Haggerty v. Thornton ( 2021 )

Filed 9/16/21
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
BRIANNA MCKEE HAGGERTY, D078049
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2019-
00028694-PR-TR-CTL)
NANCY F. THORNTON et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court of San Diego County,
Julia C. Kelety, Judge. Affirmed.
Blut Law Group and Elliot S. Blut for Plaintiff and Appellant.
Artiano Shinoff, Howard A. Kipnis and Steven J. Barnes for Defendant
and Respondent Patricia Galligan.
Cross Law and Oleg Cross for Defendant and Respondent Racquel
Kolsrud.
Higgs Fletcher & Mack, Roland H. Achtel and Scott J. Ingold for
Defendant and Respondent Union of Concerned Scientists.
No appearance for Defendants and Respondents San Diego Humane
Society, Nancy F. Thornton, Jill Bousman, George Bousman, Jack Hebert,
Larry Guentherman, Gail Spielman and Dean Spielman.
Brianna McKee Haggerty appeals an order of the probate court finding
that a trust agreement was validly amended, thereby excluding her from
distribution. Haggerty’s aunt, Jeane M. Bertsch, created the trust in 2015.
The trust agreement included the following reservation of rights: “The right
by an acknowledged instrument in writing to revoke or amend this
Agreement or any trust hereunder.” Bertsch drafted the disputed
amendment in 2018. She signed the amendment and sent it to her former
attorney, but she did not have it notarized.
After Bertsch’s death, Haggerty argued that the 2018 amendment was
invalid because it was not “acknowledged” as described in the trust
agreement. The beneficiaries under the 2018 amendment responded that the
amendment was “acknowledged” within the meaning of the trust agreement
and, in any event, the method for amendment described in the trust
agreement was not exclusive. The probate court found that the amendment
was valid. We agree and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
As noted, Bertsch created the trust at issue in 2015. The trust
agreement provided that Bertsch “reserves the following rights, each of which
may be exercised whenever and as often as [she] may wish: [¶] A. Amend or
Revoke. The right by an acknowledged instrument in writing to revoke or
amend this Agreement or any trust hereunder.” (Boldface omitted.) The
agreement nominated Nancy Thornton as trustee in the event of Bertsch’s
death, resignation, or incapacity.
The next year, Bertsch drafted a first amendment to the trust
agreement. This 2016 amendment provided that Haggerty would become
trustee in the event of Bertsch’s death. The amendment also made changes
to the beneficiaries of the trust, including a residual distribution to Haggerty.
2
Bertsch signed the amendment, and it was apparently witnessed by a notary
public in Illinois. Above the notary’s signature, the document stated, “This
instrument was acknowledged before me on 10-25-16, by JEANE M.
BERTSCH.” (Boldface omitted.) The document did not include a notarial
seal or stamp.
Bertsch subsequently drafted two handwritten documents, a
2017 beneficiary list and the disputed 2018 amendment. The
2017 beneficiary list did not include Haggerty, and it provided that any
residual assets would be distributed to the Union of Concerned Scientists
(UCS). It was not signed. The 2018 amendment revised the beneficiary
instructions again. It provided that UCS would receive “one half (Two
Million Dollars)” and several individuals would receive “equal portions from
the remainder half (Two Million Dollars)[.]” Haggerty was not included.
Above her signature, Bertsch wrote, “I herewith instruct Patricia Galligan to
place this document with her copy of the Trust. She can verify my
handwriting.” Galligan is Bertsch’s former estate attorney.
Bertsch died in late 2018. Thornton filed a petition in the probate court
to confirm her appointment as successor trustee. She contended the
2016 amendment, which named Haggerty as trustee in the event of Bertsch’s
death, had been revoked. But she believed the 2017 beneficiary list and
2018 amendments were valid.
Haggerty filed a competing petition to determine the validity of the
2016 amendment, the 2017 beneficiary list, and the 2018 amendment. She
argued the trust agreement required that any amendment be acknowledged
by a notary public or other specified person under the Civil Code. She
maintained that the 2016 amendment had been validly acknowledged, but
the 2017 beneficiary list and 2018 amendment had not. Haggerty requested
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a declaration to that effect, as well as an order recognizing that she was the
successor trustee, not Thornton.
Haggerty also filed objections to Thornton’s petition to confirm her
appointment. Several beneficiaries filed their own objections to Haggerty’s
petition. At a hearing, the court requested supplemental briefing on the
issue of whether the trust agreement allowed amendment in the manner
attempted by the 2017 beneficiary list and 2018 amendment.
In her brief, Haggerty continued to argue that the trust agreement
required acknowledgment under the Civil Code. Relying primarily on King v.
