How to Determine Entitlement to Distribution of Decedent's Estate in California?

In the recent California decision In re Estate of Robert Flores, after an heir-hunter firm informed appellant Donald Carmody he was the heir of a nephew he never knew existed, he thought it was a scam.  

He assigned any rights he might have in the nephew’s estate to his brother, John Carmody, believing any such rights were worthless.

 

However, the estate had value. John filed a petition under Probate Code section 11700 for determination of entitlement to distribution of the nephew’s estate.

 

He obtained a determination that he and Donald were the nephew’s heirs, each entitled to a 50 percent share of the estate. John died before the request for a final distribution order was submitted to the court. 

 

When the administrator of the nephew’s estate sought a final distribution order that would take into account Donald’s assignment of his rights to John, Donald objected, claiming the prior order determining entitlement to distribution was final, binding, and prohibited the court from recognizing his prior assignment of his interest to John. The trial court rejected this claim. 

 

The appellate court concluded the trial court properly gave effect to Donald’s assignment of his interest in the estate to John. John’s rights as an assignee were not raised or litigated in the section 11700 proceeding, which was limited to a determination of heirship. 

 

John did not forfeit or waive his rights as an assignee by failing to assert those rights in the section 11700 proceeding, or by failing to file a statement of interest. 

 

The appellate court therefore affirmed the trial court judgment. 

 

Robert Allen Flores (Decedent) died intestate (i.e., without a will or trust). He was not survived by a spouse, registered domestic partner, children, parents, or siblings. 

 

In 2018, American Research Bureau, Inc. (ARB), an “heir-hunter” firm, contacted brothers John and Donald to inform them that they were Decedent’s maternal uncles. 

 

John and Donald were therefore Decedent’s heirs, and ARB offered to work with them in seeking a portion of the estate. ARB sent Donald a copy of a 1930 federal census record reflecting that John and Donald’s father had a first wife prior to marrying their mother. ARB informed Donald that his father’s first wife was the Decedent’s grandmother. 

 

Donald was skeptical. Neither John nor Donald ever knew that they had a half sister— Decedent’s mother. Donald told John he thought they were being “ ‘scammed.’ ” 

 

In e-mail correspondence, ARB assured Donald that ARB was “not a scam,” and added: “If you are still not interested in receiving your portion of the estate, we can work with you so that you can assign your share to your brother if you wish.” 

 

John told Donald that he planned to “ ‘put in’ . . . for the estate of robert flores” because he “could use some pesos.” 

 

That month, John signed an agreement assigning to ARB one-fourth of any interest he might have in Decedent’s estate. In November 2018, ARB e-mailed Donald again to inform him that it was “moving forward in this matter on behalf of your brother John,” and asked if Donald wanted to be included in the proceeding with ARB’s assistance. 

 

Donald reiterated that he believed ARB might be “running a scam” and that “time will tell.” However, he also had “no problem assigning [his] share of this ‘estate’ to [his] brother.” 

 

Meanwhile, Patricia McCluskey filed a petition requesting that the probate court appoint her as administrator of Decedent’s estate. McCluskey alleged she was Decedent’s first cousin, once removed, and that she and four alleged second cousins were Decedent’s heirs-at-law and therefore entitled to the estate. McCluskey did not identify John or Donald as potential heirs. 

 

In January 2019, John filed objections to McCluskey’s petition on the basis that he, as a maternal uncle, was more closely related to Decedent and was entitled to inherit Decedent’s estate to the exclusion of McCluskey and the alleged second cousins listed in her petition. 

 

Around the same time, John filed a competing petition for letters of administration nominating Brenda Depew as the administrator of Decedent’s estate. His petition identified Donald as Decedent’s other living maternal uncle. 

 

In February 2019, the court denied McCluskey’s petition and granted John’s petition. The court issued letters of administration appointing Depew as the administrator of Decedent’s estate. 

