Judge: Olga Alvarez, Case: 37-2021-00046669-PR-TR-CTL, Date: 2023-09-13 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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CENTRAL COURTHOUSE TENTATIVE RULINGS - September 12, 2023

09/13/2023  10:30:00 AM  503 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Olga Alvarez

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Probate  Trust Proceedings Motion Hearing (Probate) 37-2021-00046669-PR-TR-CTL IN THE MATTER OF THE SURVIVORS TRUST, CREATED UNDER THE CHAFFEE FAMILY TRUST, DATED FEBRUARY 14, 1992 [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 06/06/2023

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 Bifurcate filed by John R. Chaffee is DENIED.

I. Background This case involves disputes over the Chaffee Family Survivor's Trust. Rowand R.J. Chaffee, settlor, died on September 15, 2019. Decedent's daughter, Anna M.E. Evers (Anna), was named first successor trustee, and decedent's son, Rowand Chaffee, Jr. (John) was named the second successor trustee.

Anna served as the successor trustee until August 23, 2021, after which John accepted his appointment as successor trustee.

Mary Alice E.C. Williams (Petitioner) is decedent's daughter. The remaining beneficiaries are alleged to be decedent's children and one grandchild, Anna's daughter.

On November 3, 2021, Petitioner filed a petition for accounting pursuant to Probate Code § 17200.

(ROA 1.) The petition was taken off calendar without prejudice on January 28, 2022. (ROA 10, Minute Order dated Jan. 28, 2022.) On January 19, 2022, Petitioner filed a petition for: (1) accounting; (2) to compel Anna M.E. Evers to redress breaches of trust; (3) finding of financial elder abuse; (4) surcharge; (5) double damages; (6) treble damages; (7) punitive damages; (8) order directing John R. Chaffee, as trustee, to distribute the share of Anna M.E. Evers to the other beneficiaries in equal share; (9) order that Anna M.E. Evers shall be deemed to have predeceased settlor Rowand R.J. Chaffee; (10) to deny compensation of Anna M.E.

Evers as trustee; and (11) for attorney's fees and costs. (ROA 7.) This petition was supplemented at ROA 40 and 49.

On August 22, 2022, Petitioner filed a petition for orders: (1) compelling accounting; (2) removing John R. Chaffee as trustee; (3) suspending John R. Chaffee as trustee; and (4) appointing private professional fiduciary; for attorneys' fees under the common fund doctrine. (ROA 32.) This petition was supplemented at ROA 39 and 48.

On October 11, 2022, Trustee John R. Chaffee (Trustee) filed the First Account Current and Report of Trustee, John R. Chaffee, Petition for: (a) its settlement and approval; and (b) confirmation, ratification, Calendar No.: Event ID:  TENTATIVE RULINGS

2983796 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE SURVIVORS TRUST, CREATED  37-2021-00046669-PR-TR-CTL and approval of acts of trustee pursuant to Probate Code § 17200(b)(5). (ROA 46.) On October 25, 2022, on the party's motion, the Court continued the CMC on ROA 32 and Trustee's First Account at ROA 46 to April 3, 2023. (ROA 63, Minute Order dated Oct. 25, 2022.) The Court also ordered trustee to serve a Notice of Proposed Action on all beneficiaries if Trustee wished to sell real property to a beneficiary, and (2) for objections to ROA 46 to be filed no later than January 5, 2023. (Id.) The petition for accounting at ROA 7 was also continued to April 3, 2023. (ROA 67.) On March 24, 2023, the Court granted Trustee's Application for Ex Parte Order for Instructions Approving Cash Distributions From the Trust to Each of the Named Remainder Beneficiaries at ROA 77.

(ROA 91, Minute Order dated Mar. 24, 2023; ROA 92, Order on Ex Parte Application.) The petitions for accounting and for orders at ROA 7 and 32, and Trustee's First Accounting at ROA 46, are currently set for CMC on January 8, 2024. (ROA 109, 113, 117, Minute Orders dated Apr. 3, 2023.) On June 6, 2023, Trustee filed the instant motion to bifurcate. (ROA 118.) Trustee moves pursuant to CCP §§ 1048(b) and 598 for an order: (1) granting a separate trial of the approval and confirmation of Trustee's distribution of trust real properties to the trust beneficiaries; and (2) specially setting the bifurcated issue for trial before trial of the other issues. (ROA 118.) The motion is made on the grounds that separate trials will promote the interests of convenience, economy, and expedition, and avoid undue prejudice to the moving party and the trust beneficiaries.

