Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Los Angeles County Super. Ct. No. BC 338407
APPEAL from a judgment of the Superior Court of Los Angeles County, William F. Fahey, Judge. Affirmed.
Luce, Forward, Hamilton & Scripps, Bruce S. Ross, Charles A. Bird, Geraldine A. Wyle and Vivian Lee Thoreen for Plaintiff and Appellant.
Mitchell Silberberg & Knupp, Peter B. Gelblum and Diana L. Abdulian for Defendants and Respondents.
FLIER, J.
Appellant Jane E. Siegel, administrator of the estate of Lawrence Israel, filed a legal malpractice action against the respondents, the firm of Silberberg, Mitchell & Knupp and two of its attorneys, Allan B. Cutrow and Stanley Arenberg. Appellant’s action is predicated on the preparation by respondents of an amendment to a trust agreement that disposed of the assets of Lawrence Israel and his wife. The trial court sustained respondents’ demurrer to the second amended complaint without leave to amend on the ground that the statute of limitations barred the action. On appeal, respondents contend among other things that, as a matter of law, appellant was not injured by the preparation and execution of the amendment in question. We agree and affirm.
FACTS
“We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “While allegations of the complaint are deemed to be true in ruling on the demurrers, where an allegation is contrary to law or to a fact of which a court may take judicial notice, it is to be treated as a nullity. Any allegations in the complaint which are inconsistent with facts set out in an unambiguous written instrument, incorporated by reference, may be stricken.” (Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955.) “We may also take notice of exhibits attached to the complaints. If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.) The latter rule is particularly apropos in this appeal.
The second amended complaint (hereafter the complaint) alleges that Lawrence (Larry) and Marcia Israel engaged respondent firm, and specifically respondent Cutrow, in 1989 for the purpose of estate planning. The majority of the Israels’ estate was in a joint revocable trust that was originally created in 1972 and was amended several times. The complaint alleges that under the seventh amendment to the trust, the disposition, referred to as the “Last Dispositive Provisions,” of the trust was that the Israels’ two daughters, Judith Israel and appellant, were each to receive one-third of the residue of the trust on the surviving spouse’s death. The remainder of the trust was to be distributed to various family and friends, to charitable organizations and to the Marcia and Lawrence Israel Charitable Foundation (Foundation). Appellant was to serve on the Foundation governing body and was to serve as the administrator of the Foundation.
All references are to the second amended complaint.
Lawrence Israel is referred to throughout as Larry and we follow this usage.
On the first spouse’s death, the trust was to be divided into a “Survivor’s Trust” and a “Marital Deduction Trust.” The Last Dispositive Provisions were to become irrevocable on the death of the first spouse. The surviving spouse would receive all income from the Marital Deduction Trust and potentially some or all of its principal, if necessary. Appellant, Judith Israel and the Foundation were not entitled to any sums during the surviving spouse’s lifetime. The foregoing three were also not entitled to any information about the trust upon the first spouse’s death.
The trust agreement defines the Survivor’s Trust as being composed of the surviving spouse’s interest in the community estate, and the survivor’s separate and quasi-community property. The Marital Deduction Trust was to consist of the maximum amount of the trust estate that will qualify for the federal estate tax marital deduction at the death of the first spouse to die. According to appellant, the Marital Deduction Trust held the deceased’s spouse’s one-half community share of the Trust assets, while the Survivor’s Trust held the surviving spouse’s half of the community. While the complaint refers only to these two trusts as being created on the death of the first spouse, the trust agreement provides that, after the creation of these two trusts, a third trust, the credit trust, was to be created for the balance of the trust estate. Since the complaint does not even refer to the credit trust, it appears that this trust did not play a role.
We note at this point for clarity’s sake that the gravamen of appellant’s action is that the foregoing represents Larry’s actual testamentary intent and that all changes made thereafter in the trust’s provisions, insofar as they deprived appellant and her sister of one-third shares of the trust, were contrary to Larry’s testamentary intent.
After the seventh amendment was executed in January 1991, Larry became terminally ill with cancer. He became bedridden by the late summer of 1991 and remained “bedridden, gravely ill, heavily medicated with morphine, terribly physically disabled and weakened by chemotherapy and his cancer, and completely dependent upon Marcia for his care. In fact, Larry’s health continued to consistently deteriorate until his death on September 26, 1991.”
