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Farrell v. Farrell

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR
Aug 2, 2011
No. A129898 (Cal. Ct. App. Aug. 2, 2011)

Opinion

A129898

08-02-2011

DONALD FARRELL et al., Plaintiffs and Appellants, v. LOIS FARRELL, Respondent.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(San Francisco County Super. Ct. No. PTR-08-291371)


I.


INTRODUCTION

In this probate dispute, Donald and Richard Farrell (appellants) raise the question of whether their deceased mother, Edith R. Farrell intended the 60-day survivorship provision in her pour-over will to also apply to her trust. As the probate court correctly recognized, this is the identical issue raised and decided in the latest round of litigation in this case, and consideration of appellants' arguments is barred by the doctrines of collateral estoppel and res judicata. Consequently, we affirm the trial court's denial of appellants' petition to reform the dispositive provisions of their mother's trust.

II.


FACTS AND PROCEDURAL HISTORY

Having considered three appeals in approximately two-and-a-half years, this court is extremely familiar with the facts of this case. Edith Farrell died on January 29, 2008. During her lifetime, Edith created a revocable intervivos trust and executed a pour-over will that left all of her estate, including a home in San Francisco, California, in equal shares to her three sons, Donald, Richard, and Manuel. Upon Edith's death, Donald became the trustee.

The first appeal, Farrell v. Farrell (Mar. 30, 2009, A122592, Ruvolo, P. J., Reardon, J., and Sepulveda, J. (Farrell I))involved the probate court's denial of Donald's anti-SLAPP motion. The second appeal, Farrell v. Farrell (November 17, 2009, A125289, Ruvolo, P. J., Reardon, J., and Sepulveda, J. (Farrell II),will be described in detail in this opinion. Briefly, in Farrell II this court affirmed the probate court's construction of the dispositive portions of Edith's trust and pour-over will.

Edith's will provided that a beneficiary shall not be deemed to have survived her if the beneficiary died within 60 days of Edith's death. The trust did not contain a similar provision. Instead, the trust provided, in pertinent part, " 'After the death of Trustor . . . all of the Trust Estate then in the possession of the Trustee shall be held, administered and finally distributed by the Trustee to Trustor's sons, Manuel Farrell, Jr., Richard Farrell, and Donald Farrell, in equal shares, share and share alike, or to the survivor.' " Edith's son Manuel died 33 days after Edith's death.

Manuel's wife, respondent Lois Farrell (Lois), acting as representative of Manuel's estate, filed a petition seeking declaratory relief to confirm that Manuel's estate was a trust beneficiary and was entitled to his one-third share. Donald, who was trustee of Edith's estate, argued in the probate court that the pour-over provisions of the will, which required beneficiaries of the will to survive Edith by 60 days, also governed the trust. Donald argued that because Manuel did not survive his mother by 60 days, Manuel was not a beneficiary under the trust.

The probate court rejected this argument, holding that provisions of the will did not govern the trust, and under the language of the trust, Manuel's estate qualified as a beneficiary of the trust. Donald appealed. In Farrell II, this court affirmed the probate court's ruling, holding, "the language of the trust indicates Edith's intent to impose the simple condition of survivorship and because Manuel survived his mother, his interest in the trust vested upon Edith's death." (Farrell II at p. 7.)

On January 4, 2010, while Donald's petition for review in Farrell II was pending in the California Supreme Court, Donald and his brother Richard petitioned the probate court to "reform" the trust. The reformation petition alleges that when the estate plan was drafted, "Edith clearly emphasized that it was her intention that her property go only to her living sons and under no circumstance should any part of her property pass to a personal representative of a deceased son's estate. However, Edith's attorney drafter negligently drafted the trust amendment so that the amendment failed to reflect Edith's [true] intent 'that any beneficiary under this trust shall not be deemed to have survived me if that beneficiary dies within sixty (60) days after my death.' " (Italics omitted.) Appellants argued their attorney's failure to draft the trust document to reflect Edith's intent was a "scrivener's error" that should be rectified by reformation.

Donald's petition for review of Farrell II was ultimately denied by the California Supreme Court on February 3, 2010.

The attorney who represents appellants in this appeal and in Farrell I and Farrell II, Richard Canatella, was the attorney who drafted the trust and pour-over will.

