Court Opinion

ID: 4556927
Source: CourtListenerOpinion
Date Created: 2020-08-19 19:02:23.721471+00
Date Added: 2024-06-11T09:37:11.540201
License: Public Domain

Filed 8/19/20 Schurtz v. Schurtz CA2/3
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                      DIVISION THREE

 JIM SCHURTZ,                                                 B291491

           Plaintiff and Respondent,                          Los Angeles County
                                                              Super. Ct. No. 16STPB04492
           v.

 HUGH SCHURTZ, Individually
 and as Trustee, etc.,

           Defendant and Appellant.

      APPEAL from a judgment of the Superior Court of
Los Angeles County, Brenda Penny, Commissioner. Affirmed
in part, reversed in part with directions.

         Cliff Dean Schneider for Defendant and Appellant.

    Keystone Law Group, Shawn S. Kerendian and Lindsey F.
Munyer for Plaintiff and Respondent.
                   _________________________
                         INTRODUCTION
        Don Schurtz settled the Don J. Schurtz Family Living
Trust, listing his children Hugh Schurtz, Jim Schurtz, and
Dana Perry as equal beneficiaries.1 Hugh became successor
trustee after Don’s death. Administration of the trust turned
to litigation when Jim filed two petitions under the Probate Code
to compel an accounting and confirm trust assets. (See Prob.
Code, §§ 17200, subd. (b)(7)(C) [compel accounting] & 850,
subd. (a)(3)(B) [confirm trust assets].)2 Hugh filed the accounting
and objected to the section 850 petition. Jim objected to the
accounting.
        Hugh and Jim settled their disputes at a mediation.
The resulting settlement agreement required Hugh to pay Jim
a total of $172,500 from IRA accounts held by the trust and other
unidentified assets. In exchange, Jim agreed to dismiss his
section 850 petition, withdraw his objections, and approve
the accounting. Hugh refused to make the payment, however,
after he received emails he believed Jim sent in violation of
the settlement agreement.
        Jim moved for a judgment to enforce the settlement
agreement under Code of Civil Procedure section 664.6.3
Hugh opposed the motion, arguing Jim’s breach discharged

1     For clarity, we refer to the parties by their first names.
2    Statutory references are to the Probate Code, unless
otherwise designated.
3     Code of Civil Procedure section 664.6 authorizes the
court to enforce a settlement agreement by converting it into
a judgment. (Weddington Productions, Inc. v. Flick (1998)
60 Cal.App.4th 793, 809 (Weddington).)

                                 2
his obligation to make the settlement payment and excused his
nonperformance. The trial court granted the motion and entered
judgment against Hugh, individually and in his trustee capacity,
jointly and severally, requiring him to pay Jim $172,500 as
set forth in the settlement agreement.
       Hugh appeals the judgment. He contends the court erred
when it admitted into evidence Jim’s supporting declaration,
which Hugh contends was not “subscribed” by Jim as required
under Code of Civil Procedure section 2015.5. Without Jim’s
declaration, Hugh argues the evidence was insufficient to support
Jim’s motion or to rebut Hugh’s claim that Jim breached the
agreement. Hugh also contends the court lacked jurisdiction
to enter a judgment against him in his individual capacity.
       We conclude there was sufficient evidence, even without
Jim’s declaration, to enter the judgment against Hugh in his
trustee capacity, but we agree with Hugh that the court was
not authorized under the settlement agreement to make Hugh
individually liable for the settlement payment. Thus, we will
affirm in part, and reverse in part, with directions to modify the
judgment to strike the portion holding Hugh individually liable.
         FACTS AND PROCEDURAL BACKGROUND
       Jim initiated this trust litigation with the filing of
a section 850 petition to confirm trust assets. The petition
concerned real property located on Parthenia Street in West Hills
that Don and Hugh owned as tenants in common (the Parthenia
Property). Don never recorded a deed transferring his interest
in the property to the trust. Thus, at the time of Don’s death, the
Parthenia Property remained titled in Don’s and Hugh’s names.
In his section 850 petition, Jim claimed a provision of the trust
declaring Don’s intention to transfer all of his property into

