Hillman v. Pagan CA1/4 ( 2021 )

Filed 10/21/21 Hillman v. Pagan CA1/4
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
JOHN HILLMAN et al., as
Trustees, etc., Respondents and
Appellants, A160203
v.
(San Mateo County
CELESTE PAGAN, Super. Ct. No.
Petitioner and 19PRO00851)
Respondent.
Respondents John and George Hillman are brothers who
were beneficiaries and co-trustees of their mother’s trust after
her death. They appeal from a judgment issued after the probate
court found that a Distribution Agreement, Stipulation and
Mutual Release (the distribution agreement) entered into by
respondents and the other co-trustees was binding and voluntary
under Probate Code1 section 16004.5, subdivision (b)(2) (hereafter
section 16004.5(b)(2)). Respondents argue that the distribution
agreement was invalid under section 16004.5, subdivision (a)
(hereafter section 16004.5(a)) because they were required, as
beneficiaries, to release the trustees from liability as a condition
All statutory references are to the Probate Code unless
1
otherwise noted.
1
to receiving distributions that were required under the trust. We
will affirm the judgment.
BACKGROUND
Respondents’ mother, Frances L. Hillman2, created the
Frances L. Hillman Trust (the trust) in 1995 and last restated it
in 2016. From the trust’s 2016 restatement to Frances’s death on
April 2, 20173, Frances, Celeste Pagan, and Sally Severson served
as the trust’s co-trustees. Celeste Pagan is a former girlfriend of
John Hillman, and the two share a daughter. Sally Severson is
respondents’ cousin. When Frances died, respondents became co-
trustees of the trust along with Pagan and Severson. Under the
trust terms, upon Frances’s death, two $10,000 distributions
were to go to Frances’s stepdaughters, and respondents were to
split the trust residue.
Frances lived in an assisted living center before she died,
and the sale of her residence closed shortly before her death in
March 2017. Sale proceeds of approximately $831,000 became a
trust asset. While Frances was in the hospital in the days
leading up to her death, Pagan wrote checks totaling
approximately $270,000 from the trust to Frances’s relatives and
acquaintances, including Pagan and Pagan’s husband and
daughters.
2 Because respondents and the decedent share a last name,
we will refer to them individually by their first names.
3In the end of March 2017, at the age of 91, Frances choked
on food while out to dinner, emergency responders broke her
sternum attempting to revive her, and she was taken to the
hospital. She then passed away after being transferred to
another hospital for a procedure to address a blood clot.
2
The parties executed the distribution agreement in late
June and early July 2017. In February 2019, respondents
brought a civil suit against Pagan for breach of fiduciary duty,
fraud, conversion, and negligence, alleging that Pagan raided and
liquidated trust assets, engaged in self-dealing and negligence
with the sale of Frances’s home, and failed to provide an accurate
trust accounting. In July 2019, Pagan brought the petition at
issue in this appeal, seeking to confirm that the distribution
agreement was valid and binding. The court held two evidentiary
hearings on Pagan’s petition.
I. Walter Shjeflo
Attorney Walter Shjeflo testified that Pagan contacted him
after Frances’s death and sought assistance in administering the
trust, and he agreed to represent her. Shjeflo first worked on the
distribution of Frances’s personal property to respondents, who
were anxious to get the property. On or around May 17, 2017,
the four trustees entered into an agreement allowing respondents
to split Frances’s personal property on their own without further
trustee supervision. On May 16, 2017, Shjeflo’s office served on
the trust beneficiaries and Frances’s heirs, including
respondents, a notice of Frances’s passing and of the deadline to
contest the trust pursuant to section 16061.74.
4 As is relevant here, section 16061.7 provides that a
trustee shall notify the beneficiaries of the trust and the heirs of
the settlor when a revocable trust becomes irrevocable because of
the death of the settlor. “The notification by trustee shall contain
the following information: [¶] (1) The identity of the
settlor . . . and the date of execution of the trust instrument. [¶]
(2) The name, mailing address and telephone number of each
3
Respondents were not represented by counsel. Shjeflo
testified that he discussed with respondents the concept of
seeking advice from others for both the personal property and
distribution agreements.
