NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RP11595623)
Plaintiff Thomas A. Northrop, II (Thomas) and Defendant Mark S. Wagner (Mark) are brothers and signatories to a "Compromise Agreement and Limited Mutual Release" (Compromise and Release), which settled issues relating to their father's intestate estate. More than two years after the Compromise and Release was approved by the probate court, Thomas petitioned for instructions as to a purported revocable living trust allegedly created by his father shortly before his death. The Compromise and Release, however, already resolved the issue of this alleged trust: the parties agreed that the alleged trust had no assets and that all of the father's assets went to his intestate estate, not the alleged trust. Mark filed a demurrer to the petition relying on the provisions of the Compromise and Release, and the probate court sustained the demurrer without leave to amend.
Thomas appeals, and we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Thomas A. Northrop (decedent) died on June 8, 2011. He was survived by his wife Julianne Northrop (Julianne) and three sons from a prior marriage—Thomas, Mark, and John Nilson Wagner (John). Thomas, Mark, and John's mother divorced decedent in 1963. She later married Joseph Wagner, and Wagner adopted Mark and John in 1972.
Prior Probate Proceedings
Julianne Petitions to Administer Decedent's Intestate Estate
In September 2011, Julianne filed a petition for letters of administration for decedent's estate. She alleged decedent died intestate.
In December 2012, an order for final distribution of decedent's estate was filed. The order provided that the estate was to be distributed 50 percent to Julianne and 50 percent to Thomas's son, Max Northrop (Max), after payment was made for administrative expenses and attorney's fees.
Thomas executed a disclaimer of his right to inherit from decedent in favor of his son, Max.
Mark Seeks to Set Aside the Order for Final Distribution
In August 2014, Mark filed a complaint in the decedent's probate case asking the court to set aside the December 2012 order for final distribution, to determine persons entitled to distribution, and to remove Julianne as administrator. Mark alleged Julianne fraudulently misstated the identity of the intestate heirs of decedent in her petition because she failed to check the box indicating that decedent was survived by natural born children "adopted by a third party" (i.e., Mark and John, who were adopted by their stepfather). Mark alleged he never received notice of Julianne's petition to administer decedent's estate.
Mark further alleged decedent was a beneficiary of the trust estate of decedent's father, Thomas E. Northrop. This trust was being administered in Virginia, and decedent's interest in the trust was being claimed by Julianne, Max, and Thomas. (We will refer to decedent's father's trust as the "Virginia trust.") Mark alleged that decedent's estate "has an expectancy in a substantial sum from the [Virginia] trust" and that proceeds from the Virginia trust should be distributed one-third to the surviving spouse with the remainder to the natural children as provided by the Probate Code, in this case, one-third to Julianne and two-ninths to each of Max (issue of disclaiming son), Mark, and John.
Julianne Raises Decedent's Alleged Trust in Her Answer
Julianne, individually and as the administrator of decedent's estate, Thomas, and Max filed an answer to Mark's complaint. They alleged Mark and John were not entitled to any part of decedent's estate because their birth certificates showed Joseph Lee Wagner is their father.
Julianne, Thomas, and Max further alleged that Mark and John were not entitled to any part of decedent's estate based on "a Revocable Living Trust" decedent allegedly executed, and a copy of the decedent's alleged trust was attached to the answer. They specifically relied on this alleged trust in their first affirmative defense, alleging Mark and John "are not intestate heirs of the decedent within the meaning of Probate Code section 11700, since Decedent executed a Revocable Living Trust whereby pursuant to Section 2 of the Trust, after Decedent's death, payment of the principal was to go to Decedent's spouse (Respondent Julianne Northrop), and only to surviving children who were under the age of 21."
Since Thomas, Mark, and John were all alive when their parents divorced in 1963, decedents' three sons were all well over 21 years old when decedent died in 2011.
On December 22, 2014, the probate court set aside the December 2012 order for final distribution. Julianne remained personal representative of the estate, but the court required that she post bond in the amount of $450,000.
The Parties Reach a Court-Approved Settlement
The parties entered settlement negotiations and reached a compromise agreement. The Compromise and Release was signed by all the parties and their attorneys in March and April 2015.
On July 21, 2015, the probate court approved and confirmed the Compromise and Release and "direct[ed] the interested parties to perform according to its terms." The court "determine[d] heirship of the Estate of Thomas A. Northrop as follows: the surviving spouse of the decedent, Julianne Northrop, shall receive a distribution of 33.4% of the estate (Cal.Prob.Code Section 6401(c)(3)); and the three adult sons of the decedent, Thomas A. Northrop II (who has disclaimed his interest in favor of his son, Max William Northrop), Mark Steven Wagner, and John Nilson Wagner, shall receive a distribution of 22.2% of the estate each (. . . Section 6502(a))."
