Filed 3/4/20 King v. Smith CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

DENNIS S. KING,

Plaintiff and Respondent,

v.

CAROLE LEE SMITH,

Defendant and Appellant.

G057238

(Super. Ct. No. 30-2014-00732389)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, David L. Belz, Judge. Affirmed.

Alston, Alston & Diebold and Donald A. Diebold for Defendant and Appellant.

Les Opus, Mohammed K. Ghods, Jeremy A. Rhyne and Lori L. Speak for Plaintiff and Respondent.

* * *

 

This appeal follows a final disposition in a probate matter in which the trial court concluded that the decedent, Helen Emma Krug, was unduly influenced by her daughter, Carole Lee Smith, to disinherit her brother, Dennis S. King. The court therefore voided the amendment to the family trust that disinherited Dennis. Carole appeals, arguing Dennis lacks standing, the statute of limitations bars his claims, the trial court erroneously switched the burden of proof on the issue of undue influence, and a lack of evidence to establish undue influence. We disagree on each of these points and uphold the trial court’s findings, and further conclude Carole’s briefing was so deficient as to waive any issues of substantial evidence. Carole also argues that Dennis should not have been appointed cotrustee for various reasons. We conclude this argument, too, lacks merit. Accordingly, we affirm the court’s judgment.

I

FACTS

We summarize the facts here as succinctly as possible, and we shall develop further details, as relevant, in the discussion portion of the opinion.

On April 1, 1980, spouses Helen and Henry Krug executed a document entitled “Revocable Trust Agreement” (the Trust). Henry established a business called Aero-Tech Services, Inc. (Aero-Tech).

In 1996, the Krugs jointly amended and restated the Trust in an amendment (the First Amendment). In brief, the Trust stated that upon the death of the first spouse, it would split into three subtrusts, each separate and independently administered. Trust A was designated as a survivor’s subtrust; Trust B a decedent’s subtrust; and Trust C a Terminable Interest Property subtrust for excess assets. Trusts B and C were designated as irrevocable. The Trust, related documents, and later amendments were drafted by the law firm Brown & Streza, and particularly by attorney David Brown.

Upon the death of the surviving spouse, the Trust designated the beneficiaries as the Krugs’ children, Bradley Jay Krug, Carole, and Dennis. Bradley had a disability, and the Trust created a special needs trust for him. The remainder of the Trust was to be equally split between siblings Carole and Dennis.

Around the time of the First Amendment in 1996, the Krugs also placed various residences they owned into qualified personal residence trusts (Residence Trusts). These included a home in Whittier (Whittier Residence) and another in Laguna Beach (the Beach House). The Beach House was used as a vacation home by the entire family.

In 1998, Henry entered into an agreement entitled “Salary Continuation Plan” with Aero-Tech. At the time, Dennis was Aero-Tech’s corporate treasurer and Carole was the secretary. The agreement stated that if Henry retired, Aero-Tech would pay him (or in the event of his death, his designated beneficiary or estate) $300,000 per year for 10 years. Payments were made under the agreement in 1998, 1999, and 2000.

Henry died in December 2000. Shortly before his death, Henry told Dennis that he was concerned about Helen’s memory, and she often repeated herself. Helen had been diagnosed with dementia in 2000.

In early 2001, Dennis and his wife took Helen and Bradley on a five-week trip to China. Helen wrote a letter to Dennis and his wife thanking them, calling it her “dream trip” and expressing her gratitude.

After Henry’s death, the Trust was then split into subtrusts A, B, and C pursuant to its terms. Various transactions followed between March and November of 2001. In March, Helen provided Dennis a total of $346,639 for the purchase of a San Clemente home. In October, the Beach House was transferred from the Residential Trust to Dennis, who transferred it on the same day to his daughter, Denise Paddock. In early 2001, Helen sold the Whittier Residence, and in November, Helen used $600,000 to purchase a new home in Whittier where she and Carole began living together. Dennis and Carole had agreed that Carole would move in with Helen, and thereafter, Carole began taking care of Helen.

