of the trust is a spendthrift provision designed to keep creditors from reaching trust assets, and provides that the beneficiary "cannot anticipate, assign or encumber the beneficiary's interest in income or principal. Similarly, a creditor of a beneficiary cannot subject the beneficiary's interest in income or principal to the creditor's claims or to legal process before the beneficiary actually receives a distribution." In addition to what he receives from the Trust, Mark has income from other trusts of $1,700 to $1,900 per month.
We will refer to the Powers by their given names to avoid confusion.
Mark's sisters are the trustees. His mother is the grantor. The trustees distribute to Mark monthly whatever is left over from the trust's monthly income after they pay various legal bills, trustees' fees and sums Mark owes on a loan from his mother. They also pay Mark's $2,100 rent directly as part of his monthly distribution.
Mark is argumentative and "always asking for more money." The trustees have frequently sought legal counsel because he gets angry, questions their actions and threatens to sue them. To keep their interaction with Mark "as minimal as possible to keep the contention down," some years ago they decided to pay him $4,400 monthly, later reduced to $3,600, including his rent.
In May 2011 the Napa County superior court ordered Mark to pay Patricia temporary spousal support of $1,904 per month retroactive to January 1, 2011, plus $15,000 in expert and attorney fees. The court ordered that the payments be made directly from the Trust. Patricia requested distribution from the Trust to satisfy the support order, but, with the exception of one $1,500 payment, the trustees denied her request. In 2014 she filed this action in Sonoma County, where the Trust is administered, to compel the trustees to satisfy the support order.
Following a three-day trial, the court issued a statement of decision that set forth in detail its findings of fact and the evidentiary bases. It explained that, under the trust provisions, "[t]he Trustees agree to hold, administer, and distribute the trust assets on the terms described in the Trust. . . . The Trust provides that 'all or any portion of the income and principal' may be distributed in the discretion of the Special Distribution Trustee, which the Trustee 'shall determine using the distribution guidelines set forth in Section 2.01B.['] . . . The Trustees also have the ability to make trust assets available 'for Mark's use and enjoyment.'
"The trustees have the power and authority to make distributions to or withhold distribution from the beneficiary in the manner that best accomplishes the intent and purposes of the Trust. [Citation.] The distribution guidelines in Article 2.01.B include the following: distributions are not to be based solely on the beneficiary's needs (subpart (1)); the [trustee] is to consider 'all other sources of funds known to the [trustee] to be available to the beneficiary, . . . including the beneficiary's ability to obtain gainful employment. . . ; 'Except in rare circumstances, the [trustee] shall not[] make a distribution to a beneficiary who is of legal age but who chooses not to work;' 'Mark has had substance abuse problems in the past; therefore, the [trustee] should not make distributions that would lead to continued problems with substance abuse' (subpart (2)); 'It may be necessary for the [trustee] to request specific information from the beneficiary to determine whether or not it is appropriate to make a distribution to the beneficiary. The [trustee] shall consider the beneficiary's cooperation with the [trustee] in providing this information and the [trustee] is authorized to withhold distribution if the beneficiary is not cooperative in this regard;' there is a list of financial information, including tax returns, that may be requested; 'The [trustee] may also request that the beneficiary provide the Trustee with medical evaluations including psychiatric evaluation and report so [sic] drug and alcohol testing.'"
It is undisputed that Mark has a history of severe alcoholism. The court noted that "[d]espite the power given to them by the Trust, the Trustees don't know whether Mark has made any progress with treatment for his alcoholism because they don't ask. They have followed their aversion to dealing with Mark to override the express purposes of Mark's trust." Moreover, "the evidence showed that, whether for their own convenience and to avoid having to deal with Mark's threats and litigation, or out of fear of Mark, the current Trustees do not follow the Distribution Guidelines and do not ask Mark to provide any of the information to apply the Distribution Guidelines and carry out the intent of the Trustor . . . including their right to require Mark to provide them with financial information relevant to the amounts to be distributed and their right to require testing to ascertain whether Mark has made any actual progress in dealing with his alcoholism."
