Judge: John B. Scherling, Case: 37-2022-00024104-PR-TR-CTL, Date: 2023-10-23 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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CENTRAL COURTHOUSE TENTATIVE RULINGS - October 20, 2023

10/23/2023  10:00:00 AM  502 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:John B Scherling

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Probate  Trust Proceedings Discovery Hearing (Probate) 37-2022-00024104-PR-TR-CTL IN THE MATTER OF THE GABE W. POTTER TRUST, DATED OCTOBER 4, 1989 CAUSAL DOCUMENT/DATE FILED: Motion to Compel Discovery, 04/18/2023

Pursuant to Superior Court of San Diego County, Local Rules, rule 4.23.7, the court's tentative ruling is as follows: The Motion to Compel Further Responses to Requests for Admission, Set One, is GRANTED.

The Motion to Compel Further Responses to Special Interrogatories, Set One, is GRANTED.

The Motion to Compel Further Responses to Requests for Production of Documents, Set One, is GRANTED.

I. Background This case concerns the Gabe W. Potter Trust dated October 4, 1989 ('Trust') as amended and restated.

Gabe W. Potter ('Decedent') created the Trust while he was a single man. The Trust provided for distribution of the entire trust estate to his daughter, Marnie Marie Busby ('Petitioner'), and named Regena R. Potter (aka Regena Carter) ('Respondent'), and his brothers, Robert A. Potter, and Thomas L. Baker as the contingent beneficiaries.

Petitioner is successor trustee of the Trust. Respondent was married to Decedent, and they entered into a prenuptial agreement in 1993, around the time of marriage. Decedent passed away on February 16, 2022. The prenuptial agreement contained standard language as to the characterization and treatment of their separate property during the marriage. (ROA 112, Tannenberg Decl., Exh. 1) On June 22, 2022, Petitioner filed a Petition for Modification of Trust. (ROA 1.) The First Amended Petition ('FAP') for Instructions or, in the Alternative, Modification of Trust was filed on October 28, 2022.

(ROA 22.) The Petition at ROA 1 was taken off calendar as superseded by ROA 22. (ROA 32, Minute Order dated Dec. 1, 2022.) The FAP alleges Decedent executed the first amendment to the Trust on August 27, 1993, which listed Petitioner as the first successor trustee. (ROA 22, FAP at ¶ 16.) Respondent was given a life estate in the residence shared with Decedent (located at 10811 Broken Wheel Road, in Lakeside, California) ('Lakeside Property'). (Id., at ¶ 17.) If Respondent survived Decedent, she was to also receive a remainder interest in the Lakeside Property, depending on the year Decedent passed away, and Petitioner was given the balance of the remainder interest of the Lakeside Property, and the rest of Decedent's estate was to be split between Respondent and Decedent's brothers, Robert A. Potter and Calendar No.: Event ID:  TENTATIVE RULINGS

3030537 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE GABE W.