 

In 2019, John filed a “Petition to Determine Entitlement to Estate Distribution.” He listed himself and Donald as Decedent’s sole heirs-at-law and asserted they were each entitled to half of the estate. 

 

The petition did not reference the assignment from Donald to John or the assignment from John to ARB. No other person filed a statement of interest asserting entitlement to distribution of Decedent’s estate or objecting to John’s petition. 

 

The court granted the petition and, in October 2019, entered an “Order Determining Entitlement to Estate Distribution.” The order found that “[a]ll notices have been duly given as required by law,” declared that John and Donald were the “heirs-at-law of the decedent,” and found each was entitled to a 50 percent interest in the estate. 

 

John died in 2020. In his will, he named his stepdaughters Kara Masteller and Dawn Bailey as beneficiaries of his estate, and Masteller as the executor. 

 

In April 2022, the trial court concluded the issues presented in the “heirship petition” were “to determine who the heirs of the estate were and their respective percentage of interests in the estate.” 

 

The October 2019 order “decided which individuals were statutorily entitled to inherit from the decedent but did not decide the distribution of those interests . . . .” 

 

The court reasoned Donald could not invoke collateral estoppel because “the issues in the heirship petition and petition for distribution are not identical and the validity of the challenged assignment was not presented to the court for determination in the heirship petition.” 

 

The court rejected Donald’s waiver argument, noting John had not sought such relief in the prior petition and instead had only requested that the court “determine conclusively, against any claims by any other potential heirs, who was entitled to inherit the estate of a decedent who died without a will.” 

 

The court further indicated it gave “very little weight” to Donald’s “one-sided recitation” of a phone call during which John allegedly rescinded Donald’s assignment to him, and it found John had not waived or rescinded the assignment. 

 

Finally, the court determined Donald freely assigned his interest in the estate to John without duress. The assignment was enforceable despite the lack of consideration because Donald “believed nothing would come of ARB’s efforts and . . . valued his own interest in the estate at zero.” 

 

Under section 11700, “[a]t any time after letters are first issued to a general personal representative and before an order for final distribution is made, the personal representative, or any person claiming to be a beneficiary or otherwise entitled to distribution of a share of the estate, may file a petition for a court determination of the persons entitled to distribution of the decedent’s estate.” 

 

This proceeding is permissive. If no petition is filed under section 11700, the court may determine who is entitled to distribution in a final distribution order. 

 

Notice of the proceeding must be given to each known heir and devisee whose interest would be affected by the petition, the Attorney General in some cases, the personal representative of the estate, and all persons who have requested special notice in the estate proceeding.

 

Section 11702 allows “[a]ny interested person” to appear and to file a written statement of the person’s interest in the estate in advance of the hearing. 

 

If an interested person fails to timely file a written statement, the case is still at issue and may proceed. The interested person “may not participate further in the proceeding for determination of persons entitled to distribution, but the person’s interest in the estate is not otherwise affected.” 

 

Section 11705, subdivisions (a) and (b), provide that the trial court “shall make an order that determines the persons entitled to distribution of the decedent’s estate and specifies their shares,” and “[w]hen the court order becomes final it binds and is conclusive as to the rights of all interested persons.” 

 

While section 11700 allows any person claiming to be a beneficiary or otherwise entitled to distribution of a share of a decedent’s estate to file a petition, section 11702 concerns any other persons with an interest in the estate. 

 

As noted above, under section 11702, any interested person may appear in a section 11700 proceeding and file a statement of interest. An interested person who fails to file a statement of interest may not participate further in the proceeding, “but the person’s interest in the estate is not otherwise affected.” 

 

On its face, this language indicates that the failure to file a statement of interest does not amount to an automatic forfeiture of the interested person’s rights. 

 

As a result, the effect of the proceeding on a person’s interest in the estate must depend on what is litigated and decided in the section 11700 proceeding. 