On August 30, 2023, Petitioner filed her opposition to the motion. (ROA 121.) On September 6, 2023, Trustee filed his reply. (ROA 123.) II. Discussion A. Argument This motion concerns the distribution by Trustee in early 2022 of trust real properties to the beneficiaries via an LLC, namely Solar Lands LLC.

The Survivor's Trust had a three-year solar lease option agreement with 8meLLC from late 2018 through January 2022. The solar lease was for five contiguous rural vacant land tracts totaling over 900 acres located west of Farmington, New Mexico.

1. Moving Trustee alleges the distribution of these parcels of land was made for two purposes: (1) to offset capital gains resulting from the sale of a trust real property ('Citrus property') in late 2021, and (2) to secure another solar lease option agreement with the hopes of eventually securing a long-term solar lease.

The solar lease option lapsed in January 2022, but despite the lapse, Trustee believed another solar lease option agreement with 8meLLC with the same five parcels of land was possible. Thus, Trustee advocated for the formation of Solar Lands LLC and the distribution of the five parcels from the trust into Solar Lands LLC, with all the beneficiaries as members with equal shares. Trustee claims all the beneficiaries elected to receive the in-kind distribution and membership in the LLC except the Estate of Christian Chaffee.

Trustee claims that after the initial distribution of one parcel to offset the capital gains, Trustee distributed the remaining four parcels to the beneficiaries, again via the LLC.

Trustee argues that CMCs are set far out in January 2024, and the conflict over Trustee's distribution of the trust real property hinders the administration of the trust, increases conflict, obstructs resolution Calendar No.: Event ID:  TENTATIVE RULINGS

2983796 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE SURVIVORS TRUST, CREATED  37-2021-00046669-PR-TR-CTL outside the courts, and interferes with and obstructs the governance of the LLC.

Trustee contends that the issue of whether Trustee's action was appropriate and beneficial to and consistent with the approval of the beneficiaries should be bifurcated from all other issues to avoid prejudice to the beneficiaries, and for the sake of judicial economy. Trustee asserts that resolution of this issue may lead to a resolution of the remaining issues and avoid prejudice to the beneficiaries who wish to retain the properties in the LLC.

Trustee believes the instability created by the uncertainty of whether the properties will remain in the LLC will hamper any potential resolution of this matter. Trustee believes that all the beneficiaries hope to keep the subject properties in the LLC, but that some are using the issue as a means of complicating the administration and as undue leverage in trying to resolve other issues. Thus, it is appropriate and necessary to bifurcate the issue and resolve it prior to the other pending issues.

2. Opposition Petitioner opposes the motion. (ROA 121.) Petitioner argues the issues are interrelated such that bifurcation would result in duplication of efforts and a waste of judicial resources. Petitioner argues that Trustee failed to establish any prejudice he would face if all the issues are determined in a single trial.

Petitioner seeks, among other relief, the removal of Trustee based on various breaches of his duties as trustee. Among the breaches alleged is Trustee's improper distribution of property from the trust to the LLC, which is not a trust beneficiary, without the beneficiaries' consent. The bifurcation will duplicate the parties' efforts, including presentation of the same witnesses, evidence, and likely the same expert witnesses at both trials because the Court will have to determine overlapping issues at the trials, resulting in a waste of judicial resources. If bifurcation is granted and the Court determines whether Trustee had the authority to distribute the parcels into the LLC in the first trial, in the latter trial the Court will still need to determine whether Trustee's distribution of the parcels breached his duties as Trustee.

This determination would necessarily require the same witnesses and predominantly, if not completely, the same evidence as the first trial. Petitioner would also likely have any potential expert witnesses testify at both trials regarding the measure of damages to the trust caused by Trustee's course of conduct.

Petitioner claims that after she expressed to Trustee her disagreement with the distribution of all five parcels to the LLC, Trustee provided Petitioner with an option to be bought out of her interest in the LLC.

However, Trustee's proposed buy-out was based on significantly deflated appraisals of the value of the properties, thereby forcing Petitioner to either remain a member of the LLC or accept a below-market price for her interest in the LLC.

Petitioner contends the status of the parcels is just one of several interrelated factors at issue. Further, the LLC membership and governance is not relevant to Trustee's administration of the trust, and therefore should not be a factor considered in ruling on the instant motion. Those issues will remain regardless of whether one parcel or five parcels remain in the LLC, or whether the distribution of property to the LLC is ultimately deemed to be appropriate.