From late May 2017 to early June 2017, Shjeflo sent trust
financial records to respondents, including copies of the checks
written in the days before Frances’s death and an escrow closing
statement from the sale of Frances’s house. On May 30, 2017,
Shjeflo received an email from George Hillman’s wife confirming
receipt of the trust financial documents Shjeflo had emailed
earlier that day and requesting the names of the persons who
received the checks; Shjeflo emailed copies of the checks to
respondents the next day. Shjeflo remembered speaking to
respondents approximately half a dozen times. He remembered
that respondents asked questions about the checks and the sale
of Frances’s house, but he testified that respondents did not voice
trustee of the trust. [¶] (3) The address of the physical location
where the principal place of administration of the trust is
located . . . . [¶] (4) Any additional information that may be
expressly required by the terms of the trust instrument. [¶] (5) A
notification that the recipient is entitled, upon reasonable request
to the trustee, to receive from the trustee a true and complete
copy of the terms of the trust.” (§ 16061.7, subd. (g).) The
notification must also “include a warning, set out in a separate
paragraph in not less than 10–point boldface type, or a
reasonable equivalent thereof, that states as follows: [¶] ‘You may
not bring an action to contest the trust more than 120 days from
the date this notification by the trustee is served upon you or 60
days from the date on which a copy of the terms of the trust is
mailed or personally delivered to you during that 120–day period,
whichever is later.’ ” (§ 16061.7, subd. (h).)
4
any objections during the process. When asked whether it
“played out” that respondents had to sign the distribution
agreement to get their distribution, Shjeflo responded, “No.” He
testified, “I told them there were alternatives. They could have
said, no, I don’t like X, Y or Z; propose something, another
compromise of some sort. They could have asked for an
accounting in court, and the trustees would have had to—them
included—figure[ ] out how much money they needed to reserve
for those activities, whatever they turned out to be. And the
remainder would have been distributed to [respondents].”
Shjeflo emailed an unexecuted version of the distribution
agreement to respondents and the other trustees on June 30,
2017, and all parties returned their signatures on the agreement
to Shjeflo by July 3, 2017. Respondents came to Shjeflo’s office to
pick up final hard copies of the agreement and its attachments on
Monday, July 3, 2017, and distribution checks were sent to
respondents on July 5, 2017.
II. George Hillman
George testified that he received a number of trust
financial documents from Shjeflo’s office before he signed the
distribution agreement, including the escrow closing statement
for the sale of Frances’s home. He also said that he went to
Shjeflo’s office and examined documents in person on several
occasions throughout the process. He was sure that he read the
full distribution agreement before he signed it, including the part
that stated he could go to court for an accounting. He testified
that one of the reasons he did not go to court was cost—
5
specifically, he believed the cost would have resulted in him
receiving a smaller distribution—and he wished to receive a
distribution as quickly as possible.
George testified that he signed the distribution agreement
to get his inheritance. He also testified that Shjeflo said to him,
“ ‘If you want your inheritance, you have to sign this now,’ or
sometime in the future there’s a possibility of getting it, but
[Shjeflo] didn’t say when or how long it would take or—and in
order for us to get paid, we had to sign.” George also testified
that Pagan told him, “If you don’t get this now, there’s no telling
how much will be left next time.”
On cross-examination, George conceded that he tried to
read everything that Shjeflo sent him, and he again confirmed
that he read the distribution agreement before signing it and that
Shjeflo told him he could have a court accounting but that would
cost more money. George again confirmed that he signed the
distribution agreement because further proceedings would
diminish the trust funds, and he wanted to get the money as
quickly as possible.
III. John Hillman
Although John testified that he may not have read the
trust financial documents that Shjeflo emailed to him on May 30,
2017, he confirmed that Shjeflo’s email sending these documents,
including trust bank statements and a closing statement for the
sale of Frances’s residence, went to his email address. John
further confirmed that, on May 31, 2017, Shjeflo’s office emailed
him copies of the checks written in the days before Frances’s
6
death. John testified that he did not know whether his mother
had instructed Pagan to write the gift checks, and conceded it
was possible that she had. He testified that he signed the
distribution agreement because he understood he had to sign it to
get his money, and he skimmed, but did not fully read, the
distribution agreement before signing it. John also testified that
Pagan said to respondents, “If you don’t get this now, there’s no
telling how much will be left next time.”
IV. Celeste Pagan
Pagan briefly testified that Frances was lucid and made all
the decisions about her medical care in the days leading up to her
death, John appeared happy about the checks and the help that
Pagan gave Frances when Pagan spoke to him the day Frances
died, and respondents were not with Frances very often. Pagan
testified that she never spoke to respondents about what would
happen to the trust money if they did not sign the distribution
agreement.
