Barbey v. PNC Bank CA2/6 ( 2023 )

Filed 10/10/23 Barbey v. PNC Bank CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
ANGELIQUE BARBEY, 2d Civil No. B325472
(Super. Ct. No. 21PR00053)
Plaintiff and Respondent, (Santa Barbara County)
v.
PNC BANK, N.A., et al., as
Trustees, etc.,
Defendants and Appellants.
Appellants PNC Bank, N.A. (PNC), Juliana Chugg, and
Clarence Otis are the trustees of The Mary Glyde Barbey
Irrevocable Trust for the benefit of respondent Angelique Barbey
(“the Angelique Trust”). Respondent petitioned the Santa
Barbara County Probate Court (the probate court) to instruct
appellants to make distributions to her of income from the
Angelique Trust. Appellants appeal an order instructing them to
pay respondent a lump sum of $1 million to cover her attorney
fees arising from litigation involving the Angelique Trust.
Respondent moved to dismiss the appeal, claiming that it
had been taken from a nonappealable order. We deny the
motion. Appellants contend the probate court (1) lacked subject
matter jurisdiction over the Angelique Trust, (2) erroneously
overruled their demurrer to respondent’s petition because she
had failed to join indispensable parties, and (3) erroneously
denied their request for an evidentiary hearing. The first
contention is without merit, but the second and third contentions
are meritorious.
We reverse the probate court’s order instructing appellants
to make the $1 million payment to respondent. We remand the
matter to the probate court with directions to sustain appellants’
demurrer with leave to amend the petition to join necessary
parties. We also direct the probate court to conduct further
proceedings consistent with the views expressed in this opinion.
Factual and Procedural Background
In August 1951 J.E. Barbey signed a deed of trust creating
an irrevocable trust (“the J.E. Barbey Trust”) for the benefit of
his daughter, Mary Barbey Hooker, also known as Mary Glyde
Barbey, hereafter “Mary.”1 When J.E. Barbey signed the deed of
trust, he resided in Pennsylvania. During Mary’s lifetime, the
1 In the probate court appellants alleged in their demurrer
dated September 28, 2022: “The original principal of the J.E.
Barbey Trust consisted entirely of shares of the common stock of
Vanity Fair Mills, Inc., a business founded in the 19th Century
by the Barbey family. . . . The individual Trustees [of the
Angelique Trust], Juliana Chugg and Clarence Otis, are
experienced business executives who serve as members of the
board of directors of VF Corporation, the successor to Vanity Fair
Mills, Inc. . . . VF Corp. has annual revenues over $11 billion and
a market capitalization over $13 billion.”
2
entire net income of the trust would be paid to her. Mary was
granted “the power, exercisable by will, to appoint . . . any or all
of the net income and of the principal to or in trust for such of her
issue and in such manner and amounts or proportions as she may
elect . . . .” If she did not exercise her power of appointment,
upon her death each of her children would receive an equal share
of the trust principal. Each child would be paid the net income
from his or her share.
The deed of trust provides: “The situs of this trust shall be
Pennsylvania; and all questions concerning the construction,
validity, or administration of this trust shall be governed by the
law of that Commonwealth.”
Mary died in October 2002. In her will she exercised the
power of appointment. She signed the will in August 1994. At
that time as well as the time of her death, she resided in Santa
Barbara County.
Mary had five children. As the probate court noted, “In her
Will, and pursuant to the power of appointment, Mary Barbey
created five separate sub-trusts for each of her children.” The
will provided that, except for respondent, the J.E. Barbey Trust’s
assets shall be divided equally among Mary’s children. During
each child’s lifetime, except for respondent the child shall be paid
the net income from his or her share.
As to respondent, the Trustee of the J.E. Barbey Trust
“ ‘shall allocate to the trust for her son Grant Barbey [now known
as her daughter, respondent Angelique Barbey,2] . . . the lesser of
2 Respondent’s April 2021 petition states that she “formerly
held the legal name of Grant Barbey and was previously
referenced using ‘he/him/his’ pronouns.” On January 4, 2018, the
name “Grant Barbey” was “legally chang[ed]” to “Angelique
3
(a) Four Million dollars . . . or (b) twenty percent . . . of the
principal of the trust as it exists at the date’ ” of Mary’s death.
During respondent’s lifetime, she shall be paid “ ‘[a]s much of the
net income from [her] share . . . as the Trustee considers to be
reasonable and appropriate, in the discretion of the Trustee, up
to and including all of such net income.’ ” Respondent shall also
be paid “ ‘[a]s much of the principal of [her] share as the
Trustee . . . may . . . decide to be necessary to meet any
emergency affecting [her] health . . . or maintenance.’ ” Upon
respondent’s death, “ ‘any then remaining principal of [her] share
shall be divided, per stirpes, among Mary Glyde Barbey’s then
living issue other than [respondent’s issue] . . . .’ ” Mary’s will
stated, “Except as expressly modified above, all other terms and
conditions of the [J.E. Barbey] Trust, as established by my father,
. . . shall remain in full force and effect.”
In January 2021 respondent’s brother and trust
beneficiary, Thomas Barbey, filed a petition in the probate court.
The first amended petition, the operative pleading, alleged that
respondent’s financial managers “have consistently used their
control over [respondent’s] finances and her accounts as well as
their position of trust and confidence with [her] to take
advantage of her and to misappropriate and/or misspend the
[Angelique] Trust resources that are intended to benefit
[respondent] . . . .” The petition sought to compel the financial
managers “to return all Trust assets misappropriated by [them],
and all interest thereon or income therefrom.” Respondent and
appellants were not joined as parties to Thomas Barbey’s probate
petition.
Barbey,” and the gender was “legally chang[ed]” from male to
female.