Attorneys became involved in December 2001 as issues began to arise, including the status of the Beach House, payments under the Salary Continuation Plan, and repayment of amounts characterized by Helen as loans.

The Beach House was a particularly contentious issue. Before it was sold (to Dennis for transfer to his daughter), Helen knew some of the family would be upset. After news of the sale became common knowledge in the family, Helen decided she wanted the house back. A friend of Helen’s, Kathy Tryon, noticed that by March 2002 Helen’s mental functions began to decline.

In 2002, Helen signed a second amendment of Trust A (the Second Amendment). As of that time, Carole and Dennis’s side of the family each owned 50 percent of Aero-Tech’s nonvoting shares. Dennis’s side of the family owned 60 percent of the voting shares and Carole’s side owned 40 percent. Shortly after Henry’s death, Dennis became president of Aero-Tech. No further payments were made under the Salary Continuation Plan.

In June 2002, Helen sued Dennis in an action entitled Helen Emma

Krug v. Dennis King et al. (Super. Ct. Orange County No. 02CC10785) (Krug v. King). Helen sought to recover the Beach House, various funds were provided to Dennis’s family, and payments from Aero-Tech pursuant to the Salary Continuation Plan. Among other things, the lawsuit sought rescission of a $600,000 loan to Dennis. The lawsuit, Tryon later testified, worsened Helen’s condition.

Dennis eventually filed a cross-complaint against Carole, alleging various misdeeds including interference with inheritance. Dennis claimed Carole was exerting undue influence over Helen. In 2003, Helen claimed Dennis had visited her unannounced, threatened her, and demanded she drop the lawsuit. She claimed Dennis and his family caused her to fear for her personal and financial safety and well-being.

In mid-2003, while the lawsuit was ongoing, Carole brought Helen to a dementia clinic at UCI Medical Center. Carole reported various difficulties she claimed Helen was experiencing. These included, among other things, trouble following conversations, inability to handle her personal finances and daily life activities, and that she had been looking for Henry, despite his death three years earlier. At a second appointment a month later, the doctors diagnosed Helen with Alzheimer’s and depression. She was prescribed several medications.

In late 2003, the parties to Krug v. King entered into an Interim Settlement Agreement. In essence, this settled the case in part. Among other provisions, the Beach House returned to the Residence Trust, with Denise and her husband paying rent to live there. After Helen’s death, Dennis and Carole were to hold an equal interest. Dennis and his wife acknowledged two outstanding loans from the Trust. The settlement also revoked most of the Second Amendment. Further, Helen agreed to voluntarily apply for the appointment of a conservator to serve as successor trustee, and in the event of Helen’s death, Dennis and Carole would be appointed as successor cotrustees.

On April 6, Helen filed an unlawful detainer action against Aero-Tech over $111,210 payment in rent.

On April 29, Helen appointed Kenneth J. Cummins as successor trustee to the Trust. Much later, and following a petition contested by Dennis, Cummins was appointed as conservator of Helen’s estate in March 2005.

On May 1, 2004, a final settlement was reached between the Krug v. King parties, essentially leaving the Aero-Tech issues outstanding. Shortly thereafter, Dennis dismissed Carole from the cross-complaint. At trial, the court found Aero-Tech improperly withheld payments under the Salary Continuation Plan, owed Helen $975,000, and was responsible for all future payments. According to Carole, the judgment was never paid.

In June 2004, Helen executed a document entitled “Third Amendment – Restatement of Trust A Dated June 11, 2004 and Exercise of Power of Appointment over Trust B” (the Third Amendment). The Third Amendment is the crux of the present dispute. It purported to disinherit Dennis from Trust A and exercise a power of appointment to divert Trust B to Helen’s estate. Dennis’s portion of the Trust would be distributed to Carole instead.

Helen died on March 1, 2014. Dennis subsequently filed a petition in probate court challenging the Third Amendment (the First Petition), as well as a civil action. The First Petition alleged that the Third Amendment was invalid due to Helen’s alleged lack of testamentary capacity and Carole’s undue influence.

