Court Opinion

ID: 4385947
Source: CourtListenerOpinion
Date Created: 2019-04-10 20:02:24.660251+00
Date Added: 2024-06-11T14:50:14.890252
License: Public Domain

Filed 4/10/19
                           CERTIFIED FOR PUBLICATION

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                    DIVISION ONE

                               STATE OF CALIFORNIA

DAVID DUDEK, as Trustee, etc.,                  D073491

        Appellant,

        v.                                      (Super. Ct. No. 37-2017-00023775-
                                                PR-TR-CTL)
ANNE KEBISEK DUDEK, Individually and
as Trustee, etc., et al.,

        Respondents.

        APPEAL from a judgment of the Superior Court of San Diego County,

Robert C. Longstreth, Judge. Reversed.

        The Stone Law Group, Kenneth H. Stone and Phillip J. Szachowicz for Appellant.

        Green Bryant & French and Joel R. Bryant for Respondents.
                                              I.

                                     INTRODUCTION

       Petitioner David Dudek (David)1 appeals from a judgment entered after the trial

court sustained the demurrer of respondents Anne Kebisek Dudek,2 Tiffany Guzman,

Jeanette M. Kebisek, Mary J. Kebisek, Guillermo Andrade, Maria Sanchez, Ora H. Day,

Tonya Courtney, and Michael Quinn (the respondents) to David's petition (the Petition),

filed pursuant to the Probate Code, to recover money distributed to the respondents in

accordance with the beneficiary designation of Genworth Life Insurance Policy

#5804946 (the Policy), which covered the life of J.D. Dudek (J.D.), the Petitioner's

brother.

       According to David, in late 2009, J.D. created and executed the J.D. Dudek Life

Insurance Trust (the Trust), an irrevocable life insurance trust that named David as the

trustee. David asserts that the Policy is listed as an asset of the Trust, to be held and

administered in accordance with the Trust's terms. According to the Petition, the Trust

designates David and his sister, Sharon Van de Grift, as the residual beneficiaries of the

Trust who, pursuant to the terms of the Trust, would be entitled to the proceeds of the

Policy.

1       Because the Petitioner and other individuals to be referenced in this opinion share
the same last name, we will refer to the Petitioner and others, when necessary, by their
first names for the purpose of clarity.

2      Defendant Anne Kebisek Dudek was sued in her individual capacity, as well as in
her capacity as trustee of the Dudek Family Trust.
                                              2
       According to the allegations of the Petition, J.D. prepared and submitted to the life

insurance company the forms required by that company to change the ownership and

beneficiary designations on the Policy in order to establish David, as trustee, as the sole

owner and named beneficiary of the Policy.3 David was unaware that not long after J.D.

submitted the forms, the insurance company rejected the ownership and beneficiary

designation forms because J.D. had altered some of his entries without initialing the

changes. David was also unaware that J.D. had failed to file corrected forms with the life

insurance company after he was notified of the insurance company's rejection of his

submitted forms. Further, David did not know that approximately six years later, in

2016, J.D. submitted a new form to the life insurance company in which he purported to

alter the beneficiary designation on the Policy to name the respondents as the

beneficiaries of the Policy, instead of naming David, as trustee of the Trust, as the

beneficiary. The form that J.D. submitted in 2016 naming the respondents as

beneficiaries of the Policy was accepted by the life insurance company.

       After J.D. died, David produced the Trust to the life insurance company and

sought to obtain the proceeds of the policy. However, the life insurance company

distributed the proceeds of the policy to the beneficiaries that it had on file, pursuant to

the beneficiary designations that J.D. submitted in 2016.

       David subsequently filed the Petition in this case, seeking an order directing the

respondents to transfer the proceeds of the Policy to him as the trustee of the Trust. In

3     According to the allegations of the Petition, the original beneficiaries of the Policy
were David and one of the respondents, Ora H. Day.
                                              3
ruling on the respondents' demurrer, the trial court concluded that the Trust had not been

funded, and therefore, had not become a valid trust, as a result of J.D.'s failure to file

documents with the life insurance company to change the ownership and beneficiary

designations to correspond with the terms of the Trust document. In other words, the trial

court concluded that no trust was ever created because J.D. never effectively placed the

Policy into the Trust.

       On appeal, David contends that the trial court erred in concluding that the

allegations of the Petition cannot support a finding that a valid irrevocable trust was

created when J.D. executed the Trust document in 2009 and transferred ownership of the

Policy to David as trustee through that document. David further contends that the

allegations of the Petition support an order requiring the respondents to convey the life

insurance proceeds to him, as trustee of the Trust.