The complaint alleges that on or about August 27, 1991, Larry was presented with the eighth amendment to the trust, which he executed as Marcia guided his hand while he signed the document. Respondents did not explain the eighth amendment to Larry, nor did they make an effort to determine whether Larry understood this amendment. This amendment, which is attached to the complaint as an exhibit, curtailed appellant’s and Judith Israel’s benefits under the trust agreement to some extent. The sisters were no longer to receive an outright allocation of one-third of the trust estate but were to receive the income of their respective one-third shares, and the principal at a rate of $100,000 per year. While there were other provisions, they are not material to this appeal; the substance of it is that the eighth amendment allegedly did not conform to Larry’s actual testamentary intent.
The amendment that is central to this appeal is the ninth amendment. On August 27, 1991, Marcia Israel contacted respondent Cutrow and instructed him to draft an amendment that would give Marcia “unfettered control of all of the Trust’s assets upon Larry’s death.” Since Cutrow was leaving on vacation, he instructed respondent Arenberg to prepare the amendment. On August 28, 1991, Arenberg and a notary employed by the respondent firm, Diane Fortney, and an accountant employed by the Israels, Brian Frazier, entered Larry’s bedroom. Larry “was unable to lift himself to a sitting position. Larry did not respond to any greeting from anyone in the group. When asked whether he wanted to sign the Ninth Amendment, Larry said, ‘No.’ Marcia then climbed onto Larry’s sickbed, whispered to him, and held his hand to form Larry’s purported ‘signature,’ moving his hand across the page.” Marcia is alleged to have also “moved Larry’s hand across the page” to sign a letter drafted by the respondents in which they endeavored to explain the ninth amendment. At no time did respondents confirm that the ninth amendment represented Larry’s testamentary intent, even though they had a fiduciary duty to do so.
The complaint alleges: “Although the changes made in the Ninth Amendment ostensibly only impacted the ‘administration’ of the assets of the Marital Deduction Trust (the 1/2 interest in the Trust estate of the first spouse to die) and made no changes to the disposition of the assets, the legal effect of the changes set forth in the Ninth Amendment was to pour the assets of the Marital Deduction Trust into the Survivor’s Trust, giving the surviving spouse (who, at the time, was clearly going to be Marcia, given the circumstances surrounding Larry’s impending death) the ability to not only administer the assets of the entire Trust as she saw fit, but also the absolute power to change the entire dispositive scheme of all of the assets of the Trust. This change, which is not evident on the face of the Ninth Amendment, allowed Marcia at her sole and absolute discretion, up through the time of her death, to be able to fully ignore Larry’s estate planning intentions, which were that his daughters would each have a one-third share of his estate on Marcia’s death.” (Original italics.)
The complaint goes on to allege that Marcia Israel’s acts relating to the trust “were revocable until her death” and that therefore “the ultimate impact of the Ninth Amendment on Larry’s testamentary intentions could not be confirmed until Marcia’s death.” The theory of the complaint is that neither Larry nor Larry’s estate suffered any damages until Marcia Israel’s death on August 17, 2004, when Marcia’s disposition of the assets of the trust became irrevocable by virtue of her death. Judith Israel and appellant “were conclusively disinherited upon Marcia’s death.”
The complaint alleges that respondents willfully concealed the tainted circumstances of the execution, by Larry, of the ninth amendment by filing on November 16, 1992, on Marcia’s behalf, a petition for an order authorizing the trustee to accept additions to the trust. This petition, which is attached to the complaint as an exhibit, contains the original trust agreement and all nine amendments to that agreement; appellant and her sister were served with copies of this petition. The theory of the complaint is that, by referring to the ninth amendment and attaching it to this petition, respondents falsely represented, by clear implication, that this amendment was valid. The complaint goes on to allege that respondents failed to advise the court in this 1992 petition, and appellant and her sister, that the ninth amendment was void “due to its lack of due execution or its procurement by undue influence.”
The complaint alleges that Larry and his estate were injured since his right to bequeath his property to appellant and her sister in accordance with the Last Dispositive Provisions in effect at the time of the seventh amendment to the trust was frustrated “as a proximate cause of [respondents’] negligent representation.”
We note only in the margin allegations of the complaint that appellant joined in an action that sought to set aside the ninth amendment and that also alleged the wrongful taking of trust property, and that this action was settled.
