Sehremelis v. Sehremelis CA4/3 ( 2020 )

Filed 11/20/20 Sehremelis v. Sehremelis 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
JOHN SEHREMELIS et al.,
Plaintiffs and Respondents, G057541
v. (Super. Ct. No. 30-2016-00875465)
ANDREA SEHREMELIS, as Trustee, etc. OPINION
Defendants and Appellants.
Appeal from a judgment of the Superior Court of Orange County, David L.
Belz, Judge. Affirmed in part, reversed in part.
Klapach & Klapach, and Joseph S. Klapach for Defendants and Appellants.
Bunt & Shaver, and David N. Shaver for Plaintiff and Respondent.
* * *
In 2014, George A. Sehremelis established a revocable trust for the benefit
of his four children: Andrea, Froso, John and Peter. Article IV, section (B)(8) of the trust
provided that “upon the approval of a majority of the grantor’s then living children, the
trust may be terminated at an earlier date, and the property comprising the trust estate
distributed in equal shares to the income beneficiaries of the trust estate.” George died in
July 2016, and two months later, three of his children petitioned the superior court to
terminate the trust pursuant to article IV, section (B)(8). The trustees -- Andrea and
Joseph Ressler -- argued the language of article IV, section (B)(8) is precatory, not
mandatory, and thus the trustees could exercise their discretion to not terminate the trust
despite the approval of a majority of George’s children to terminate the trust.
Following a bench trial, the trial court determined the language of article
IV, section (b)(8) was unambiguous, and the early termination provision vests the
discretionary power to terminate the trust in the children, not the trustees. The court
ordered the trust terminated, and to ensure an orderly dissolution process, it removed the
trustees and appointed Wells Fargo Bank as the new independent trustee. The trustees
appealed, arguing the trial court misinterpreted the early termination provision and
abused its discretion in removing them as trustees.
As discussed below, we conclude the language in the early termination
provision is unambiguous and mandatory. The trial court properly ordered the trust
terminated. We also conclude the trial court did not abuse its discretion in removing
Andrea as a trustee because the hostility and lack of trust between Andrea and his
siblings would impair the administration of the trust. The trial court, however, erred in
removing Ressler because there was no evidence of similar hostility or lack of trust.
Because the removal of Ressler as trustee was erroneous, the appointment of Wells Fargo
Bank was unnecessary and contrary to George’s intent. Accordingly, we affirm the
judgment in part and reverse in part.
I
FACTUAL AND PROCEDURAL BACKGROUND
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A. Trust Documents
On September 23, 2014, George created the revocable trust, naming
himself as the trustee, his sons Andrea and John as the family cotrustees, and Joseph T.
Ressler as the independent cotrustee. His daughter Froso, his son Peter and Wells Fargo
Bank were named as successor trustees.
The trust documents enumerated the powers of a trustee, but noted the
enumerated powers were “in addition to those powers now or hereafter conferred by law
or other provisions of this instrument.” The enumerated trustee powers included the
power to sell, exchange or repair trust property, but did not include the power to
terminate the trust. The trust documents also included a spendthrift provision, which
limits the transfer of a beneficiary interest in trust assets.
Article IV of the trust documents detailed George’s wishes about the
distribution of the trust when he died. Article IV, section (B)(1) provides: “It is the
desire of the grantor that the investments of the grantor in real estate be maintained in a
form similar to that owned at the time of the grantor’s death, and held, administered and
distributed by the trustees for the long term benefit of his children and their own children
(grandchildren of the grantor). To accomplish this, the grantor intends that the properties
be retained provided, however, that upon agreement of a majority of the then living
children of the grantor, specific properties may be sold. In addition, the trustees shall
have discretion where appropriate, by their decision, to exchange properties for other
replacement properties. The proceeds from sale of property should be held, administered,
and distributed in the same manner as the properties initially distributed under this
instrument. The trustee shall also have discretion as to the property operation or sale of
the businesses conducted by LLCs, corporations or other entities owned by the trust,
though it is anticipated that so long as they are reasonably profitable, these businesses
may continue to be operated in such manner as the trustees determine.”