The civil action was dismissed without prejudice to a probate petition. Carole and Cummins filed responses and objections to the First Petition. Cummins also filed a petition for instruction regarding status as trustee. Dennis then filed a counter-petition (Second Petition).

After a trial, which we will discuss below as necessary, the trial court issued a final statement of decision. The court ultimately determined that Helen did not lack the capacity to disinherit Dennis, but agreed that the evidence supported a finding of undue influence. Accordingly, the court voided the Third Amendment and determined that Dennis and Cummins would be cotrustees.

Carole now appeals.

 

II

DISCUSSION

A. Dennis’s Standing

Carole’s first argument is that Dennis lacks standing to file a petition in probate court as a disinherited beneficiary. Both parties argued the applicability of Barefoot v. Jennings et al. (2018) 27 Cal.App.5th 1, review granted Dec. 12, 2018, S251574, which held that individuals not named as beneficiaries lack standing under Probate Code section 17200. After briefing was completed in this matter, the California Supreme Court, in a 7-0 decision, expressly disagreed and held that standing exists for individuals who claim that trust amendments eliminating their beneficiary status arise from incompetence, undue influence, or fraud. (Barefoot v. Jennings et al. (Jan. 23, 2020) __Cal.4th __, __ [2020 WL 372523].)

Dennis submitted the Supreme Court case pursuant to California Rules of Court, rule 8.254, but neither party has requested the opportunity for briefing on this issue. By our reading, the case is squarely on point, and the Supreme Court’s decision resolves this issue in Dennis’s favor.

B. Statute of Limitations

Carole’s next argument is that Dennis’s claim of undue influence is barred by the statute of limitations because he raised the same arguments in the Krug v. King litigation. Where the relevant dates are undisputed, we review the applicability of the statute of limitations independently, applying the de novo standard of review. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.)

Carole’s argument, however, is not really about the statute of limitations. It is an attempt to squeeze the square peg of issue preclusion, also known as collateral estoppel, into the round hole of the statute of limitations. Issue preclusion, of course, does not apply here, because as Carole readily admits, Dennis dismissed the undue influence and other claims against her in Krug v. King without prejudice.

“The doctrine of collateral estoppel or issue preclusion is a secondary form of res judicata. [Citation.] It prevents a party who had a full and fair opportunity to litigate a particular issue in a prior proceeding from relitigating it in a subsequent proceeding. [Citation.] ‘A prior determination by a tribunal will be given collateral estoppel effect when (1) the issue is identical to that decided in a former proceeding; (2) the issue was actually litigated and (3) necessarily decided; (4) the doctrine is asserted against a party to the former action or one who was in privity with such a party; and (5) the former decision is final and was made on the merits.’” (McCutchen v. City of Montclair (1999) 73 Cal.App.4th 1138, 1144.) Claims that were dismissed without prejudice do not qualify as actually litigated, necessarily decided, or final and on the merits.

To the extent this argument involves the statute of limitations at all, Carole claims that the limitations period set forth in either Welfare and Institutions Code section 15657.7 or Code of Civil Procedure section 343 applies here. Therefore, a four-year limitations period applies from the time the plaintiff discovers or should have discovered the relevant facts. But Welfare and Institutions Code section 15657.7 applies to “action for damages” for elder abuse, and a petition in probate court is not an action for damages. As to Code of Civil Procedure section 343, it is a catch-all provision that applies to claims without a specific limitations period attached. But the two well-seasoned cases Carole cites on this point relate to entirely different facts, which she does not attempt to analogize to the present case. (See Estate of Pieper (1964) 224 Cal.App.2d 670, 689; Wade v. Busby (1944) 66 Cal.App.2d 700, 702.) Moreover, the catch-all provision does not apply here, because the Probate Code sets forth its own limits for contesting a trust. (§16061.8.) Accordingly, Carole’s statute of limitations argument must fail.