POTTER TRUST, DATED OCTOBER  37-2022-00024104-PR-TR-CTL Thomas L. Baker. (Id.) Decedent executed the Second Amendment to the Trust on June 6, 2000. (Id., at ¶ 18.) Petitioner is named the first successor trustee, followed by her husband, Steven Busby, then Respondent as the second and third successor trustees respectively. (Id., at ¶ 19.) As before, Respondent was given a life estate in the Lakeside Property, but Petitioner was given a 100% remainder interest in the Lakeside Property, and the balance of Decedent's estate was to be divided between Respondent and Decedent's brothers. (Id., at ¶ 20.) On the same day as the Second Amendment, Decedent executed his Last Will, which listed Petitioner as the executor. (Id., at ¶ 21.) All real and personal property owned by Decedent was to be bequeathed to the Trust upon his death. (Id.) On or about November 15, 2017, Decedent executed and recorded a Simple Revocable Transfer on Death (TOD) Deed listing Petitioner as his successor in interest to the Lakeside Property. (Id., at ¶ 22.) The FAP further alleges that Petitioner's status as a specific gift beneficiary depended on Decedent's continued ownership of the Lakeside Property and Decedent mistakenly failed to amend his trust to make it clear that Petitioner was supposed to receive the sale proceeds of the sale of the Lakeside Property. (Id., at ¶ 23.) Subsequently, Decedent moved to Arizona and sold the Lakeside Property on August 13, 2023. (Id., at ¶ 26.) Decedent deposited the proceeds into one of his investment accounts, as it was Decedent's separate property, and kept separate from Respondent in accord with their prenuptial agreement. (Id.) Respondent purchased a home in Sun City (Arizona) and Decedent moved in with Respondent, but they maintained separate finances and as such, Decedent paid Respondent $1,000 in monthly rent. (Id., at ¶ 27.) After Petitioner assumed her role as successor trustee, and in reviewing the Trust, she discovered that her status as a beneficiary was unclear due to the sale of the Lakeside Property. (Id., at ¶ 32.) Decedent consistently listed Petitioner as the primary beneficiary of his estate in every planning document he signed but did not amend the Trust after selling the Lakeside Property. (Id., at ¶ 33.) Under the Second Amendment to the Trust, Petitioner was to receive a fee remainder interest in the Lakeside Property following Respondent's life estate, however, Petitioner was not otherwise provided for. (Id.) The FAP alleges that Decedent did not intend for such results. (Id., at ¶ 34.) Petitioner requests instructions confirming that the specific gift of the Lakeside Property did not adeem and that she is entitled to the sales proceeds plus any interest, or the value of the Lakeside Property at the time of Decedent's death. (Id., at ¶ 35.) Alternatively, Petitioner requests modification of the Trust such that she is the sole beneficiary of all sales proceeds of the sale of the Lakeside Property. (Id.) Respondent objects to the Petition arguing that Decedent purposefully caused the ademption of the specific gift of the Lakeside Property to Petitioner in the Second Amendment to the Trust when Decedent sold it in 2020. (ROA 35, at ¶¶ 12-14.) On March 28, 2023, Respondent filed a Petition for Order: (1) removing Marie Busby as Trustee and appointing a professional trustee; (2) or alternatively, suspending Marie Busby's authority as trustee and appointing of an interim trustee; and (3) for surcharge against Marnie Busby for breach of trust. (ROA 42.) On May 30, 2023, Petitioner filed a proposed amendment to her FAP, in compliance with Local Rule 4.20.7 and the Court's order of May 4, 2023. (ROA 93.) At the hearing on August 11, 2023, the Court ordered as follows: Pending further order of the court, Ms. Busby is not to use trust assets for the litigation of ROAs 22 and 42. Absent agreement of the parties resolving the issue, the court will consider it further at the September 29, 2023 2:00 p.m. hearing. The parties are to file points and authorities of not more than Calendar No.: Event ID:  TENTATIVE RULINGS

3030537 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE GABE W.

POTTER TRUST, DATED OCTOBER  37-2022-00024104-PR-TR-CTL four pages addressing the issue, including the possibility of posting a bond to cover attorney fees, not later than September 21, 2023.

(ROA 110, Minute Order dated Aug. 11, 2023.) Petitioner filed the instant motions to compel further responses to discovery propounded on Respondent.

(ROA 45, 58 & 60, Notices of Mot. amended at ROA 87, 89, & 91.) Petitioner moves to compel further responses to Requests for Admission ('RFA'), Set One, Nos. 1, 3, 14, and 27-31, pursuant to CCP § 2033.290 on the ground Respondent's refusal to answer and refusal to provide unqualified answers is without substantial justification. Petitioner requests $5,000 in monetary sanctions for bringing the motion.

Petitioner also moves to compel further responses to Special Interrogatories ('SROG'), Set One, Nos.

21 and 22, pursuant to CCP § 2030.300 (ROA 89), and to Requests for Production of Documents ('RFP'), Set One, No. 7[1], pursuant to CCP § 2031.310 (ROA 91), on the ground that Respondent's refusal to answer and refusal to provide unqualified answers is without substantial justification. As to these two motions, Trustee requests $2,000 in monetary sanctions.