DISCUSSION
1. The Structure and Operation of the Trust Agreement and the Ninth Amendment
The parties agree that the fifth amendment of the trust agreement fully restated the agreement. Accordingly, our references are to the trust agreement as it appears in the fifth amendment.
The provisions of the trust agreement that are relevant to this appeal are paragraphs C, D and F. For reasons that will become apparent, we describe first the operation of paragraph D.
Paragraph D set forth how the Marital Deduction Trust was to be administered. Prior to the ninth amendment, paragraph D provided that the surviving spouse was to receive all income from the Marital Deduction Trust (section 1); that if the income from this trust was insufficient, the trustee was empowered to pay to the surviving spouse some or all of the principal of this trust (section 2); and section 3 provided that upon the surviving spouse’s death, this trust was to be distributed “to such one or more of the Settlors’ children and issue and on such terms and conditions, either outright or in trust, as the Surviving Settlor shall appoint by a Will specifically referring to and exercising this special power of appointment.” Section 3 closed by stating that “[a]ny of the Marital Trust not so appointed by the Surviving Settlor shall be administered as provided in Paragraph F. below.” Paragraph F dealt with the distribution of the trust estate following the death of both spouses.
It is to be remembered that this trust held the deceased’s spouse’s half of the community.
The ninth amendment deleted all three sections of paragraph D. In lieu of the old section 1, the new section 1 provided: “Notwithstanding anything to the contrary contained herein, upon the determination of the Marital Deduction Trust the assets constituting such trust shall be allocated to the Survivor’s Trust and administered in accordance with the terms and conditions relating to the Survivor’s Trust, effective as of the date of death of the Deceased Settlor.” Sections 2 and 3 of paragraph D were left intentionally blank. The foregoing is the totality of the ninth amendment.
Paragraph C of article 5 of the trust agreement, which sets forth how the Survivor’s Trust was to be administered, paralleled, with some exceptions, the Marital Deduction Trust prior to the ninth amendment. That is, section 1 provided that the surviving spouse was to receive all income from the Survivor’s Trust; section 2 stated that if the income from this trust was insufficient, the trustee was empowered to pay to the surviving spouse some or all of the principal of this trust; and section 3 gave the surviving spouse the right to require the trustee make distributions to third persons from the principal of the trust. Section 4 required the trustee to make the distributions on the surviving spouse’s death “on such terms and conditions, either outright or in trust, as the Surviving Settlor may appoint by a Will specifically referring to and exercising this general power of appointment. This power of appointment shall be exercisable by the Surviving Settlor alone and in all events.” Section 4 closes by stating: “Any of the Survivor’s Trust not appointed by the Surviving Settlor shall be administered as provided in Paragraph F. below.”
Unlike the Marital Deduction Trust, which required a distribution to the children and issue of the second spouse to die, the Survivor’s Trust (paragraph C) left the selection of beneficiaries solely in the hands of the surviving spouse. When coupled with the fact that the ninth amendment allocated the assets of the Marital Deduction Trust to the Survivor’s Trust, it was evident that the surviving spouse had unfettered discretion under the ninth amendment in designating the party or parties who were to receive the trust assets upon the surviving spouse’s death. As we discuss below in part 2, it is another matter whether, prior to the ninth amendment, the surviving spouse was also in a position to disinherit appellant and her sister, a decision that was clearly within the powers of the surviving spouse as a result of the ninth amendment.
The “second spouse to die” is another way of referring to the surviving spouse.
Paragraph F of article 5 was to operate following the death of both spouses. It was under the sixth amendment to paragraph F that appellant and her sister were each to receive one-third of the trust estate. Paragraph F would become operative only if the Marital Deduction and Survivor’s Trusts and, after the ninth amendment, the Survivor’s Trust was not exhausted by appointments to various beneficiaries.
2. Larry Was Not Injured by the Ninth Amendment
As we have already pointed out, appellant’s action is predicated on the theory that the ninth amendment nullified Larry’s testamentary intent, which was that his two children, appellant and her sister, would each receive one-third of the trust estate.
Respondents contend that Larry was not injured by the ninth amendment since Marcia Israel, as the surviving spouse, had the power, prior to the ninth amendment, to effectively disinherit appellant and her sister. That is, respondents claim that the ninth amendment did not newly empower Marcia Israel to disinherit her children; she had that power beginning with the fifth amendment, if not before, a circumstance Larry was aware of before his illness and death.