Lynch (2012) 204 Cal.App.4th 1186 (King), Haggerty reasoned that the trust
agreement provided for a method of amendment, so that method must be
followed in order to validly amend the agreement. Haggerty contended the
2016 amendment was valid, because it was acknowledged, but the
2017 beneficiary list and 2018 amendment were not.
Galligan responded that the trust agreement’s use of the phrase
“ ‘acknowledged instrument in writing’ ” was ambiguous. It could mean
“expressly advis[ing] someone that the instrument amending the Trust was
genuine or authentic,” rather than imposing the Civil Code requirements for
acknowledgment. Galligan argued that the court was required to consider
extrinsic evidence of Bertsch’s intent in using the phrase “ ‘acknowledged
instrument’ ” to determine its meaning. Alternatively, Galligan contended
the court could conclude the 2018 amendment was valid as a matter of law
because the method of amendment specified in the trust agreement was not
exclusive. Galligan distinguished King and suggested it was wrongly
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decided. UCS and Racquel Kolsrud filed briefs advancing similar
arguments.1
After a further hearing, which was not reported, the probate court
denied Haggerty’s petition. In a minute order, the court made the express
finding that the 2018 amendment was a valid amendment to the trust
agreement. Haggerty appeals.
DISCUSSION
The Probate Code governs the revocation and modification of trusts,
and subsequent statutory references are to that code. The parties dispute the
meaning of its provisions. We consider the issue de novo. “The meaning and
construction of a statute is a question of law, which we decide
independently.” (B.H. v. County of San Bernardino (2015) 62 Cal.4th 168,
189.) “The goal of statutory construction is to ascertain and effectuate the
intent of the Legislature. [Citation.] Ordinarily, the words of the statute
provide the most reliable indication of legislative intent. [Citation.] When
the statutory language is ambiguous, the court may examine the context in
which the language appears, adopting the construction that best harmonizes
the statute internally and with related statutes. [Citations.] ‘ “Both the
legislative history of the statute and the wider historical circumstances of its
enactment may be considered in ascertaining the legislative intent.” ’ ”
(Pacific Gas & Electric Co. v. County of Stanislaus (1997) 16 Cal.4th 1143,
1152.)
1 Galligan’s brief also asserted that the 2016 amendment had been
expressly revoked. It stated that Bertsch told Galligan she had a dispute
with Haggerty in late 2017 and Bertsch had “destroyed the
[2016 a]mendment with the intent to revoke it. Neither the original nor any
copy of the [2016 a]mendment was found among [Bertsch’s] estate planning
documents in her possession following her death and the original has never
been found.”
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Section 15401, subdivision (a) provides that a revocable trust may be
revoked either (1) “[b]y compliance with any method of revocation provided in
the trust instrument” or (2) “[b]y a writing, other than a will, signed by the
settlor or any other person holding the power of revocation and delivered to
the trustee during the lifetime of the settlor or the person holding the power
of revocation.” However, if the trust instrument “explicitly makes the method
of revocation provided in the trust instrument the exclusive method of
revocation,” the method in the trust instrument must be used. (Id.,
subd. (a)(2), italics added.)
Section 15401 changed the prior rule, which required that a trust
instrument’s method of revocation must be used if it was either explicitly or
implicitly exclusive. (Cal. Law Revision Com. com., West’s Ann. Prob. Code
(2021 ed.) foll. § 15401; Huscher v. Wells Fargo Bank (2004) 121 Cal.App.4th
956, 970 (Huscher).) “[W]e presume the change made was to require a
statement of explicit exclusivity and thereby avoid the problems of
interpretation inherent in determining issues of implicit exclusivity.”
(Huscher, at p. 971, fn. 13.)
Section 15402 governs modification. It states, “Unless the trust
instrument provides otherwise, if a trust is revocable by the settlor, the
settlor may modify the trust by the procedure for revocation.” (§ 15402.)
“This section codifies the general rule that a power of revocation implies the
power of modification.” (Cal. Law Revision Com. com., West’s Ann. Prob.
Code (2021 ed.) foll. § 15402.)
In this appeal, as in the probate court, the parties focus heavily on
King, supra, 204 Cal.App.4th 1186. In King, a married couple created a
revocable trust. (Id. at p. 1188.) For jointly owned property, the trust
instrument described separate procedures for modification and revocation.
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The trust could be modified “by an instrument in writing signed by both
Settlors and delivered to the Trustee[.]” (Ibid.) The trust could be revoked
“by an instrument in writing signed by either Settlor and delivered to the
Trustee and the other Settlor[.]” (Id. at p. 1189.) After one spouse suffered a
serious injury, the other spouse executed several amendments to the trust,
without the first spouse’s signature. (Ibid.)