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Article IV, section (B)(8) provides: “Notwithstanding the foregoing
provisions, upon the approval of a majority of the grantor’s then living children, the trust
may be terminated at an earlier date, and the property comprising the trust estate
distributed in equal shares to the income beneficiaries of the trust estate. Such division
may be made by physical segregation of assets or by assignment or transfer of undivided
interests in all or any part of the property comprising the trust estate.”
Article V provides that “[u]nless terminated at an earlier date in accordance
with other provisions of this instrument, the trust . . . shall terminate on the date which is
twenty-one (21) years after the death of the last survivor of the beneficiaries of such
trusts who are living at the time of the death of the grantor.”
On September 9, 2015, George amended his trust to remove John as a
family cotrustee and Wells Fargo Bank as a successor trustee. A month before his death,
on June 2, 2016, George amended the trust to add to the list of trustee powers the power
to employ and delegate authority to agents.
B. Instant Action
George died on July 4, 2016. Following George’s death, John and Peter
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filed a petition to terminate the trust pursuant to Article IV, section (B)(8).
Andrea and Ressler objected to the petition to terminate the trust. They
noted that in a prior proceeding, the San Bernardino Superior Court ruled that the
language in Article IV, section (B)(1) is “precatory language and not mandatory.” They
argued that “[l]ike the language of Trust Article IV, Section (B)(1) . . . , Article IV,
Section (B)(8), on which Petitioners base their request for instruction to wind up the
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The petition also alleged causes of action for the return of property (baseball card
collection) to the trust and for breach of fiduciary duty. The trial court, however, found
George had gifted the collection to Andrea’s son, and it did not find a breach of fiduciary
duty. Respondents do not challenge those determinations on appeal.
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Trust, contains the same precatory language and does not give the Petitioners the absolute
right to terminate the Trust.”
C. Trial Testimony
Ressler, the independent trustee, testified George wanted to control his
estate “from the grave, to where it continues to benefit his children and grandchildren.
And then 21 years after his last grandchild passed away, it was his wish[ ] that it would
be able to be dissolved then.” George never spoke with Ressler about the early
termination provision. About 10 months before George died, George amended his trust
to remove John as a trustee because John had stopped speaking with George and letting
him see his grandchildren. Ressler also testified he does the accounting for the trust, but
he did not prepare the accounting filed with the court.
John Sehremelis testified that after his father had a medical emergency in
2016, George spoke with John about redoing his trust. A week later, while George and
John were talking with Ressler about the family business accounts, Ressler recommended
George consult the law firm of Rodi Pollock for his estate planning. John drove his
father to the law firm, where they met William Christian.
During the meeting with Christian, George stated he wanted John and
Andreas as cotrustees with Ressler as the mediator because he knew John and Andrea
“didn’t get along.” George wanted the trust to exist after he died. However, George also
wanted an “escape hatch” to allow the majority to “dissolve the trust and go their own
ways” because of the discord among his children. George never discussed leaving money
to his grandchildren.
Several weeks later, George and John received copies of the trust
documents and discussed various trust provisions, including the early termination
provision. According to John, George told him the early termination provision was “in
case you guys don’t get along, because of what is going on, and it seems to be getting
worse.” George made clear he intended the early termination provision to allow a
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majority of his children to “just change and sell all of his assets.” John also testified
George complained to him about Andrea’s financial irresponsibility on multiple
occasions.
In August 2016, John signed a document, along with his siblings Peter and
Froso, to dissolve the trust. Peter testified he signed the document to terminate the trust
because he did not trust or have faith in Andrea. Froso also testified she wanted to
dissolve the trust because she did not trust Andrea.
Over respondents’ objections, the trial court permitted attorney Marshal
Oldman to testify as an expert on a trustee’s standard of care in exercising discretion
under the trust document. Oldman opined a trustee would not abuse his discretion to
decline to terminate the trust despite the vote of the majority of the current beneficiaries,
if the trustee engaged in a weighing process of the relevant factors. Oldman also opined
the trustee owed a duty to George’s grandchildren.