This contention is well taken. There is nothing in either paragraph C (Survivor’s Trust) or D (Marital Deduction Trust) that required the surviving spouse to leave anything to be distributed under paragraph F, which is the provision under which appellant and her sister were to receive one-third of the trust estate. Both paragraph C and D close by providing that anything not appointed under these two paragraphs was to be distributed under paragraph F; but there is nothing that requires the surviving spouse to leave something to be administered under paragraph F. The surviving spouse could dispose of the entirety of the Survivor’s and Marital Deduction Trusts under, respectively, sections 4 and 3.
It is true that section 3 of paragraph D (Marital Deduction Trust), which was deleted by the ninth amendment, differed from section 4 of paragraph C (Survivor’s Trust) in that the former required the surviving spouse to dispose of this trust by appointing it “to such one or more of the Settlors’ children and issue,” while the latter contained no such provision. The two sections also differ in that section 3 of paragraph D precluded an appointment of the trust for the benefit of the surviving spouse or his or her estate, and that section 4 of paragraph C has no such limitation.
These limitations on section 3 of paragraph D did not prevent the surviving spouse from disinheriting appellant and her sister. Under section 3 of paragraph D, the surviving spouse could appoint all of that trust to “issue,” which includes grandchildren and “lawful blood descendants and lawfully adopted children,” as “issue” is defined by paragraph E of article 4. This would leave appellant and her sister with nothing.
In addition, it appears that the surviving spouse was not required to appoint all of the principal and undistributed income of the Marital Deduction Trust to children and issue. This appears from the phrase that we have italicized: “On the Surviving Settlor’s death, the Trustee shall distribute so much of the principal and accrued but undistributed income of the Marital Deduction Trust, up to the whole thereof . . . as the Surviving Settlor shall appoint.” Thus, the surviving spouse could appoint the bulk of the Marital Deduction Trust to a third party, leaving only a little to the children or issue.
We do not agree with appellant that “Marcia had only narrow options under the Fifth Amendment. True, she could adjust the distributions to Siegel [appellant] and her sister, but only within the class of beneficiaries including those two and their children.” There are two reasons why this is mistaken. First, it ignores that there is no limitation on the power of the surviving spouse to distribute the assets of the Survivor’s Trust; the limitation to children and issue appears only in the Marital Deduction Trust. Thus, Marcia Israel’s “options” under the Survivor’s Trust were not “narrow” but rather unfettered. Second, in the instance of the Marital Deduction Trust, the appointment was to be made to “one or more” of the Israels’ children “and issue.” Thus, the surviving spouse could appoint the Marital Deduction Trust to one grandchild and satisfy the terms of this trust, leaving appellant and her sister with nothing. It is also true that even in the instance of the child or issue to whom the surviving spouse made an appointment from the Marital Deduction Trust, there was no requirement that all of the trust be conveyed to the child or issue.
Appellant’s contention that she and her sister “were also income beneficiaries and discretionary beneficiaries for education, lifestyle, and medical support” and that these provisions, left intact by the ninth amendment, were “much superior to being virtually disinherited upon Marcia’s death” is also mistaken. References to education, lifestyle and medical support are to the eighth amendment, which altered section 2 of paragraph F. This provision came into operation only upon the death of the surviving spouse. As we have noted, the surviving spouse was under no obligation to fund paragraph F by not exhausting the Survivor’s and Marital Deduction Trusts by making appointments to other beneficiaries. Thus, appellant and her sister were not guaranteed to become “income beneficiaries and discretionary beneficiaries for education, lifestyle, and medical support” unless the surviving spouse chose to fund paragraph F, something the surviving spouse was not obligated to do.
In sum, the injury that appellant claims was done to Larry by the ninth amendment, i.e., the nullification of his intent to leave his children each one-third of the trust estate, was not enabled by the ninth amendment; Marcia Israel had the power to disinherit the sisters under the trust agreement as it appears in the fifth amendment, well before Larry fell ill and died.
