Court Opinion

ID: 9297612
Source: CourtListenerOpinion
Date Created: 2022-11-30 21:02:37.362371+00
Date Added: 2024-06-11T17:13:28.114511
License: Public Domain

Filed 11/30/22 Tatum v. Kaplan CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                        DIVISION TWO

THOMAS T. TATUM et al.,                                   B311869

     Plaintiffs and                                       (Los Angeles County
Respondents,                                              Super. Ct. No. 20STCV08112)

         v.

JEFFREY A. KAPLAN,
individually and as trustee, etc.,

     Defendant, Movant and
Appellant,

DONNA L. KAPLAN,

     Defendant and
Respondent.

     APPEAL from an order of the Superior Court of Los
Angeles County, Christopher K. Lui, Judge. Affirmed.
     Lang, Hanigan & Carvalho and Arthur Carvalho, Jr., for
Defendant, Movant, and Appellant.
     Freedman + Taitelman, Bryan J. Freedman and Sean M.
Hardy for Plaintiffs and Respondents.
     PB Law Group, Luan K. Phan and Jody M. Borrelli for
Defendant and Respondent.

                             ******

       Defendant, movant and appellant Jeffrey A. Kaplan
(Jeffrey),1 individually and in his capacity as the purported
trustee of the interests of his former spouse, defendant and
respondent Donna L. Kaplan (Donna), appeals from the trial
court’s order denying his motion to intervene and substitute in
Donna’s stead in this action brought by plaintiffs and
respondents Thomas T. Tatum (Tatum) and Tatum Family
Investments, LLC (TFI),2 against Jeffrey and Donna as
individuals. We affirm the trial court’s order.

                          BACKGROUND
       The parties jointly own interests in certain business
entities (the Partnership Entities) that are the subject of a

1      Because Jeffrey and Donna share the same surname, we
refer to them by their first names to avoid confusion; we mean no
disrespect.
2     Tatum and Claudia Tatum (Claudia), divorced in 2003. In
May 2003, one-half of the interests in the Partnership Entities
that are the subject of the Buy/Sell Agreement at issue was
transferred to Claudia. Upon Claudia’s death, her interests in
the Partnership Entities were divided equally and distributed
among six subtrusts for the benefit of her three children. TFI
holds the interests of those six subtrusts. Tatum and TFI are
referred to collectively as plaintiffs.

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buy/sell agreement entered into by Jeffrey and Tatum in 1983
and amended and restated in 1998 (the Buy/Sell Agreement).
Under the terms of the Buy/Sell Agreement, Jeffrey and Tatum
agreed that upon the death of the first of them to die, the estate
of the deceased party is obligated to sell, and the surviving party
is obligated to purchase, the interests of the deceased party in the
Partnership Entities.
       At the time Jeffrey and Tatum entered into the Buy/Sell
Agreement, Jeffrey was married to Donna and Tatum was
married to Claudia. Jeffrey and Donna divorced in 1999. The
court in the Kaplans’ dissolution action entered a further
judgment on reserved issues (FJRI) that addressed the couple’s
community property interests in the Partnership Entities. The
FJRI requires Jeffrey to hold Donna’s interests in the
Partnership Entities as a trustee in trust but gives him control of
those entities.

                     PROCEDURAL HISTORY
      Plaintiffs filed this action against Jeffrey and Donna on
February 26, 2020, asserting three causes of action for
declaratory relief. The first cause of action by TFI seeks a
declaration that it is not bound by the terms of the Buy/Sell
Agreement. The second cause of action, brought by TFI and
Tatum, seeks a declaration that certain of the Partnership
Entities are not subject to the Buy/Sell Agreement. The third
cause of action by TFI and Tatum seeks a declaration that the
Buy/Sell Agreement is void because (a) Donna advised Tatum
that as a nonparty to that agreement, she is not bound by the
agreement, and (b) the transfers of interests from Tatum to

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Claudia and then to TFI and from Jeffrey to Donna render the
Buy/Sell Agreement uncertain and frustrate its purpose.
      Donna filed her answer to the complaint on May 27, 2020.
In her answer, Donna asserted, among other defenses, that the
Buy/Sell Agreement was not enforceable as to her, as she was not
a party to the agreement.
      Jeffrey filed a demurrer to the complaint in June 2020,
arguing that the Buy/Sell Agreement was clear, unambiguous,
and enforceable, and that plaintiffs failed to state a claim for
declaratory relief. The trial court overruled the demurrer, and
Jeffrey filed his answer to the complaint on November 23, 2020.
In his answer, Jeffrey asserted that Donna is not a proper party
to the action because her interests in the Partnership Entities are
held in trust by him, and that he, as trustee, is a necessary and
indispensable party. Jeffrey also filed a cross-complaint against
plaintiffs for equitable indemnity and declaratory relief in which
he sought indemnity from plaintiffs for any liability or losses
resulting from breaches of representations and warranties made
by certain of the Partnership Entities to lenders concerning
ownership, control, and transfer of the partnership interests.
      On November 25, 2020, Jeffrey filed the motion that is the
subject of this appeal—a motion to intervene as trustee of
Donna’s interests in the Partnership Entities and to substitute in
the action in her stead pursuant to Code of Civil Procedure
sections 187, 379, and 3873 and Probate Code section 552. Jeffrey
argued that, as trustee, he is the only proper party in this action
with respect to Donna’s interests; Donna is not a proper party