4
Respondent resided in Santa Barbara County. In April
2021 respondent filed a petition in the probate court requesting
various forms of relief (“the April 2021 petition”). The petition
had the same caption and case number as Thomas Barbey’s
petition. The petition alleged: “The [Angelique] Trust was
originally funded with four million dollars, but has grown
substantially over the years, with a value of over 45 million
dollars as of December 31, 2020.[3] [¶] . . . For many years,
[respondent] had been the recipient of Trust income distributions
. . . for her health, maintenance, and best interests. These
distributions were ordinarily made in quarterly – or near
quarterly – payments, totaling approximately $250,000 annually,
and in some years much more.” “After December 2017,
distributions to [respondent] abruptly ceased. This sudden
change . . . coincided with the grant of a decree finalizing
[respondent’s] legal name and gender change [see fn. 2 at p. 4,
ante] – an undertaking by [respondent] that was not supported by
her family members . . . .” Appellants acknowledge that
“[d]istributions were not made for a period from 2018 through
mid-2021 . . . .”
The petition’s requested relief included (1) the removal of
PNC as a trustee of the Angelique Trust, (2) the appointment of a
successor trustee, (3) the annual payment to respondent of
$250,000 from the income of her trust, and (4) an order requiring
“Trustees, and any successor to them, to address the conduct
3 The probate court observed, “Since funding, the
[Angelique] Trust has experienced what [appellants] refer to as
‘explosive growth’ in the value of the Trust’s assets and the
income the Trust generates.”
5
of . . . Thomas Barbey, who has purported to act on behalf of the
[Angelique] Trust, in place of the Trustees.” In addition,
respondent requested that the trustees “immediately make
retroactive distributions to [her], pending adjudication of this
matter, in the amount of $250,000 per year, for the years 2018,
2019, 2020, and prorated for the year 2021 until the date that
regular disbursements are resumed.”4
Appellants filed a motion to quash or dismiss respondent’s
petition. One of the grounds for the motion was that the probate
court lacked “in rem jurisdiction over the [Angelique] Trust.”
(Italics omitted.) The probate court denied the motion.
Appellants filed in this court a petition for a writ of
mandate. They sought an order directing the probate court to
grant their motion. We summarily denied the petition. (PNC
Bank, N.A., et al., v. Superior Court of Santa Barbara County,
July 21, 2021, B313559; rev. denied Sept. 15, 2021, S270155.)
In October 2021 the probate court ordered appellants to
distribute to respondent $15,000 “per month . . . from the
[Angelique] Trust’s income, retroactive to January 2021, and
continuing until further order of [the] Court.”
In June 2022 respondent filed her Second Amended
Petition, the operative pleading in respondent’s action against
appellants, hereafter “the Second Amended Petition.” The
Second Amended Petition requested, inter alia, “an order
instructing [appellants] . . . to make distributions to [respondent]
in the amount of the greater of either $500,000 per year or the
annual net income of the Trust, from January 1, 2022,
4 Appellants will have to account for this non-payment in a
subsequent proceeding.
6
forward . . . .” It also requested the removal of all of the
appellants, not just PNC, as trustees of the Angelique Trust.
In August 2022 respondent filed a separate document
entitled, “Petition to Instruct Trustees to Make Further Interim
Distributions During Pendency of Litigation,” hereafter “the
Distribution Petition,” not to be confused with “the Second
Amended Petition.” Respondent requested that appellants be
instructed “to immediately distribute [to her] $1,000,000 of the
$1,155,894 retained income held in the Trust as of June 30, 2022
. . . .” Respondent claimed she needed the funds “to ensure that
[she] has access to sufficient resources to represent her interests
in the extensive litigation” concerning her trust. She alleged,
“[Appellants] have failed and refused to make any
distributions . . . to provide her with resources to pay for
counsel . . . .” Respondent also requested that appellants be
instructed to continue making trust income distributions to her of
$15,000 per month.
Appellants demurred to the Distribution Petition, claiming
“that there is a nonjoinder of necessary and indispensable
parties.” Appellants argued that “the [Angelique] [T]rust’s
remainder beneficiaries ([respondent’s] siblings) and contingent
remainder beneficiaries (the issue of [respondent’s] siblings) all
must be parties to [the] action . . . .”
In its minute order overruling the demurrer, the probate
court noted: “By failing to distribute all net income and retaining
it into the trust, [appellants] have converted the [Angelique]
Trust’s income to principal, which harms Angelique’s interests
and benefits the remainder beneficiaries’ interests . . . . In 2020
alone, [appellants] transferred $2.2 million of income to the
[Angelique] Trust’s principal account, causing irreparable harm
7
to [respondent]. As of June 30, 2022, [appellants] were holding
more than $1.1 million in undistributed income, and estimated
that the [Angelique] Trust would receive additional income of
$566,000. The [Angelique] Trust has earned income of
approximately $5.3 million since [appellants] ceased making
distributions to [respondent], yet has only distributed $270,000 to
[respondent] in that time period ($15,000/month, ordered by the
court).”
Appellants “request[ed] that, before deciding whether any
relief may be appropriate, the Court conduct an evidentiary
hearing at which [respondent] should be required to testify and
present admissible evidence concerning the factual bases for the
relief she seeks.” Without conducting an evidentiary hearing, the
probate court instructed appellants to make the distribution of
funds requested by respondent.
Appellants timely filed an appeal from the probate court’s
order. In their opening brief they limit their appeal to the “order
instructing [appellants] to distribute $1,000,000 of net income
from the [Angelique] Trust to [respondent].”
Respondent’s Motion to Dismiss Appeal
Respondent moved to dismiss the appeal, claiming that the
probate court’s order requiring the distribution of trust funds is a
nonappealable order. The motion is denied.