By order filed on September 1, 2010, the probate court denied appellants' petition for reformation, finding it was barred by collateral estoppel and res judicata. The trial court explained, "The issue of Edith's intent was squarely before the Court in the earlier Petition. Edith's intent regarding the 60-day survivorship clause was necessarily decided, and is final on its merits." The court also denied appellants' request for an evidentiary hearing on the issue of Edith's intent. By separate order filed on the same date, the court ordered the trustee to "pay the balance of all funds presently held" in the Trust Account representing the undistributed portion of Edith's estate which has been put in dispute by this litigation, "to Lois Farrell as the Personal Representative of the Estate of Manuel Joseph Farrell." This appeal followed, challenging all of the probate court's orders.

III.


DISCUSSION

A. Application of Collateral Estoppel/Res Judicata to Bar New Argument

In appellants' petition for reformation of Edith's trust they basically claim that because Manuel failed to survive his mother for a 60-day timeframe, his widow Lois is prevented from receiving her deceased husband's share of the trust. This is the identical argument we considered and rejected in Farrell II, finding "the language of the trust indicates Edith's intent to impose the simple condition of survivorship, and because Manuel survived his mother, his interest in the trust vested upon Edith's death." (Farrell II at p. 7.) As the probate court correctly found, even though appellants predicated their claim on a different legal theory than in Farrell II—their attorney's purported "scrivener error thwart[ing] Edith's true intent"—this did not change the fact that they seek redress for a violation of the same primary right already adjudicated and finally determined in Farrell II. Under these circumstances, reviewing the matter de novo, we agree with the probate court that this new argument is barred because it could have been raised when Edith's testamentary intent was being considered in the underlying proceedings in Farrell II. (See Murphy v. Murphy (2008) 164 Cal.App.4th 376, 399 (Murphy) [standard of review on appeal is de novo].)

Our Supreme Court has set out the governing legal principles. "Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion 'precludes relitigation of issues argued and decided in prior proceedings.' [Citation.]" (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) "Under this doctrine, all claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date. ' "Res judicata precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause of action on a different legal theory or for different relief." ' [Citation.] . . . [The doctrine] 'seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration.' " (Id. at p. 897, italics omitted; see also Hamilton v. Asbestos Corp. (2000) 22 Cal.4th 1127, 1145 [a plaintiff cannot split a cause of action into successive suits]; Sutphin v. Speik (1940) 15 Cal.2d 195, 202 ["If the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged."].)

In the recent case of Murphy, supra, 164 Cal.App.4th 376, the Court of Appeal concluded that collateral estoppel barred a son from relitigating issues decided in an earlier proceeding that concerned his father's estate. In Murphy, the father's conservator petitioned for a substituted judgment to execute a living trust and pour-over will that disinherited the son. (Id. at p. 383.) The son did not file objections in the substituted judgment proceeding despite receiving special notice, nor did he appeal the resulting substituted judgment order. (Id. at pp. 391-392.)

After the father died, the son sued his sister, individually and as trustee of his father's revocable living trust, for undue influence and " 'wrongful disinheritance,' " challenging the testamentary dispositions encompassed by the substituted judgment. (Id. at p. 392.) The Court of Appeal held that the son was barred by collateral estoppel from pursuing the issue of whether the dispositions made in the father's living trust and pour-over will were the result of fraud or undue influence by the daughter because the son had a full and fair opportunity to litigate the claim in the substituted judgment proceeding. The Murphy court held that "[a]pplication of collateral estoppel in this case would give credit to the implied findings made by the probate court, acting within the scope of its jurisdiction, and in a forum where the parties were afforded a fair and full opportunity to present their evidence and arguments, and where appellate review of adverse rulings was available. [Citation.]" (Id. at p. 407.)

Murphy stands for the well-established rule that a primary right (i.e., the claim that the son was wrongfully disinherited) may not be split and litigated in different actions. "If the matter was within the scope of the [previous] action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged. The reason for this is manifest. A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable . . . ." (Id. at p. 401.)

