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LUND v. WELLS FARGO BANK, N.A., G052717. (2017)

Court: Court of Appeals of California Number: incaco20170811044 Visitors: 12
Filed: Aug. 11, 2017
Latest Update: Aug. 11, 2017
Summary: NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. OPINION IKOLA , J. This appeal arises out of a dispute over distributions from the Walt Disney Family Trust (the Trust). Under the terms of the Trust,
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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

OPINION

This appeal arises out of a dispute over distributions from the Walt Disney Family Trust (the Trust). Under the terms of the Trust, because Walt Disney's children have died, the remaining beneficiaries are entitled to a final distribution of their share of the res of the trust. Petitioner Bradford Lund (Brad) is Walt Disney's grandchild and is a beneficiary entitled to his share. At the time he became eligible for his final distribution, however, he was the subject of a conservatorship proceeding in Arizona, where he lives. In that proceeding, his sister Michelle Lund and two half-siblings alleged Brad has congenital cognitive defects and was subject to undue influence from his father and stepmother. In that proceeding, prior to the death of the heirs that triggered the final distribution, Brad and Wells Fargo Bank, N.A. (Wells Fargo), the sole remaining trustee, stipulated that monthly distributions would be made under certain conditions designed to mitigate the risk of undue influence. That stipulation became an order of the Arizona court. When the final heir died, Wells Fargo petitioned the Arizona court for instructions on whether and how to distribute Brad's share. Pending the outcome of the conservatorship proceeding, the Arizona court instructed Wells Fargo to withhold Brad's share.

Dissatisfied with that result, Brad filed the underlying petition in California, asking the court to instruct Wells Fargo to distribute his share of the trust. He argued the Arizona court lacked jurisdiction to order Wells Fargo to withhold his share of the trust. Brad relied on Probate Code section 17000, subdivision (a), which states, "The superior court having jurisdiction over the trust pursuant to this part has exclusive jurisdiction of proceedings concerning the internal affairs of trusts."1 No one disputes that the trust is administered from Orange County, California. The court denied the petition.

We affirm. Section 17000 does not implicate a court's fundamental jurisdiction. Rather, it was intended to correct a historical anomaly that resulted in disputes over trusts being adjudicated in different courts depending on the type of relief sought. Consequently, there is no basis to conclude Arizona lacked subject matter jurisdiction. And Arizona undoubtedly had personal jurisdiction. Since there was no fundamental jurisdictional defect with the Arizona court's order, the superior court was correct in deferring to the Arizona court out of principles of comity.

FACTS

Brad is Walt Disney's grandchild and a beneficiary of the Trust. Wells Fargo is the sole remaining trustee of the Trust. The principal place of administration of the Trust is Orange County, California.

In 2009 an involuntary conservatorship petition was filed against Brad by his half sisters and aunt (the Arizona proceeding). In 2010 Brad's sister Michelle joined in the petition. The petition alleged Brad has significant cognitive disabilities that impair his ability to make independent decisions and expose him to undue influence. It further alleged that his father took advantage of Brad's vulnerability by exploiting Brad's considerable financial assets in derogation of his fiduciary duty as trustee of various trusts for Brad's benefit.

As a result of the Arizona proceeding, the trustees of the Trust suspended Brad's monthly distributions, which he had been receiving for years up to that point. In January 2010, Brad filed — in Arizona — a motion for a preliminary injunction ordering the trustees to resume Brad's monthly distributions. After the motion was fully briefed by both sides, but prior to the hearing, the parties entered into a joint stipulation and proposed order to resolve the issue of Brad's trust distributions. The stipulation contained various restrictions on how the money would be distributed to Brad, with the aim of ensuring only Brad or his guardian ad litem could access the funds. The stipulation was signed by an Arizona commissioner on March 12, 2010, and became an order of the Arizona court.