Code of Civil Procedure section 904.1, subdivision (a)(10)
provides that an appeal may be taken “[f]rom an order made
appealable by the Probate Code.” The order at issue here is
appealable pursuant to Probate Code section 1300, subdivision
(c), which allows an appeal from an order “instructing, or
8
directing a fiduciary.”5 As trustees of the Angelique Trust,
appellants are fiduciaries. The order is also appealable pursuant
to section 1300, subdivision (e), which allows an appeal from an
order “[f]ixing, authorizing, allowing, or directing payment of
compensation or expenses of an attorney.”
Respondent argues that the order is not appealable because
“[i]t is not a final order on [her] Second Amended Petition . . . .”
Instead, “[i]t is an interim order on an interim matter under . . .
section 17206 – a request for a pendente lite distribution of trust
funds.”6 The order “does not finally dispose of the disputes
between the parties, as set out in [respondent’s] Second Amended
Petition . . . .” That petition is “still being actively litigated.”
The applicable statutes do not limit appeals to only those
orders that finally dispose of all disputes between the parties.
Respondent contends such a finality “requirement should be
implied in the statute.” We disagree. “When interpreting
statutes, ‘we follow the Legislature's intent, as exhibited by the
plain meaning of the actual words of the law . . . . “This court has
no power to rewrite the statute so as to make it conform to a
presumed intention which is not expressed.” ’ ” (Equilon
Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 59.)
It is arguable that appellants would have been bound by
the probate court’s order if they had failed to appeal it. (See
Estate of Gilkison (1998) 65 Cal.App.4th 1443, 1450, fn. 5 [“The
orders listed as appealable in the Probate Code must be
5 Unless otherwise stated, all statutory references are to
the Probate Code.
6 Section 17206 provides, “The court in its discretion may
make any orders and take any other action necessary or proper to
dispose of the matters presented by the petition . . . .”
9
challenged timely or they become final and binding. They may
not be collaterally attacked in a subsequent appeal from the final
order of distribution”].)
The Probate Court Had Subject Matter Jurisdiction
Appellants contend the probate court “lacked subject
matter jurisdiction to issue the challenged order” instructing
them to make the $1 million payment to respondent. (Bold and
capitalization omitted.) They do not contend the probate court
lacked jurisdiction over their persons. Nor do they contend the
probate court’s assumption of jurisdiction violated their right to
due process under the Fourteenth Amendment of the United
States Constitution. (See Shaffer v. Heitner (1977) 433 U.S. 186(Shaffer); International Shoe Co. v. Washington (1945) 326 U.S.
310, 316.)
“Subject matter jurisdiction is a fundamental requirement
for judicial consideration of claims. ‘The California Supreme
Court has defined subject matter jurisdiction thusly: “Subject
matter jurisdiction . . . is the power of the court over a cause of
action or to act in a particular way.” [Citations.] By contrast, the
lack of subject matter jurisdiction means the entire absence of
power to hear or determine a case; i.e., an absence of authority
over the subject matter. [Citations.] Where the evidence is not in
dispute, a determination of subject matter jurisdiction is a legal
question subject to de novo review.’ [Citation.] Subject matter
jurisdiction may not be ‘ “ ‘conferred by consent, waiver,
agreement, acquiescence, or estoppel.’ ” . . . ’ . . . ‘[A]ny judgment
or order rendered by a court lacking subject matter jurisdiction is
“void on its face . . . .” . . . ’ ” (Saffer v. JP Morgan Chase Bank,
N.A. (2014) 225 Cal.App.4th 1239, 1248.)
10
Appellants argue: “Probate proceedings are proceedings in
rem.” “A court’s jurisdiction over a proceeding in rem is based on
its authority over property within its territory that is the subject
of dispute.” (See Hanson v. Denckla (1958) 357 U.S. 235, 246
[“The basis of [in rem] jurisdiction is the presence of the subject
property within the territorial jurisdiction of the forum State”];
Shaffer, supra, 433 U.S. at p. 199 [“If jurisdiction is based on the
court's power over property within its territory, the action is
called ‘in rem’ or ‘quasi in rem.’ The effect of a judgment in such
a case is limited to the property that supports jurisdiction”];
Estate of Buckley (1982) 132 Cal.App.3d 434, 443 [“A probate
proceeding is essentially an in rem proceeding, in which the
decedent’s assets within the state constitute the res”].)
Appellants continue: “[T]he [probate] court lacked
jurisdiction over the [Angelique] Trust because the trust is
outside the territorial jurisdiction of the court. This proceeding
involves an irrevocable inter vivos trust [i.e., a trust created
during the trustor’s lifetime] that was established in 1951 by . . .
John E. Barbey. [Record citation.] By the express terms of the
Deed of Trust . . . the situs of the trust ‘shall be Pennsylvania.’
[Record citation.] The trust is administered through the trust
office of PNC Bank, N.A. in Philadelphia, Pennsylvania. [Record
citation.] The assets of the trust—including assets that the trial
court ordered to be distributed to [respondent]—consist of cash
and securities held through the trust department of PNC Bank in
Pennsylvania. [Record citation.] As such, the subject of
[respondent’s] claims is located in Pennsylvania. California
courts therefore lack jurisdiction to decide matters relating to the
internal affairs of the [Angelique] Trust because California does
not have ‘jurisdiction over the trust.’ ” (Fn. omitted.) “[T]he
11
determinative issue” is that “the [Angelique] Trust cannot be
found within the territorial jurisdiction of the California courts.”
The authority “to adjudicate matters related to the internal
affairs of the [Angelique] Trust . . . resides with the courts in
Pennsylvania.”