The point becomes even clearer when approached in terms of causation, specifically causation-in-fact. Marcia Israel decided to disinherit her daughters; this decision was hers alone. Once she made that decision, she needed the power to implement it. She had that power under section 4 of paragraph C by appointing all of the trust assets under section 4, leaving nothing for paragraph F. She had the same power under section 3 of paragraph D, which the ninth amendment deleted, because she could appoint to issue only, and then not the entirety of the Marital Deduction Trust. Thus, the event (disinheritance) would have occurred without respondents’ drafting of the ninth amendment, and the execution by Larry of that amendment. In short, the ninth amendment had nothing to do with Marcia Israel’s decision to disinherit her daughters.
“The defendant’s conduct is a cause of the event if the event would not have occurred but for that conduct; conversely, the defendant’s conduct is not a cause of the event, if the event would have occurred without it.” (Prosser & Keeton on Torts (5th ed.) § 41, p. 266.) As Witkin observes, the “but for” rule has traditionally been applied to determine cause in fact. (6 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 1185, p. 552.) Or, as one court has put it: “ ‘If the conduct which is claimed to have caused the injury had nothing at all to do with the injuries, it could not be said that the conduct was a factor, let alone a substantial factor, in the production of the injuries.’ ” (Mitchell v. Gonzales (1991) 54 Cal.3d 1041, 1052, citing Doupnik v. General Motors Corp. (1990) 225 Cal.App.3d 849, 861.)
But this case does not hinge on causation; this is not a case where the plaintiff has in fact been injured, but the cause of the injury is not an act of the defendant. In this case the plaintiff, i.e. appellant, has not been injured by the events on which her claim is predicated, which is the preparation and execution of the ninth amendment. Appellant’s case hangs by the slender thread that Marcia Israel’s act in disinheriting the sisters was enabled by the ninth amendment; this thread is severed by the fact that, as a matter of law, this is not true.
“It is fundamental that a negligent act is not actionable unless it results in injury to another (35 Cal.Jur.2d, Negligence, § 52, p. 549, enunciating the complementary Latin reciprocals ‘injuria absque damno’ and ‘damnum absque injuria,’ which properly interpreted mean that a wrong without damage does not constitute a cause of action for damages any more than damage without wrong does not ordinarily constitute a cause of action).” (Fields v. Napa Milling Co. (1958) 164 Cal.App.2d 442, 447-448; 4 Harper, James and Gray on Torts (2007) Damages in Accident Cases, § 25.1, p. 577 at fn. 4, citing inter alia Rest.2d Torts, § 328A(d); 6 Witkin, Summary of Cal. Law, supra, Torts, § 1545, p. 1020.) But this is neither a case of a wrong without damage nor a case of damage without wrong; this is a case of no wrong and no damage, at least as far as the operative effect of the ninth amendment is concerned.
The comparable section is now in 46 Cal.Jur.3d, Negligence, section 80, page 315.
In light of our conclusion, it is not necessary to address the remainder of appellant’s contentions.
3. The Decision in Neinstein v. Mitchell Silberberg & Knupp
The cotrustees of the “Marcia Israel Living Trust,” who are also special representatives of the estate of Marcia Israel and the Foundation, sued respondents for legal malpractice on grounds that are very similar, if not identical, to those asserted in the case at bar. The trial court in that case sustained respondents’ demurrer without leave to amend on the ground that this action was barred by the statute of limitations. Division 2 of this court reversed that dismissal in Neinstein v. Mitchell Silberberg & Knupp, B191341, a nonpublished opinion filed on August 7, 2007. Division 2 concluded that it is possible that the injury occurred as late as December 2004.
In addition to the important fact that the parties in Neinstein v. Mitchell Silberberg & Knupp and the instant case are different, the court in Neinstein did not address, as we have in this decision, the question whether, as a matter of law, the ninth amendment injured the appellants. The question whether the actionable event, in our case the preparation and execution of the ninth amendment, actually injured the plaintiffs is different from when the plaintiff sustained injuries or damages. If, as we have found, the events on which the action is predicated never injured the plaintiff, the question whether the injury was delayed does not arise.
Since the dispositive holding here was not addressed by the court in Neinstein v. Mitchell Silberberg & Knupp, there is no conflict between that decision and ours in this case.
DISPOSITION
The judgment is affirmed. Respondents are to recover their costs on appeal.
We concur: COOPER, P. J, TODD, J.
Associate Justice of the Court of Appeal, Second Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.