The court found the Trustees refused to honor the support order so they would avoid a conflict with Mark, who threatened to sue them if they paid "even 'one dollar.' " "The Trustees were very candid in their testimony about the challenges of dealing with Mark. One of their brothers, a former co-Trustee of the Trust resigned previously. Ms. Zimmerman testified that Mark has a history of alcoholism; that he started fighting with all of his family members over money when he started having financial troubles, and that he kept wanting the Trust to give him more money. Mark was described in various testimony and exhibits as difficult to work with, contentious, arguing over everything, often getting angry and threatening to sue, forcing the trustees to seek legal counsel resulting in ongoing costs, and causing the Trust to incur extremely high attorney fees for litigation and mediation with a former Trustee of Mark's Trust whom Mark wanted to remove. The 'practical solution' adopted by the current Trustees after [a predecessor Trustee] resigned has been to give Mark everything there is left to give him—after paying Mark's debts to his birth family—and paying nothing to Patricia under the Support Order." Although the trustees had chosen to pay certain of Mark's debts from the trust, the court noted that "none of Mark's creditors that have been paid directly from the Trust are preferred or secured creditors. For the most part, these debts are owed to the limited partnership and the Trustees have scrupulously seen to it that Mark pays his debts to his birth family, while leaving Patricia with no funds."
Although the Trustees were not legally bound by the Napa support order, the court found they were aware of its terms and had the discretion and authority under the Trust to honor it. "Since the Support Order was entered on May 2, 2011, the former and present Trustees of the Trust have acted beyond the bounds of reasonable judgment, in that they have disregarded the terms and purposes of the trust, and they have acted out of personal self-interest or for their own convenience to protect themselves from retributive lawsuits by Mark and from being subjected to offensive and coercive behavior by Mark should they comply with the terms of the Support Order. This may be an understandable motive, given the evidence regarding Mark's conduct, but it is an 'improper, if not dishonest' motive. . . . It is also beyond the bounds of reason for the Trustees to aid and abet Mark's efforts to deprive Patricia of the benefit of the support ordered by the Napa Court."
The court ordered the Trustees to pay Patricia monthly support pursuant to the Napa order, arrearages of $89,892 plus interest, and costs. The trustees filed a timely appeal after the court denied their motion for a new trial.
The Trustees began making those payments as of January 1, 2015, after the trial.
DISCUSSION
The trial court ordered the trustees to make support payments directly to Patricia pursuant to section 15305 and Ventura County Dept. of Child Support Services v. Brown (2004) 117 Cal.App.4th 144 (Ventura). The trustees concede that section 15305 empowers the court to equitably allocate any distributions they elect to make to Mark as between Mark and Patricia, but they contend the court may not compel them to make distributions directly to Patricia to satisfy her spousal support judgment. They also argue the court's findings that they acted improperly are unsupported by the record and that it failed to consider Mark and Patricia's respective financial positions before it ordered them to pay the full support amount ordered by the Napa court. We disagree.
I. Section 15305
Section 15305 was enacted in 1986 as one of a series of statutes intended to improve existing law relating to spendthrift trusts, in relevant part by giving greater rights to child and spousal support creditors. (Ventura, supra, 117 Cal.App.4th at pp. 150-151.) To that end, it creates an exception to the general rule that a beneficiary's interest in a spendthrift trust may not be transferred or subjected to enforcement of a judgment until it is paid to the beneficiary. (Id. at p. 151; §§15300 [interest], 15301 [principal].) Section 15305, subdivision (c) thus provides: "Whether or not the beneficiary has the right under the trust to compel the trustee to pay income or principal or both to or for the benefit of the beneficiary, the court may, to the extent that the court determines it is equitable and reasonable under the circumstances of the particular case, order the trustee to satisfy all or part of the support judgment out of all or part of future payments that the trustee, pursuant to the exercise of the trustee's discretion, determines to make to or for the benefit of the beneficiary." The Law Revision Commission Comment succinctly explains the reason for the revision: "As a general rule, the beneficiary should not be permitted to have the enjoyment of the interest under the trust while neglecting to support his or her dependents." (Cal. Law Revision Com. com., 54 West's Ann. Prob. Code (1991 ed.) foll. § 15305, p. 556.)