Appellants made a similar argument in the probate court in
support of their motion to dismiss respondent’s April 2021
petition for lack of “in rem jurisdiction over the [Angelique]
Trust.” (Italics omitted.) In denying the motion, the probate
court reasoned: “[Appellants] ignore the fact that the [Angelique]
Trust is a testamentary trust that was created pursuant to the
power of appointment in the Will of Mary Barbey, [respondent’s]
mother. [Record citation.] Mary Barbey was a resident of Santa
Barbara County and following her death in 2002, her Will was
probated in Santa Barbara County . . . . Because the [Angelique]
Trust arose by exercise of a power of appointment in the Will of
Mary Barbey, which was probated in Santa Barbara County, this
court may properly exercise in rem jurisdiction over the trust,
which was created for [respondent’s] benefit.” (Italics omitted.)
Appellants maintain that the Angelique Trust is not a
testamentary trust because it was not “funded by assets of
[Mary’s] estate.” It was funded by Mary’s father, J.E. Barbey.
(See 13 Witkin, Summary of Cal. Law (11th ed., May 2023
update) ch. XX, Trusts, § 2, p. 611 [“A testamentary trust is one
created in a decedent's will and funded by a distribution of
probate assets”].)
Appellants also claim the Angelique Trust is not a
testamentary trust because it is a continuation of the trust
created by Mary’s father: “[T]he [Angelique] Trust is a
continuation of the irrevocable inter vivos trust created by John
12
E. Barbey through the 1951 Deed of Trust. That the [probate]
court probated Mary’s Will following her death in 2002 does not
grant it jurisdiction over the assets in or the administration of an
irrevocable inter vivos trust that existed prior to and outside of
probate.”
In support of their position, appellants cite the following
excerpt from the Restatement (Second) of Trusts, § 427,
Comment a: “A person [such as Mary] who has a special power of
appointment, unlike a person who has a general power of
appointment . . . , has not such an interest in the property as to
make him in substance the owner of the property. If he makes an
appointment of the property in trust, the donor of the power [here
J.E. Barbey] and not the donee is the creator of the trust; and if
the trust fails and a resulting trust arises, it arises in favor of the
donor of the power or his estate, and not in favor of the donee or
his estate.” “A general power of appointment is one which may
be exercised in favor of anyone, including the donee, and is
equivalent to a grant of absolute ownership. A special power is
one which may be exercised in favor of certain specified
individuals or to a class of designated persons, not including the
donee or his estate.” (Estate of Thorndike (1979) 90 Cal.App.3d
468, 473.)7
7 See also Restatement (Second) of Conflict of Laws, § 274,
Comment (b): “It is frequently said that the property which
passes upon the exercise of a power of appointment is the
property of the donor and not the property of the donee of the
power. It is said that the instrument by which the power is
exercised is to be read back into the instrument which created
the power. For this reason it is said that the substantial validity
of the exercise of the power is determined by the law which
determines the validity of the trust under which the power was
13
Guidance is provided from a leading treatise on trusts:
Bogert et al., The Law of Trusts and Trustees (June 2023
update). According to Bogert, the Angelique Trust is a
“multistate trust,” i.e., “a trust having significant contacts or
relationships with more than one state.” (Id. at § 291.) “In
determining whether it has jurisdiction to entertain the
proceedings [involving a multistate trust] . . . , the forum court in
which the proceedings are brought must consider the nature and
extent of the various contacts that the several states have with
the trust. These contacts may include the domicile of the settlor
or testator at the time of creation of the trust or execution of the
will, the testator’s domicile at death, the trustee’s domicile, the
respective domiciles of the beneficiaries, the physical situs of the
trust assets, [and] the state in which the trust is being
administered (where other than that of the trustee’s
domicile) . . . .” (Ibid.) “Generally, a court has jurisdiction to
adjudicate by reason of its relationship to the trust, the trust
parties or the trust property which is sufficient to make its decree
reasonable and recognized as valid in other states.” (Id., § 292.)
The forum court should also consider the issue in question.
Here, the issue in question is appellants’ obligation to pay to
respondent the income of the Angelique Trust. This obligation is
an intangible. “Being an intangible, it has no situs in fact. [¶]
‘An intangible, unlike real or tangible personal property, has no
physical characteristics that would serve as a basis for assigning
created. [¶] This is undoubtedly so where the power is a special
power, that is, a power to appoint among a limited class of
persons. The appointees take the property from the donor rather
than from the donee, even though the donee may select which
members of the class shall take and in what proportions.”
14
it to a particular locality.’ ” (Atkinson v. Superior Court (1957) 49
Cal.2d 338, 342-343 (Atkinson).)
In Atkinson our Supreme Court refused to “attempt to
assign a fictional situs to intangibles.” (Atkinson, supra, 49
Cal.2d at p. 345.) The “intangibles in question” consisted of an
employer’s obligation to make “royalty payments and payments
for reuse of motion pictures . . . .” (Id. at p. 340.) The employer’s
California employees and a nonresident trustee made conflicting
claims to the payments. “The question presented . . . [was]
whether the [intangibles] in question may be treated as being
within this state . . . for purposes of exercising in rem or quasi in
rem jurisdiction over it . . . .” (Id. at p. 343.) The Supreme Court
considered the totality of California’s contacts with the parties
and the intangibles. The court reasoned: “It is significant that
with respect to jurisdiction to tax intangibles [citation] . . . and
jurisdiction to adjudicate trust obligations [citation], emphasis is
no longer placed on actual or physical presence but on the
bearing that local contacts have to the question of over-all fair
play and substantial justice.” (Id. at p. 345, italics added.) The
court continued: “It is true that for some purposes the state of
incorporation may be peculiarly appropriate for the purpose of
litigating conflicting claims to corporate stock, but if so, it is
because of relevant contacts there; if such contacts exist
elsewhere, jurisdiction also follows. [Citation.] [¶] Similarly, in
the case of other intangibles, jurisdiction must be determined in
the light of the totality of contacts with the state involved.” (Id. at
pp. 346-347, italics added.) The court held, “[T]he multiple
contacts with this state fully sustain the jurisdiction of the
superior court to exercise quasi in rem jurisdiction over the
intangibles in question.” (Id. at p. 348; see also Waite v. Waite
15
(1972) 6 Cal.3d 461, 468, disapproved on another ground by In re
Marriage of Brown (1976) 15 Cal.3d 838, 851, fn. 14, and
superseded by statute on another ground as stated in In re
Marriage of Carnall (1989) 216 Cal.App.3d 1010, 1019
[jurisdiction over intangible pension rights “should be determined
‘in the light of the totality of contacts with the state involved’ and
the ‘bearing that local contacts have to the question of over-all
fair play and substantial justice’ ”].)