Petitioner further argues that Trustee's motion lacks any substantive argument explaining how bifurcation would lead to efficiency for the court or the parties. The status of the parcels would not impact the parties' current positions, as that was not a factor which impeded resolution at mediation.

Petitioner contends that while there are distinctions between the determinations the Court would make in the first and second trial, the issues are interrelated and overlap as the Court would consider the same evidence, the same witness testimony, and the same expert opinions in both trials. Accordingly, bifurcation should be denied as it would result in the parties' duplication of efforts and a waste of judicial resources. Trustee will not be prejudiced if all issues are decided at a single trial.

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2983796 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE SURVIVORS TRUST, CREATED  37-2021-00046669-PR-TR-CTL 3. Reply In the reply, Trustee argues the parties disagree on whether the transfer of the trust real properties is interrelated with other issues such that bifurcation would result in duplication of efforts and a waste of resources, or whether bifurcation would protect the beneficiaries and facilitate potential agreement or a trial on all remaining issues. Trustee contends that bifurcation will conserve the court's resources, protect the interests of all the beneficiaries, allow for unfettered administration of the trust, and, potentially, lead to resolution outside of the court.

Trustee wishes to bifurcate and have a separate trial on all issues associated with the transfer of the properties, including breaches of trust, liability, and damages such that efforts would not be duplicated on the issue. A ruling by the court will not affect the remaining issues, and if expert witnesses are needed, Trustee anticipates the experts would only testify at the trial on the bifurcated issue concerning the transfer.

B. Analysis '[I]n furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy,' a court 'may order a separate trial of any cause of action or of any separate issue or of any number of causes of action or issues ...' (CCP § 1048(b).) Here, the motion discusses the merits of Trustee's actions for transferring the trust real property to the LLC, and the advantages of resolution outside of court if the issue of the transfer is adjudicated and settled first in court. Trustee claims the uncertainty regarding the status of the parcels interferes with settlement and is contrary to the benefit of the beneficiaries, particularly considering the serious tax consequences and the beneficiaries' desire to hold the parcels of land in the LLC. Trustee further argues that efforts need not be duplicated because all issues related to the transfer of real property by the Trustee will be adjudicated, not just liability.

The Court is not persuaded that bifurcation will promote judicial economy or expedition. The issues in the petition at ROA 7 relating to Anna's conduct as the first successor trustee are tied to issues regarding John's conduct as the second successor trustee, given the allegations that John breached his fiduciary duties as trustee when he engaged in a backroom deal with Anna. The transfer of the five parcels of land to the LLC is one of the claims against John for breach as alleged in the petition at ROA 32, seeking the suspension and removal of John as the current trustee based on various allegations of breach.

Thus, it is unclear to the Court why all issues could not be adjudicated at a single trial, when all issues of breach, including the transfer of real property at issue, are tried. A single presentation of evidence and witness testimony would streamline the process and promote convenience. Trustee claims, for instance, that an expert witness would only have to testify as to the issues involved with the transfer. However, the expert may need to testify regarding other issues relating to John's breach of his fiduciary duties and be forced to appear at two trials. More important, resolution of the issue of the transfer would leave unresolved the claims of breach of trust at ROA 32 and related claim in Trustee's accounting at ROA 46, which seeks confirmation, ratification, and approval of the acts of Trustee. As such, the Court is not persuaded that bifurcation will conserve judicial resources or promote efficiency.

Further, while the Court understands that resolution of the transfer issue may bring the parties to a position to settle outside of court, the Court finds no prejudice to the beneficiaries with respect to this litigation, if bifurcation is not granted. Trustee will have his chance to present evidence and argument at trial, albeit at a single trial. The prejudice to the beneficiaries that Trustee notes, such as from the possible tax consequences of reversing the transfer, ability to obtain another solar lease, or hindrance with the governance of the LLC and administration of the Trust, will not necessarily be resolved through bifurcation if the issues are bifurcated and ruled in favor of Petitioner.

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2983796 CASE NUMBER: CASE TITLE:  IN THE MATTER OF THE SURVIVORS TRUST, CREATED  37-2021-00046669-PR-TR-CTL Therefore, the motion to bifurcate is DENIED.

Attorney for Petitioner is directed to serve notice of ruling in accordance with the provisions of CCP § 1019.5(a).

IT IS SO ORDERED.

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