Filed 4/22/15 Lawrence v. Lawrence CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

SUSAN L. LAWRENCE, Plaintiff and Appellant,

v. ZAHIDE A. LAWRENCE, Defendant and Respondent. G049531
(Super. Ct . No. 30-2012-00590309)

O P I N I O N

Appeal from a judgment of the Superi or Court of Orange County, Randall J. Sherman, Judge. Affirmed. Thomas J. O’Keefe; a nd Everett L. Skillman for Plaintiff and Appellant. Hart | King, William R. Hart, Andrew C. Kienle, and Rhonda H. Mehlman for Defendant and Respondent.

* * *2 This is a trust dispute. The appella nt is Susan Lawrence (Susan). Her mother, Maxine Lawrence (Maxine) died in 1993 and disposed of certain property through a will; other property through a trust. By the terms of the trust, at Maxine’s
death the trust was subdivided into “Trust A,” “Trust B,” a nd “Trust C.” Susan’s father, Harry Lawrence (Harry), was entitle d to the income of Trusts B and C for life, and Susan was the remainder beneficiary of Trusts B a nd C. Susan’s parents owned significant art holdings. Susan contends these holdings shoul d have been in Trusts B and C, and Harry, as trustee, misappropriated them. Responden t Zahide Lawrence (Zah ide) married Harry after Susan’s mother died. Harry died in 2012 and Zahide is the executor of Harry’s
estate. Zahide is also the successor trustee of Trust A. Zahide cont ends the art was never trust property because it passed directly to Harry by Maxine’s will. The trial court entered judgment in favor of Zahide. We affirm. The issue with respect to the art holdings is whether the art was encompassed by the phrase “tangible property of a personal nature,” as used in Maxine’s will. We conclude this phrase simply mean s tangible personal property, which includes the art. The result is that it passed directly to Harry, without passing in to the Trust as part of the residue of Maxine’s estate, and thus Susan has no claim to it. Susan also contends Harry violated hi s fiduciary duties in taking out a loan on real property in Trust C an d investing the proceeds in a bond fund and in purchasing a
home in Dana Point. We deem these claims waived because Susan has not cited evidence in the record to support these claims and, to the contrary, ignored adverse facts in the record. Moreover, a settlement agreement Susan previously signed specifically
authorized some of the uses of the funds Susan comp lains of, and thus, even if her claims had not been waived, there was no breach of duty. Finally, Susan claims the court abus ed its discretion in denying her lastminute motion to amend her pleadings to add a cause of action for an accounting. We disagree and affirm.3 FACTS

The Lawrence Family Trust dated January 28, 1976, as amended and restated in its entirety on January 8, 1993 (the trust) was established by Susan’s parents, Maxine and Harry. Maxine di ed on May 17, 1993. Followi ng Maxine’s death, Harry, as the sole surviving trustee, subdivided the asse ts of the trust into Trust A, Trust B, and
Trust C. Trust A was a revocable “survivor’s trust.” Trust B became an “irrevocable unified credit ‘bypass trust.’” And Trust C became an irrevocable “QTIP marital trust.” 1 Harry was the sole trustee of all three subtru sts. He was entitled to the entire net income
from all three subtrusts for life. Susan was the remainder beneficiar y of Trusts B and C
and had been the remainder beneficiary of Trust A until Harry amended and restated Trust A to make his new wife, Zahide, the remainder beneficiary of Trust A. Maxine also created a will on January 8, 1993. In it, she left all of her clothing and jewelry to Susan. To Harry sh e left “household furniture, and furnishings, personal automobiles, and othe r tangible articles of a personal nature, . . . not otherwise specifically disposed of by this will or in any other manner . . . .” Harry and Maxine had
a valuable collection of oriental art. Some of the art was owned by Harry and Maxine personally, and the remainder was owned by their business, Warren Imports, which specialized in selling oriental ar t. The will did not specifically bequeath the art. The will contained a pour-over provision granting the re sidue of Maxine’s estate to the trust. In 2004, Susan sued Harry, alleging he was threatening to encumber real property in Trust C and to use the proceeds for his own benefit. She also alleged that Harry had removed valuable art objects and artifacts from his residence that she claimed