Pursuant to the terms of the Trust, upon the death of the last to survive of Walt Disney's children, the res of the trust was to be distributed in equal shares to Walt Disney's grandchildren, and the distribution was to be outright to grandchildren over the age of 30. The last of Walt Disney's children died in November 2013. Brad was over age 30.

Afterwards, Wells Fargo brought a petition in the Arizona proceeding for instructions regarding the distribution of the trust principal (though it is styled as a petition, the case number is the same as the conservatorship proceeding). Wells Fargo's petition recited the gist of the 2010 stipulation and noted the Trust provides that the trustee may make payments to any disabled beneficiary by making the payment to the beneficiary's guardian, directly to the beneficiary, or may "apply them for the beneficiary's benefit." Wells Fargo's petition stated, "[I]t remains unclear whether the substantial Trust distribution now due Brad Lund should be made directly to him, or to some Court appointed fiduciary or other person or entity acting on behalf of Brad Lund." It further stated, "The interested parties appropriate to address the issues relating to the best interests and appropriate protections of Brad Lund's property are before the Court in this action and those interested persons are presumably in possession of the pertinent facts."

Subsequently, Brad filed a motion to transfer Wells Fargo's petition to another court, and specifically raised the issue of whether the Arizona court had jurisdiction over the California trust. The Arizona court denied the motion and instructed Wells Fargo as follows: "In order to protect Bradford Lund and maintain the status quo, pending the determination of whether Bradford is in need of a Conservator, the following is ordered: [¶] 1. The order entered by Commissioner Hammer on March 12, 2010 shall be and hereby is continued until further order of the Court; and [¶] 2. The principal amount from the Walt Disney Family Trust being held by Wells Fargo Bank on behalf of Bradford Lund shall be preserved by Wells Fargo Bank except to the extent that is necessary to carry out the order of this Court dated March 12, 2010." Brad appealed that ruling, but did not renew his contention on appeal that the Arizona court lacked jurisdiction.2

While Brad's appeal was pending, he filed the underlying petition in the Orange County Superior Court to compel distribution of his share of the trust. The petition alleged, "The Arizona court lacked, and continues to lack, subject matter jurisdiction to render such an order affecting the administration of a California Trust." Brad served his petition on Wells Fargo, but not on the petitioners in the Arizona proceedings (his sister and half sisters).

Wells Fargo moved to dismiss or, in the alternative, stay the California petition based on the doctrines of comity and full faith and credit. In September 2014, the court granted the stay request.

In April 2015, Brad moved to lift the stay and to compel distribution of the Trust funds. On June 26, 2015, Michelle and the half sisters, having learned about the underlying proceeding for the first time, filed an objection to the petition.

Three days later the court held a hearing on Brad's motion. At the hearing, the court not only denied the motion but also denied the entire petition without prejudice. The court reasoned, "We still come down to exactly the same problem we had before which is the — anything this court may do, because of the hearings in Arizona, Wells Fargo would have no choice whatsoever except not to comply with a ruling by this court to disburse the funds because of what's pending in Arizona. [¶] However, it appears to the court that the Arizona matter is now moving forward. Because the Arizona matter is now moving forward, this court does not need you to come back again. I am denying the petition to compel distribution in accordance with trust provisions, got to play out in Arizona." "I did try to find a solution, but I'm sorry, it's got to be decided in Arizona, it is just too much of a conflict of jurisdiction." Brad timely appealed.3

DISCUSSION

Brad raises a single issue on appeal: whether the Arizona court had jurisdiction to order Wells Fargo to withhold Brad's final trust distribution. His argument is based on section 17000, which states, "(a) The superior court having jurisdiction over the trust pursuant to this part has exclusive jurisdiction of proceedings concerning the internal affairs of trusts. [¶] (b) The superior court having jurisdiction over the trust pursuant to this part has concurrent jurisdiction of the following: [¶] (1) Actions and proceedings to determine the existence of trusts. [¶] (2) Actions and proceedings by or against creditors or debtors of trusts. [¶] (3) Other actions and proceedings involving trustees and third persons." Brad then cites article 6, section 14, of the Arizona Constitution which states, "The superior court shall have original jurisdiction of: 1. Cases and proceedings in which exclusive jurisdiction is not vested by law in another court."4 Brad concludes that because exclusive jurisdiction of the Trust was vested in Orange County, Arizona lacked jurisdiction to hear the case.