       We agree with David that the trial court erred in sustaining the respondents'

demurrer to the Petition; the Petition alleges facts that could support a finding that the

execution of the Trust document created an irrevocable trust and constituted an effective

inter vivos donative transfer of the Policy to David as trustee of the Trust. Given the

irrevocable nature of the Trust and the language in the Trust document demonstrating

J.D.'s intention to immediately transfer ownership of the Policy to David, upon execution

of the Trust document, the Policy irrevocably became Trust property. As a result, J.D.

would have had no ability to effectuate any further transfer of the trust property to other

parties. Thus, David, as trustee, may petition the court for, and be entitled to, an order

                                               4
requiring the respondents to transfer the proceeds of the Policy to him in his capacity as

trustee of the irrevocable Trust. We therefore reverse the judgment.

                                              II.

                  FACTUAL AND PROCEDURAL BACKGROUND4

       On July 5, 2001, J.D. initiated coverage under a life insurance policy for a

$1,000,000 death benefit. At that time, J.D. designated David and Ora H. Day, in their

individual capacities, as beneficiaries of the life insurance policy.5

       In 2003, J.D. was diagnosed with acute lymphoblastic leukemia. According to the

petition, "[i]n an effort to aid in Decedent's treatment, Petitioner agreed to act as a donor

in two separate bone marrow transplants[,] which prolonged Decedent's life."

       On December 31, 2009, J.D. executed the J.D. Dudek Life Insurance Trust,

naming David as trustee and beneficiary.6 The operative terms of the Trust included the

following relevant provisions:

          "A. . . . It is the Grantor's intent in creating this trust that all gifts
          made to this trust be both complete and gifts of present interests for
          federal gift tax purposes, and that the assets of this trust, including
          any life insurance proceeds, be excluded from his gross estate for
          federal estate tax purposes. All provisions of this trust shall be
          construed in such a manner as best to affect [sic] these intents.

4     Because this appeal arises from a judgment entered after the sustaining of a
demurrer, we take the relevant factual background from the allegations of the petition.

5      J.D. specified that 85 percent of the proceeds of the policy was to go to David and
15 percent was to go to Day.

6     The Petition alleges that J.D. executed the Trust "in appreciation of the emotional
support and medical support provided by [David]."
                                               5
          "B. The Grantor transfers to the Trustee the property listed in
          Schedule A, to be held and administered according to the terms of
          this trust. . . . The Grantor retains no right, title, or interest in any
          trust property.

          "[¶] . . . [¶]

          "This trust and all interests in it are irrevocable, and the Grantor has
          no power to alter, amend, revoke, or terminate any trust provision or
          interest."

       Schedule A of the Trust lists two assets to be held in the Trust: (1) one hundred

dollars, and (2) the Policy.

       David signed the Trust, with a notary verifying his signature, on January 20, 2010.

       Approximately one month after executing the Trust documents, on January 29,

2010, J.D. "executed a 'Certification of trustee powers' and 'Ownership, beneficiary and

payee designation request,' " which he submitted to the insurance company, requesting

that the owner and beneficiary of the Policy be changed to David, as trustee of the Trust.

These forms were signed not only by J.D., but also by David as the trustee and new

owner of the Policy.

       In completing the forms, J.D. handwrote the information requested on the forms.

In doing so, he made two errors, which he sought to correct by interlineating his original

responses and then writing his corrected responses next to the interlineations.7 A copy of

7      The forms demonstrate that the items for which J.D. had crossed out his original
responses and wrote in new responses without initialing the corrections involved one
correction in the location where he was asked to write the "Social Security/Tax ID
Number" for the new owner (i.e., the Trust), as well as one correction in the location
where he was asked to write the Policy number.
                                               6
the forms attached to the Petition demonstrates that J.D. did not initial next to either of

his corrected responses.

       According to the Petition, J.D.'s insurance agent faxed to Genworth Life Insurance

Company (Genworth) the forms that J.D. had completed. However, on February 16,

2010, "Genworth rejected Decedent's change of ownership form, stating that the form

was altered and that changes must be initialed by the policyholder."8

       The Petition alleges that J.D. failed to resubmit to Genworth the change of

ownership forms with the changes initialed.