1 A QTIP marital trust is a mechanis m for avoiding federal estate taxes. ( Estate of Ellingson v. C.I.R. (9th Cir. 1992) 964 F.2d 959, 960.) The inner workings of these trusts are not relevant on appeal.4 was Trust C property. Later that year, Susa n and Harry signed an “interim agreement,” which permitted Harry to borrow $3.5 million against the real property in Trust C. It specified that the loan would be an adjustable-rate mortgage , starting at 2.25 percent for the first year, with annual pa yment increases not to exceed 7.5 percent of the previous year’s payments. The agreemen t specified where the proceeds of the loan were to be spent. Nine hundred thousand dollars would be invested in an interest bearing account (called the “sinking fund”), with the interest to be paid directly to Ha rry. The principal of that fund would be used to pay the principa l and interest on the mortgage. Eighty-five thousand dollars would be used to pay o ff an existing loan on the property. The
remainder would be invested in a bond accou nt, with the interest and income on that account to be paid directly to Harry. The principal of the bond account could not be withdrawn unless for a purpos e permitted by Trust C. Su san was entitled to monthly
account statements on both the cash account and the bond account, and she was entitled to a 30-day written notice of a withdrawal of the principal of either account. The agreement concluded with the following: “by executing th is interim agreement, it is neither Harry’s intent . . . nor Susan’s intent to waive or release any cl aims that they have against each other . . . .” In 2007, Harry sued Susan for violating the “no contes t” clause of the trust, seeking to disinherit her. In December 2010, Harry and Susa n signed a “General Release and Settlement Agreement” to reso lve all of the litigation betw een them. The consideration included the following. Harry was to rece ive $1,040,000 from Trust C, payable, if necessary, from the bond account. Susan wa s to receive $500,000. The sinking fund would continue to pay “the existing . . . mortgage, or an y refinanced or replacement mortgage.” Harry would continue to receive all income generated by Trust C investments, including the sinking fund and the bond account. And the parties dismissed5 their existing litigation with pr ejudice. Both parties were represented by counsel in negotiating the agreement. All of the art from Warren Imports wa s sold at auction when the business closed in 2006, and the proceeds distributed to the owners, Susan, Michael May, and Harry. Harry died in March 2012. In August 2012, Susan filed the present petition. In May 2013, Zahide’s counsel signed a stipulation to permit Susan to file a first amended petition. Zahide’s co unsel agreed to sign the stipulation only after receiving
Susan’s counsel’s assurance that he would no t add a prayer for an accounting, to which Susan’s counsel agreed. In the petition, although there is a vague reference to the improper withdrawal of principal from Trusts B and C, almost the entire focu s is on the allegedly misappropriated pieces of art. The petition cl aims Harry misappropria ted the art and/or undervalued the art for purposes of establis hing the trust values, which devalued her vested rights. The prayer in the petition s eeks only the restitution of “misappropriated tangible personal property” a nd damages for “the fraudulen t undervaluation of tangible personal property on the 706 estate tax return of Maxine Lawrence.” In August 2013, Susan filed a motion to amend her petition to add a prayer for an accounting. She set the hearing for Se ptember 13, 2013, just 10 days before the
scheduled trial date. The motion was based on vague claims that Harry had improperly invaded the principal of Trusts B and C, and it was also base d on claims that he had taken out a $3.6 million loan encumbering real prop erty in Trust C. As Zahide’s opposition pointed out, however, the loan was authorized by the previous settlement agreement. The court denied the motion, stating, “Such a requ est adds a new cause of action, not simply a prayer for relief . . . . W ith trial only 10 days away, gr anting this motion would be prejudicial to Respondent.” “[S]uch an a ccounting could cover several years and take6 significant effort to assemble. Finally, . . . counsel for [appellant ] stated in writing on May 24, 2013 that he would forbear adding a cause of action for an accounting.” The matter proceeded to a bench tria l. During trial testimony, Susan acknowledged that the art object s at issue in the present cas e are the same objects that were at issue in the 2004 lawsuit. Also, Susan called as a witne ss Michael May, who was employed by Warren Imports for approximately 40 years, ultim ately holding the title vice president. He testified that the art owne d by Warren Imports was frequently on display in Harry’s home. He also testified that of the list of art objects in Exhibit 5, which purports to appraise several dozen items that were on display in Harry and Maxine’s home, 75 percent were owned persona lly by Harry and Maxine. After trial concluded, th e court entered judgment in favor of Zahide. With respect to the art, the court found Susan had “no cl aim to these assets since: (1) they were the personal property of [Susan’s] pare nts, Harry and Maxine Lawrence, and passed to her father, Harry Lawrence, individually pursuant to the terms of Maxine Lawrence’s will and outside of the Lawrence Family Trus t; (2) any such claim was released by way of the December 2010 general release and se ttlement agreement signed by [Susan] and her father, Harry Lawrence and (3) any such clai m is barred by the three-year statute of
limitations codified in Probate Code §§ 16460 and 10382.” The court also addressed the loan Harry had taken out secured by real proper ty in Trust C. It held, “the Court finds
that there has been no breach of fiduciary duty since: (1 ) the money obta ined from the loans remained in Trust C; (2 ) the money obtained from the loans was used to generate income to support Harry La wrence, a legitimate use of Trust C funds during Harry Lawrence’s lifetime; (3) any such claim wa s released by way of the December 2010 general release and settlement agreement signed by [Susan] and her father, Harry7 Lawrence and (4) any such claim is barred by the three-year statute of limitations
codified in Probate Co de §§ 16460 and 10382.” 2 Susan timely appealed.