V. The Distribution Agreement
The distribution agreement identifies the co-trustees and
named beneficiaries of the trust, the value of the trust assets as
of Frances’s death, and the amount available for distribution
“now” after accounting for the then-current trustee’s fees, taxes,
and legal expenses. Pursuant to the distribution agreement, the
parties approved of the accounting provided therein and the
documentation that had been provided; they waived further
rights to an accounting; they approved of the conduct and
administration of the trustees before and after Frances’s death;
7
and they fully released the trustees and their advisors as to all
conduct through the date of the agreement. The parties further
acknowledged that they had been advised of the right to seek
counsel, and they had exercised that right to the extent they
desired to do so. The parties also agreed that the agreement
reflected “compromises as to the treatment and characterization
of some matters” and that all parties entered into the agreement
“voluntarily and without coercion as they wish to finish and end
this matter without a formal or Court accounting or other
proceedings despite their right to have such proceedings.”
VI. The Statement of Decision
After the evidentiary hearings, the trial court issued a
statement of decision. The court framed the issue before it as
whether section 16004.5(a) or section 16004.5(b)(2) applied. It
noted that respondents argued that the matter turned on the
dates of the distribution checks and the distribution agreement;
the disputed issue of whether Shjeflo and Pagan made certain
statements suggesting that a release was a condition of
distribution; and, if the statements were made, the disputed issue
of whether it could be construed from such evidence that Pagan
required a release as a condition of a mandated distribution. The
trial court then made a number of findings based on “the totality
of the evidence.”
First, the court found, “The statements attributed to Mr.
Shjeflo, and the statement attributed to Ms. Pagan are
ambiguous at most. Any reference to the fact that the remaining
funds in the trust might not be there later, if made at all, do[es]
8
not condition distribution on signing the comprehensive release
but only reflect what was obvious; that further trust proceedings
will result in more expense. Even if made, nothing in any of the
statements attributed to Shjeflo or Pagan can be characterized a
requirement of distribution.” The court also found that “[n]othing
in the [distribution agreement] itself conditions receipt of funds
on its approval.”
The court continued, “George Hillman5 testified that upon
signing the release and obtaining the resulting check, he
intended to use the money he obtained from the voluntary release
and discharge to sue the trust. There is no evidence that
[respondents] were coerced or forced into signing the [distribution
agreement], or didn’t understand its terms. [Respondents] had
an opportunity to review the terms and seek legal advice if they
chose to do so. Both waived that right. Both had the right to
review supporting documents, and to varying degrees, both took
advantage of that right. Further, although each testified in
substance that their review of the [distribution agreement] was
rather casual, each seemed to be aware of its importance.”
Finally, the court found that respondents knew about the trust
checks written in the days before Frances’s death when they
signed the distribution agreement, and, while respondents had no
legal training, “they were advised of the opportunity to obtain
independent representation before signing the document and
explicitly waived that right.”
The parties agree that the trial court meant “John
5
Hillman.”
9
The court concluded that the distribution agreement “is
binding and that further, such agreements are specifically
contemplated and permitted by the provisions of [ ] section
16004.5(b). Subdivision (a) is inapplicable on these facts.” It also
found Bellows v. Bellows (2011) 196 Cal.App.4th 505 (Bellows), to
be factually distinguishable. The trial court entered a judgment
finding that the distribution agreement is binding, and
respondents timely appealed.
DISCUSSION
I. Governing Law
Section 16004.5 governs this appeal. It begins, “A trustee
may not require a beneficiary to relieve the trustee of liability as
a condition for making a distribution or payment to, or for the
benefit of, the beneficiary, if the distribution or payment is
required by the trust instrument.” (§ 16004.5, subd. (a).) The
statute continues, “This section may not be construed as affecting
the trustee’s right to: [¶] (1) [m]aintain a reserve for reasonably
anticipated expenses, including, but not limited to, taxes, debts,
trustee and accounting fees, and costs and expenses of
administration. [¶] (2) [s]eek a voluntary release or discharge of a
trustee’s liability from the beneficiary. [¶] (3) [r]equire
indemnification against a claim by a person or entity, other than
a beneficiary referred to in subdivision (a), which may reasonably
arise as a result of the distribution. [¶] (4) [w]ithhold any portion
of an otherwise required distribution that is reasonably in
dispute. [¶] (5) [s]eek court or beneficiary approval of an
10
accounting of trust activities.” (§ 16004.5, subd. (b), italics
added.)
II. Standard of Review
In their opening brief, respondents assert that a mixed
standard of de novo and abuse of discretion review applies,
although they decline to explain how this mix of standards should
be applied. In contrast, Pagan contends that this case involved
disputed factual matters to which this court must apply the
substantial evidence standard of review. We agree with Pagan.