 

In this case, the section 11700 proceeding determined only the identity of Decedent’s heirs and their respective shares of the estate. John’s interest as an assignee was contingent on Donald first being determined to be an heir of Decedent. 

 

Even as an assignee, John was bound by the determination that Donald was Decedent’s heir and was entitled to a one-half share of the estate. John could not have subsequently argued that Donald was entitled to a greater or lesser share, for example. 

 

Yet to conclude, as Donald contends, that John’s rights as an assignee to Donald’s share of the estate were eviscerated because he failed to file a statement of interest, we would have to ignore the express language of section 11702, subdivision (b)(2).

 

Indeed, Donald ignored section 11702, subdivision (b)(2) altogether. He maked no attempt to explain how his argument that John’s failure to file a statement of interest waived his assignee interest for all time can be squared with section 11702, subdivision (b)(2)’s provision that, other than preventing an interested person from participating further in the proceedings, the failure to file a statement of interest does not otherwise affect that person’s interest in the estate. 

 

Donald’s arguments were also inconsistent with caselaw which has long drawn a distinction between heirs, devisees, and legatees, who have a direct entitlement to a share of a decedent’s estate, and persons whose only interest in the estate is derivative of the rights of an heir, devisee, or legatee. 

 

Donald did not acknowledge the historical distinction courts have drawn between those with direct claims to an estate, such as heirs, and those with only indirect claims, such as the assignees of heirs. 

Instead, he contended that because section 11700 concerns distribution, and allows for the participation of any interested person, the October 2019 order must be understood as finally adjudicating—and in this case eliminating—the rights of all other interested persons. 

 

Yet, he failed to cite a single legal authority holding that where the claims of an heir’s assignee are not raised in a petition to determine entitlement to distribution, the court’s resulting order determining the identity or respective interests of the heirs moots, eliminates, or otherwise precludes those unadjudicated assignee claims. 

 

Here, John’s section 11700 petition sought a determination of heirship, not his rights as an assignee. Indeed, John’s rights as an assignee could not be perfected until the probate court first determined the identity of Decedent’s heirs and their respective interests in the estate. 

 

Under sections 11702 and 11705, the October 2019 order prevented John from challenging Donald’s entitlement to a portion of the estate as an heir, but it did not affect his contractual rights as Donald’s assignee, which were only derivative of and contingent upon Donald’s rights as an heir. 

 

Likewise, in this case, John’s rights as an heir were different from his contractual rights as Donald’s assignee. The trial court could not order distribution consistent with the assignment until it had first determined the identity and shares of the heirs.

 

As explained above, under section 11702, the lack of a statement of interest did not affect John’s rights as an assignee. Donald was afforded an opportunity to contest the validity of the assignment prior to the issuance of the final distribution order. Even if the record could be construed as reflecting a bifurcation of the section 11700 proceeding, we would find any error harmless. 

 

In sum, neither John’s petition nor any other filing in the section 11700 proceeding raised the issue of Donald’s assignment to John. 

 

There was no request for distribution based on the assignment or challenge to the assignment. No interested party filed a statement of interest. The trial court’s October 2019 order determined heirship. John’s contractual rights as an assignee remained unaffected.

 

LESSONS:

 

1.         To avoid dying intestate, persons should have a will or even better, a living trust that specifies the beneficiaries of an estate.

 

2.         Donald made a bad decision without consulting an attorney or determining that ARB was a legitimate company.

 

3.         Donald's assignment was gratuitous on his part when he did not learn the complete information and there is no evidence that Donald would have been harmed by his suspected scam.

Are Electronic Signatures the Same as Handwritten Signatures?

As discussed in the recent California Appellate Court decision in Ramirez v. Golden Queen Mining Company, LLC, Carlos Ramirez filed a class action lawsuit against his former employer alleging various violations of the Labor Code and unfair competition. The employer moved to compel arbitration. 