DISCUSSION

We begin by addressing Maxine’s intere st in the art collection, which Susan claims passed into the trust as part of the residue of Maxine ’s estate. The issue turns on whether the art was bequeathed to Harry outs ide of the trust pursuant to the following provision in Maxine’s will: “I give all my household furniture, and furnishings, personal automobiles, and other tangible articles of a personal nature, . . . not otherwise specifically disposed of by this will or in any other manner . . . to my husband . . . .” Susan’s counsel made the following conc ession at trial: “[F]irst, hypothetical
concessions: . . . if Maxine Lawrence’s will had simply said — as many wills do — ‘I leave all my tangible personal property to my husband, the remainder of my estate to my trust,’ Susan would have no claim to the orient al art collection . . . .” Susan argues it does not mean that, but contends instead that the phrase refers to physical items to which
Maxine had an emotional connection. Th ere was no extrinsic ev idence introduced regarding Maxine’s intent. And the parties have not cite d any cases using the phrase “tangible property of a personal na ture,” nor have we found any.
We conclude there is no difference between the phrases “tangible personal property” and “tangible property of a pers onal nature.” Gra mmatically, they mean exactly the same thing. Moreov er, this is a testamentary doc ument. It would be strange to ask heirs to determine, post-mortem, which items the decedent had an emotional
connection to and which ones she did not. It would be fa r more common to refer to

2 The court also rejected Susan’s clai m that the 2010 settle ment agreement is unenforceable on the grounds of duress, findi ng “inconsistency in her testimony” and “lack of credibility.” Susan does no t raise the duress argument on appeal.8 personal property in the legal sense. And, indeed, the term “tangible personal property” is specifically defined in the Probate Code as “articles of personal or household use or ornament, including, but not limited to, furniture , furnishings, automobiles, boats, and jewelry, as well as precious me tals in any tangible form, such as bullion or coins and articles held for investment purposes.” (Pro b. Code, § 6132, subd. (h)(1).) We think it far more likely Maxine intended to convey th is legal concept rather than some vague concept of emotional attachment . Consistent with Susan’s c oncession, therefore, the art work passed directly to Harry as tangible pe rsonal property, either as “household . . . ornament” or “articles held for investment purpos es,” and thus was not part of the residue
of the state that went into the trust. 3

Susan also claims the court erred by failing to find Harry breached his fiduciary duty by refinanci ng the loan on the real prope rty in Trust C and using $1 million of the proceeds to purc hase a house in Dana Point for himself and Zahide. We
conclude this issue is waived for two reas ons. First, Susan di d not include a single
citation to evidence in the reco rd to support this allegati on. And in our independent review of the record, we found no support for this claim. Second, Zahide testified that the Dana Point property was pu rchased with the proceeds of the sale of Warren Imports, not the loan proceeds, a fact Susan conspicuously omits mentioning. ( Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 [“if, as defendants here contend, ‘some particular issue of fact is not sustained, they are required to set forth in their brief all the
material evidence on the point and not merely their own evidence . Unless this is done the error is deemed to be waived’”]; Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246 [“‘The appellate court is not required to search the record on its own seeking error.’