Atkinson is consistent with section 65 of the Restatement
(Second) of Conflict of Laws. Section 65 provides, “A state has
power to exercise judicial jurisdiction to affect interests in an
intangible thing which is not embodied in a document if the
relationship of the state to the thing and to the parties involved
makes the exercise of such jurisdiction reasonable.” The
Reporter’s Note to section 65 refers the reader to Atkinson “[f]or a
case upholding the exercise of jurisdiction to affect interests in an
intangible thing . . . .” If the argument is made that the
intangible thing here is embodied in a document, i.e., Mary’s
exercise of the power appointment in her will, the rejoinder to the
argument is that the will is located in California, where it was
probated. Section 63 of the Restatement (Second) of Conflict of
Laws provides, “A state has power to exercise judicial jurisdiction
to affect interests in an intangible thing embodied in a document
which is within the state.”
As in Atkinson, “the multiple contacts with this state fully
sustain the jurisdiction of the [probate] court to exercise . . .
jurisdiction over the intangibles in question,” i.e., appellants’
obligation to pay to respondent the income of the Angelique
Trust. (Atkinson, supra, 49 Cal.2d at p. 348.) The Angelique
Trust exists in its present form only because of Mary’s exercise in
16
her will of the power of appointment. Mary resided in California
when she signed the will and when she died. Her will was
probated in California. But for Mary’s exercise of the power of
appointment, respondent would have been treated the same as
her siblings. She would have received an equal share of the trust
principal and would have been entitled to be paid the entire net
income from her share. Both the Second Amended Petition and
the Distribution Petition arose from Mary’s exercise of the power
of appointment in California.
Moreover, respondent is the sole lifetime beneficiary of the
Angelique Trust, and she resides in California. Until December
2017, respondent received annual income distributions of
approximately $250,000 from the Angelique Trust. “[A] state has
a strong interest in assuring its own residents an adequate forum
for the redress of grievances [citation].” (Stangvik v. Shiley Inc.
(1991) 54 Cal.3d 744, 754-755.) “[T]he relationship of [California]
to the [intangible] thing [– appellants’ obligation to pay to
respondent the income of the Angelique Trust –] and to the
parties involved makes the exercise of . . . jurisdiction [by
California] reasonable.” (Restatement (Second) of the Conflict of
Laws, § 65.)
The probate court may exercise jurisdiction in proceedings
under the Trust Law (§ 15000 et seq.) “on any basis not
inconsistent with the Constitution of this state or of the United
States.” (Code Civ. Proc., § 410.10; Prob. Code, § 17004.) In view
of California’s significant contacts with the Angelique Trust and
its sole lifetime beneficiary, appellants have not carried their
burden of showing that the probate court lacked subject matter
jurisdiction. “ ‘A judgment or order of the lower court is
17
presumed correct. . . . [E]rror must be affirmatively shown.”
(Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
In their appellate briefs the parties do not discuss
Atkinson’s “totality of the contacts” test applicable to intangibles.
They do not mention the word “intangible.” Government Code
section 68081 provides, “Before . . . a court of appeal . . . renders a
decision in a proceeding . . . based upon an issue which was not
proposed or briefed by any party to the proceeding, the court
shall afford the parties an opportunity to present their views on
the matter through supplemental briefing.” We have not asked
the parties to submit supplemental briefing on the “totality of the
contacts” test because it is fairly included within the issues
expressly raised by the parties. “The parties need only have been
given an opportunity to brief the issue decided by the [appellate]
court, and the fact that a party does not address an issue, mode of
analysis, or authority that is raised or fairly included within the
issues raised does not implicate the protections of [Government
Code,] section 68081.” (People v. Alice (2007) 41 Cal.4th 668, 679,
italics added.)
The Probate Court Erroneously
Overruled Appellants’ Demurrer
Appellants contend the probate court erred in overruling
their demurrer insofar as it was based “on the ground that
remainder [beneficiaries, i.e., respondent’s siblings,] and
contingent remainder beneficiaries [i.e., the siblings’ children,] . .
. are indispensable parties . . . and were not joined as parties.”
(See Code Civ. Proc., § 430.10, subd. (d), authorizing a demurrer
on the ground that “[t]here is a defect or misjoinder of parties”];
Organizacion Comunidad De Alviso v. City of San Jose (2021) 60
18
Cal.App.5th 783, 791 [“Failure to join an indispensable party is a
ground for demurrer”].)
In the demurrer appellants alleged: “[Respondent] has
failed to join her siblings and their children, who are necessary
and indispensable parties to this proceeding, by failing to name
them as respondents and by failing to effect service of process
sufficient to compel their appearance before this Court. Indeed,
because there is no showing that this Court could ever properly
exercise jurisdiction over all such parties, the Distribution
Petition is fatally defective, and [appellants’] demurrers must be
sustained without leave to amend.”