The trial court denied the motion on the ground that the employer failed to demonstrate the existence of an executed arbitration agreement. 

 

The employer appealed, contending it carried the initial burden of making a prima facie showing that a written arbitration agreement existed. 

 

The employer also contended Ramirez’s statements that he did not recall being presented with or signing an arbitration agreement were insufficient to rebut its initial showing and create a factual dispute about the authenticity of a handwritten signature.

 

There is a split of authority among the Courts of Appeal as to what constitutes sufficient evidence to create a factual dispute about the authenticity of a handwritten signature on a document agreeing to arbitration. 

 

The decision in Iyere v. Wise Auto Group concluded that an individual is capable of recognizing his or her handwritten signature and if that individual does not deny a handwritten signature is his or her own, that person’s failure to remember signing the document does not create a factual dispute about the signature’s authenticity. 

 

Here, Ramirez’s declaration asserts he does not recall ever being presented with or signing an arbitration agreement. 

 

The declaration, however, omited several significant facts. 

 

First, the declaration failed to state whether Ramirez even reviewed the arbitration agreement, the related handbook acknowledgement, or any other documents purportedly signed by him and included in the employer’s moving papers. A review of those documents, the handwritten signatures, and the handwritten initials might have improved Ramirez’s recollection.

 

Second, the declaration did not address whether Ramirez recalled signing the handbook acknowledgement, which is the document relied upon by the employer to show his consent to arbitration. The acknowledgement included a bolded, underlined sentence stating he agreed to the terms of the arbitration agreement in the employee handbook. 

 

Third, Ramirez’s declaration did not state, one way or the other, whether the handwritten signature on the handbook acknowledgement is his. 

 

Based on these omissions, the appellate court concluded Ramirez did not rebut the employer’s initial showing that an arbitration agreement existed. 

Appellant Golden Queen Mining Company, LLC (Queen Mining) is a California limited liability company that operates the Soledad Mountain gold and silver mine in Mojave, California. The open-pit mine operates 24 hours per day, 365 days per year. Queen Mining’s operations use equipment, explosives and chemicals obtained from sources outside California. 

 

All the gold and silver recovered from the crushed ore is sold to a refinery outside of California. Based on its purchases and sales, Queen Mining contends its business operations involve interstate commerce and, therefore, the Federal Arbitration Act governs its arbitration agreements. 

 

In 2019, Ramirez was hired by Queen Mining as a nonexempt hourly employee to perform electrical work. Ramirez’s employment ended in August 2022. 

 

As part of Queen Mining’s onboarding process, new employees are provided with many documents including an employee handbook containing an arbitration agreement. 

 

In October 2022, Ramirez filed a class action complaint against Queen Mining alleging causes of action for failure to pay overtime wages, pay minimum wages, provide meal periods, provide rest periods, pay all wages due upon termination, provide accurate wage statements, indemnify employees for expenses incurred in performing their jobs, and pay for vested, unused vacation time upon termination.

 

In 2023, Queen Mining filed a motion to compel arbitration and supporting declarations. The declaration of Latasha Marshall, Queen Mining’s human resources manager, asserted Ramirez signed an Arbitration Agreement on or about March 28, 2019.

 

Marshall attached as exhibits to her declaration copies of (1) a two-page arbitration agreement, (2) a handbook acknowledgement purportedly signed by Ramirez and dated March 28, 2019, and (3) six other documents purportedly signed by Ramirez and dated March 28, 2019. 

 

Ramirez opposed the motion, contending that Queen Mining could not prove the existence of an arbitration agreement between the parties because (1) Queen Mining had failed to authenticate the proffered arbitration agreement, and (2) even if authentic, a signature on an employee handbook acknowledgement did not constitute valid assent to arbitration.  

 

When presented with a motion or petition to compel arbitration, a trial court must determine whether an agreement to arbitrate the controversy exists.