Oldman admitted he never met or spoke with George. He acknowledged
his opinion differed from the opinion of Elizabeth Blakely of the Rodi Pollock law firm,
who was the attorney for the trustees following Christian’s death in 2016. Oldman also
conceded the word “notwithstanding” in Article IV, section (B)(8) meant the early
termination provision would control even if other provisions were contrary.
Attorney Brandon Roesler testified he represented George in obtaining a
restraining order against Froso in early 2016. A few weeks after Roesler started
representing George, Andrea retained him to file a lawsuit against one of Andrea’s
siblings.
Rosa Castanon testified George hired her to work at one of his restaurants
in 1990. She became the restaurant’s manager in 2000, and currently works for Andrea.
Castanon testified that in 2014 or 2015 she overheard George complaining to Andrea
about John taking money from the restaurant’s registers. George often told Castanon he
was tired of supporting his kids and their family. In 2014, George handed Castanon his
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will to place in the restaurant’s safe, and told her that Andrea was going to take care of
everything, that Andrea was his only responsible child, and that Andrea was going to
make sure everything was done according to George’s will.
Randall Hausauer, a close friend of George, testified he spoke with George
about George’s estate plan. George said he wanted “his grandchildren to be well taken
care of.” George praised Andrea’s ability to handle money while expressing concern
about “his other three children being able to manage money.”
Andrea Sehremelis testified that in 2014 George expressed concerns to him
about his siblings’ handling of money. In August and September of 2014, George spoke
with Andrea about George’s trust. George told Andrea: “He wanted his assets to grow.
He wanted a legacy for his grandkids and great grandkids to have . . . [¶] . . . he wanted
[Andrea] to protect his grandchildren, to make sure they were educated . . . [and] had
health insurance all their lives . . . And . . . cash flow enough that it would generate a
good income for his kids to live off of.” According to Andrea, George intended the early
termination provision to allow the trustees the discretionary power to terminate the trust
upon a majority vote of the beneficiaries.
On cross-examination, Andrea acknowledged that in response to a special
interrogatory asking why the trustees have not terminated the trust, on May 4, 2017, he
responded: “Administration of the trust, the estate tax return, and liquidation of trust
assets are occurring so the trust can be terminated.” Andrea conceded he received
$991,800 in fees for his trustee work from the date George died, July 4, 2016 to June 30,
2017. Ressler received $42,788 in trustee fees for the same period. ~(5RT 871.)~
D. Trial Court’s Ruling and Posttrial Proceedings
Following the bench trial, the trial court issued a tentative statement of
decision. In the statement of decision, the trial court found the language in article IV,
section (B)(8) was “unambiguous.” “[A]lthough it was the wish of the settlor, George
Sehremelis, that the real estate assets of his estate be maintained in a form similar to that
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owned at the time of his death for the benefit of his children and grandchildren (Article
IV section B paragraph 1), the plain language of the trust [in article IV, section (b)(8)] is
to be understood to allow for a termination of the trust by majority vote of the then living
surviving children of the Settlor George Sehremelis.”
After noting that extrinsic evidence of George’s intent could be used to
reform an unambiguous trust provision, the trial court concluded the trustees failed to
meet their burden of proof to show by clear and convincing evidence that George
intended to vest the trustees with the power to terminate the trust at an earlier date. In
reaching its conclusion, the court stated that Andrea’s receipt of almost $1 million in
trustee fees weighed against the credibility of his testimony because Andrea had a
financial incentive not to terminate the trust. The court also found George was aware of
the history of conflict within the family, and it noted the “considerable conflict and
family dysfunction [was] observed by the Court and [was] reflected in the [trial]
testimony. These family members have filed lawsuits against one another and currently
have pending lawsuits.”
The trial court also exercised its discretionary authority under the Probate
Code to suspend the current trustees and to appoint Wells Fargo Bank as the interim
trustee. Following objections from the trustees, the court reserved the issue of removing
the trustees and set the matter for “an Order to Show Cause re Why the Court Should Not
Exercise Authority under Probate Code Section 17206 to Suspend and/or Remove the
Trustees and Appoint Wells Fargo as an Independent Trustee for the purpose of
liquidating and making distribution of the Trust assets.”