“ ‘We treat the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions
of fact or law. [Citation.] We also consider matters which may be
judicially noticed.’ [Citation.] Further, we give the complaint a
reasonable interpretation, reading it as a whole and its parts in
their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A
‘decision to sustain or overrule a demurrer is subject to de novo
review on appeal . . . .’ ” (Mt. Hawley Ins. Co. v. Lopez (2013) 215
Cal.App.4th 1385, 1394.)
“ ‘Joinder of parties is governed by section 389 of the Code
of Civil Procedure (section 389).’ [Citation.] ‘[S]ection 389
subdivision (a) defines persons who should be joined in a lawsuit
if possible, sometimes referred to as “necessary” parties.
[Citation.] It provides: “A person who is subject to service of
process and whose joinder will not deprive the court of
jurisdiction over the subject matter of the action shall be joined
as a party in the action if (1) in his absence complete relief cannot
be accorded among those already parties or (2) he claims an
interest relating to the subject of the action and is so situated
19
that the disposition of the action in his absence may (i) as a
practical matter impair or impede his ability to protect that
interest or (ii) leave any of the persons already parties subject to
a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of his claimed interest. If he
has not been so joined, the court shall order that he be made a
party.” ’ ” (Dreamweaver Andalusians, LLC v. Prudential Ins. Co.
of America (2015) 234 Cal.App.4th 1168, 1173 (Dreamweaver).)
“ ‘A determination that a person is a necessary party
[under section 389, subdivision (a)] is the predicate for the
determination whether he or she is an indispensable party [under
section 389, subdivision (b)] [citation] . . . . [Citation]. [¶] If a
necessary party cannot be joined, [section 389, subdivision (b)
provides that] the court shall “determine whether in equity and
good conscience the action should proceed among the parties
before it, or should be dismissed without prejudice, the absent
person being thus regarded as indispensable.” ’ ” (Dreamweaver,
supra, 234 Cal.App.4th at p. 1173.)
“ ‘The determination of whether a party is necessary or
indispensable is one in which the court “weighs ‘factors of
practical realities and other considerations.’ ” [Citation.] In view
of that standard, we review the trial court's ruling for abuse of
discretion. [Citation.]’ [Citations.] [¶] . . . ‘It is the appellant's
burden on appeal to show the trial court abused its
discretion. . . .’ ” (Dreamweaver, supra, 234 Cal.App.4th at pp.
1173-1174.)
Respondent asserts, “Probate Code section 17203, not Code
of Civil Procedure section 389, governs service of the
[Distribution Petition] on the [Angelique] Trust’s remainder
beneficiaries.” (Bold omitted.) Respondent cites section 17203,
20
subdivision (a)(2), which provides, “ ‘At least 30 days before the
time set for the hearing on the petition, the petitioner shall cause
notice of hearing to be delivered to . . . [a]ll beneficiaries . . . .’ ”
(Italics added.) Respondent argues that, because she “complied
with the service requirements of section 17203,” she was not
required to join the remainder beneficiaries as indispensable
parties pursuant to Code of Civil Procedure section 389.
Respondent observes that, in its order overruling appellants’
demurrer, the probate court found that appellants “make no
claim that any of the remainder beneficiaries or contingent
remainder beneficiaries were not provided with notice.”
Section 17203, subdivision (a)(2) is merely a “notice”
provision. Nothing in the Probate Code or case law suggests that
section 17203 supplants section 389. Probate Code section 1000
provides, “Except to the extent that this code provides applicable
rules, the rules of practice applicable to civil actions . . . apply to,
and constitute the rules of practice in, proceedings under this
Code.” If a beneficiary is an indispensable party under section
389, the petitioner cannot circumvent the joinder requirement of
that section by providing the beneficiary with a 30-day advance
notice of the hearing on the petition. (See Ruttenberg v.
Ruttenberg (1997) 53 Cal.App.4th 801, 808 [“Stacy's actual notice
of the wrongful death action was not legally sufficient to
accomplish joinder. A party cannot be properly joined unless
served with the summons and complaint; notice does not
substitute for proper service. Until statutory requirements are
satisfied, the court lacks jurisdiction over a defendant”].)
The probate court noted that appellants claim “the
remainder and contingent remainder beneficiaries are
indispensable parties” because “undistributed income [from the
21
Angelique Trust] is converted to . . . principal . . . .” Therefore,
respondent’s requested distributions from the Angelique Trust’s
income “will necessarily impact the amount of principal to be
allocated to the remainder and contingent beneficiaries following
[respondent’s] death.” The Angelique Trust instrument states
that, upon respondent’s death, “ ‘any then remaining principal of
[her] share shall be divided, per stirpes, among Mary Glyde
Barbey’s then living issue other than [respondent’s issue] . . . .’ ”
In rejecting appellants’ argument, the probate court
reasoned: “The remainder and contingent remainder beneficiaries
. . . do not have ‘similar interests’ to those of [respondent] in the
funds held by the [Angelique] [T]rust. [Respondent’s] request[]
do[es] not ‘necessarily’ and ‘inevitably’ affect the rights of the
remainder and contingent beneficiaries, as baldly claimed by
[appellants].”
The court explained: “[T]he [Angelique] [T]rust permits
[respondent] to obtain up to all of the income of the trust, and for
the principal of the trust to be invaded as necessary to meet any
emergency affecting [respondent’s] health or maintenance.
Under these terms alone, it is possible that the entire amount
held in trust for [respondent] could be paid out to her entirely
pursuant to the terms of the trust, leaving nothing for any
remainder beneficiary to obtain following her death. As a result,
‘inevitable’ impact on the remainder beneficiaries’ interests does
not exist. Further, to the extent that the trust does contain
principal at the time of [respondent’s] death, and a pre-deceased
sibling of hers has exercised their own power of appointment to
divert the per stirpes share of the principal away from their child
or children, the contingent remainder beneficiary child of that
sibling would receive nothing. Once again, any judgment in
22
[respondent’s] favor on her petitions seeking additional
distributions from the trust does not ‘necessarily’ or ‘inevitably’
impact the contingent remainder beneficiaries.”