3    All further statutory references are to the Code of Civil
Procedure unless indicated otherwise.

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and cannot assert any claims or defenses on her own behalf; and
good cause exists for his substitution as a defendant in Donna’s
stead.
       Plaintiffs and Donna opposed the motion. Donna argued
that she did not consent to Jeffrey acting as her representative in
the action and that she would be irreparably harmed by his
intervention or substitution on her behalf because he is taking
litigation positions directly contrary to hers. Donna further
argued that Jeffrey breached his fiduciary duties owed to her as
trustee and that incurable conflicts precluded him from
representing her interests in this action.
       Plaintiffs in their opposition argued they had sued Jeffrey
and Donna as individuals, Donna was a proper party who had
appeared in the action, and Jeffrey was not entitled to intervene
or join in the action under any of the statutes he cited.
       The trial court denied Jeffrey’s motion, ruling that he had
not demonstrated a right to intervene as trustee of Donna’s
interests or to displace Donna as a defendant. The trial court
noted that plaintiffs’ complaint seeks declaratory relief against
Donna individually, and that, in order for such relief to be
binding against her, Donna must be a party to the action. The
court also observed that substituting Jeffrey in Donna’s place
would allow him to abandon Donna’s position that the Buy/Sell
Agreement is unenforceable as to her. The trial court stated:
             “Whether or not [Donna’s] only interest is held
       in trust, such that her position contrary to the
       Buy/Sell Agreement is not justified, is a matter to be
       determined on the merits. [Jeffrey] is, in effect,
       seeking to have this Court preemptively adjudicate
       such issue by way of this motion to intervene.

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            “In this regard, permitting [Jeffrey] to
      intervene as trustee of the interests of [Donna], even
      as an additional Defendant, would not appear to have
      any practical purpose. [Jeffrey] may seek leave to file
      a Cross-Complaint against [Donna] if he wishes to
      assert . . . her lack of standing on the ground that her
      only interest is held in trust.”
      Jeffrey did not file a cross-complaint against Donna.
Instead, he filed a motion for summary judgment, or in the
alternative, summary adjudication that he is the trustee of
Donna’s interests. The summary judgment motion
remained pending at the time Jeffrey filed this appeal.

                           DISCUSSION
I.     Intervention and substitution
       Jeffrey contends the trial court abused its discretion by
denying his motion to intervene under section 387, subdivision
(d)(1).4 That statute provides:
              “The court shall, upon timely application,
       permit a nonparty to intervene in the action or
       proceeding if either of the following conditions is
       satisfied:

4      California case authority is not settled on whether the
denial of a request for mandatory intervention under section 387
is reviewed de novo or for abuse of discretion. (See Edwards v.
Heartland Payment Systems, Inc. (2018) 29 Cal.App.5th 725,
732.) We need not decide which standard is correct because both
parties contend the abuse of discretion standard applies and
because we find no error in the trial court’s ruling under either
standard.

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           “(A) A provision of law confers an
      unconditional right to intervene.
            “(B) The person seeking intervention claims an
      interest relating to the property or transaction that is
      the subject of the action and that person is so
      situated that the disposition of the action may impair
      or impede that person’s ability to protect that
      interest, unless that person’s interest is adequately
      represented by one or more of the existing parties.”
      (§ 387, subd. (d)(1).)
      A.     Standing to intervene
      Plaintiffs and Donna contend Jeffrey had no standing to
intervene under section 387 because he is already a party to the
action, and the statute governs intervention by a nonparty only.
Jeffrey’s motion to intervene makes clear, however, that he
sought to intervene in his capacity as the trustee of Donna’s
interests.5
      B.     No mandatory right to intervene
      To establish a right to mandatory intervention under
section 387, subdivision (d)(1), Jeffrey bears the burden of
demonstrating (1) a protectable interest in the subject of the
action, (2) disposition of the action in his absence may impair or
impede his ability to protect that interest, and (3) his interests
are not adequately represented by the existing parties. (Edwards
v. Heartland Payment Systems, Inc., supra, 29 Cal.App.5th at
p. 732.) Jeffrey fails to meet that burden.