                                 3
the trust was effective to transfer the Parthenia Property,
notwithstanding the statute of frauds. Jim recorded a
lis pendens on the Parthenia Property.
       Hugh opposed Jim’s section 850 petition. In his response,
Hugh argued the trust provision was insufficient to satisfy the
statute of frauds, and he claimed he had an unwritten agreement
with Don to convert their ownership interests to a joint tenancy
with right of survivorship.
       Jim also filed a petition to compel an accounting of trust
assets. Hugh filed the accounting, and Jim objected to it. Among
other things, Jim objected to a $148,414.02 creditor claim Hugh
made for living expenses he purportedly advanced to Don. Before
Hugh filed a response to Jim’s objections, the parties settled their
disputes at mediation.
       Jim, Hugh, and their respective counsel signed the
written settlement agreement. As pertinent to this appeal,
the agreement contained the following provision regarding
the settlement of Jim’s pending claims: “In settlement of all
monetary claims, the accounting is approved [and] objections are
withdrawn, on the following conditions: [¶] The sum of $172,500
shall be paid [no later than December 1, 2017] as follows: [¶]
a) The [two] Jackson Annuities IRA’s (all IRA accounts) will be
distributed in kind to Jim, in an amount not to exceed [one-third]
of the total IRA accounts[;] [¶] b) The balance due to Jim shall
be paid by wire transfer to the client trust account at [Jim’s
attorneys].” The settlement agreement also required Jim to
dismiss the section 850 petition and remove the lis pendens
on the Parthenia Property “upon completion” of the foregoing
provision. Additionally, Hugh and Jim mutually agreed that
“neither of them shall contact the other in any form (except

                                 4
through counsel . . . ) upon signing of this agreement.” The
agreement required Hugh to release his creditor’s claim.
      On December 1, 2017, Jim’s attorney emailed Hugh’s
attorney regarding the status of the settlement payment.
Later that day, Hugh emailed Jim’s attorney to notify her that
he would not make the settlement payment because he believed
Jim violated the agreement by contacting him via email.
      On January 26, 2018, Jim filed a motion to enforce
the settlement agreement under Code of Civil Procedure
section 664.6. The motion sought a judgment requiring Hugh,
individually and in his trustee capacity, jointly and severally,
to pay Jim $172,500 as provided in the agreement’s monetary
claims provision. Jim offered a supporting declaration denying
any communication with Hugh, by email or otherwise, since
execution of the settlement agreement. His attorney also
offered a supporting declaration authenticating the settlement
agreement and confirming that Hugh had not made the $172,500
payment.
      Hugh opposed the motion. He argued Jim “did not adhere
to the agreement” and this discharged his duty to “obligate the
Trust [to pay] any funds to [Jim].” In support of the claim, Hugh
attached a series of emails he received from several different
accounts (info@whole-sky.com, audainm@district148.net,
moni@m-klemme.de, jimmie.schurtz465@biblio.uniroma2.it,
abramstk@lopers.unk.edu, contact@sesame14.fr) bearing the
sender name “Jimmie Schurtz.” The emails all consisted of
a one-line message—e.g., “something you would appreciate”—
followed by an Internet hyperlink.
      The trial court held a hearing and received argument
on the motion to enforce. In addition to arguing the emails

                                5
discharged his duty to make the settlement payment, Hugh
objected that the signature on Jim’s declaration was not Jim’s
actual signature. After confirming the parties had nothing
further to offer, the court granted the motion.
       On May 10, 2018, the trial court entered a judgment
ordering Hugh, individually and as trustee of the trust, jointly
and severally, to pay Jim $172,500 “as follows: [¶] i. The
distribution in-kind of one-third (1/3) of Decedent’s two IRA
Accounts with Jackson Annuities . . . ; and [¶] ii. The balance
remaining, minus the transfer of the IRA Accounts, to be paid
in cash to [Jim’s attorneys’] attorney-client trust account.”
Hugh filed a timely notice of appeal from the judgment.
                            DISCUSSION
1.     Governing Law and Standard of Review
       Code of Civil Procedure section 664.6 creates “a summary
procedure for specifically enforcing certain types of settlement
agreements by converting them into judgments.” (Weddington,
supra, 60 Cal.App.4th at p. 797.) The statute provides: “If
parties to pending litigation stipulate, in a writing signed by
the parties outside the presence of the court or orally before
the court, for settlement of the case, or part thereof, the court,
upon motion, may enter judgment pursuant to the terms of the
settlement. If requested by the parties, the court may retain
jurisdiction over the parties to enforce the settlement until
performance in full of the terms of the settlement.” (Code Civ.
Proc., § 664.6.)
       The trial court’s factual findings on a motion to enforce a
settlement “are subject to limited appellate review and will not
be disturbed if supported by substantial evidence.” (Williams v.
Saunders (1997) 55 Cal.App.4th 1158, 1162 (Williams); Osumi v.