 

The party seeking arbitration has the burden of proving the existence of an arbitration agreement by a preponderance of the evidence. The agreement must be in writing to be valid and enforceable. 

 

A written arbitration agreement does not necessarily need to be signed because a party’s acceptance may be implied in fact or be effectuated by delegated consent. 

 

The party opposing arbitration bears the burden of proving by a preponderance of the evidence any defense to the agreement’s enforcement.

 

Whether the arbitration agreement is a legally enforceable contract is determined by applying general principles of California contract law.  

 

A signature manifesting assent to arbitration need not be on the arbitration agreement itself. 

 

In Iyere, three employees who had been terminated by their employer filed a joint complaint alleging many employment-related causes of action. The employer filed a motion to sever the complaints and compel each plaintiff to submit his claims to individual arbitration. The trial court denied the motion, concluding the employer failed to prove the authenticity of the plaintiffs’ signatures on the arbitration agreements. 

 

On appeal, the First District addressed whether the plaintiffs' evidence was sufficient to create a factual dispute shifting the burden of production back to the employer. 

 

The employer’s moving papers included copies of arbitration agreements bearing the plaintiffs’ apparent handwritten signatures. The plaintiffs’ opposition papers included each plaintiff’s declaration stating that, on the first day of work, he (1) was given a stack of documents, (2) was told to quickly sign the documents so he could get to work, and (3) signed the stack of documents immediately and returned them. 

 

Each declaration also stated: “ ‘I do not recall ever reading or signing any document entitled Binding Arbitration Agreement .... I do not know how my signature was placed on [the document].’ ” Each plaintiff further stated that if he had understood that the agreement waived his right to sue the employer, he would not have signed it. 

 

The First District concluded the declarations did not create a factual dispute as to whether the plaintiffs signed the agreements, stating: The declarations explicitly acknowledge that plaintiffs signed a stack of documents and do not deny that the stack included the agreement. 

 

Although plaintiffs state they do not recall signing the agreement, there is no conflict between their having signed a document on which their handwritten signature appears and, two years later, being unable to recall doing so. 

 

In the absence of any evidence that their purported signatures were not their own, there was no evidence that plaintiffs did not in fact sign the agreement.

 

The First District distinguished cases involving a plaintiff’s statement that he or she did not recall electronically signing an arbitration agreement because the individual’s inability to recall signing electronically may reasonably be regarded as evidence that the person did not do so. 

 

However, an individual is capable of recognizing his or her own personal signature. If the individual does not deny that the handwritten personal signature is his or her own, that person’s failure to remember signing is of little or no significance.  

Consequently, in Iyere, the First District concluded that, if a plaintiff presented with a handwritten signature on an arbitration agreement is unable to allege the signature is inauthentic or forged, the plaintiff’s failure to recall signing the agreement “neither creates a factual dispute as to the signature’s authenticity nor affords an independent basis to find that a contract was not formed.

 

Because Ramirez had the burden of producing evidence, we describe some seemingly obvious points that are omitted from his declaration. 

 

First, Ramirez’s declaration did not state he reviewed the arbitration agreement and other documents attached to Marshall’s declaration. The idea that a witness’s inspection of a writing may refresh the witness’s memory is long established. 

 

Here, Ramirez’s evidence does not allow the appellate court to discern whether he took the fundamental step of inspecting the arbitration agreement included in Queen Mining’s moving papers. It follows that whether such an inspection would have improved his ability to recall being presented with the arbitration agreement and related acknowledgement. 

 

Second, Ramirez’s declaration did not state he examined any of the seven handwritten signatures on the documents that Queen Mining contended he purportedly signed. 

 

Third, Ramirez’s declaration did not state he did not recall signing the “HANDBOOK ACKNOWLEDGEMENT,” which is the specific document relied upon by Queen Mining to manifest Ramirez’s assent to arbitration. 

 

The distinction between a signed arbitration agreement and a signed acknowledgement is significant in the context of this case because Ramirez’s opposition papers explicitly raised that distinction. 

