Judge: Olga Alvarez, Case: 37-2019-00019242-PR-TR-CTL, Date: 2023-09-27 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

DEPT.:

EVENT DATE:

EVENT TIME:

CENTRAL COURTHOUSE TENTATIVE RULINGS - September 26, 2023

09/27/2023  10:30:00 AM  503 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Olga Alvarez

CASE NO.:

CASE CATEGORY:

EVENT TYPE:

CASE TITLE: CASE TYPE:

Probate  Trust Proceedings Motion to Quash (Probate) 37-2019-00019242-PR-TR-CTL IN RE: THE MAURY AND LILLIAN NOVAK CHARITABLE TRUST [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 08/04/2023

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 Quash Subpoena for Production of Business Records to Union Bank, San Diego Private Bank and/or for Protective Order filed by Earl Nelson Feldman is DENIED as to the motion to quash and GRANTED as to the protective order.

I. Background In November 2019, Earl Nelson Feldman ('Trustee') pleaded guilty to one felony count of wire fraud in violation of 18 U.S.C. § 1343 (count 1), and one count of making a false tax return in violation of 26 U.S.C. § 7206(1) (count 2), in the matter of United States of America v. Earl Nelson Feldman, Case No.

19CR4892. (ROA 103, Barrientos Decl., Exh. 3, Plea Agreement at p. 1.) As part of the plea deal, Trustee agreed to $1,648,531.40 in restitution to the Yvonne H. Mitchell Charitable Trust ('Mitchell Trust') and the Maury and Lillian Novak Charitable Trust ('Novak Trust'). (Id. at p. 14.) Trustee admitted the following factual basis for the guilty plea: Beginning at least as early as January 2012 and continuing up to and including April 15, 2015 (the 'Relevant Time Period'), the defendant EARL NELSON FELDMAN ('Defendant'), within the Southern District of California, and elsewhere, did devise, participate and engage in a scheme to defraud two charitable trusts for which he was trustee, of approximately $1,648,531.40, by making unauthorized wire transfers and withdrawals from the trusts' bank account under his control.

[¶] During the Relevant Time Period, Defendant used his position as trustee to defraud the charitable trusts by making unauthorized wire transfers and withdrawals from the charitable trust bank accounts.

Defendant then transferred the misappropriated funds for his own personal use and benefit.

[¶] During the Relevant Time Period, Defendant misappropriated trust assets for his own personal expenses, including but not limited to: paying his personal mortgage; paying taxes on properties he owned; making his personal federal and state tax payments; purchasing personal vehicles; paying contractors working on his personal residence; transferring funds from the charitable trust accounts to his personal brokerage account; and paying his personal credit cards.

(Id. at pp. 3-4.) Calendar No.: Event ID:  TENTATIVE RULINGS

3014459 CASE NUMBER: CASE TITLE:  IN RE: THE MAURY AND LILLIAN NOVAK CHARITABLE TRUST  37-2019-00019242-PR-TR-CTL On April 12, 2019, Xavier Becerra, the Attorney General of the state of California ('Petitioner'), filed a Petition pursuant to Probate Code § 17200 for removal of Trustee as trustee of the Mitchell Trust, for an order compelling Trustee to render a full and complete accounting, and for surcharge based on breach of trust. (ROA 1.) An amended Petition was filed on September 11, 2019. (ROA 25.) On May 14, 2019, Petitioner filed a Notice of Related Case, relating this case with case no. 2019-19222, the Mitchell Trust matter, which is also before this Court. (ROA 7.) On October 20, 2022, Petitioner deposed Trustee. (ROA 103, Barrientos Decl., Exh. 1, Excerpts from the Deposition Transcript dated October 20, 2022.) On July 13, 2023, Petitioner issued a subpoena to Union Bank for documents for accounts held by Trustee, and/or accounts held by Trustee and his wife, Sarah Scott, from January 2010 through December 2015, including but not limited to: (1) Union Bank Essentials Checking account number 4790012645, and (2) Account number 0011255296. (ROA 90, Swan Decl., Exh. A, Deposition Subpoena for Production of Business Records dated Jul. 13, 2023.) On August 4, 2023, Trustee filed the instant motion to quash deposition subpoena pursuant to CCP § 1987.1. (ROA 80.) A corresponding motion to quash was filed in the related case. (ROA 84.) Trustee moves to quash Petitioner's subpoena to Union Bank for his personal bank records, and alternatively, for a protective order to preserve the confidentiality of his personal bank records should the Court allow the documents to be subpoenaed.

The Petition alleges breach of trust based on breach of duties by Trustee as trustee. Petitioner argues based on information and belief that Trustee did not comply with the terms of the Trust and failed to make the distributions to charitable organizations as required. Petitioner claims that instead, Trustee made distributions to himself and has taken unauthorized and excessive payments for his own personal benefit under the guise of managing the trust. Petitioner is informed and believes that Trustee was not managing the Trust for the benefit of the charitable beneficiaries but was taking funds for himself, and Trustee misappropriated $1,684,722 in Trust assets from 2010 to 2015.

On September 14, 2023, Petitioner filed an opposition. (ROA 102.) On September 19, 2023, Trustee filed a reply. (ROA 104.) II. Discussion A. Compliance with the Rules of Court Preliminarily the Court notes that the parties' electronic exhibits fail to comply with CRC 3.1110(f)(4).