C. Carole’s Deficient Briefing

We begin by noting that the next two sections of our discussion are fact-heavy inquiries. California Rules of Court, rule 8.204(a)(2)(C) states an appellant must “[p]rovide a summary of the significant facts limited to matters in the record.” (Italics added.) This does not mean only the facts that support the appellant’s position while ignoring all other facts. Appellants must “‘“set forth in their brief all of the material evidence on the point and not merely their own evidence. Unless this is done the error is deemed to be waived.”’” (People v. Dougherty (1982) 138 Cal.App.3d 278, 282.) An appellant’s failure to set forth a statement of facts based on the evidence presented at trial waives any challenge to the sufficiency of the evidence to support the trial court’s findings. “[A]n attack on the evidence without a fair statement of the evidence is entitled to no consideration when it is apparent that a substantial amount of evidence was received on behalf of the respondent.” (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246.)

Carole failed to do so. Her opening brief includes a statement of facts that can charitably be characterized as highly deferential to her own view of the facts. Less charitably, it could be described as completely ignoring any fact unfavorable to her. As Dennis points out, she completely ignores such facts as Helen’s diagnosis with Alzheimer’s, stating that Helen suffered “mild” or “mid-level” dementia. She fails to include many facts about Helen’s feelings about the Beach House and its sale. Perhaps most significantly, Carole omits her own role in Helen’s legal affairs, including that she held Helen’s power of attorney, and directly participated in or managed many of Helen’s affairs such as estate planning, litigation, and medical care.

In his respondent’s brief, Dennis pointed out that Carole had failed to fairly state the evidence. In her reply brief, rather than conceding this rather obvious point, Carole nitpicks her way through the facts Dennis claimed she omitted and attempts to justify why she ignored them. She also complains that Dennis did not present both favorable and unfavorable facts, ignoring the relevant burdens of appellant and respondent as well as the standard of review. Thus, Carole was given notice of her failure to brief properly and a chance to rectify matters somewhat in her reply brief, but instead of doing so, she doubled down on her error. Accordingly, we find any issues relating to evidence on the undue influence question to be waived. (Nwosu v. Uba, supra, 122 Cal.App.4th at p. 1246; see Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)

D. Burden of Proof on Undue Influence

Even if we did not deem the undue influence issues waived, we would find Carole’s next two arguments unavailing. With respect to proving undue influence, Carole asserts the trial court shifted the burden of proof from Dennis, to prove the Third Amendment was the product of undue influence, to Carole, to prove that it was not. Although Carole contends this is an issue we must review de novo, she is wrong. It is a question of whether there was substantial evidence to shift the burden of proof. (See In re Marriage of Dawley (1976) 17 Cal.3d 342, 354-355.)

“‘When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.’” (Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 881.) “Where statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision.” (In re Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358.) “Substantial evidence includes circumstantial evidence and the reasonable inferences flowing therefrom.” (Conservatorship of Walker (1989) 206 Cal.App.3d 1572, 1577.) “The testimony of a single credible witness may constitute substantial evidence.” (City and County of San Francisco v. Ballard (2006) 136 Cal.App.4th 381, 396.)

“[A] presumption of undue influence, shifting the burden of proof, arises upon the challenger’s showing that (1) the person alleged to have exerted undue influence had a confidential relationship with the testator; (2) the person actively participated in procuring the instrument’s preparation or execution; and (3) the person would benefit unduly by the testamentary instrument.” (Rice v. Clark (2002) 28 Cal.4th 89, 97.)

Carole does not contend that the first and third elements stated above did not exist, only that there was not sufficient evidence that she “actively participated” in procuring the execution of the contested instrument. (Rice v. Clark, supra, 28 Cal.4th at pp. 96-97.) The court, she claims, “did not offer any explanation of how Carole . . . actively participated in the procurement of the Third Amendment.”