Here, pursuant to section 15305, subdivision (c), the court found it equitable and reasonable under the circumstances to order the trustees to honor the Napa court's spousal support order. It found the trustees "have acted beyond the bounds of reasonable judgment, in that they have disregarded the terms and purposes of the trust, and they have acted out of personal self-interest or for their own convenience and to protect themselves from retributive lawsuits by Mark and from being subjected to offensive and coercive behavior by Mark . . . . It is also beyond the bounds of reason for the Trustees to aid and abet Mark's efforts to deprive Patricia of the benefit of the support ordered by the Napa Court." Although the Probate Code expressly elevates support creditors to the status of preferred creditors (§ 15306.5), the trustees cooperated with Mark "to completely frustrate the Support Order" even while paying Mark's unpreferred creditors. The court's factual determinations are supported by the record, which we have carefully reviewed, and amply support its exercise of discretion under section 15305, subdivision (c).
The Trustees disagree. They argue the court was unjustified in overriding their discretion because in light of Napa County's lack of jurisdiction over the trust their decision not to honor the support order was not illegal, that they had no duty to honor it until Patricia perfected her claim by obtaining a distribution order in Sonoma, and that there was no evidence they "acted in a frame of mind not in accord with the Trust." These points are irrelevant.
The only determination the court was required to make was whether ordering the trustees to satisfy Patricia's support order was equitable and reasonable under the circumstances. (§ 15035.) Based on ample evidence, the court found the trustees knew of the support order and had the discretion to honor it, but chose not to—even while paying Mark's debts to unpreferred, unsecured creditors, including family debts—out of a desire to avoid his offensive behavior and litigious tendencies. It also found the trustees made payments to Mark without regard to the trustor's intent that they monitor his alcoholism and efforts to remain gainfully employed. Under these circumstances the court found it equitable and reasonable to compel the trustees to satisfy the support order. Those findings are amply supported by the record and, particularly in view of the statutory and public policy objectives favoring the payment of support (see Ventura, supra, 117 Cal.App.4th at pp. 154, 155), well within the court's discretion.
The trustees urge us to draw different conclusions from the record. For example, they assert they did not "aid and abet" Mark to avoid his support obligation, as the trial court ruled, but that they "simply did not take on [his] independent obligation to do so" and that it was reasonable to pay Mark's promissory notes and housing costs from the Trust rather than his support obligation. They argue the court erred in finding they acted with an improper motive because there was no evidence the settlor intended the trust to benefit estranged or former spouses. They maintain the court acted punitively, failed to weigh Mark's and Patricia's respective needs, and issued an excessive award in ordering them to honor the support award in full. These claims, in essence, challenge the sufficiency of the evidence to support the court's determination that it was equitable and reasonable to require the trustees to pay the amount of support that was found appropriate and ordered in the divorce proceedings. "With rhythmic regularity it is necessary for us to say that where the findings are attacked for insufficiency of the evidence, our power begins and ends with a determination as to whether there is any substantial evidence to support them; that we have no power to judge of the effect or value of the evidence, to weigh the evidence, to consider the credibility of the witnesses, or to resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom." (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, §365 pp. 423-424, quoting Overton v. Vita-Food Corp. (1949) 94 Cal.App.2d 367, 370.) Such is the case here. An ample evidentiary basis supports the court's determinations, so it is beyond our purview to disturb them.
II. Ventura
The trustees argue at length that Ventura does not support the court's decision to override their discretion. But while Ventura provides an illustration of the court's authority under section 15035 over assets held in spendthrift trusts, its specific holding is largely irrelevant to the question before us. As a matter of first impression, Ventura holds that section 15305 applies even where the trustee attempts to insulate trust assets from a support order by withholding all distributions from the beneficiary. While the trustee there conceded that under section 15305 the court could compel it to make support payments out of amounts the trustee elected to pay to the beneficiary—as happened here, at least with respect to Mark's ongoing support obligation—it asserted that this authority was "limited to those payments that the trustee has chosen to make in the exercise of his discretion." (Ventura, supra, 117 Cal.App.4th at p. 149.)