(Cal. Rules of Court, rule 3.1110(f)(4) ['[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.'].) The bookmark titles of Petitioner's exhibits do not briefly describe the exhibit. (See ROA 103, Barrientos Decl.) Trustee did not include any electronic bookmark with a link to the first page of the exhibit. (See ROA 90.) The parties are expected to comply with all applicable rules in the future.

B. Motion to Quash Trustee argues the Court should quash the subpoena for the personal bank records because the subpoena is overbroad, does not describe the requested documents with reasonable particularity, is not Calendar No.: Event ID:  TENTATIVE RULINGS

3014459 CASE NUMBER: CASE TITLE:  IN RE: THE MAURY AND LILLIAN NOVAK CHARITABLE TRUST  37-2019-00019242-PR-TR-CTL reasonably calculated to lead to the discovery of admissible evidence, and the personal bank records are protected by Trustee's constitutional right to privacy.

In opposition, Petitioner argues Trustee's theft of money from two charitable trusts and failure to account for the funds is the reason compelling the subpoena. Petitioner argues that Trustee admits he wrote checks to himself and deposited the checks into his personal bank accounts. Trustee claims that some of these funds were reimbursements for funds he used for the benefit of the trusts, however, Trustee testified he does not have any recollection of how the funds were used and does not have any documents to support his claims the funds were used for charitable purposes.

Petitioner argues that in 2019, Trustee pleaded guilty to two federal felony counts, admitting he stole money from the Mitchell Trust and the Novak Trust. There is no dispute that Trustee stole money from the trusts and committed perjury in the process. Despite his guilty plea and admission to stealing money from the charitable trusts, Trustee maintains that some of the funds he took from 2012 through 2015 were used for the benefit of the trust.

Petitioner further argues that Trustee also admits to comingling charitable trust funds in his personal bank account. Comingling of funds is a violation of the statutory duties of a trustee. Trustee does not have the right to claim privacy under the circumstances.

In reply, Trustee argues the opposition makes numerous material misstatements and omissions relating to the criminal case, to paint Trustee in the worst light. Trustee further argues that in response to the motion to quash, Petitioner made no attempt to support the disclosure of every bank record, or to show why records after April 2015 would be necessary. Efforts must be made to minimize the intrusion on privacy interests, but Petitioner has not done so. Petitioner has not shown why records from Trustee's joint account are necessary.

Analysis The subpoena seeks documents for accounts held by Trustee, and/or accounts held by Trustee and his wife, Sarah E. Scott, from January 2010 through December 2015, including but not limited to: (1) Union Bank Essentials Checking account number 4790012645, and (2) Account number 0011255296. (ROA 90, Swan Decl., Exh. A.) Here, the deposition subpoena seeks documents for accounts in Union Bank held by Trustee separately or jointly with his wife, from January 2010 through December 2015, including but not limited to the accounts ending in 2645 and 5296.

Trustee pleaded guilty in 2019 to two federal felony counts, including one count of wire fraud for making unauthorized wire transfers and withdrawals from the bank accounts of the trusts at issue. Trustee admitted that in April 2014, he 'deposited approximately $96,838 from the charitable trust accounts into his personal bank account at Union Bank ending 5296.' (ROA 103, Barrientos Decl., Exh. 3, Plea Agreement, at p. 4.) Trustee also admitted that in May 2014, he 'caused an interstate wire transfer of $100,000 from his personal bank account at Union Bank ending x5296 to his personal brokerage account at Schwab ending x8929, which consisted of funds belonging to the charitable trusts.' (Id.) Trustee argues the subpoena is overbroad as it seeks all documents relating to the two personal bank accounts from 2010 to 2015, without identifying any particular type of documents or attempting to limit the documents requested. The Court disagrees. The subpoena is directed to a single bank and requests bank records pertaining to all accounts held by Trustee personally, whether separately or jointly with his wife. Thus, the requested documents are identifiable and specific. These documents are relevant to the litigation based on allegations that Trustee breached his duties to the Novak Trust by making unauthorized transfers from this trust to Trustee's personal bank account. There is evidence Trustee transferred money out of his personal bank account into at least one other account (the investment account). Further, Petitioner is not required to rely on Trustee's claim that the transfers from the Trust Calendar No.: Event ID:  TENTATIVE RULINGS

3014459 CASE NUMBER: CASE TITLE:  IN RE: THE MAURY AND LILLIAN NOVAK CHARITABLE TRUST  37-2019-00019242-PR-TR-CTL were deposited only into his separate account and has a right to inspect the records as part of the discovery process. Thus, the bank records associated with the joint account, and any other bank account(s) in existence at Union Bank held by Trustee, are also relevant for purposes of this litigation, on the issues of whether Trustee should be removed based on breaches of his fiduciary duties to the Novak Trust.

While Trustee has a privacy right over his financial records, the right is not absolute and must be balanced against the right to discovery. Considering Trustee's guilty plea in the federal criminal case, Trustee's deposition testimony, and the allegations raised in the Petition, the relevance of the records is clear.

Therefore, the motion to quash is DENIED.

The motion for protective order is GRANTED. The documents sought are subject to a protective order that they may not be viewed except by the parties to the lawsuit and may not be disseminated or disclosed outside the litigation. (CCP § 2031.060(b); O&C Creditors Group, LLC. v. Stephens & Stephens XII, LLC (2019) 42 Cal.App.5th 546, 560.) Petitioner is directed to serve notice of ruling in accordance with the provisions of CCP § 1019.5(a).

IT IS SO ORDERED.

Calendar No.: Event ID:  TENTATIVE RULINGS

3014459