                                 6
Sutton (2007) 151 Cal.App.4th 1355, 1360 (Osumi).) Under the
substantial evidence rule, we must view the evidence in the light
most favorable to the trial court’s order, presume every fact the
court could reasonably have deduced from the evidence, and defer
to the trial court’s determination of the evidence’s weight and
credibility. (Campbell v. Southern Pac. Co. (1978) 22 Cal.3d 51,
60.)
       A judge hearing a motion to enforce a settlement may
“receive evidence, determine disputed facts, and enter the terms
of a settlement agreement as a judgment.” (Weddington, supra,
60 Cal.App.4th at p. 810.) However, “nothing in [Code of Civil
Procedure] section 664.6 authorizes a judge to create the material
terms of a settlement, as opposed to deciding what terms the
parties themselves have previously agreed upon.” (Ibid.; Osumi,
supra, 151 Cal.App.4th at p. 1360.)
       Although the trial court’s factual determinations are
entitled to deference, where a pure issue of law is presented
requiring the application of legal principles to undisputed facts,
the appellate court reviews the issue de novo. (Wackeen v. Malis
(2002) 97 Cal.App.4th 429, 437; see also Kohn v. Jaymar-Ruby,
Inc. (1994) 23 Cal.App.4th 1530, 1533–1535 [resolving factual
disputes under substantial evidence standard, but determining
legal issues de novo].) The interpretation of a contract is
a judicial function, subject to our de novo review, unless the
interpretation turns upon the credibility of extrinsic evidence.
(Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865
(Parsons).)
2.     Substantial Evidence Supports the Entry of Judgment
       to Enforce the Settlement Agreement

                                7
       Hugh contends the evidence was insufficient to support
the trial court’s judgment under Code of Civil Procedure
section 664.6. However, Hugh does not dispute the authenticity
of the written settlement agreement, nor does he deny that he
consented to the agreement’s material terms when he signed it
in his capacity as trustee.4 Thus, the statutory prerequisites for
entry of judgment were met and the only questions for review
are whether substantial evidence establishes Hugh breached
the settlement agreement and whether, as he asserts, his
nonperformance under the agreement was excused. (See Code
Civ. Proc., § 664.6; Weddington, supra, 60 Cal.App.4th at p. 797.)
We resolve these questions in favor of the judgment and conclude
the trial court properly enforced the settlement agreement
against Hugh in his trustee capacity.
       a.    Hugh failed to perform under the settlement
             agreement
       We begin with the breach issue. As Hugh correctly notes,
the settlement agreement authorizes a motion for enforcement
only upon a party’s “failure to comply with the terms of this
settlement.” Thus, to obtain a judgment under Code of Civil
Procedure section 664.6, Jim had the burden of proving a breach
had occurred. In his motion, Jim asserted Hugh breached the
agreement by failing to perform under a provision requiring
Hugh to pay Jim a total of $172,500. The trial court implicitly
found Hugh breached the agreement when it incorporated this

4      As we discuss later, in challenging the trial court’s joint
and several liability ruling, Hugh does dispute that he consented
to the settlement agreement in his individual capacity. Our
discussion in this section is limited to the judgment against Hugh
in his trustee capacity.

                                8
provision into the judgment. Hugh acknowledges our review
is limited to determining whether substantial evidence supports
the trial court’s finding. (See Skulnick v. Roberts Express, Inc.
(1992) 2 Cal.App.4th 884, 889; Williams, supra, 55 Cal.App.4th
at p. 1162.)
       Hugh contends the trial court erred in admitting Jim’s
supporting declaration, which Hugh maintains Jim did not sign
with his “ ‘own hand’ ” as required under Code of Civil Procedure
section 2015.5. (In re Marriage of Reese & Guy (1999) 73
Cal.App.4th 1214, 1222; Code Civ. Proc., § 2015.5 [authorizing
submission of unsworn declaration provided it is certified to be
true under penalty of perjury and “subscribed” by the declarant].)
We need not decide whether the court properly admitted the
declaration into evidence because, contrary to Hugh’s contention,
other substantial evidence supports the court’s finding.5
       In addition to his own declaration, Jim offered his
attorney’s declaration in support of the motion. In her
declaration, Jim’s counsel authenticated the settlement
agreement and an email exchange she had with Hugh, in which
Hugh unequivocally stated he had no intention of making the
settlement payment without a directive from the trial court.
Jim’s counsel also confirmed that her firm had not received the
settlement payment from Hugh. This evidence was sufficient
to support the court’s finding that Hugh failed to comply with
the settlement agreement’s terms. (See Mickelson Concrete Co.
v. Contractors’ State License Bd. (1979) 95 Cal.App.3d 631, 634