The court, however, expressly found active participation by Carole: “The Court finds that Carole knew of Helen’s vulnerability and actively participated in the process of having the 3rd Amendment prepared and signed and disinheriting Dennis.” It rejected Carole’s objection to the proposed statement of decision on this point. Further, the court is required only to set forth the ultimate facts supporting its decision, not each supporting fact. (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1124-1125.) “[T]he term ‘ultimate fact’ generally refers to a core fact, such as an essential element of a claim. [Citation.] Ultimate facts are distinguished from evidentiary facts and from legal conclusions.” (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513.)

The specific facts Carole apparently finds lacking are evidentiary. The court more than met its burden, in its 21-page statement of decision, to state the ultimate facts upon which its decision rested. We find no error in the court’s decision to shift the burden to Carole to demonstrate that the Third Amendment was not procured by undue influence.

E. Sufficiency of the Evidence of Undue Influence

Carole next contends that the evidence of undue influence did not meet the substantial evidence standard. As we stated above, this issue is waived due to Carole’s briefing, but even if it was not, this contention would be unsuccessful. The evidence of undue influence was more than substantial; it was nearly overwhelming. Carole’s argument on this point ignores the standard of review; we do not evaluate the record to determine if there is evidence that might have supported her version of events had she prevailed, but only to determine if there is substantial evidence, contradicted or uncontradicted, to support the court’s judgment. (Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 881.)

First, and perhaps most importantly, the trial court did not find Carole’s testimony to be credible. She “contradicted herself and was impeached during her testimony.” This is not a finding we reexamine on appeal. (See Johnson v. Pratt & Whitney Canada, Inc. (1994) 28 Cal.App.4th 613, 622-623.) Rather than find that Carole’s testimony supported her version of events, the court found that it “clearly support[ed] a finding of undue influence in this case to the point of overcoming Helen’s free will by the undue influence of Carole and likely other members of Carole’s family.” Helen, the court found, was vulnerable to and dependent on Carole. Carole was in a position of trust and gained “apparent authority” over Helen, ultimately resulting in Helen’s decision to disinherit Dennis.

The standard for determining undue influence is whether there was “excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will,” which ultimately results in inequity. (Welf. & Inst. Code, § 15610.70, subd. (a).)

The factors the court uses to determine the presence of undue influence are set forth in Welfare and Institutions Code section 15610.70 and also apply to the Probate Code. (§ 86.) Those factors are: 1) “[t]he vulnerability of the victim”; 2) “[t]he influencer’s apparent authority”; 3) “[t]he actions or tactics used by the influencer”; and 4) “[t]he equity of the result.” (Welf. & Inst. Code, § 15610.70, subd. (a).)

A brief review of the evidence found reliable by the court demonstrates each factor was against Carole. The court found that due to “deficits in mental functioning, confusion, incapacity, cognitive function, delusion, isolation and dependence, Helen was vulnerable to undue influence by Carole and her family.” Many pieces of supporting evidence exist. Helen had been diagnosed with dementia in 2000. Henry informed Dennis before his death that she was already having difficulties with memory. By 2004, her dementia had progressed to at least moderate impairment. She was assessed as having probable Alzheimer’s disease in February 2004.

Further, the evidence supported Helen’s dependence on Carole, who lived with her starting in 2001. By 2003, Helen could no longer drive and by 2004, she was dependent on Carole for her basic needs, including medications, legal affairs, and finances. There was also evidence that Carole controlled and limited access to Helen, keeping Dennis and his family away. Carole’s own testimony supported findings that she was aware of Helen’s vulnerabilities.

With respect to apparent authority, the court found Carole was in a position of trust and confidence from late 2001 to June 2004, the date of the Third Amendment. “[B]y her actions Carole gained apparent authority over Helen such as to influence her to falsely believe that Dennis had wrongfully taken $600,000 from Helen and to convince Helen that the sale of the Beach House was a wrongful act by Dennis and that Dennis had taken advantage of Helen. As a result, Helen was convinced that Dennis had committed acts that deserved a disinheritance.”

All of these facts were supported by substantial evidence. As Helen’s daughter and caregiver, and as the person responsible for her personal, financial, and legal affairs, Carole had enormous power over Helen’s life. Carole also held Helen’s power of attorney.