       Six years later, J.D. executed new beneficiary change forms and submitted them to

Genworth. The Petition attaches a letter dated November 11, 2016, in which Genworth

notified J.D. that it had "received [his] request to change the beneficiary on this

8      A letter written by a member of Genworth's claims department to David after
David attempted to make a claim on the Policy indicated that Genworth had indeed
rejected J.D.'s 2010 attempt to change the ownership and beneficiary designation of the
Policy:
          "The policy file records show that an attempt to change the owner
          and beneficiary on the policy to the J D Dudek Life Insurance Trust
          dated 12/31/2009 was received in our office via fax on 02/01/2010.
          The request was not in good order due to alterations to the form that
          were not initialed by the policy owner. The policy owner was
          notified in writing on 02/17/2010 (copy enclosed) and given the
          opportunity to submit a new form. While subsequent beneficiary
          change requests were received for the policy, records do not show
          that another request to change the beneficiary to the trust was ever
          received."
       The copy of the letter sent to J.D. in February 2010 indicated that Genworth
notified him that they had been "unable to process [his] request" because they were
"unable to accept altered forms. All changes must be initialed by the policyowner."
                                              7
contract(s)," and said that its "records now show" that the respondents were the primary

beneficiaries of the Policy.

       J.D. died on December 7, 2016.

       Between December 7, 2016 and January 12, 2017, David was informed via

telephone that another beneficiary claim had been made on the Policy. David sent a letter

to Genworth informing them of his contention that he was entitled to the proceeds of the

Policy pursuant to the Trust. In a separate letter sent January 14, 2017, David again

informed Genworth of the existence of the Trust, notified Genworth of his intent to

contest the November 11, 2016 beneficiary designation based on the execution of the

irrevocable trust document, and requested that Genworth not make any distributions from

the Policy at that time.

       On February 7, 2017, Genworth notified David that it would not withhold

distribution of the proceeds of the Policy, and that it intended to distribute the proceeds to

the respondents.

       On April 8, 2017, David sent letters to the respondents notifying them that they

had received the proceeds from the Policy to which they were not legally entitled because

those proceeds were the property of the Trust. David asked the respondents to deliver to

him, as trustee of the Trust, the Policy's death benefits. David did not receive payment

from any of the respondents.

       On June 30, 2017, David filed his Petition in the trial court, seeking the following:

(1) an order directing the transfer of Trust property from respondents to David, as trustee,

pursuant to Probate Code section 850; (2) an order determining the proper beneficiaries

                                              8
of the Trust's assets pursuant to Probate Code section 17200; (3) a determination that the

respondents had acted in bad faith in wrongfully taking, concealing, or disposing of

property belonging to the Trust; and (4) a determination that J.D. had acted in bad faith in

wrongfully taking, concealing, or disposing of the property of the Trust.

       Approximately three months after David filed the Petition, the respondents

demurred, arguing that David had failed to state a cause of action against them and that

David's claim should have been brought against J.D., alone. The respondents argued that

they "have no liability to the Trust" because they "are not signator[ies] to the Trust, are

not bound by the Trust and owe no duty or obligations to the Trust." According to the

respondents, the terms of the Trust obligated J.D. to change the beneficiary designation

on the Policy to David, as trustee, and "[w]hatever obligations JD had to the Trust, if any,

would be based on the terms of the Trust itself and are between him and the Trust."

(Italics added.) They argued that because the only obligations to do anything belonged to

J.D., such obligations "do not bind either Genworth or the individual Respondents, none

of whom are parties to the Trust." The respondents repeated that the "alleged wrong

[that] forms the basis of Petitioner's Petition is JD Dudek's failure to name the Trust as

beneficiary of the Genworth Policy," and claimed that they cannot be "somehow liable

for JD Dudek's conduct in that regard."

       After full briefing on the issue and a hearing, the trial court sustained the

respondents' demurrer on a ground raised tangentially by the respondents' demurrer.

Specifically, the court concluded that it was "evident from the face of the Petition that

[the] claims [of the Petition] arise from Decedent's alleged failure to complete the

                                              9
creation of the Trust as to the policy by transferring the policy into the Trust as required

by Probate Code § 15200(b)." According to the trial court, David erred in choosing not

to assert a claim "against the Decedent," but "instead to assert a claim against

beneficiaries who were paid by the insurance company according to the terms of the

policy, rather than the terms of a purported trust as to the policy that the Decedent failed

to create." The court therefore sustained the demurrer as to all of the respondents,

without permitting David an opportunity to amend.

       The trial court entered a judgment of dismissal with prejudice on December 14,

2017. David filed a timely notice of appeal.

                                              III.