Following the hearing on the Order to Show Cause, the trial court exercised
its authority under Probate Code sections 17206 and 15642 to remove Andrea and
Ressler as trustees. It appointed Wells Fargo Bank as trustee for the asset liquidation and
distribution of Trust assets, “as per the wishes of the settlor George A. Sehremelis that
Wells Fargo be considered as a successor trustee.” The court found it would be in the
8
best interest of the trust to remove Andrea and Ressler as trustees for the “various reasons
stated in the proposed statement of decision.” It also found “no need for Ressler to
continue as Trustee” due to the appointment of Wells Fargo as an independent trustee.
II
DISCUSSION
A. Early Termination Provision
The trustees argue the trial court misinterpreted article IV, section (B)(8).
“‘The interpretation of a written instrument, including a . . . declaration of trust, presents
a question of law unless interpretation turns on the competence or credibility of extrinsic
evidence or a conflict therein. Accordingly, a reviewing court is not bound by the lower
court’s interpretation but must independently construe the instrument at issue.
[Citations.]’ [Citations.]” (Scharlin v. Superior Court (1992) 9 Cal.App.4th 162, 168.)
“In construing a trust instrument, the intent of the trustor prevails and it must be
ascertained from the whole of the trust instrument, not just separate parts of it.
[Citation.]” (Ibid.) In interpreting a document such as a trust, it is proper for the trial
court in the first instance and the appellate court on de novo review to consider the
circumstances under which the document was made so that the court may be placed in the
position of the testator or trustor whose language it is interpreting, in order to determine
whether the terms of the document are clear and definite, or ambiguous in some respect.
(Estate of Russell (1968) 69 Cal.2d 200, 208-210.) Thus, extrinsic evidence as to the
circumstances under which a written instrument was made is admissible to interpret the
instrument, although not to give it a meaning to which it is not reasonably susceptible.
(Id. at p. 211.) Particularly in the field of interpreting trusts and wills, each case depends
upon its own peculiar facts, and “‘precedents have comparatively small value. . . .’”
(Estate of Lawrence (1941) 17 Cal.2d 1, 6.)
Here, article IV, section (B)(8) provides in relevant part: “Notwithstanding
the foregoing provisions, upon the approval of a majority of the grantor’s then living
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children, the trust may be terminated at an earlier date, and the property comprising the
trust estate distributed in equal shares to the income beneficiaries of the trust estate.”
After independently reviewing the trust provisions, we conclude this language is
unambiguous. By its plain language, article IV, section (B)(8) vests the discretionary
power to terminate the trust at an earlier date in the children, not the trustees. Thus, the
trustees must terminate the trust if a majority of the children agree to terminate the trust.
The extrinsic evidence of the circumstances under which the trust was
created support our interpretation. It is undisputed there was a history of conflict
between Andrea and his siblings. The appointment of Ressler as an independent trustee
who could act as a tiebreaker in the case of a conflict between Andrea and John as
trustees demonstrates George was aware of the conflict among his children and provided
the means to resolve their conflict in the trust. The early termination provision was
another method to resolve intrafamily conflict because it permitted the siblings to
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permanently resolve any disputes over the administration of the trust.
The trustees raise several arguments to support their claim the early
termination provision permits but does not mandate the trustees terminate the trust “upon
the approval of a majority of the grantor’s then living children.” The trustees note that
“approval” generally means “‘confirming, ratifying, assenting, sanctioning or consenting
to some act or thing done by another,’” and argues the term “approval” in article IV,
section (B)(8) must therefore refer to the approval of the trustees’ decision to terminate
the trust, and not their own decision to terminate the trust. However, even under the
trustees’ definition of “approval,” one of the grantor’s children may approve the decision
2
Although we have concluded the language of article IV, section (B)(8) is
unambiguous, to the extent it is ambiguous, John’s testimony about the early termination
provision resolves any ambiguity in favor of our interpretation that article IV, section
(B)(8) vests the power to terminate the trust at an earlier date in the children, not the
trustees. As noted, John testified George intended the early termination provision to
allow the majority of his children to “sell all of his assets.”