With respect to Carole’s tactics, the court found she took advantage of Helen’s vulnerability. Tactics that may indicate undue influence include “controlling necessaries of life, medication, the victim’s interactions with others, access to information, or sleep,” the manipulation of affection or coercion, and “[i]nitiation of changes in personal or property rights, use of haste or secrecy in effecting those changes, effecting changes at inappropriate times and places, and claims of expertise in effecting changes.” (Welf. & Inst. Code, § 15610.70, subd. (a)(3)(A) & (C).)

In addition to the control Carole exercised, as discussed above, there was also evidence that Carole misled Helen with respect to the Beach House and a $600,000 payment, leading Helen to believe that Dennis was a wrongdoer who had stolen from her. The court’s conclusion that Carole used tactics that are the hallmarks of undue influence was supported by substantial evidence.

As to the final factor, the equity of the result, the inequity is obvious here. Carole began as beneficiary to half the Trust’s value; after the Third Amendment, she was the beneficiary of the entire Trust (minus the amount set aside for Bradley), leaving Dennis with nothing. All previous indications demonstrated an intent to split the Trust equally between Dennis and Carole.

Taken together, there was more that substantial evidence to support the court’s finding of undue influence. Again, despite Carole’s arguments to the contrary, we do not reweigh the evidence or determine whether the evidence she presented would have been sufficient if the court had found in her favor. Our only query is whether the evidence supporting the judgment meets the substantial evidence test. It does, many times over.

F. Dennis’s Status as Cotrustee

Finally, Carole argues the court should not have appointed Dennis as successor cotrustee. Although Carole claims we should review this issue de novo, a mixed standard applies. To the extent we must construe the Trust documents based on undisputed facts, we apply a de novo standard. (See Estate of Cairns (2010) 188 Cal.App.4th 937, 944.) But pursuant to the Probate Code, the trial court is empowered to issue orders in the exercise of its broad discretion as are “necessary or proper” (§ 17206) to dispose of the matters before the court. Its orders are reviewed for abuse of that discretion and will not be reversed unless the court has “exceeded the bounds of reason or contravened the uncontradicted evidence.” (In re Estate of Parker (1921) 186 Cal. 668, 670; see Estate of Gilmaker (1962) 57 Cal.2d 627, 633.)

First, Carole asserts there was no request to appoint Dennis and no mechanism to permit the court to issue such an order. Dennis points out that the issue was before the court in the form of Cummins’s petition to determine the issue, and the petition was tried at the same time as Dennis’s petition.

As to authority to add an additional successor trustee, Carole points to a document entitled “Amended Appointment of Successor Trustee,” that relied on a provision in the Third Amendment – which the court voided in its judgment. The terms of the Trust, as noted previously, reverted to the First Amendment, which stated Carole and Dennis would become cotrustees after Helen’s death. The court, therefore, did not appoint Dennis as cotrustee; rather, it restored him to the position contemplated by the First Amendment, and substituted Cummins for Carole, a decision she does not contest. Nor would we find it improper if she had – the First Amendment, by its terms, contemplated cotrustees, and the court removed Carole because of her inequitable conduct. Therefore, we find the court’s actions were procedurally proper under the de novo standard of review.

As to whether a conflict of interest should have prevented the court from restoring Dennis to his status as cotrustee, this is an issue we review for abuse of discretion. The conflict of interest claimed by Carole is Dennis’s status as president of Aero-Tech in the face of ongoing legal disputes between the company and the Trust. But the court addressed this by keeping Cummins on as a cotrustee and ordering that Cummins would “have the sole day to day management and responsibility for trust administration including banking, investments, tax matters, asset management and

accountings, as well as all matters relating to Aero-Tech Services, Inc. as it related to the trust.” This was a valid solution to resolve any conflict of interest between Dennis and the Trust, and we find no abuse of discretion.

III

DISPOSITION

The judgment is affirmed. Dennis is entitled to his costs on appeal.

MOORE, ACTING P. J.

WE CONCUR:

ARONSON, J.

FYBEL, J.