On September 15, 2023, Petitioner filed oppositions to the motions. (ROA 111, 114 & 116.) Petitioner also requests monetary sanctions for opposing the motions. (ROA 112, 115 & 117, Tannenberg Decl., at ¶ 4.) On September 21, 2023, Objector filed replies. (ROA 118-120.) In addition to the discovery motions, the parties submitted briefing on the issue of whether attorney's fees could be paid out of the Trust. (ROA 124, 127.) II. Discussion A. Compliance with the Rules of Court As a preliminary matter, the Court notes Petitioner's electronic exhibits fail to comply with CRC 3.1110(f)(1), which requires an index of exhibits. The exhibits also fail to comply with CRC 3.1110(f)(4), which provides that '[u]nless they are submitted by a self-represented party, electronic exhibits must include electronic bookmarks with links to the first page of each exhibit and with bookmark titles that identify the exhibit number or letter and briefly describe the exhibit,' and with Local Rules, rule 4.3.2.A.4, which requires that '[p]leadings that contain more than one exhibit attached must include electronic bookmarks with links to the first page of each exhibit and titles that identify the exhibit number or letter and briefly describe the exhibit.' (See ROA 48, 55, 63, 112, 115, and 117.) The parties are expected to comply with all applicable rules in the future.

B. Discovery Motions The meet and confer requirement under CCP § 2016.040 is satisfied. (ROA 48, 55, and 63.) 1. Requests for Admission Petitioner argues the disputed RFAs seek information relating to Respondent's financial relationship with Decedent during their marriage and his intentions regarding the disposition of his assets, which are matters clearly relevant to the core issues in this case.

Petitioner further argues the prenuptial agreement is directly relevant to Petitioner's theory of her case that Decedent and Respondent agreed to keep their finances and estate plans separate. Petitioner Calendar No.: Event ID:  TENTATIVE RULINGS

3030537 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE GABE W.

POTTER TRUST, DATED OCTOBER  37-2022-00024104-PR-TR-CTL contends the prenuptial agreement specifically references Decedent's and Respondent's estate plans and confirms the real property (the Lakeside Property) gifted to Petitioner in the Second Amendment to the Trust is Decedent's separate property. Petitioner asserts that she is entitled to discovery concerning Respondent's claims or defenses and the relevance objection is meritless.

Respondent argues 'the management of Gabe and Regena's finances during their joint lifetime, their prenuptial agreement, and the identity of their separate and community property while they were married, is not in issue and is not relevant because it will not prove or disprove Gabe's intent as to the distribution of his assets after his death.' (ROA 111, Oppo. at p. 9, original italics.) Respondent argues that '[s]he has stated that Gabe wanted to take care of her after his death should he predecease her. He had the right to do that under the prenuptial agreement.' (Id., at p. 10.) Here, on January 17, 2023, Petitioner served the RFAs on Trustee, and now seeks further responses to RFA Nos. 1, 3, 14, and 27-31, to which Trustee responded by serving blanket objections based on relevance, privacy, and vagueness/ambiguity of the requests. (See ROA 47, Separate Statement.) The Court finds the objections are without merit. The RFAs request information regarding the Lakeside Property, the prenuptial agreement, and Decedent and Respondent's finances while married, which are issues clearly related to and reasonably calculated to shed light on Decedent's testamentary intent regarding the Lakeside Property and whether he intended the property to go to Petitioner as his separate property or intended the gift to adeem. The crux of Petitioner's claim is that Decedent sold the Lakeside Property but neglected to amend the Trust to reflect his intent that the proceeds from the sale of this property go to Petitioner. Respondent inconsistently claims, on the one hand, that Decedent had a right to make gifts to her under the prenuptial agreement, but on the other hand, claims only the Trust terms govern disposition of Decedent's assets. Petitioner is justified in seeking discovery on matters related to disputed issues.

Respondent further objects to the discovery requests as vague and ambiguous because she is not named Regena Carter. However, it is clear the request is seeking information about Respondent herself.

This information is easily clarified with Petitioner and not a genuine basis to withhold discovery.

As to privacy, Respondent generally argues her financial records are confidential and not relevant or necessary to Respondent's case, and Trustee's need for the records must be balanced against Respondent's privacy rights. However, the motion concerns admissions of the genuineness of documents or the truth of matters asserted. 'Each answer shall: (1) Admit so much of the matter involved in the request as is true ... (2) Deny so much of the matter involved in the request as is untrue ... [or] (3) Specify so much of the matter involved in the request as to the truth of which the responding party lacks sufficient information or knowledge.' (CCP § 2033.220(b).) These requests do not involve disclosure of confidential, private financial documents, such as documents pertaining to Respondent's finances or assets. To the extent that responding to the RFAs discloses private financial information (such as the amount of rent Respondent received), the invasion is minimal when balanced against Petitioner's need and right to discovery. As Petitioner argues, Respondent placed the matter at issue in claiming that Decedent promised to provide for Respondent for the rest of her life and therefore, the Lakeside Property adeemed. Respondent thus has impliedly waived objection to matters necessary to prove or disprove the allegation, and the information sought through the RFAs is clearly related to the issues raised by the parties.