A de novo standard of review applies where an appellate
court’s task consists of interpreting a statute or applying a
statute to underlying facts that are not in dispute. (Shapiro v.
San Diego City Council (2002) 96 Cal.App.4th 904, 912
(Shapiro).) However, to the extent that the trial court made
factual findings or drew factual inferences from disputed or
undisputed facts, we defer to those findings and inferences to the
extent they are supported by substantial evidence. (Ibid.) “Our
power in this regard ‘begins and ends with the determination as
to whether there is any substantial evidence, contradicted or
uncontradicted, which will support the finding of fact.
[Citations.] [¶] When two or more inferences can reasonably be
deduced from the facts, a reviewing court is without power to
substitute its deductions for those of the trial court.’ ” (Ibid.,
italics removed.) Additionally, credibility is an issue of fact for
the trial court to resolve. (Johnson v. Pratt & Whitney Canada,
Inc. (1994) 28 Cal.App.4th 613, 622–623.)
11
The ruling at issue turned on the trial court’s factual
determinations that Pagan did not require respondents to sign
the distribution agreement as a condition to making a
distribution mandated by the trust, and that respondents’
execution of the distribution agreement was voluntary. In their
reply brief, respondents argue for de novo review, claiming that it
is undisputed that respondents executed the distribution
agreement before obtaining their distribution checks, and
respondents “were compelled” to execute the distribution
agreement. But even if the dates of execution of the pertinent
checks and agreement are undisputed, as the trial court
observed, the matter turned on the disputed issues of whether
certain statements were made, and, if made, whether it could be
inferred from such evidence that Pagan required a release as a
condition of a distribution mandated by the trust. Under these
circumstances, we review the trial court’s determinations for
substantial evidence. (See Eyford v. Nord (2021) 62 Cal.App.5th
112, 123 [reviewing for substantial evidence the trial court’s
ruling on the contested issue of whether decedent suffered from a
mental health disorder with symptoms of delusions that would
establish testamentary incapacity under section 6100.5, subd.
(a)(2)].)
III. Analysis
The trial court found that a preponderance of the evidence
established that the execution of the distribution agreement was
voluntary and without coercion or force; respondents had been
afforded and waived the right to seek independent counsel;
12
respondents were afforded the right to review trust financial
documents before they signed the distribution agreement; and
the evidence did not establish that Pagan required execution of
the distribution agreement as a condition to making a mandatory
trust distribution.
Respondents dispute the trial court’s findings, contending
that the following evidence established they were required to sign
the distribution agreement to get a distribution mandated by the
trust: 1) George’s testimony that Shjeflo said they had to sign
now if they wanted their inheritance “or sometime in the future
there’s a possibility of getting it,” though Shjeflo did not say
“when or how long it would take”; and 2) respondents’ testimony
that Pagan said something to the effect that respondents had
better take the money because it might not be there later.6 But
respondents ignore that the trial court’s findings are supported
by Shjeflo’s testimony denying that respondents had to sign the
distribution agreement to get their distribution, and stating that
he told respondents there were alternatives to the distribution
agreement, including saying, “I don’t like, X, Y, Z,” or doing an
accounting that would result in the trustees (respondents
included) setting reserves and respondents getting the
remainder.7 Additionally, noting that the statements
6 Respondents do not argue that the language of the
distribution agreement expressly required that they sign the
release before they could receive a distribution mandated by the
trust.
7Section 16004.5, subdivision (b)(1) expressly authorizes
the trustee to withhold reserves for reasonably anticipated
expenses. “This section may not be construed as affecting the
13
respondents attributed to Shjeflo and Pagan were “ambiguous at
most,” the trial court declined to infer therefrom that Pagan
required a release as a condition of distribution. As it was
relayed by George, the statement attributed to Shjeflo left room
for inferences, and it is not for this court to draw an inference
contrary to the one drawn by the trial court. (Shapiro, supra,
96 Cal.App.4th at p. 912.) The same is true for Pagan’s
statement, which did not expressly state that respondents had to
sign a release to get the distribution required by the trust. (Ibid.)
We agree with the trial court’s observation that Pagan’s
statement that the remaining funds in the trust might not be
there later, “if made at all, do[es] not condition distribution on
signing the comprehensive release but only reflect[s] what was
obvious; that further trust proceedings will result in more
expense.”