                                        DISCUSSION

       David asserts that the trial court erred in sustaining the respondents' demurrer to

the Petition without leave to amend. Specifically, he contends that the trial court erred in

concluding that J.D. "failed to complete the steps necessary to create the Trust as required

by Probate Code § 15200(b)." According to David, when J.D. executed the Trust, he

"forfeited his interest in and control of the Trust and its assets, so that [J.D.] did not have

the right to change the beneficiary designation in November 2016," and that because J.D.

lost the right to change the beneficiary designation, David, "as trustee of the Trust, may

properly pursue a claim against Respondents for recovery of the Trust's assets that

Respondents received, but [to] which they were not entitled."

                                              10
A. Standards of review on demurrer

       "A demurrer tests the legal sufficiency of the complaint." (Hamilton v. Greenwich

Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1608.) On appeal, an appellate court

"review[s] the complaint de novo to determine whether it alleges facts sufficient to state a

cause of action. For purposes of review, we accept as true all material facts alleged in the

complaint, but not contentions, deductions or conclusions of fact or law. We also

consider matters that may be judicially noticed. [Citation.] When a demurrer is sustained

without leave to amend, 'we decide whether there is a reasonable possibility that the

defect can be cured by amendment: if it can be, the trial court has abused its discretion

and we reverse; if not, there has been no abuse of discretion and we affirm.' [Citation.]

Plaintiff has the burden to show a reasonable possibility the complaint can be amended to

state a cause of action." (Id. at pp. 1608–1609, fn. omitted.)

       Further, in considering the trial court's order sustaining a demurrer without leave

to amend, " 'we review the trial court's result for error, and not its legal reasoning.' "

(Bains v. Moores (2009) 172 Cal.App.4th 445, 478.) In other words, if the judgment is

correct on any theory, even one not provided by the trial court, we affirm. (Hendy v.

Losse (1991) 54 Cal.3d 723, 742.)

B. Analysis

       The trial court concluded that, based on the allegations of the Petition, David

could not establish that a valid trust had been created. According to the trial court, the

claims in the petition "arise from [J.D.'s] alleged failure to complete the creation of the

Trust as to the policy by transferring the policy into the Trust as required by Probate

                                              11
Code § 15200(b)." Essentially, the court determined that the allegations of the Petition

demonstrate that the trust "was never created because the property at issue was never

transferred into the Trust." We disagree with the trial court's understanding of what was

required to create a trust and to transfer the property into the trust, and its conclusion that

such requirements were not met by what is alleged to have occurred, according to the

factual allegations in the Petition.

       Under the Probate Code, a trust may be created in one of five ways: "(a) A

declaration by the owner of property that the owner holds the property as trustee. [¶]

(b) A transfer of property by the owner during the owner's lifetime to another person as

trustee. [¶] (c) A transfer of property by the owner, by will or by other instrument taking

effect upon the death of the owner, to another person as trustee. [¶] (d) An exercise of a

power of appointment to another person as trustee. [¶] (e) An enforceable promise to

create a trust." (Prob. Code,9 § 15200.) As the trial court recognized, the Petition here

alleged that J.D. sought to create the Trust pursuant to subdivision (b) of section 15200—

through the "transfer of property by the owner during the owner's lifetime to another

person as trustee."

       The essential necessary elements of a valid trust are (1) a trust intent (§ 15201);

(2) trust property (§ 15202); (3) trust purpose (§ 15203); and (4) a beneficiary (§ 15205).

(See 13 Witkin, Summary of Cal. Law (11th Ed. 2017) Trusts, § 33, p. 644.) The trial

court focused on the requirement that in order to create a trust, there must be "trust

9      Further statutory references are to the Probate Code unless otherwise indicated.
                                              12
property." (§ 15202.) The trial court apparently believed that because J.D. never

submitted corrected change of ownership and beneficiary forms to Genworth, the Policy

was never transferred to David, as trustee, and it was therefore never placed into the

Trust. Essentially, the trial court concluded that the facts as alleged amounted to an

ineffective inter vivos transfer of the Policy. We disagree.

       According to the Restatement, "[e]xcept for trusts that are created by declaration

[citation] or by contract [citation], a transfer of the intended trust property is required for

the creation of an express trust, whether during life or at death." (Rest.3d Trusts, § 16,

com. a.)10 The effectiveness of a transfer for the purposes of establishing an inter vivos

trust, however, is determined by the rules that govern the making of gifts. (See Rest.3d

Trusts, § 16 ["The effectiveness of a transfer for these purposes, that is, to establish an

inter vivos or testamentary trust, respectively, is determined either by rules that govern

the making of gifts or by those governing devises"].) Thus, we look to the rules of

property law—and in particular to the law of donative transfers or gifts—to determine

whether an effective transfer of personal property has been made.