The court of appeal disagreed. It declined to interpret section 15305 as permitting trustees to thwart court-ordered support obligations by declining to make discretionary distributions to the beneficiary. Rather, based on the legislative history, out-of-state authority interpreting a similar provision and the strong public policy favoring the payment of support, it concluded section 15305 authorizes courts to compel the trustee to pay spousal or child support from the trust whether or not the trustee elects to make distributions to the beneficiary. "The fact that the statute refers to payments made by the trustee demonstrates legislative intent that the trustee make distributions from the trust." (Ventura, supra, 117 Cal.App.4th at p. 155.) Thus, "under section 15305, subdivision (c), a court may overcome the trustee's discretion under the narrow circumstances present here: when there is an enforceable child support judgment that the trustee refuses to satisfy. Under these circumstances, the trial court may order the trustee to satisfy past due and ongoing support obligations directly from the trust." (Ibid; see Pratt v. Ferguson (2016) 3 Cal.App.5th 102 [reversing trial court's denial of a petition to compel support payments from spendthrift trust] (Pratt).)
In this case, of course, the trustees did not withhold distributions from Mark, so Ventura's specific holding and the factual distinction that the trustees in that case were found to have acted in bad faith are largely irrelevant here. Accordingly, we need not address the trustees' lengthy attempts to distinguish Ventura on its facts. Even so, we agree with the trial court that there is no "material difference between the actions of the Trustee in the Ventura case who refused to make distributions so that a delinquent support order could be paid, and the Trustees in this case, who made distributions but spent it on 'everything but' payment of Patricia's enforceable support order, allowing it to become so delinquent that it would require an invasion of the trust principal to satisfy the arrears."
It was stipulated here that the trustees did not act in bad faith. --------
To the extent the trustees seem to argue that Ventura restricts the court's authority to order trustees to pay support only to cases where bad faith is found, we disagree. As the trial court noted, nothing in Ventura limits the court's power under section 15305 to cases in which the trustee acts in bad faith. Ventura observes, rather, that "[t]he court will not interfere with a trustee's exercise of discretion 'unless the trustee, in exercising or failing to exercise the power acts dishonestly, or with an improper even though not dishonest motive, or fails to use his judgment, or acts beyond the bounds of reasonable judgment." (Ventura, supra, 117 Cal.App.4th at p. 154, quoting Rest.2d Trusts, § 157, com. e, p. 331, italics added.) Nor does section 15305 itself require bad faith for the court to order payment of a support obligation from a trust. It also makes no difference whether the order required the trustees to distribute principal as well as income, or ordered them to pay arrears as well as ongoing support. Under the plain statutory language, the court need only find that such an order is "equitable and reasonable" under the circumstances. (see § 15305, subd. (c).) The court so found here, and there is no basis to disturb its conclusion.
The trustees' reliance on Young v. McCoy (2007) 147 Cal.App.4th 1078 (Young) is also misplaced. That case involved the application of section 15305.5, which concerns restitution judgments, not section 15305, which concerns support payments. Moreover, the trustee in Young declined to make unneeded support distributions to the beneficiary, while in this case the trustees exercised their discretion to make payments to the Mark but refused to make distributions to Patricia, his support creditor. (Id. at pp. 1081, 1087-1088.) Young is thus inapposite.
DISPOSITION
The judgment is affirmed. Patricia is awarded costs on appeal. (Cal. Rules of Court, rule 8.278 (a)(2).) Patricia's request for judicial notice is denied as unnecessary for resolution of any issue on appeal.
/s/_________
Siggins, J.
We concur:
/s/_________
Pollak, Acting P.J.
/s/_________
Jenkins, J.