Further undesignated statutory references are to the Probate Code.
The Terms of the Compromise and Release
The court-approved Compromise and Release addressed the decedent's alleged revocable living trust as follows: "Respondents filed answers to the petition filed by Mark. These answers attached a form of revocable living trust allegedly executed by the decedent on June 3, 2011, five days before his death, leaving assets to be described on a Schedule A to the trust to Julianne. There was no Schedule A prepared, executed or attached to the trust during the decedent's lifetime. No assets were physically transferred to the trust. It was a 'dry' trust. There was no accompanying 'pour over' will leaving all decedent's assets not transferred to the trust to the successor trustee. The trust was never administered. Instead, [Thomas], the successor trustee, allowed Julianne to obtain an order appointing her as the administrator of an intestate estate, no will or legally enforceable trust."
Under the heading "Nature and Effect of Agreement," the Compromise and Release provided: "This Agreement consists of a compromise and settlement by each party of that party's claims against the other parties, and a release given by each party to the other relinquishing the known claims as set for [sic] in the recitals above against the other. By executing this Agreement, each of the parties intends to and does hereby extinguish the known obligations heretofore existing between them, except as may be specifically continued or created by this Agreement. This Agreement is not, and shall not be treated as, an admission of liability by any party for any purpose. This Agreement is a successful compromise and settlement between the parties of the known disputed claims as stated herein above in the recitals."
Under the heading, "Mutual Compromise Agreement," the parties agreed to "further agreements, terms and conditions" set forth in nine lettered paragraphs. Paragraph (b) provided: "The Estate consists entirely of the separate property of Thomas A. Northrop. The intestate heirs of Thomas A. Northrop as to his separate property are his surviving spouse, Julianne Northrop, as to 33.4%, and his three children, Thomas A. Northrop, II . . . who has disclaimed his interest in favor of his son, Max Northrop, Mark Steven Wagner and John Nilsen Wagner, equally as to 66.6%, or 22.2% each."
Paragraph (f) provided: "The Thomas A. Northrop Revocable Living Trust executed on June 3, 2011 had no assets transferred to it and did not specifically refer to any assets to be transferred to it other than what was to be listed on a Schedule A thereto. There was no Schedule A to the trust prepared or signed prior to the death of the decedent on June 8, 2011. All of the assets of the decedent are part of the Estate."
Thomas and Julianne Petition for Instructions on the Alleged Trust
On October 20, 2017, Thomas and Julianne filed a "Verified Petition for Instructions and Orders Regarding the Thomas A. Northrop Revocable Living Trust" in decedent's probate case, with Thomas as the putative trustee and Julianne the beneficiary of the alleged trust. They alleged the purpose of the petition was "to determine the validity of [decedent's alleged] LIVING TRUST, as well as to interpret the terms of this LIVING TRUST prior to any final distribution with respect to the ESTATE [of decedent] (currently opened in this Court as an intestate estate)."
Mark Files a Demurrer
Mark filed a demurrer to Thomas and Julianne's petition. He argued the probate court's approval of the Compromise and Release in 2015 was "res judicata as to the validity of the settlement agreement and the issues resolved."
The Probate Court Sustains the Demurrer Without Leave to Amend
The probate court issued a tentative ruling indicating the demurrer would be sustained based on the Compromise and Release. On March 5, 2018, the court heard oral argument on the demurrer.
Thomas and Julianne's attorney, Adam Dolce, admitted he didn't "have a good answer" for why his clients had not tried to enforce the decedent's alleged trust earlier. He speculated, "I don't know if it's improper legal counsel, improper financial counsel."
Here, we note that Julianne's counsel of record when she filed the petition for letters of administration in 2011 was Sara Ennor and that Julianne, Thomas, and Max's counsel of record when they answered Mark's complaint in 2014 was Barry Jorgensen. Jorgensen was still their counsel when they reached the Compromise and Release in March 2015.
The court observed, "[E]verybody agreed that [decedent's alleged trust] essentially was a meaningless document. It was a document that showed there was no corpus, there was no list of assets, nothing. And everyone sort of went forward on that. [¶] Now they have buyers' remorse because apparently, there is a lot of money in Virginia. I can't upset this settlement all these years later because of buyers' remorse."
Dolce stated that he did not believe decedent's interest in the Virginia trust "prompted [his clients] to take an entirely new position. I think they had improper counsel that led them to this."
The court responded, "People get bum information from lawyers all the time. I can't save them from that. The Court makes orders based on people's positions that they take. Here is a settlement agreement that, on its face, seems, apparently to Judge Bean [the judge who approved the Compromise and Release], to be appropriate. She signed off on it. [¶] If you got bad advice, you sue your lawyer."