As the probate court in this case recognized, this is a classic case for the application of collateral estoppel/res judicata. In its written order, the court noted that "[b]oth Donald and Richard had notice of the earlier Petition [construing the provisions of Edith's trust] and a full and fair opportunity to litigate the issue of Edith's intent. . . . Petitioners aver that counsel for Petitioners was the attorney drafter of the trust and pour-over will. The Petition alleges, counsel informed Donald, shortly after the May 26, 2009 trial court order finding in favor of Lois on the earlier Petition, that Edith had expressed her intention that both the trust and the will contain a 60-day survival provision. Counsel, aware of these facts, strategically chose not to offer the evidence at the earlier hearing. Petitioners now seek to adduce such evidence. Petitioners cannot file successive Petitions by selectively and in piece-meal fashion proffering evidence of Edith's intent on the 60-day survivorship clause."

We agree with the probate court's conclusion that the claims made in appellants' petition for reformation of Edith's trust are barred by collateral estoppel/res judicata because these arguments could have and should have been asserted earlier in the Farrell II proceedings. Nothing precluded appellants from advocating their position that they should not have to share the trust proceeds with their brother's widow on the basis that Edith specifically directed her attorney to add a 60-day survivorship clause to the trust but that "Edith's attorney drafter negligently drafted the trust" so that it "failed to clearly reflect Edith's true intent." By counsel's own admission, acting on his advice, appellants consciously chose not to present the theory they now seek to advance, deciding instead to "let the appeal [in Farrell II] run its course." This approach allowed appellants to drag out the proceedings, run up Lois's legal costs, and further delay distribution of the trust funds to Lois.

Appellants claimed they first learned of Edith's "[true] intent" shortly after the probate court issued its May 2009 order. However, they decided not to immediately seek reconsideration and/or file a petition to reform the trust based on the supposed new evidence of Edith's intent, but rather elected to wait and see if they would prevail on appeal in Farrell II.

To countenance appellants' attempt to revive these arguments and to inject them into this case at this late date implicates all the key policy reasons the doctrine of res judicata exists. "Those policies include conserving judicial resources and promoting judicial economy by minimizing repetitive litigation, preventing inconsistent judgments which undermine the integrity of the judicial system, and avoiding the harassment of parties through repeated litigation." (Murray v. Alaska Airlines, Inc. (2010) 50 Cal.4th 860, 879.) As one court pointed out, under any other rule, litigation would finally end only when the plaintiff could no longer find counsel "whose knowledge and imagination could conceive of different theories of relief based upon the same factual background." (Kronkright v. Gardner (1973) 31 Cal.App.3d 214, 216.) Appellants are thus relegated to seeking relief against their attorney for any damages which his alleged negligence in drafting Edith's trust may have caused.

B. Disbursement of Trust Proceeds

In this appeal, appellants also challenge the probate court's order disbursing Lois's one-third share of the trust to her. By way of background, on July 30, 2009, the probate court ordered " '[t]hat Trustee Donald Farrell shall deposit the sum of $181,756.69 into a blocked interest bearing account for the benefit of Lois Farrell, not to be released without further order of court.' " (Italics removed.) Donald complied with the court's order, depositing the money with Sterling Bank & Trust. Having established her right to receive these funds as the successor to Manuel Farrell by our decision in Farrell II, the probate court issued an order on September 1, 2010, releasing the funds in the blocked account to her.

Although appellants claimed "the blocked account cannot be distributed because it is subject to trustee fees, attorney fees and other expenses," the record shows appellants' attorney stipulated in open court that the trustee would pay Lois the funds placed in the blocked account for her benefit if and when she won the appeal in Farrell II. At a hearing June 29, 2009, Mr. Canatella told the probate court: "If the Court (referring to the Court of Appeal) rules Lois Farrell has standing, that is the end of this case. She's entitled to a share (of the estate) and her share's available. If there's a ruling made that she's entitled to it, then she's entitled to it. That's why we're on appeal. The court followed up by asking counsel, "What do you mean 'that is the end of the case'?" Mr. Canatella responded, "That she has standing, and she has a beneficial interest and that it will be paid." He agreed that the amount to be put into the blocked account was $181,756.69, and "that is the amount that would go to Lois." The probate court's order of July 30, 2009, memorialized the stipulation: "Based on the stipulation of counsel" the trustee shall "deposit the sum of $181,756.69 into a blocked interest bearing account for the benefit of Lois Farrell, not to be released without further order of court."