But section 389 does not say that, to be a necessary party,
the disposition of the action must “necessarily” or “inevitably”
impact the absent party’s interest. Section 389, subdivision (a)
provides that a necessary party is one who “claims an interest
relating to the subject of the action and is so situated that the
disposition of the action in his absence may [not must] . . . as a
practical matter impair or impede his ability to protect that
interest . . . .” The remainder and contingent remainder
beneficiaries claim an interest in the Angelique Trust. Upon
respondent’s death, they are entitled to share in whatever
principal remains in the trust. The less income distributed to
respondent, the greater that principal will be. In the absence of
the remainder and contingent beneficiaries, the disposition of
respondent’s request for $1 million to cover her attorney fees
“may . . . as a practical matter impair or impede [their] ability to
protect” their interest in the trust principal. (Ibid.)
The remainder and contingent remainder beneficiaries
cannot rely on appellants to represent their interest. As trustees
of the Angelique Trust, appellants owe a fiduciary duty to
respondent, the sole lifetime beneficiary of the trust, as well as to
the remainder and contingent remainder beneficiaries. “Trustees
owe all beneficiaries, including . . . income beneficiaries . . . , a
fiduciary duty.” (Hearst v. Ganzi (2006) 145 Cal.App.4th 1195,
1208.)
In the Distribution Petition respondent acknowledged the
conflict between her and the remainder beneficiaries: “By failing
to distribute all net income and retaining that income in the
23
[Angelique] Trust, [appellants] have converted the Trust’s income
to principal, effectively further harming [respondent’s] interests
and benefiting the remainder beneficiaries’ interests . . . .”
(Italics omitted.) Respondent made the same point in the Second
Amended Petition: “[E]very income dollar not distributed to
[respondent] and converted to principal is—in effect—taken from
[respondent] and given to the remainder beneficiaries of the
[Angelique] Trust . . . , as [respondent] does not have access to
the principal of the [Angelique] Trust in the same way that she
has access to the income thereof.” Appellants observe that “the
reverse is true as well, that every dollar distributed to
[respondent] is a dollar that will be forever unavailable to the
remainder and contingent remainder beneficiaries.”
In its minute order overruling the demurrer, the probate
court recognized the conflict between respondent and the other
beneficiaries of the Angelique Trust: “By failing to distribute all
net income and retaining it into the trust, [appellants] have
converted the Trust’s income to principal, which harms
[respondent’s] interests and benefits the remainder beneficiaries’
interests . . . .”
“[W]here [as here] a number of persons have undetermined
interests in the same property, or in a particular trust fund, and
one of them seeks, in an action, to recover the whole, to fix his
share, or to recover a portion claimed by him[,] [t]he other
persons with similar interests are [necessary] parties. The
reason is that a judgment in favor of one claimant for part of the
property or fund would necessarily determine the amount or
extent which remains available to the others.” (Bank of
California Nat. Assn. v. Superior Court (1940) 16 Cal.2d 516, 521;
see also Security-First Nat. Bank of Los Angeles v. Superior Court
24
(1951) 104 Cal.App.2d 227, 232 [“[Necessary] parties are such
persons as have undetermined interests in the same trust
fund”].)
Accordingly, the probate court erred in ruling that the
remainder beneficiaries are not necessary parties. On the other
hand, it did not err in finding that the contingent remainder
beneficiaries are not necessary parties. Since the contingent
remainder beneficiaries are the children of the remainder
beneficiaries, the children’s interests are adequately represented
by the still-living remainder beneficiaries, i.e., respondent’s
siblings. (See Verizon California Inc. v. Board of Equalization
(2014) 230 Cal.App.4th 666, 684 [an absent “ ‘party’s ability to
protect its interest is not impaired or impeded as a practical
matter where a joined party has the same interest in the
litigation’ ”]; Code Civ. Proc., § 382 [“when the question is one of a
common or general interest, of many persons, or when the parties
are numerous, and it is impracticable to bring them all before the
court, one or more may sue or defend for the benefit of all”].)
Thus, the probate court erroneously overruled appellants’
demurrer. It should have sustained the demurrer with leave to
amend the Distribution Petition to add the necessary parties, i.e.,
the remainder beneficiaries. “If [a necessary party] has not been
. . . joined, the court shall order that he be made a party.” (§ 389,
subd. (a).) As the probate court observed, there is no evidence
that the remainder beneficiaries cannot be joined as parties:
“[Appellants] wish this Court to conclude that the remainder
beneficiaries . . . are not subject to California jurisdiction, by
referring to nothing more than the fact that most or all live
outside of the State of California, as reflected by the addresses at
which they were provided notice by [respondent]. However, that
25
an individual resides outside of California is not determinative of
the issue of California jurisdiction over the party. No evidence is
provided . . . that the factors relevant to such a determination are
supported by evidence showing that the absent remainder . . .
beneficiaries have insufficient contacts with California to permit
California to exercise jurisdiction over them.” (See Goodyear
Dunlop Tires Operations, S.A. v. Brown (2011) 564 U.S. 915, 923
[“The canonical opinion in this area remains International Shoe
[Co. v. Washington, supra,] 326 U.S. 310, . . . in which [the United
States Supreme Court] held that a State may authorize its courts
to exercise personal jurisdiction over an out-of-state defendant if
the defendant has ‘certain minimum contacts with [the State]
such that the maintenance of the suit does not offend “traditional
notions of fair play and substantial justice” ’ ”].)
Thomas Barbey, respondent’s brother and a remainder
beneficiary, subjected himself to the probate court’s jurisdiction
by filing his petition against respondent’s financial advisers. (See
ante, at pp. 4-5.) According to the probate court’s order granting
the Distribution Petition, Thomas Barbey appeared through his
counsel at the hearing on the Distribution Petition.