Mark's counsel stated his position: "[T]here was a disputed question of fact and law as to whether this was a valid trust, because it was never funded. And the parties had a right to reach a decision between themselves on that question. [¶] It was not decided by the Court that this trust was invalid or that it didn't exist. It was decided by the Court that the parties had entered into an agreement that it was irrelevant, that it wasn't funded, that there were no assets on which that trust would operate. And the parties agreed, in addition, that this would be administered as an intestate estate, and it would not be administered under the trust. That's what was agreed. [¶] So in terms of now asking the Court to go back and decide an issue as to which the parties settled a disputed question of fact and law, that's inappropriate. The parties did enter into a valid agreement. The Court ruled, approving that agreement. And that's really what it's all about."
After hearing Mark's argument, the probate court confirmed its tentative ruling sustaining the demurrer without leave to amend.
As a preliminary matter, Mark argues that Thomas is not appealing from an appealable order. He points out that an order sustaining a demurrer is not appealable. (See Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1386, 1396 ["An order sustaining a demurrer without leave to amend is not appealable, and an appeal is proper only after entry of a dismissal on such an order"].) But courts also recognize that "the appealability of an order of the probate court is determined not from its form, but from its legal effect." (Estate of Martin (1999) 72 Cal.App.4th 1438, 1442.) "An order is appealable, even if not mentioned in the Probate Code as appealable, if it has the same effect as an order the Probate Code expressly makes appealable." (Estate of Miramontes-Najera (2004) 118 Cal.App.4th 750, 755.) In this case, the effect of the court's order sustaining Mark's demurrer without leave to amend was to end the matter, and so we will treat the order as a dismissal of the petition for instructions and orders. "Having deemed the order to be an appealable judgment, we proceed to consider the appeal on its merits." (Estate of Dito (2011) 198 Cal.App.4th 791, 800.) B. Standard of Review
A "refusal to make" an order "[a]djudicating the merits of a claim" of a putative trustee making a claim to property is appealable under section 1300 (§§ 1300, subd. (k); 850, subd. (a)(3); cf. Estate of Redfield (2011) 193 Cal.App.4th 1526, 1534 [denial of administrator's petition for instructions was appealable].)
"In reviewing a dismissal based on an order sustaining a demurrer, we apply the de novo standard. [Citation.] To determine whether the complaint states a cause of action as a matter of law, we give it a reasonable interpretation and accept the truth of all properly pleaded material facts." (Shine v. Williams-Sonoma, Inc. (2018) 23 Cal.App.5th 1070, 1076.)
In this case, we may consider the Compromise and Release because it was referred to and quoted in the petition and a copy was attached to the petition and because it was approved by the court and is subject to judicial notice. (See City of Pomona v. Superior Court (2001) 89 Cal.App.4th 793, 800 ["Where written documents are the foundation of an action and are attached to the complaint and incorporated therein by reference, they become a part of the complaint and may be considered on demurrer."]; Evid. Code, § 452, subd. (d); Gabriel v. Wells Fargo Bank, N.A. (2010) 188 Cal.App.4th 547, 556 ["A demurrer may be sustained if the inability to state a claim on which relief may be granted appears from facts that are judicially noticeable"].) C. Analysis
On appeal, Thomas recognizes, "The dispositive question . . . is whether the parties manifested an intent such that the Compromise and Release, and Order of Approval, had resolved the issues presented by the Verified Petition for Instructions." Mark agrees this is the dispositive issue. He argues Thomas and Julianne are precluded from attempting to enforce decedent's alleged trust because they released any claims related to the alleged trust when they signed the Compromise and Release. Thomas, on the other hand, maintains, "the parties did not manifest the intent required to abolish the legal effect of the [alleged t]rust." The issue is what did the parties agree to in the Compromise and Release?
Thomas cites Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, in which the court observed that the stipulation of settling parties "may have preclusive effect as between the parties to the underlying stipulation, but not because it satisfies the criteria for claim preclusion or issue preclusion. Rather it is binding on the parties to the extent they have consented to be bound by it." (Id. at p. 540.)
Mark cites In re Mission Ins. Co. (1995) 41 Cal.App.4th 828, in which the court explained: "A release is 'the abandonment, relinquishment or giving up of a right or claim to the person against whom it might have been demanded or enforced [citations] and its effect is to extinguish the cause of action . . . ." [Citation.] Thus, a release 'conclusively estops the parties from reviving and relitigating the claim released.' [Citation.] 'The general rule is that when a person with the capacity of reading and understanding an instrument signs it, he is, in the absence of fraud and imposition, bound by its contents, and is estopped from saying that its provisions are contrary to his intentions or understanding . . . .' " (Id. at p. 838, italics added.)