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of another child or the decision of a group of the grantor’s children. Here, three of the
children approved the proposal to terminate the trust.
The trustees also argue the use of the permissive term “may” in article IV,
section (B)(8), rather than the term “shall,” demonstrates the grantor’s intent that
termination would be at the discretion of the trustees, not immediately upon approval of
the children. We disagree because the term “may” in article IV, section (B)(8), merely
vests the discretionary power to terminate the trust with the person or persons chosen by
the grantor. Specifically, the discretionary authority to terminate the trust at an earlier
date was vested in the majority of George’s children. Thus, the children may or may not
decide to terminate the trust.
The trustees also argue similar language in article IV, section (B)(1),
support their interpretation the trustees have the discretionary power to terminate the
trust. As noted above, article IV, section (B)(1), provides that “upon agreement of a
majority of the then living children of the grantor, specific properties may be sold.” The
trustees note the San Bernardino Superior Court has interpreted this language to mean the
trustees, not the majority of the grantor’s children, have the discretionary power to sell
specific property. We are not persuaded the San Bernardino Superior Court’s
interpretation of article IV, section (B)(1), compels a similar interpretation of article IV,
section (B)(8). First, the San Bernardino Superior Court’s judgment is not binding
because it interpreted a different provision of the trust document. (See Lucido v.
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Superior Court (1990) 51 Cal.3d 335, 341 [“Collateral estoppel precludes relitigation of
3
issues argued and decided in prior proceedings.”].)
Second, article IV, section (B)(8), expressly authorizes early termination
“[n]otwithstanding the foregoing provisions.” Thus, article IV, section (B)(8) is an
exception to the other provisions in the trust documents, including article IV, section
(B)(1).
Finally, article IV, section (B)(1) contains language differentiating its grant
of discretionary power to sell specific property from the grant of discretionary power to
terminate the trust in article IV, section (B)(8). In article IV, section (B)(1), after
providing that specific properties may be sold upon agreement of the majority of the
children, the next sentence provides: “In addition, the trustees shall have discretion
where appropriate, by their decision, to exchange properties for other replacement
properties.” (Italics added.) The transitional term “In addition” informs the reader that
the power granted in the prior sentence is similar and complementary to the power
granted in the current sentence. Because the current sentence vests the discretionary
power to exchange properties in the trustees, the power to sell specific properties in the
3
The trustees’ reliance on California Physicians’ Service v. Aoki Diabetes Research
Institute (2008) 163 Cal.App.4th 1506 (California Physicians’ Service), and McMillin
Development, Inc. v. Home Buyers Warranty (1998) 68 Cal.App.4th 896 (McMillin
Development), is misplaced. In California Physicians’ Service, supra, the appellate court
concluded a prior administrative determination was binding because “in both the
administrative proceeding and this case, the identical October 1990 provider contract is at
issue.” (California Physicians’ Service, supra, 163 Cal.App.4th at p. 1520.) Here, a
different provision is at issue. In McMillin Development, supra, the appellate court
declined to address the trial court’s determination that a federal district court’s order
compelling arbitration based on similar arbitration language in a different contract
between the same parties was binding because “[i]n light of the trial court’s waiver
determination and our agreement with that determination, any discussion of the res
judicata issue would be unnecessary dicta.” (McMillin Development, supra,
68 Cal.App.4th at p. 906, fn. 5.) The case therefore does not provide support for the trial
court’s res judicata ruling. Moreover, the instant case is distinguishable because, as
discussed below, the language in the two provisions is not similar.
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prior sentence must also be vested in the trustees. No similar language, however, is
found in article IV, section (B)(8). Indeed, the lack of similar language in article IV,
section (B)(8), supports our interpretation the discretionary power to terminate the trust at
an earlier date is not vested in the trustees. (See Civ. Code § 1641 [“The whole of a
contract is to be taken together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other.”].) In sum, the trial court properly
granted the petition to terminate the trust.