On remand, if the remainder beneficiaries cannot be joined,
the probate court should proceed as set forth in section 389,
subdivision (b): “[T]he court shall determine whether in equity
and good conscience the action should proceed among the parties
before it, or should be dismissed without prejudice, the absent
person being thus regarded as indispensable.”8
8 If Thomas Barbey can be joined as a party to the
Distribution Petition but the three other remainder beneficiaries
cannot be joined, the probate court should consider whether
Thomas Barbey would adequately represent the interests of the
26
The Probate Court Erroneously Refused to
Conduct an Evidentiary Hearing
Appellants requested an evidentiary hearing on
respondent’s Distribution Petition. In open court appellants’
counsel declared, “[F]rom an evidentiary hearing, what we were
hoping to get . . . was, what do you [respondent] need the money
for and why do you need it and the information that would
support that.” Respondent’s counsel protested that “in our June
letter” he had “explicitly detail[ed] the need for distributions and
explicitly [made] a request for distributions of over a million
dollars and, going forward, net income distributions.”
Respondent’s counsel said appellants’ counsel “either has not
read [the June letter] or is intentionally misrepresenting that.”
Respondent’s counsel continued: “[I]t would be manifestly unjust
for the trustees to say that . . . the only beneficiary entitled to
anything from the trust right now has to engage counsel and
participate in a trial without any funds to do so before she can get
distributions.” “In the great scheme of things, the $1,000,000
distribution . . . from the retained income held in the trust is very
modest.”
The court did not conduct an evidentiary hearing. It
explained: “This is a case where the dollar amounts at issue are
such that while to some persons a million sounds like a lot, the
history here suggests that it's not . . . . [¶] So to leave a
beneficiary in a position where they are unable to respond to
absent remainder beneficiaries. (See the discussion, ante, at p.
26.) In her will Mary wrote: “My daughter Katrina Burrus and
my son Thomas Hooker [also known as Thomas Barbey] shall act
as advisors to the Trustee [of the Angelique Trust] regarding
distributions to [respondent]. I have complete confidence in their
judgment regarding the best interests of [respondent].”
27
significant litigation under the particular circumstances of this
trust seems to the Court, in fact, to be unjust. And so I am going
to order the distribution.”
Appellants argue: “[B]y granting [the Distribution] Petition
without an evidentiary hearing, the trial court committed a
structural error that deprives this Court of the ability to
determine what evidence would have been introduced at the
hearing and whether [respondent] could meet her burden of
establishing that she was entitled to payment of her attorneys’
fees and legal expenses from the trust and that [appellants]
breached their fiduciary duties by not distributing $1,000,000 to
her based on her unsupported demand. This mandates reversal.”
“It has long been the rule that in probate matters ‘affidavits
may not be used in evidence unless permitted by statute. . . .’”
(Estate of Bennett (2008) 163 Cal.App.4th 1303, 1308-1309.)
“[T]he Probate Code limits the use of affidavits to ‘uncontested
proceeding[s].’” (Id. at p. 1309.) “Consequently, ‘when challenged
in a lower court, affidavits and verified petitions may not be
considered as evidence at a contested probate hearing. . . .’”
(Ibid.) The relevant statute is section 1022, which provides, “An
affidavit or verified petition shall be received as evidence when
offered in an uncontested proceeding under this code.” (Italics
added.)
The Distribution Petition was contested. Therefore, “the
probate court should have granted the request for an evidentiary
hearing . . . .” (Estate of Lensch (2009) 177 Cal.App.4th 667, 677.)
“The Probate Code anticipates that a party may submit a matter
on a verified petition alone. However, once a petition is
contested, as this one was, the court erred in refusing to permit
appellants to proceed to an evidentiary hearing on the question of
28
[respondent’s need for the $1 million distribution].” (Id. at p. 678;
accord, Estate of Bennett, supra, 163 Cal.App.4th at pp. 1308-
1309; see Levy v. Toyota Motor Sales, U.S.A., Inc. (1992) 4
Cal.App.4th 807, 816 [party seeking attorney fees “had the
burden of showing that the fees incurred were ‘allowable,’ were
‘reasonably necessary to the conduct of the litigation,’ and were
‘reasonable in amount’ ”].)
We are reversing the order instructing appellants to make
the $1 million payment to respondent because the probate court
erroneously overruled appellants’ demurrer. Thus, we need not
determine whether the denial of appellants’ request for an
evidentiary hearing was structural error mandating a reversal.
If on remand appellants again request an evidentiary hearing to
determine respondent’s need for $1 million in attorney fees, the
probate court should conduct such a hearing and make its ruling.
We express no opinion on how the probate court should rule.
Disposition
The December 16, 2022 order instructing appellants to pay
$1 million to respondent to cover her attorney fees is reversed. In
all other respects, the December 16, 2022 order is affirmed. The
matter is remanded to the probate court with directions to vacate
its order overruling appellants’ demurrer to the Distribution
Petition and to enter a new order sustaining the demurrer with
leave to amend to join the remainder beneficiaries as necessary
parties. The probate court shall thereafter proceed pursuant to
the views expressed in this opinion. Each side shall bear its costs
on appeal.
29
NOT TO BE PUBLISHED.
YEGAN, J.
We concur:
GILBERT, P. J.
CODY, J.
30
Colleen K. Sterne, Judge
Superior Court County of Santa Barbara
______________________________
Snell & Wilmer, Howard M. Privette and Jing (Jenny) Hua,
for Defendants and Appellants.
Mullen & Henzell, Jana S. Johnston and Allegra Geller-
Kudrow; Will Tomlinson, for Plaintiff and Respondent.