5     Jim maintains he signed the declaration “electronically”
in accordance with California Rules of Court, rule 2.257(b).
We need not address the merits of his argument.

                                9
[“A single witness’[s] testimony may be sufficient to satisfy the
substantial evidence test.”].)
       b.    Hugh failed to prove his nonperformance
             was excused
       In his email correspondence with Jim’s attorney, Hugh
maintained he had no obligation to make the settlement payment
because Jim had already breached the agreement by emailing
Hugh in violation of a provision prohibiting the parties from
contacting each other “in any form,” except through counsel.
In opposing Jim’s motion, Hugh submitted a series of emails
he received from several different accounts bearing the name
“Jimmie Schurtz.” Based on the emails, Hugh argued Jim’s
breach of the no-contact provision discharged his obligation to
make the settlement payment and excused his nonperformance.
In his declaration, Jim denied sending Hugh the emails.6 As
discussed, Hugh argues the trial court erred in admitting Jim’s
declaration into evidence. Thus, he contends the trial court
was compelled to excuse his nonperformance because there was
no evidence to contradict his contention that Jim contacted him
in violation of the agreement. We disagree.

6       Jim’s attorney also declared that she had spoken to Jim
and that Jim denied sending the emails to Hugh. Because the
trial court received the attorney’s declaration without objection
from Hugh, this evidence alone would be sufficient to affirm
the judgment. (Flood v. Simpson (1975) 45 Cal.App.3d 644, 649
[“It is well settled that hearsay or other incompetent evidence
in an affidavit . . . if received without proper objection or motion
to strike is to be regarded as competent evidence in support of
an order or judgment.”].)

                                 10
       We must determine whether substantial evidence supports
the court’s implicit finding that Hugh’s obligation to make the
settlement payment was not discharged. (See Whitney Inv. Co.
v. Westview Dev. Co. (1969) 273 Cal.App.2d 594, 601.) Critically,
however, it was Hugh—not Jim—who had the burden of proving
Jim’s breach excused Hugh’s nonperformance. (See Jacobs v.
Tenneco West, Inc. (1986) 186 Cal.App.3d 1413, 1417 [“the burden
of proof is shifted to the breaching party by virtue of the breach”
to prove his nonperformance was excused].) “[W]here the trier
of fact has expressly or implicitly concluded that the party with
the burden of proof did not carry the burden and that party
appeals,” the question for the reviewing court is not so much
whether substantial evidence supports the trial court’s finding,
but “whether the evidence compels a finding in favor of the
appellant as a matter of law.” (In re I.W. (2009) 180 Cal.App.4th
1517, 1528 (I.W.), citing Roesch v. De Mota (1944) 24 Cal.2d 563,
570–571, disapproved on other grounds in Conservatorship of
O.B. (July 27, 2020, S254938) __Cal.5th __ [2020 Cal. Lexis 4646
at *19, fn. 4].) Specifically, “the question becomes whether the
appellant’s evidence was (1) ‘uncontradicted and unimpeached’
and (2) ‘of such a character and weight as to leave no room
for a judicial determination that it was insufficient to support
a finding [in the appellant’s favor].’ ” (I.W., at p. 1528, italics
added.) Even absent Jim’s declaration denying he emailed Hugh,
we conclude Hugh’s evidence was not of a sufficient character
and weight that it compelled the trial court, as a matter of law,
to find Hugh’s nonperformance was excused.
       “When a party’s failure to perform a contractual obligation
constitutes a material breach of the contract, the other party may
be discharged from its duty to perform under the contract.”