While Brad's argument has facial appeal, it relies on a misinterpretation of the term "jurisdiction" as used in section 17000. "[T]he sort of jurisdiction provided by [section 17000] is not the sort of fundamental jurisdiction, i.e., implicating the competency or inherent authority of the court, the lack of which would render a judgment void." (Harnedy v. Whitty (2003) 110 Cal.App.4th 1333, 1345.) Sections 17000 and 17001 "were enacted (in original form in 1986) to make clear that the probate departments of the California superior courts could exercise the full and complete jurisdiction of a regular superior court when hearing and deciding a probate matter."5 (Ibid.) As the California Law Revision Commission explained, after the founding of the superior courts in 1879, "courts invented the concept of the superior court sitting in probate with a `limited and special' jurisdiction and without the general equity jurisdiction and powers of the superior court not sitting in probate. Courts have agonized over this state of affairs and drawn distinctions between different forms of jurisdiction and between the proper and improper exercise of equitable powers in the probate court." (Recommendation Proposing the Trust Law (Dec. 1985) 18 Cal. Law Revision Com. Rep. (1985) p. 578, fn. omitted.) "This situation of having separate and limited probate courts has long been criticized by commentators. The proposed law seeks to eliminate the confusion and unnecessary limitations involved in the question of jurisdiction over trusts by providing for exclusive jurisdiction over internal trust affairs in the superior court." (Id. at p. 579, fn. omitted.) Accordingly, section 17000 was not intended to confer exclusive fundamental jurisdiction to any particular court, but, rather, was simply intended to streamline the process of adjudicating trusts by ensuring parties would not bounce back and forth between different courts depending on the type of relief sought.

Since section 17000 does not deprive Arizona of jurisdiction, principles of comity counsel in favor of avoiding an order contradicting the Arizona court's order. Moreover, the Arizona court's order was merely a temporary order. If Brad is found to be competent, the Arizona court may well dissolve the temporary order without making any further orders concerning the trust. In that respect, it would be premature for us to address the broader question of where any remaining issues concerning trust distributions ought to be decided.6

DISPOSITION

The judgment is affirmed.7 Respondents shall recover their costs incurred on appeal.

ARONSON, ACTING P. J. and THOMPSON, J., concurs.

FootNotes


1. All statutory references are to the Probate Code unless otherwise stated.
2. Brad's appeal was ultimately dismissed as having been taken from a nonappealable, interlocutory order.
3. Where, as here, a dismissal without prejudice is merely meant to leave open the possibility of a future action on new facts, the order is appealable. (Topa Ins. Co. v. Fireman's Fund Ins. Companies (1995) 39 Cal.App.4th 1331, 1336.)
4. That same section provides Arizona Superior Courts with jurisdiction over "8. Matters of probate."
5. Section 17001 provides, "In proceedings commenced pursuant to this division, the court is a court of general jurisdiction and has all the powers of the superior court."
6. Brad also argues that the sisters lacked standing to appear in the trial court. The court determined the issue was moot because, by the time the sisters' filed their objection, the court had already done its analysis and did not consider the sisters' objection. Brad has not moved to strike the sisters' brief on appeal. And since we are affirming the dismissal of the petition, it would serve no purpose to order the trial court to strike the sisters' objection. Thus we choose not to address the issue.
7. Wells Fargo and the sisters independently filed unopposed motions for judicial notice regarding various filings from the Arizona proceeding. Both motions are granted.
Source:  Leagle

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