The majority opinion in King held that these amendments were invalid
because they did not comply with the method of modification described in the
trust instrument. (King, supra, 204 Cal.App.4th at p. 1194.) The majority
recognized that, under section 15401, a method for revocation must be
explicitly exclusive to displace the statutory method. (Id. at p. 1192.) But it
held that, under section 15402, a trust instrument need only “provide[]
otherwise” for its method of modification to be exclusive. (Ibid.) The King
majority explained, “The qualification ‘[u]nless the trust instrument provides
otherwise’ indicates that if any modification method is specified in the trust,
that method must be used to amend the trust.” (Id. at p. 1193.) Under prior
law, “courts applied the rules governing trust revocations to trust
modifications. However, when the Legislature enacted sections 15401 and
15402, it differentiated between trust revocations and modifications. This
indicates that the Legislature no longer intended the same rules to apply to
both revocation and modification.” (Ibid.) To apply the same rules, the King
majority believed, would leave section 15402 as mere surplusage. (Ibid.)
The King majority concluded, “The trust specified a modification
method and thus, under section 15402 the trust could only be amended in
that manner. The settlors bound themselves to a specific method of
modification. If we were to hold otherwise, especially where, as here, the
amendment provision is more restrictive than the revocation provision, we
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would cause the amendment provision to become superfluous and would
thereby thwart the settlors’ intent.” (King, supra, 204 Cal.App.4th at
p. 1194.)
One justice in King disagreed. The dissenting opinion believed that the
new, higher standard for exclusivity for revocation also applied to
modification. (King, supra, 204 Cal.App.4th at p. 1194 (dis. opn. of
Detjen, J.).) The dissent focused on the purpose of sections 15401 and 15402,
which was to permit greater flexibility for the settlor of a revocable trust. (Id.
at pp. 1195-1196.) The dissent explained, “[T]he 1987 adoption of
section 15401 in the terms proposed by the [California Law Revision
Commission] reflected a clear legislative choice to change the existing law in
favor of permitting greater flexibility for the settlor, and rejecting the rule
that the majority here asserts, which would designate a method of
modification as exclusive simply because it has been set forth in the trust
instrument.” (Id. at p. 1196.) The dissent continued, “[P]rior to 1987,
modification of a trust was viewed as merely one aspect of the more inclusive
power to revoke a trust. [Citation.] In recommending the 1987 revisions to
the law of trusts, however, the Commission set forth explicitly the nature of
the implied power of modification: ‘Under general principles the settlor, or
other person holding the power to revoke, may modify as well as terminate a
revocable trust. [Fn. omitted.] The proposed law codifies this rule and also
makes clear that the method of modification is the same as the method of
termination, barring a contrary provision in the trust.’ ” (Ibid.)
“In summary, section 15401 was written specifically to change the
restrictive rule adopted in [prior caselaw]. [Citation.] And section 15402 was
added, not to establish a different rule from section 15401, as the majority
asserts [King, supra, 204 Cal.App.4th] at pp. 1192-1193 (maj. opn.), but in
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order to adopt the same flexible rule for modifications as for revocations
unless ‘bar[red]’ by ‘a contrary provision in the trust’ [citation] or, in the
language of statute, ‘[u]nless the trust instrument provides otherwise’
(§ 15402). . . . Nothing in the Commission’s comments on sections 15401 and
15402 supports the position that, even though [the prior rule] should not
apply to revocations (§ 15401), it should, as the majority asserts, apply to
modifications under section 15402.” (King, at p. 1196 (dis. opn. of Detjen, J.).)
The King dissent found support in Huscher, supra, 121 Cal.App.4th at
pages 960 through 963, which examined both current and prior law. (King,
supra, 204 Cal.App.4th at p. 1197 (dis. opn. of Detjen, J.).) “The trust
instrument in Huscher provided that the trustor ‘ “may at any time amend
any of the terms of [the] trust by an instrument in writing signed by the
Trustor and the Trustee.” ’ [Citation.] The Huscher court found that this
provision did not provide explicit exclusivity, that is, the language did not
expressly preclude the settlor from using alternate statutory methods to
modify the trust instrument.” (Ibid.) The dissent explained that Huscher
was inconsistent with the interpretation of section 15402 advanced by the
King majority: “Instead, Huscher specifically stated, in reference to
section 15402, ‘Under the current law, the statutory procedure for modifying
a trust can be used unless the trust provides a modification procedure and
explicitly makes that method exclusive.’ ” (King, at p. 1197, quoting Huscher,
at p. 967.) (The King majority responded that the discussion of section 15402
in Huscher was dicta and unpersuasive, see King, at p. 1193, fn. 3.)
The King dissent concluded that the trust instrument at issue “did not
explicitly exclude use of the alternative statutory method for modification or
revision” so the statutory method was available. (King, supra,
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204 Cal.App.4th at p. 1198 (dis. opn. of Detjen, J.).) Because the
amendments complied with the statute, they were valid modifications. (Ibid.)