                                11
(Brown v. Grimes (2011) 192 Cal.App.4th 265, 277.) But if the
alleged breach related to a covenant independent of, and not
material to, the innocent party’s obligation, the breach does
not excuse that party’s nonperformance. (Id. at p. 279.) “The
determination of whether a promise is an independent covenant,
so that breach of that promise by one party does not excuse
performance by the other party, is based on the intention of the
parties as deduced from the agreement.” (Ibid.) In determining
the materiality of a breach, the following factors are to be
considered: “(1) The extent to which the injured party will
obtain the substantial benefit which he could have reasonably
anticipated; (2) the extent to which the injured party may
be adequately compensated in damages for lack of complete
performance; (3) the extent to which the party failing to perform
has already partly performed or made preparations for
performance; (4) the greater or less hardship on the party failing
to perform in terminating the contract; (5) the wilful, negligent,
or innocent behavior of the party failing to perform; and (6) the
greater or less uncertainty that the party failing to perform will
perform the remainder of the contract.” (Sackett v. Spindler
(1967) 248 Cal.App.2d 220, 229 (Sackett).)
       Hugh did not conclusively prove, as a matter of law, that
Jim’s purported breach was material or that it discharged Hugh’s
obligation to make the $172,500 settlement payment. The terms
of the agreement unambiguously show that Hugh agreed to make
the settlement payment in exchange for Jim’s promise to dismiss
his section 850 petition and approve the accounting. Hugh
offered no evidence to prove he was unlikely to receive those
anticipated benefits, and he likewise failed to show damages
would be insufficient to compensate him for the harm Jim’s

                               12
alleged emails caused. To the contrary, in a message to his
attorney, Hugh described the emails as merely “stupid ad[s],” for
which he demanded “damages”—not rescission of the agreement.
Given this conflicting and marginal evidence, the trial court
was not compelled to find the hardship Hugh experienced from
receiving some cryptic emails outweighed the hardship Jim
would suffer from Hugh’s refusal to make the settlement
payment. (See I.W., supra, 180 Cal.App.4th at p. 1528.)
Hugh failed to prove his nonperformance was excused. (Cf.
Sackett, supra, 248 Cal.App.2d at p. 230 [party was justified
in terminating agreement because evidence showed it was
“extremely uncertain” breaching party would perform].)
3.     The Judgment Is Inconsistent with the Settlement
       Agreement to the Extent It Holds Hugh Individually
       Liable
       We now turn to the portion of the judgment holding Hugh,
individually and in his trustee capacity, jointly and severally
liable. As discussed, the judgment incorporates the part of
the settlement agreement requiring Hugh to pay Jim a total of
$172,500. Hugh contends he consented to the provision only
on behalf of the trust in his trustee capacity, and the trial court
therefore lacked jurisdiction to enter a judgment against him
individually.7 Because the parties could not have reasonably

7      Jim argues Hugh forfeited this issue by failing to raise
it in the trial court. He is incorrect. Code of Civil Procedure
section 664.6 authorizes the court to enter a judgment consistent
with the terms of a settlement agreement; it does not confer
jurisdiction to create material terms the parties did not agree to.
(Steller v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175, 180;
Osumi, supra, 151 Cal.App.4th at p. 1360.) Because Hugh argues

                                13
agreed to create a joint obligation that would result in a conflict
between Hugh’s personal financial interest and his statutorily
mandated duty to preserve trust assets, we agree with Hugh and
conclude he cannot be held individually liable for the obligation.
      “ ‘A settlement agreement is a contract, and the legal
principles which apply to contracts generally apply to settlement
contracts.’ ” (Canaan Taiwanese Christian Church v. All World
Mission Ministries (2012) 211 Cal.App.4th 1115, 1123 (Canaan);
Weddington, supra, 60 Cal.App.4th at p. 810.) Absent a
factual dispute arising from the credibility of extrinsic evidence,
we independently determine a settlement contract’s terms in
accordance with applicable legal principles. (Canaan, at p. 1124;
Parsons, supra, 62 Cal.2d at p. 866.)
      “ ‘ “Under statutory rules of contract interpretation, the
mutual intention of the parties at the time the contract is formed
governs interpretation. (Civ. Code, § 1636.) Such intent is to
be inferred, if possible, solely from the written provisions of the
contract. (Id., § 1639.)” ’ ” (Canaan, supra, 211 Cal.App.4th at
p. 1124.) “The whole of a contract is to be taken together, so as
to give effect to every part, if reasonably practicable, each clause

the trial court exceeded its jurisdiction by entering a judgment
inconsistent with the settlement agreement’s terms, he may
properly raise the issue for the first time on appeal. (See Estate
of Buckley (1982) 132 Cal.App.3d 434, 446 [“Where a statute
relates to jurisdiction in the ‘fundamental’ sense, that is to
authority over the subject matter or the parties, disregard of the
statute may render the judgment void and subject to collateral
attack.”]; Kabran v. Sharp Memorial Hospital (2017) 2 Cal.5th
330, 339 [“ ‘ “[A] claim based on a lack of . . . fundamental
jurisdiction[ ] may be raised for the first time on appeal.” ’ ”
(Italics omitted.)].)