Therefore, the motion to compel further responses to RFA Nos. 1, 3, 14, and 27-31 is GRANTED.

Respondent is ordered to serve verified code-compliant responses within 15 days of this order.

2. Special Interrogatories Petitioner moves to compel further responses to SROG Nos. 21 and 22. (ROA 89, Amended Notice of Mot.) SROG No. 21 requests that Respondent '[i]dentify all assets jointly owned by YOU and SETTLOR as of Calendar No.: Event ID:  TENTATIVE RULINGS

3030537 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE GABE W.

POTTER TRUST, DATED OCTOBER  37-2022-00024104-PR-TR-CTL February 16, 2022.' (ROA 54, Separate Statement.) SROG No. 22 requests that Respondent '[i]dentify all deposits made by SETTLOR into any account owned, in whole or in part, by YOU by stating the date, amount, and reason for each deposit. This interrogatory is limited to the time period of January 1, 2021, to February 16, 2022.' For the reasons discussed above, SROG Nos. 21 and 22 are relevant to the issues raised in the Petition. On balance, they likewise do not unreasonably invade Respondent's right to privacy and are not vague or ambiguous. The Court finds the objections are without merit.

Therefore, the motion to compel further responses to SROG Nos. 21 and 22 is GRANTED. Respondent is ordered to serve verified code-compliant responses within 15 days of this order.

3. Requests for Production of Documents Petitioner moves to further compel responses to RFP No. 7, which seeks 'All WRITINGS (as defined by Evidence Code, § 250) comprising of or evidencing any agreements between YOU and SETTLOR related to payment of living expenses.' This request is relevant to the issues of Decedent's intent with respect to the Lakeside Property, whether this property was treated as separate property during his lifetime, and whether he intended to provide for Respondent after his death and how he intended to provide. On balance, this request does not unreasonably invade Respondent's right to privacy. As such, the Court finds the objections are without merit.

Therefore, the motion to compel further responses to RFP No. 7 is GRANTED. Respondent is ordered to serve a verified code-compliant response within 15 days of this order.

4. Sanctions Petitioner requests a total of $9,000 ($5,000 + $2,000 + $2,000 = $9,000) in monetary sanctions based on costs and attorney's fees incurred for the substantial meet and confer efforts, bringing this motion, and the appearance at the hearing. (ROA 48, 55 & 63.) Respondent requests a total of $7,350 in monetary sanctions for opposing the motions. (ROA 112, 115 & 116.) The Court finds monetary sanctions against Respondent are appropriate given the blanket objections and that Respondent unsuccessfully opposed the motions. Therefore, Respondent's requests for monetary sanctions are DENIED.

However, Petitioner does not provide any explanation as to the reasonableness and necessity of the costs incurred, and the amounts requested are entirely unsubstantiated. Counsel for Petitioner does not provide counsel's billing rate, the tasks performed and time expended thereon, nor explain why the requested fees/costs are compensable.

Therefore, Petitioner's requests for sanctions are DENIED without prejudice.

C. Request for Attorney's Fees and Cost from Trust Funds On August 11, 2023, the Court ordered Petitioner to not to use trust assets for the litigation of the petitions at ROA 22 and 42 pending further court order. (ROA 110, Minute Order dated Aug. 11, 2023.) In her brief, Respondent argues Petitioner cannot use Trust funds to pay her litigation expenses.

Respondent argues that Petitioner has paid all the legal fees and costs of the present litigation from the Calendar No.: Event ID:  TENTATIVE RULINGS

3030537 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE GABE W.

POTTER TRUST, DATED OCTOBER  37-2022-00024104-PR-TR-CTL Trust without court approval. Respondent contends that the petitions seek orders to modify the trust distribution for Petitioner's sole benefit, to the detriment of the remainder beneficiaries. Respondent asserts that as of March 2023, Petitioner has paid over $40,000 in legal fees from the Trust, and thus, requests that at a minimum, the Court enter an order that Petitioner be precluded from using trust funds for all litigation fees and costs until the petitions are resolved.