3 Given our resolution of this issue, we need not address whether Susan’s claim to the art was barred e ither by the 2010 settlement agre ement or by the statute of limitations.9 [Citation.] Thus, ‘[i]f a party fails to support an argument w ith the necessary citations to the record, . . . the argum ent [will be] deemed to have been waived’”].) Susan also claims Harry breached hi s fiduciary duty by, in December 2010, selling off over $1 million of bonds in the bo nd fund from Trust C. Again, she has waived the issue by failing to pr esent us with all relevant facts. She omits mentioning
that the settlement agreement, signed in December of 2010 , entitled Harry to a payment of $1,040,000 from Trust C. That agreem ent, moreover, specifica lly permitted Harry to take that money from the bond fund . The omission of this crucial fact is inexcusable and
results in a waiver. Rather than present us with the releva nt facts, Susan simply argues that the settlement agreement was unenf orceable pursuant to Proba te Code section 16464, subdivision (b)(2), which states, “A release or contract is not effective to discharge the trustee’s liability for a breach of trust in any of the following circ umstances,” including, “Where the beneficiary did not know of his or her rights and of the material facts (A) that
the trustee knew or reasonabl y should have known and (B) that the trustee did not reasonably believe that the beneficiary knew. ” The trial court ne ver made findings on this issue because Susan never presented it to th e court. Her theory at trial was that the settlement agreement was unenfor ceable because it was the product of duress (the court rejected this contention). Although a party may raise new purely le gal issues on appeal, we will not consider a new theory that, as this one does, requi res factual findings on disputed evidence. ( Cal Sierra Construction , Inc. v. Comerica Bank (2012) 206 Cal.App.4th 841, 850.) Moreover, with respect to the loans, Susan does not specify what facts were
concealed. The interim settle ment agreement specified qu ite clearly the amount and disposition of the loan proceeds. Susan was entitled to receive regular account statements on the sinking fund and the bond account, and the one statement we have in the record indicates she was receiving copies. Thus fro m our review of the record, at least with10 respect to the loans, the relevant facts we re revealed and the settlement agreement is
valid. Next, Susan claims some of the art should be characterized as a “later discovered asset,” and thus part of Trust C. In Maxine’s es tate tax return, it was stated, “A protective election is made for the decedent’s interest in any later discovered assets to be allocated to Trust ‘C.’” Susan contends, “The evidence was not disputed that art was
shuffled back and forth between the La wrence residence and the Warren Imports building, and Harry could have thought (a lbeit mistakenly) at the time he signed
Maxine’s estate tax return that the art be longed to Warren Imports and was therefore not part of the trust or of Maxine’s estate. On e could say that the ownership of that art and the characterization of that art as privately- owned investment property was ‘discovered’
after Maxine’s estate tax return was sent to the IRS.” But whatever “could” be said or “could” have happe ned, Susan offers no evidence that it actually happened. We will not reverse a judgment on the basis of speculation. Lastly, Susan claims the court abus ed its discretion in denying her motion to amend her petition to add a prayer for an accounting. Although motions to amend are generally granted liberally ( Berman v. Bromberg (1997) 56 Cal.App.4th 936, 944-945), eleventh hour requests are not automatic, part icularly where there is no excuse for the delay and the opposing party will suffer prejudice. ( Id . at p. 945; City of Stanton v. Cox (1989) 207 Cal.App.3d 1557, 1564.) We conclude any error was harmless. Susan’s request was based on her contention that Harry had encu mbered the real property in Trust C, purchased a bond account, and paid himself th e income from the bond accoun t while using other Trust C
funds to service the loan. Bu t this is precisely what the interim settlement agreement, signed in 2004, permitted. All income from the bond account was to be paid directly to Harry. And the mortgage was to be serviced with the sinking fund. Consequently, even11 if Susan had been permitted to add a request for an accounting to he r prayer, there was no evidence to support any claimed damages. 4

DISPOSITION

The judgment is affirmed. Zahide shall recover her costs incurred on appeal. 5

IKOLA, J.

WE CONCUR:

O’LEARY, P. J.

BEDSWORTH, J.

4 Notably, Susan does not claim any evidence at trial was excluded as a result of the denial of her motion to amend.

5 Susan’s motion for judicial notice is denied on the ground that the proffered exhibits, two recorded deeds, were not in evidence before the trial court. ( Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3 [“Reviewing courts generally do not take judi cial notice of evidence not pres ented to the trial court”].)