                                 14
helping to interpret the other.” (Civ. Code, § 1641.) “The
language of a contract is to govern its interpretation, if the
language is clear and explicit, and does not involve an absurdity.”
(Civ. Code, § 1638.) “ ‘The factual context in which an agreement
was reached is also relevant to establish its meaning unless the
words themselves are susceptible to only one interpretation.’ ”
(Canaan, at p. 1124.; see Nish Noroian Farms v. Agricultural
Labor Relations Bd. (1984) 35 Cal.3d 726, 735; Civ. Code, § 1647
[“A contract may be explained by reference to the circumstances
under which it was made, and the matter to which it relates.”].)
       Applying these principles, we must determine whether
the settlement agreement is reasonably susceptible of an
interpretation jointly obligating the trust and Hugh, in his
individual capacity, to pay Jim $172,500 as provided in the trial
court’s judgment.8 The provision at issue states, “[i]n settlement
of all monetary claims” and in exchange for Jim’s withdrawal

8     Contrary to one of Hugh’s arguments, the settlement
agreement does contain certain obligations that unambiguously
bind Hugh in his individual capacity. As Jim notes, the
agreement requires Hugh to release a creditor’s claim for
$148,414.02 that Hugh asserted against the trust, in his
individual capacity, for living expenses he purportedly advanced
to Don. Hugh’s mutual agreement with Jim not to contact the
other in any form, except through their counsel, also presumably
binds Hugh in his individual capacity. Nevertheless, because the
judgment incorporates only the obligation to pay Jim $172,500
as provided in the monetary claims provision of the settlement
agreement, our review of the court’s joint and several liability
ruling necessarily focuses on that obligation, and not these other
miscellaneous provisions.

                                15
of his objections and approval of the accounting, “[t]he sum of
$172,500 shall be paid . . . as follows: [¶] a) The [two] Jackson
Annuities IRA’s (all IRA accounts) will be distributed in kind
to Jim, in an amount not to exceed [one-third] of the total IRA
accounts; [¶] b) The balance due to Jim shall be paid by wire
transfer to [his attorneys’ client trust account].”
       Jim does not dispute the provision requires Hugh, in his
trustee capacity, to make the IRA payment from trust assets.
However, Jim emphasizes there are no “express terms” requiring
Hugh to make the balance wire transfer payment from any
“specific assets.” Based on this ambiguity, Jim argues the
payment “could have come from anywhere, including Hugh’s
personal funds,” and the trial court thus properly held Hugh and
the trust jointly and severally liable for the $172,500 obligation.9
The agreement is not reasonably susceptible of this
interpretation.
       Jim’s proposed construction creates a conflict of interest,
pitting Hugh’s individual interest in paying as little as possible
from his personal assets against his statutory duty to “take

9     When the parties formed the settlement agreement,
the trust had sufficient assets to satisfy the obligation without
Hugh’s personal contribution. According to the approved
accounting, the value of the two Jackson Annuities IRA accounts
totaled $29,185.76 and the trust had $275,586.76 of cash on hand
at the end of the accounting period.