Sufficient evidence also supports the trial court’s finding of
voluntariness. Respondents were afforded the right to seek
independent counsel, to review the distribution agreement, and
to review and question the trust financial documents provided
before they signed the distribution agreement. The distribution
trustee’s right to . . . [m]aintain a reserve for reasonably
anticipated expenses, including, but not limited to, taxes, debts,
trustee and accounting fees, and costs and expenses of
administration.” Respondents claim that they received a check
for exactly what they would have received under the trust in any
circumstance. This argument overlooks the fact that the scope of
further administration and reserves had not been finally
determined, and further administration likely would have
required additional administrative expenditures.
14
agreement was signed during the trust contest period
(§§ 16061.7, 16061.8), so the trustees were allowed to consider
that timing “in exercising discretion with respect to the timing
and nature of distributions of trust assets . . . .” (§ 16061.9,
subd. (c).) George Hillman confirmed that he knew he could ask
for “an accounting, court involvement and that sort of thing”
before he signed the distribution agreement, but he signed
because he wanted the money as soon as possible. Thus,
substantial evidence supports the conclusions that the
distribution here occurred prior to the completion of all aspects of
trust administration, and that respondents voluntarily executed
the distribution agreement.
Respondents argue that the fact that distribution checks
were sent after the execution of the distribution agreement
establishes that the distribution was conditioned on the release
as a matter of law. We cannot agree. Section 16004.5 allows the
trustee to seek a voluntary release at the same time it prohibits a
trustee from requiring a beneficiary to sign a release as a
condition to receiving a mandatory distribution. (§ 16004.5,
subds. (a), (b)(2).) Where a distribution is sent after a release is
executed, the trustee’s conduct violates section 16004.5(a) only if
it is established that the trustee conditioned the distribution on
the signing of the release. The distribution check date and the
release execution date cannot in every instance provide the
requisite factual showing, and, here, the trial court made a
sufficiently supported finding that the trustee did not require
15
respondents to sign a release as a condition to their receipt of a
mandatory distribution.8
Like the trial court, we find Bellows, supra,
196 Cal.App.4th 505, distinguishable. In Bellows, Donald, a
beneficiary of his mother’s trust, petitioned to force his trustee
brother, Frederick, to do an accounting and distribution nine
months after their mother’s death, and the trial court ordered
Frederick to complete the final accounting and distribution
within 10 days. (Id. at p. 508.) Frederick sent a $30,376.80 check
to Donald’s counsel with a final accounting, and Donald’s counsel
returned the check, disputing whether Frederick properly
deducted $13,000 of attorney fees from the trust corpus. (Ibid.)
Frederick then sent Donald a $37,520.48 check (including one-
half of the attorney fees), with a letter advising that Donald was
“ ‘authorized to negotiate the check when he has signed and
returned the enclosed receipt of final distribution,’ ” which
included an acknowledgment that the payment represented the
final distribution. (Ibid.) When Donald sought to compel
Frederick to comply with the court’s accounting order, Frederick
argued, and the trial court agreed, that Donald had cashed the
check in full satisfaction of his claim for half the trust assets.
(Id. at pp. 508–509.) The appellate court reversed, finding there
to be no dispute that Frederick owed Donald “at least $30,376.80,
based on Frederick’s own accounting,” and, under section
8Respondents’ argument that Pagan did not satisfy her
burden of proof by a preponderance of the evidence is meritless,
given the substantial evidence supporting the trial court’s ruling.
16
16004.5(a), the cashed check could not be an accord and
satisfaction because Frederick was prohibited from conditioning a
required distribution upon Donald’s execution of a release. (Id. at
pp. 510–511.) The court explained: “A release obtained as a
condition of accepting payment to which the beneficiary is
entitled is in no sense voluntary.” (Id. at p. 511.) Bellows did not
involve a court’s factual finding that a trustee did not condition
receipt of a mandatory distribution upon execution of a release.9
DISPOSITION
The judgment is affirmed.
BROWN, J.
WE CONCUR:
POLLAK, P. J.
TUCHER, J.
Hillman et al. v. Pagan (A160203)
At oral argument, respondents asserted for the first time
9
that their execution of the distribution agreement was not
voluntary because Pagan failed to disclose that she lacked
written authorization under the trust to write the checks totaling
approximately $270,000, and because these checks were not
attached to the distribution agreement when respondents signed
the agreement. We do not address these untimely arguments,
which, in any event, are of doubtful merit. (People v. Cardenas
(1997) 53 Cal.App.4th 240, 248, fn. 4.)

Presiding Justice of the Court of Appeal, First Appellate
District, Division Three, sitting by assignment pursuant to article
VI, section 6 of the California Constitution.
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