"Compromise agreements are, of course, 'governed by the legal principles applicable to contracts generally.' They 'regulate and settle only such matters and differences as appear clearly to be comprehended in them by the intention of the parties and the necessary consequences thereof, and do not extend to matters which the parties never intended to include therein, although existing at the time.' [Citations.] Thus, they ordinarily conclude all matters put in issue by the pleadings—that is, questions that otherwise would have been resolved at trial." (Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 677 (Folsom).)
Here, the decedent's alleged trust was "put in issue by the pleadings" in the matter settled by the Compromise and Release. (Folsom, supra, 32 Cal.3d at p. 677.) Julianne expressly relied on the existence of the alleged trust as an affirmative defense to Mark's claim for a determination of heirs. Julianne alleged Mark and John "are not intestate heirs of the decedent within the meaning of . . . section 11700, since Decedent executed a Revocable Living Trust whereby pursuant to Section 2 of the Trust, after Decedent's death, payment of the principal was to go to Decedent's spouse (Respondent Julianne Northrop), and only to surviving children who were under the age of 21." Thus, her pleading put in issue whether the alleged trust held decedent's property after his death and whether the trust determined how decedent's property would be distributed after his death.
And the issue of the legal effect of the alleged trust on the distribution of decedent's property (a question "that otherwise would have been resolved at trial") was resolved by the Compromise and Release. (Folsom, supra, 32 Cal.3d at p. 677.) The parties agreed that the alleged trust "had no assets transferred to it and did not specifically refer to any assets to be transferred to it" (other than reference to "Schedule A," which did not exist) and, instead, that "All of the assets of the decedent are part of the Estate."
The parties further agreed, "The Estate consists entirely of the separate property of Thomas A. Northrop. The intestate heirs of Thomas A. Northrop as to his separate property are his surviving spouse, Julianne Northrop, as to 33.4%, and his three children, Thomas A. Northrop, II . . . who has disclaimed his interest in favor of his son, Max Northrop, Mark Steven Wagner and John Nilsen Wagner, equally as to 66.6%, or 22.2% each."
Thomas's claim that the parties did not manifest an intent "to abolish the legal effect of the Living Trust" is untenable. The clear purpose of the Compromise and Release was to determine how to distribute decedent's property given the competing claims of Mark on the one hand, who claimed the property should be distributed according to statutory rules for intestate estates, and Julianne, Thomas, and Max on the other hand, who claimed the property should be distributed in accordance with the terms of the alleged trust. The Compromise and Release provided for the designation of decedent's property as the property of the intestate estate (not the property of the trust), the identification of the heirs who would receive that property (not beneficiaries identified in the alleged trust), and the proportion each heir would receive (not following the terms of the alleged trust). The position Thomas takes in his current petition—that decedent's separate property should not be considered part of his intestate estate and that instead it should be distributed as provided in the trust document—completely contradicts the terms of the Compromise and Release he agreed to.
In short, we conclude the Compromise and Release settled the matter of the legal effect of the decedent's alleged trust and, therefore, Thomas is estopped from reviving and relitigating the issue in the current petition. (See In re Mission Ins. Co., supra, 41 Cal.App.4th at p. 838 ["a release 'conclusively estops the parties from reviving and relitigating the claim released' "].) Accordingly, the probate court properly sustained Mark's demurrer without leave to amend.
To be clear, we expressly reject Thomas's argument that his current petition constitutes an "unknown" claim not covered by the Compromise and Release. The issue of the legal effect of the alleged trust was undeniably known to the parties and was resolved by the Compromise and Release. Finally, we need not consider Thomas's various contentions, including arguments that res judicata does not apply, that parties may not terminate an irrevocable living trust by agreement, that the alleged trust should still apply to new assets of decedent's estate, and that the alleged trust meets the formalities of a will. Whether any of these arguments would have merit if brought by a non-signatory to the Compromise and Release is not before us. (Cf. Ferraro v. Camarlinghi, supra, 161 Cal.App.4th at p. 542 [a stipulated judgment has no preclusive effect on a stranger to the stipulation].) We hold only that Thomas is precluded from trying to enforce the terms of decedent's alleged trust because he consented to be bound by the terms of the Compromise and Release. (See id. at p. 540 [a stipulated judgment may have "preclusive effect as between the parties to the underlying stipulation, . . . not because it satisfies the criteria for claim preclusion or issue preclusion" but because "it is binding on the parties to the extent they have consented to be bound by it"].) --------
The order of March 5, 2018, is affirmed. Mark is entitled to costs on appeal.
Miller, J. We concur: /s/_________
Richman, Acting P.J. /s/_________