 

Read literally, Ramirez’s broad representation that he did not recall ever being presented with an arbitration agreement implies either that his attorney did not have Ramirez review the arbitration agreement in Queen Mining’s moving papers before signing the declaration or that Ramirez did review the arbitration agreement but, due to a poor memory or some other reason, he could not recall it by the time he signed the declaration. 

 

LESSONS:

 

1.         An individual’s inability to recall signing electronically may reasonably be regarded as evidence that the person did not do so. 

 

2.         However, an individual is capable of recognizing his or her own personal signature. If the individual does not deny that the handwritten personal signature is his or her own, that person’s failure to remember signing is of little or no significance.  

 

What is the Privette Doctrine that Determines Liability for Subcontractor Injuries in California?

As discussed in the recent California appellate court decision in CBRE v. Superior Court (Johnson), Jake Johnson was injured while working as an electrician on a construction project in a building owned by Property Reserve, Inc. (PRI) and managed by CBRE (collectively, Defendants).  

When injured, Johnson was employed by PCF Electric (PCF), a subcontractor hired by Crew Builders (Crew), the general contractor for the project. 

 

Johnson filed a complaint against Defendants, Crew, and PCF for damages. 

 

Defendants moved for summary judgment based on the Privette doctrine, which generally protects entities that hire independent contractors from liability for injuries sustained by employees of the independent contractor while working on a project. 

 

The trial court denied Defendants' motion, finding a triable issue of fact as to when they hired Crew for the project. 

 

In their petition for writ of mandate, Defendants asserted the trial court erred by focusing on the execution date of the written contract, and they asked the appellate court to issue a writ compelling the trial court to grant their motion for summary judgment. 

 

The appellate court agreed that the trial court erred in denying Defendants’ motion for summary judgment because a written contract is not required to invoke the Privette doctrine, and the undisputed facts established that Defendants delegated control over the tenant improvements to Crew prior to Johnson’s injury. 

 

The undisputed facts also established that no exception to the Privette doctrine applied. 

 

Prior to Johnson’s injury, Defendants and Crew mutually agreed to proceed with the project without obtaining permits such that the permitting process was never within the scope of the contracted work. 

 

Because the evidence conclusively showed PCF was able to discover any non- code-compliant wiring itself, even in the absence of permits, the “concealed hazardous condition” exception to the Privette doctrine was inapplicable as a matter of law. 

 

Further, because the decision to forego the permitting process did not affect the means by which PCF and its employees performed the electrical work for which they were hired or the manner in which they ensured their own safety, the “retained control” exception to the Privette doctrine was equally inapplicable. 

 

Because no triable issues of material fact precluded summary judgment, the appellate court granted Defendants' motion. 

 

In Privette, the California Supreme Court recognized the common law principle that a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor’s negligence in performing the work. 

 

The doctrine presumes that the hirer of an independent contractor ordinarily delegates to that independent contractor all responsibility for the safety of the contractor’s workers.

 

This presumption is grounded in two major principles: first, that independent contractors by definition ordinarily control the manner of their own work; and second, that hirers typically hire independent contractors precisely for their greater ability to perform the contracted work safely and successfully.

 

Thus, it is generally presumed that a hirer delegates all control over the contracted work, and with it all concomitant tort duties, by entrusting work to a contractor.

 

However, that presumption gives way to two recognized exceptions: where the hirer withholds critical information regarding a concealed hazard or retains control over the contractor’s work and actually exercises that control in a way that affirmatively contributes to the worker’s injury. 

 

First, to the extent the trial court suggested a written contract was necessary for Privette to attach, the California Supreme Court recently rejected that premise. It explained the doctrine is not based in a contract’s terms but rather in the delegation implicit when a hirer turns over control of the worksite to the contractor to undertake the work, whether by written or informal agreement. 