Respondent also states that '[a]ccording to Jeff Davis, the owner of Bond Services of California, the main fiduciary bond company in San Diego, no surety company will write a bond for this type of situation because it would be effectively a financial guarantee that Busby would win because if not, the surety would be dragged into litigation by a beneficiary's claim against the surety.' (Id., at p. 5.) Petitioner argues the Petition at ROA 22 seeks an order interpreting latently ambiguous trust provisions, and not an order for removal or modification of the terms. Petitioner argues that modification is sought in the alternative if the Court finds that Petitioner's residual interest in the Lakeside Property lapsed when it was sold. In that case, Petitioner would be seeking modification solely to clarify Decedent's intent.

Petitioner is not contesting any provision in the Trust. Petitioner contends that Respondent by contrast, seeks to convert a special gift into a gift to the remainder beneficiaries and completely disinherit Petitioner.

1. Analysis A trustee has a duty to administer the trust according to the trust terms and the Probate Code. (Prob.

Code, § 16000.) A trustee is entitled to repayment from the trust property for '(a) [e]xpenditures that were properly incurred in the administration of the trust. [And] (b) To the extent that they benefited the trust, expenditures that were not properly incurred in the administration of the trust.' (Prob. Code, § 15684(a), (b).) '[W]here litigation is necessary for the preservation of the trust, it is both the right and duty of the trustee to employ counsel in the prosecution or defense thereof, and the trustee is entitled to reimbursement for his expenditures out of the trust fund.' (Metzenbaum v. Metzenbaum (1953) 115 Cal.App.2d 395, 399.) 'If the trustee acts in good faith, he has the power to employ such assistants and to compensate such assistants out of the assets of the trust even though he may not ultimately succeed in establishing the position taken by him as such trustee.' (Evans v. Superior Court (1939) 14 Cal.2d 563, 574.) 'The foregoing rules, of course, presuppose that the litigation was for the benefit of the trust estate.

[Citation.] For example, the defense of a lawsuit that has the potential for depleting trust assets would be for the benefit of the trust, justifying the employment of counsel. However, litigation seeking to remove or surcharge a trustee for mismanagement of trust assets would not warrant the trustee to hire counsel at the expense of the trust. Such litigation would be for the benefit of the trustee, not the trust.' (Zahnleuter v. Mueller (2023) 88 Cal.App.5th 1294, 1304 citing Whittlesey v. Aiello (2002) 104 Cal.App.4th 1221, 1227, emphasis added.) Here, the Trust as amended does not explicitly provide that the proceeds from the sale of the Lakeside Property go to Petitioner, and the ultimate issue in the Petition is whether Decedent meant for the gift to Petitioner to lapse in not amending the Trust when he sold the Lakeside Property and depositing the sales proceeds into an account held by the Trust, to be distributed among the other beneficiaries.

Whether the Court is asked to interpret or modify the Trust, it is clear the Petition aims to benefit Petitioner, as a beneficiary under the Trust, rather than benefiting the Trust. The Petition does not involve expenses relating to the administration of the Trust. It cannot be disputed that the Petition does not seek to preserve Trust assets but only change the distribution of the Trust assets. Thus, the Court finds that Trustee is not entitled to pay litigations fees and costs from the Trust funds at this time.

Therefore, Petitioner's request to modify the Court's August 11, 2023 order that she 'is not to use trust assets for the litigation of ROAs 22 and 42' is DENIED without prejudice to the conclusion of the case.

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3030537 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE GABE W.

POTTER TRUST, DATED OCTOBER  37-2022-00024104-PR-TR-CTL Attorney for Petitioner is directed to serve notice of ruling in accordance with the provisions of CCP § 1019.5(a).

IT IS SO ORDERED.

[1] The Amended Notice of Motion (ROA 91) refers to RFP Nos. 1, 3, 14, and 27-31, while the Separate Statement (ROA 62) and Memorandum of Points and Authorities only discuss RFP No. 7 (ROA 61).

Thus, it appears the Amended Notice of Motion incorrectly refers to the same numbers as the RFAs at issue, and only RFP No. 7 is at issue.

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