                                 16
reasonable steps” as the trustee “to preserve the trust property.”
(§ 16006.) Jim maintains Hugh and the trust can be held jointly
liable for the settlement payment because the agreement does not
specify what assets were to be used to pay the balance left after
making the IRA payment. However, Jim does not claim
Hugh was required to make the payment from personal assets.
Instead, because the agreement is silent about the source of
the funds, Jim tacitly concedes Hugh could make the payment
from trust assets or personal assets in whatever proportion Hugh
deemed fit. In other words, the necessary implication of Jim’s
proposed construction is that, in making Hugh jointly obligated
with the trust for the balance payment, the parties also
contractually authorized Hugh to use as much of the trust assets
as he wished to satisfy his personal part of the obligation. Given
Hugh’s statutory duties as trustee, the parties could not have
agreed to such an obvious conflict of interests. (See Roden v.
AmerisourceBergen Corp. (2010) 186 Cal.App.4th 620, 651 [“[W]e
must interpret a contract in a manner that is reasonable and
does not lead to an absurd result.”]; see also Civ. Code, § 1641.)
       Apart from avoiding absurdities, we must give the
settlement agreement “such an interpretation as will make it
lawful, operative, definite, reasonable, and capable of being
carried into effect, if it can be done without violating the
intention of the parties.” (Civ. Code, § 1643.) Here, the monetary
claims provision can be reasonably interpreted to avoid the
conflict of interests that Jim’s proposed construction creates.
As discussed, the provision unambiguously binds Hugh, in his
trustee capacity, to make the IRA payment from trust assets.
Although the provision does not specify the source for the balance
payment, it can be reasonably construed, consistent with the IRA

                               17
payment clause, likewise to require Hugh, in his trustee capacity,
to make the payment from trust assets.
       This construction is consistent with the structure of the
provision. The settlement arose out of Jim’s petition to compel
an accounting and his subsequent objection to the accounting
Hugh filed as trustee. (See § 17200, subds. (a) & (b)(7)(C)
[authorizing beneficiary to initiate judicial proceeding to compel
trustee to account to beneficiary].) At the time of the settlement,
Jim had no “monetary claims” against Hugh individually.
Rather, Jim’s claims were entirely based on his interest as a
trust beneficiary in trust assets. Consistent with that underlying
circumstance, the agreement states that in settling “all monetary
claims,” Jim would approve the accounting and withdraw his
objections—matters solely implicating Hugh’s administration
of the trust. (See § 16004.5, subd. (b)(5) [authorizing trustee to
obtain beneficiary approval of an accounting of trust activities];
cf. Bellows v. Bellows (2011) 196 Cal.App.4th 505, 511 [explaining
§ 16004.5 permits trustee and beneficiary to settle claim over
disputed amount of distribution so long as agreement is not
conditioned on beneficiary’s release of right to an accounting].)
In consideration for settling those matters, the provision
contemplates a total payment of $172,500 to Jim, with part of the
payment coming from the trust’s IRA accounts and the “balance”
from a wire transfer. Given the structure of the provision, it
stands to reason that the parties intended the IRA payments
and the “balance” to come from the same source—namely, trust
assets. Conversely, had the parties intended Hugh to pay any
portion of the balance from his personal assets, we must presume
they would have specifically provided as such. They would
not have relied on an ambiguous provision to create a joint

                                18
obligation, especially given the inherent conflict of interest that
would arise from allowing Hugh to make the payment from trust
assets.
       Jim argues his proposed interpretation does not necessarily
create a conflict of interest because, although Hugh was the
trustee, he “was also a beneficiary,” and he “could have
contracted to pay to Jim a portion of his beneficial interest in
the Trust in compromise of the litigation.” Jim also suggests
that it is “reasonable for Hugh to be individually responsible”
because Hugh “personally benefited” from Jim’s dismissal of
the section 850 petition and the withdrawal of the lis pendens
on the Parthenia Property.
       The problem with these arguments, and with Jim’s
proposed construction generally, is that nothing in the settlement
agreement expressly binds Hugh to use his personal assets (or
his personal beneficial interest in the trust) to satisfy any portion
of the $172,500 settlement payment. Thus, as we have discussed,
Jim can only argue for a joint obligation by speculating that the
settlement payment “could have come from anywhere, including
Hugh’s personal funds.” (Italics added.) But “anywhere” implies
that Hugh could also use trust assets, in his trustee capacity,
to satisfy the obligation. Because the parties could not have
reasonably agreed to create such an obvious conflict of interests,
the agreement must be construed, consistent with the IRA
payment clause, to bind Hugh, in his trustee capacity, to make
the entire settlement payment from trust assets. The trial court
erred in holding Hugh, in his individual capacity, jointly and
severally liable for the settlement payment.

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                          DISPOSITION
      The judgment is reversed to the extent it holds Hugh, in
his individual capacity, jointly and severally liable with the trust,
and the judgment is modified to strike the part making Hugh
individually liable. The judgment is affirmed in all other
respects. The parties shall bear their own costs for the appeal.

      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                      EGERTON, J.

We concur:

             EDMON, P. J.

             DHANIDINA, J.

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