 

Thus, the nonexistence of a written contract at the time of Johnson’s injury was immaterial. 

 

Undisputed evidence established that Defendants had previously hired Crew, a licensed general contractor, for numerous tenant improvement projects on the property. Defendants and Crew thus had developed an “understanding” that Crew would begin work on projects before a formal contract was finalized. 

 

Defendants asked Crew to immediately start the project in accordance with that understanding. 

 

Crew defined the full scope of the project’s work in its detailed bid and formulated the construction schedule for the project, subject to input from Defendants. 

 

There is no dispute Crew subcontracted all the electrical work for the project to PCF, which began work as a subcontractor, and no dispute that Johnson was working on the project as an employee of PCF on the day of the incident several weeks later. 

 

On this evidence, Defendants hired Crew and implicitly delegated complete control of the worksite, including its safety, to Crew before the date of Johnson’s injury. 

 

LESSONS:

 

1.         A person who hired an independent contractor generally is not liable to third parties for injuries caused by the contractor’s negligence in performing the work. 

 

2.         The doctrine presumes that the hirer of an independent contractor ordinarily delegates to that independent contractor all responsibility for the safety of the contractor’s workers.

 

3.         A written contract is not necessary for Privette to attach, because the doctrine is not based in a contract’s terms but rather in the delegation implicit when a hirer turns over control of the worksite to the contractor to undertake the work, whether by written or informal agreement

 

Can Trust Disputes be Resolved by the California Probate Court?

In the recent decision in Stadel Art Museum v. Mulvihill, Städel Art Museum (the Museum) was the sole residuary beneficiary of the Peter Boesch Revocable Trust(Boesch Trust). 

The principal assets of the Boesch Trust are a 50 percent ownership interest in each of four real properties located in San Francisco (hereafter the subject properties). The other 50 percent interests are held by the Darril Hudson Revocable Trust, dated March 9, 1994 (Hudson Trust).

 

Thomas Mulvihill, successor trustee of both trusts, initiated the underlying action by filing a petition under section 17200 of the Probate Code seeking instructions from the probate court due to a potential conflict in administering the trusts in the best interests of the respective beneficiaries. 

 

According to the petition, the Museum had requested that the acquisition indebtedness on the subject properties be paid off in full and that the Boesch Trust make an in-kind distribution of its interests to the Museum so that the Museum may, as a tax-exempt organization, sell the interests without suffering certain tax consequences. 

 

The Hudson Trust beneficiaries, which did not face the same tax consequences, prefered that the trusts sell the subject properties undivided and distribute the proceeds. 

 

After a hearing on the petition, the probate court instructed Mulvihill to immediately sell the properties and distribute the proceeds to the respective beneficiaries. 

 

On appeal, the Museum made three contentions. First, the probate court’s interpretation of the Boesch Trust was erroneous because it improperly rewrote trust language to require the trustee to immediately sell the subject properties instead of requiring the trustee to restructure the distribution to make an in-kind distribution to minimize tax consequences. 

 

Second, the court improperly considered the interests of the Hudson Trust beneficiaries in interpreting the Boesch Trust. 

 

Third, the court should have removed Mulvihill as trustee and appointed an independent special trustee due to Mulvihill’s conflicted dual trusteeship. 

 

The appellate court agreed with the Museum that in light of a trust provision granting the trustee “sole discretion” to distribute trust property in cash or in kind, the probate court erred in interpreting the trust instrument to require an immediate sale of the subject properties. 

 

Given that Mulvihill never purported to exercise that discretion, the appellate court reversed and remanded the case with directions that, barring any conflict of interest matters that may arise on remand, Mulvihill be instructed to exercise his discretion to grant or deny the Museum’s request for an in-kind distribution of the trust’s property interests. 

 

Generally, the basis of property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent is the fair market value of the property at the date of the decedent’s death.