The oral stipulation in the instant case was made in open court and its terms were definite. Therefore, it was binding upon appellants. (Code Civ. Proc, § 283, subd. (1).) As was explained in Knabe v. Brister (2007) 154 Cal.App.4th 1316, " '[t]he attorney is authorized by virtue of his employment to bind the client in procedural matters arising during the course of the action. . . . In retaining counsel for the prosecution or defense of a suit, the right to do many acts in respect to the cause is embraced as ancillary, or incidental to the general authority conferred, and among these is included the authority to enter into stipulations and agreements in all matters of procedure during the progress of the trial. Stipulations thus made, so far as they are simply necessary or incidental to the management of the suit, and which affect only the procedure or remedy as distinguished from the cause of action itself, and the essential rights of the client, are binding on the client." [Citation.]' " (Id. at p. 1324.)

Here, as appellants' agent, Mr. Canatella had authority to agree that the trustee would pay Lois the funds placed in the blocked account for her benefit if and when she won the appeal in Farrell II. The stipulation made in open court was not conditioned upon first determining whether "trustee's fees, attorney's fees, accountant's fees and other administrative expenses" should be deducted from Lois's share of the trust proceeds. Having prevailed in Farrell II, the funds should have been disbursed to Lois. By appealing the court's order disbursing these funds and obtaining a stay while the order is being appealed, these funds, which rightfully belong to Lois, continue to be withheld despite the fact that the other trust beneficiaries have been paid.

C. Entitlement to Costs of Litigation Under Probate Code section 17211, subdivision (b)

As a final matter, appellants request that this court remand this case for the probate court to determine whether Lois is entitled to recover her legal expenses under Probate Code section 17211, subdivision (b). Probate Code section 17211, subdivision (b) permits a probate court to award legal fees to the beneficiary of a trust who "contests the trustee's account" if the court determines the trustee's opposition to the contest was "without reasonable cause and in bad faith." The purpose of Probate Code section 17211, subdivision (b) is plain. It prevents a malevolent trustee from exhausting the assets of the beneficiaries of a trust by means of frivolous opposition to their meritorious objections to a trustee's account. (See Soria v. Soria (2010) 185 Cal.App.4th 780, 787; Leader v. Cords (2010) 182 Cal.App.4th 1588, 1598 [§ 17211, subd. (b), must be liberally construed, and, read liberally, the phrase "contest[s] the trustee's account" encompassed the beneficiaries' petition to compel a final trust distribution].)

The section of Probate Code section 17211, subdivision (b), which applies to trustees, states as follows: "If a beneficiary contests the trustee's account and the court determines that the trustee's opposition to the contest was without reasonable cause and in bad faith, the court may award the contestant the costs of the contestant and other expenses and costs of litigation, including attorney's fees, incurred to contest the account. The amount awarded shall be a charge against the compensation or other interest of the trustee in the trust. The trustee shall be personally liable and on the bond, if any, for any amount that remains unsatisfied."

Lois claims this case warrants the shift of litigation costs and expenses under Probate Code section 17211, subdivision (b) to the trustee who has proceeded unreasonably and in bad faith. She claims the litigation tactics used in this case have "allowed appellants to drag out the proceedings, run up Lois's legal costs, and further delay distribution of the funds to Lois." Whether Lois can recover her litigation costs and expenses under Probate Code section 17211, subdivision (b) because appellants have opposed her entitlement to Manuel's share of the trust "without reasonable cause" and "in bad faith" is an issue that can and should be considered and decided in the first instance by the probate court.

III.


DISPOSITION

The orders are affirmed. Costs on appeal awarded to Lois.

RUVOLO, P. J.

We concur:

REARDON, J.

SEPULVEDA, J.


Summaries of

Farrell v. Farrell

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR
Aug 2, 2011
No. A129898 (Cal. Ct. App. Aug. 2, 2011)
Case details for

Farrell v. Farrell

Case Details

Full title:DONALD FARRELL et al., Plaintiffs and Appellants, v. LOIS FARRELL…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR

Date published: Aug 2, 2011

Citations

No. A129898 (Cal. Ct. App. Aug. 2, 2011)