5     We reject plaintiffs’ and Donna’s contention that we lack
jurisdiction to consider Jeffrey’s appeal because his motion was
not a proper motion to intervene under section 387.

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       Jeffrey’s interest in this action as trustee is to protect
Donna’s interest in the Partnership Entities as a trust
beneficiary. He fails to establish that Donna’s interest in that
regard is not being adequately protected by Donna’s appearance
and participation in the action.
       Although Jeffrey purports to represent Donna’s beneficial
interest in the Partnership Entities, his interest in the action as
an individual and the litigation positions he has taken conflict
with Donna’s interests and her litigation position. Donna’s
stated position is to have the Buy/Sell Agreement determined to
be unenforceable as to her. Jeffrey’s position, as set forth his
trial court pleadings, is to confirm the validity and enforceability
of the Buy/Sell Agreement in its entirety.
       The trial court also did not err by denying Jeffrey’s motion
to displace Donna as a defendant. As the trial court noted,
plaintiffs have sued Donna individually for declaratory relief in
connection with the Buy/Sell Agreement. For that relief to be
enforceable against Donna, she must be an individual defendant
in this action. (Fazzi v. Peters (1968) 68 Cal.2d 590, 594.) Donna
claims the Buy/Sell Agreement is unenforceable against her as a
nonparty to that agreement. Donna’s litigation position appears
to be in direct conflict with that of Jeffrey, who seeks to confirm
the validity and enforceability of the Buy/Sell Agreement. The
existence of such conflict necessitates Donna’s continued presence
and participation as a party to this action. (See First Nat. etc.
Bank v. Superior Court (1942) 19 Cal.2d 409, 414 [beneficiaries of
a trust are indispensable parties in an action involving conflicting
rights between them and the trustee]; see also Straube v. Security
First Nat. Bank (1962) 205 Cal.App.2d 352, 360-361 [trustee’s
ability to sue or defend action without joining beneficiaries

                                 8
excludes circumstances involving conflicting interest on part of
trustee].)
       Jeffrey’s reliance on case authority holding that a trustee
as the sole power and authority to prosecute or defend litigation
on behalf of the trust is misplaced. (See, e.g., Presta v. Tepper
(2009) 179 Cal.App.4th 909, 914; Galdjie v. Darwish (2003) 113
Cal.App.4th 1331, 1344.) Plaintiffs’ action is not against the
purported trust, but against Donna and Jeffrey as individuals.
The action seeks declaratory relief with regard to the validity and
enforceability of the Buy/Sell Agreement. It does not seek to
compel Donna to do anything with regard to her interests in the
Partnership Entities. Case law and statutes pertaining to a
trustee’s authority are therefore inapposite.
       The trial court did not err by denying Jeffrey’s motion to
intervene and substitute in Donna’s place as a defendant in this
action.
II.    Joinder of indispensable party
       The criteria for compulsory joinder of an indispensable
party are virtually identical to those for mandatory intervention.
(Hodge v. Kirkpatrick Development, Inc. (2005) 130 Cal.App.4th
540, 556; see § 389, subd. (a).) Section 389, subdivision (a)
provides that a person who may be properly joined as a party in
an action “shall” be so joined in certain circumstances: “if (1) in
his absence complete relief cannot be accorded among those
already parties or (2) he claims an interest relating to the subject
of the action and is so situated that the disposition of the action
in his absence may (i) as a practical matter impair or impede his
ability to protect that interest or (ii) leave any of the persons
already parties subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations by reason of his

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claimed interest.” We review a trial court’s determination
regarding an indispensable party under section 389 for abuse of
discretion. (County of Imperial v. Superior Court (2007) 152
Cal.App.4th 13, 25.)
      For the reasons discussed above, the trial court did not
abuse its discretion by concluding that Jeffrey in his capacity as
trustee of Donna’s interests is not an indispensable party who
must be joined in this action. Donna’s interests are being
adequately protected by her appearance and participation in the
action. Allowing Jeffrey’s joinder as trustee would conflict with
Donna’s stated interests and would impede or impair her ability
to protect those interests.

                         DISPOSITION
       The order denying Jeffrey’s motion to intervene as trustee
of the interests of Donna and to displace Donna as a defendant is
affirmed. Plaintiffs and Donna shall recover their costs on
appeal.

                                     ___________________________
                                     CHAVEZ, Acting P. J.

We concur:

______________________________       ___________________________
HOFFSTADT, J.                        SEGAL, J.*

*      Associate Justice of the Court of Appeal, Second Appellate
District, Division Seven, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.

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