 

Accordingly, Mulvihill requested an order from the probate court instructing him as to (1) the resolution of the mortgage debt against the subject properties; (2) the manner of distribution to be made to the Museum pursuant to the terms of the Boesch Trust; and (3) an allocation of his attorney fees and costs between the two trusts. 

 

Under section 17200, a trust beneficiary may petition the probate court regarding matters affecting “the internal affairs of the trust.” 

 

Among other powers, the probate court has the authority to determine “questions of construction of a trust instrument” and instruct the trustee. 

 

The primary rule in construction of trusts is the court must, if possible, ascertain and effectuate the intention of the trustor or settlor. The intention of the transferor as expressed in the trust instrument controls the legal effect of the dispositions made in the instrument.

 

The centerpiece of interpretation, of course, is the language contained in the trust document. One of the axioms is that words are to be taken in their ordinary and grammatical sense, unless a clear intention to the contrary can be ascertained. 

 

Furthermore, the words of an instrument are to receive an interpretation that will give every expression some effect, rather than one that will render any of the expressions inoperative.

 

All parts of an instrument are to be construed in relation to each other and so as, if possible, to form a consistent whole. If the meaning of any part of an instrument is ambiguous or doubtful, it may be explained by any reference to or recital of that part in another part of the instrument.

 

Read together, the trust provisions permit the trustee, upon the later of Boesch’s or Hudson’s death, to exercise his discretion to make an in-kind distribution of the trust’s ownership share of the subject properties to the beneficiary in lieu of a direct sale and distribution of proceeds. 

 

In the instant matter, the petition made it clear that Mulvihill never purported to exercise the discretion conferred upon him by the trust instrument to grant or deny the Museum’s request for an in-kind distribution of the trust’s property interests.

 

Under these circumstances, and in light of the interpretation of the trust instrument, the appropriate response to the petition would have been to instruct Mulvihill to exercise the discretion conferred upon him under the Boesch Trust, consistent with his overall duty to administer the trust according to its terms and applicable law. 

 

The law is settled that a trustee has a duty to administer the trust solely in the interest of the beneficiaries. 

 

Although this duty is frequently invoked as a protection against creating conflicts between a trustee’s fiduciary duties and personal interests, it is also understood to protect against improper influence generally. 

 

Thus, actions by a trustee may be considered improper if they are taken either for the purpose of benefiting a third person (whether or not a party to the transaction) rather than the trust estate or for the purpose of advancing an objective other than the purposes of the trust.

 

A trustee may be removed in accordance with the trust instrument, by the court on its own motion, or on petition of a settlor, cotrustee, or beneficiary.

 

 The statutory grounds for removal of a trustee by the probate court include where the trustee fails or declines to act, and for other good cause.

 

The trial court’s power to remove a trustee is a power that the court should not lightly exercise, and whether or not such action should be taken rests largely in the discretion of the trial court. 

 

Furthermore, the court will not ordinarily remove a trustee appointed by the creator of the trust, and will never remove a trustee named by the settlor for potential conflict of interest but only for demonstrated abuse of power detrimental to the trust. 

 

LESSONS:

 

1.         Under section 17200, a trust beneficiary may petition the probate court regarding matters affecting “the internal affairs of the trust.” 

 

2          Among other powers, the probate court has the authority to determine “questions of construction of a trust instrument” and instruct the trustee. 

 

3.         The primary rule in construction of trusts is that the court must, if possible, ascertain and effectuate the intention of the trustor or settlor. The intention of the transferor as expressed in the trust instrument controls the legal effect of the dispositions made in the instrument.

 

4.         The law is settled that a trustee has a duty to administer the trust solely in the interest of the beneficiaries. 

 

5.         A trustee may be removed in accordance with the trust instrument, by the court on its own motion, or on petition of a settlor, cotrustee, or beneficiary.

 

 6.        The statutory grounds for removal of a trustee by the probate court include where the trustee fails or declines to act, and for other good cause.