B. Removal of Trustees
As noted, the trial court removed Andrea and Ressler as trustees. Removal
of a trustee is governed by Probate Code section 15642, which includes several specific
grounds for removal, including breach of trust, hostility among cotrustees, and excessive
compensation (id., subds. (b)(1), (3), (5)), and the catchall, “[f]or other good cause.” (Id.,
subd. (b)(9).) In light of the catchall, Probate Code section 15642 effectively continues
the preexisting rule placing the decision to remove a trustee in the sound discretion of the
trial court. (Estate of Gilmaker (1962) 57 Cal.2d 627, 633; Estate of Bixby (1961) 55
Cal.2d 819, 826.) Nonetheless, “this is a power that the court should not lightly
exercise.” (Estate of Bixby, at p. 826.)
We review the trial court’s decision to remove a trustee for an abuse of
discretion. (Copley v. Copley (1981) 126 Cal.App.3d 248, 286 (Copley).) “‘An abuse of
discretion occurs only if the reviewing court, considering the applicable law and all of the
relevant circumstances, concludes that the trial court’s decision exceeds the bounds of
reason and results in a miscarriage of justice.’ [Citations.] In applying the abuse of
discretion standard, ‘we resolve all evidentiary conflicts in favor of the judgment and
determine whether the court’s decision “‘falls within the permissible range of options set
by the legal criteria.’” [Citation.] We may reverse only if the trial court’s decision
‘“exceeds the bounds of reason, all of the circumstances before it being considered.”’
(Orange Catholic Foundation v. Arvizu (2018) 28 Cal.App.5th 283, 292-293.)
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The trustees argue there was no good cause to remove Andrea as a trustee,
noting the trial court did not find any breach of trust or excessive compensation. The
trustees acknowledge the trial court found “considerable conflict and family
dysfunction,” but argues George was aware of these facts when he appointed Andrea as a
trustee. They cite the well-established principle that a “‘court will not ordinarily remove
a trustee named by the settlor upon a ground existing at the time of his appointment and
known to the settlor and in spite of which the settlor appointed him, although the court
would not have appointed him trustee.’” (In re Brown’s Estate (1937) 22 Cal.App.2d
480, 486, quoting Restatement of the Law on Trusts, section 107.)
However, “[h]ostility between the beneficiary and the trustee is a ground
for removal of the trustee when the hostility impairs the proper administration of the
trust.” (Estate of Gilmaker (1962) 57 Cal.2d 627, 632; accord, Copley, supra,
126 Cal.App.3d at p. 288 [“Hostility, antagonism and inevitable future conflict can justify
an order of removal of the trustee when those factors impair the proper administration of
the trust”].) Here, the conflict between the siblings had developed to the point where the
other siblings did not trust Andrea and filed the instant lawsuit alleging various claims
against him. The siblings also were involved in the San Bernardino action. The trial
court personally observed the family dysfunction, and its appointment of a neutral trustee
rather than one of the other siblings named as a successor trustee indicates the court
believed only a neutral trustee would result in the proper administration of the trust. In
light of the present hostility between Andrea and his siblings and the likelihood of further
litigation over the administration of the trust, the trial court did not abuse its discretion in
removing Andrea as a trustee.
Although the trial court did not abuse its discretion in removing Andrea as
a trustee, the factual record does not support removal of Ressler for good cause. There
was no testimony that John, Froso and Peter did not trust or were hostile to Ressler.
Although Ressler has not performed many trustee duties, as evidenced by the fees he
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earned, nothing suggests Ressler is incompetent or would be unable to perform the duties
of a trustee in the absence of Andrea. The trial court abused its discretion in removing
Ressler.
Having reached the conclusion the trial court improperly removed Ressler,
the trial court’s appointment of Wells Fargo as the new independent trustee was not
necessary. We also note that in their appellate brief respondents have asserted that Wells
Fargo has declined the appointment.
III
DISPOSITION
The judgment granting the petition to terminate the trust and removing
Andrea as a trustee is affirmed. The removal of Ressler as a trustee is reversed. The
parties are to bear their own costs on appeal.
ARONSON, ACTING P. J.
WE CONCUR:
FYBEL, J.
GOETHALS, J.
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