We do not need to comment on King’s interpretation of its trust
instrument. The language of that instrument differs significantly from the
language of the trust agreement here. Nor do we need to consider whether
King was ultimately correctly decided on its facts. But, as a general matter,
we conclude the King dissent more accurately captures the meaning of
section 15402 than the majority opinion. Section 15402 cannot be read in a
vacuum. It does not establish an independent rule regarding modification. It
recognizes the existing principle that “a power of revocation implies the
power of modification.” (Cal. Law Revision Com. com., West’s Ann. Prob.
Code, supra, foll. § 15402.) The method of modification is therefore the same
as the method of revocation, “[u]nless the trust instrument provides
otherwise,” i.e., unless the trust instrument distinguishes between revocation
and modification. (§ 15402.) The California Law Revision Commission made
this point explicit: “ ‘Under general principles the settlor, or other person
holding the power to revoke, may modify as well as terminate a revocable
trust. [Fn. omitted.] The proposed law codifies this rule and also makes
clear that the method of modification is the same as the method of
termination, barring a contrary provision in the trust.’ ” (King, supra,
204 Cal.App.4th at p. 1196 (dis. opn. of Detjen, J.), quoting Selected
1986 Trust and Probate Legislation (Sept. 1986) 18 Cal. Law Revision Com.
Rep. [1986] p. 1271.) Under this interpretation, section 15402 is not mere
surplusage, as the King majority believed. As the California Law Revision
Commission’s comment explains, it codifies the existing rule that the power
of revocation includes the power of modification, thus an available method of
revocation is also an available method of modification—unless the trust
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instrument provides otherwise. (See Cal. Law Revision Com. com., West’s
Ann. Prob. Code, supra, foll. § 15402.)
With these principles in mind, we turn to the language of the trust
agreement at issue here. “The primary duty of a court in construing a trust
is to give effect to the settlor’s intentions.” (Barefoot v. Jennings (2020)
8 Cal.5th 822, 826.) Where, as here, interpretation of the instrument does
not depend on disputed extrinsic evidence, we consider the issue de novo.
(Gardenhire v. Superior Court (2005) 127 Cal.App.4th 882, 888.)
The language of Bertsch’s trust agreement does not distinguish
between revocation and modification. It reserves the following right to the
settlor: “The right by an acknowledged instrument in writing to revoke or
amend this Agreement or any trust hereunder.” Because the trust does not
distinguish between revocation and modification, it does not “provide
otherwise” than the general rule, and under section 15402 the trust may be
modified by any valid method of revocation. Moreover, as a reservation of
rights, it does not appear Bertsch intended to bind herself to the specific
method described in the trust agreement, to the exclusion of other
permissible methods. Because the method of revocation and modification
described in the trust agreement is not explicitly exclusive (and no party
argues otherwise), the statutory method of revocation was available under
section 15401. (See Masry v. Masry (2008) 166 Cal.App.4th 738, 742
[reservation of rights not explicitly exclusive].) Bertsch complied with the
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statutory method by signing the 2018 amendment and delivering it to herself
as trustee. It was therefore a valid modification of the trust agreement.2
Finally, in her opening brief, Haggerty requests that we find the
2016 amendment valid under the method of amendment specified in the trust
agreement. It does not appear the probate court addressed this issue. Our
decision is without prejudice to whatever contentions the parties may make
regarding that amendment.
2 Again, we need not and do not consider the situation in King, where the
trust instrument did distinguish between methods for revocation and
modification and imposed an arguably more stringent requirement on
modification. The circumstances here are materially different. This appeal is
also distinguishable from Pena v. Dey (2019) 39 Cal.App.5th 546, 552, where
the court cited King and found that the method of amendment described in
the trust instrument governed. The method of amendment described in the
trust instrument was the same as the statutory method under the
circumstances, so the issue was not clearly presented. (Compare id. at
pp. 552, 551 [amendment “ ‘shall be made by written instrument signed by
the settlor and delivered to the trustee’ ”] with § 15401, subd. (a)(1)
[revocation made “[b]y a writing, other than a will, signed by the settlor or
any other person holding the power of revocation and delivered to the
trustee”].) Haggerty’s reliance on this court’s opinion in Conservatorship of
Irvine (1995) 40 Cal.App.4th 1334 is likewise unpersuasive for the reasons
discussed in Huscher, supra, 121 Cal.App.4th at pages 966 through 967 and
footnote 13.
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DISPOSITION
The order is affirmed. The parties shall bear their own costs on appeal.
GUERRERO, J.
WE CONCUR:
McCONNELL, P. J.
DATO, J.
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