       "A gift is a transfer of personal property, made voluntarily, and without

consideration." (Civ. Code, § 1146; 13 Witkin, Summary of Cal. Law (11th ed. 2017)

Personal Property, § 134, p. 142; Bounds v. Superior Court (2014) 229 Cal.App.4th 468,

10     " 'California trust law is essentially derived from the Restatement Second of
Trusts. Over a number of years, the Restatement Second of Trusts has been superseded
by the Restatement Third of Trusts. [Citation.] As a result, we may look to the
Restatement Third of Trusts for guidance.' " (Carne v. Worthington (2016) 246
Cal.App.4th 548, 557 (Carne), citing Lonely Maiden Productions, LLC v. GoldenTree
Asset Management, LP (2011) 201 Cal.App.4th 368, 379.)
                                              13
481–482 ["A donative transfer is a gratuitous transaction. It can be inter vivos or

testamentary"], citing 13 Witkin, Summary of Cal. Law (10th ed. 2005) Personal

Property, §§ 124–137, pp. 139–150.) "Three things are necessary for a valid gift:

(a) There must be an intent, on the part of a donor having capacity to contract, to make an

unconditional gift. [Citation.] (b) There must be an actual or symbolical delivery, such

as to relinquish all control by the donor. [Citation.] (c) The donee must signify

acceptance, except where it may be presumed. [Citation.]" (13 Witkin, Summary of Cal.

Law (11th ed. 2017) Personal Property, § 134, p.142.)

       With respect to personal property, it is clear that a donative transfer that is

intended to be completed during the donor's lifetime may be completed in one of two

ways: either by the actual delivery of the personal property at issue to the intended donee

or through the use of a document of donative transfer. (Rest.3d Property, Wills and

Other Donative Transfers, § 6.2, com. ["The transfer of personal property, necessary to

perfect a gift, may be made [¶] (1) by delivering the property to the donee or [¶] (2) by

inter vivos donative document"].)

       The Petition clearly alleges that J.D. attempted to make a donative transfer of the

Policy into the Trust, such that the Policy would be owned by David as Trustee, through

the use of a document of donative transfer. "An inter vivos donative document may

transfer any type of personal property, whether tangible or intangible, including contract

rights such as those embodied in a life-insurance policy . . . ." (Rest.3d Property, Wills

and Other Donative Transfers, § 6.2., com. t.) Witkin and the Restatement Third of

Property, section 6.2 concur with respect to what is meant by a document of transfer

                                              14
sufficient to make an inter vivos gift of personal property: "An inter vivos donative

document is a writing signed by the donor that (a) identifies the donor and donee,

(b) describes the subject matter of the gift, and (c) specifies the nature of the interest

given. [Citation.] The terms of an inter vivos donative document must be in writing and

the document must be signed by the donor. [Citation.] The document may transfer any

type of tangible or intangible personal property, including contract rights, shares of stock,

a bond, or a promissory note. [Citation.]" (13 Witkin, Summary of Cal. Law (11th ed.

2017) Personal Property § 142, p. 147, citing Rest.3d Property, Wills and Other Donative

Transfers, § 6.2, coms. q, r, s, & t.)11

       The Trust document attached to the Petition appears to meet all of the necessary

elements of a donative transfer document. Specifically, the Trust document evidences

that J.D. had the intent to effectuate an immediate, complete and irrevocable transfer of

ownership of the Policy to David, as trustee. For example, the Trust states: "The Grantor

transfers to the Trustee the property listed in Schedule A, to be held and administered

according to the terms of this trust. . . . The Grantor retains no right, title, or interest in

any trust property." (Italics added.) The only property listed in Schedule A is $100 and

the Policy; the document thus establishes that J.D. intended to transfer $100 and the

Policy to David, as trustee, to be effective immediately upon execution of the document.

The Trust also includes the following language: "It is the Grantor's intent in creating this

11     Again, the Restatement Third of Property specifies that a transferring document
may be used to transfer contract rights such as those at issue here—i.e., "contract rights
such as those embodied in a life-insurance policy." (Rest.3d Property, Wills and Other
Donative Transfers, § 6.2., com. t, italics added.)
                                               15
trust that all gifts made to this trust be both complete and gifts of present interests for

federal gift tax purposes, and that the assets of this trust, including any life insurance

proceeds, be excluded from his gross estate for federal estate tax purposes" (italics

added), thereby indicating J.D.'s intention to transfer all of his rights to ownership of the

Policy immediately and irrevocably to David. The Trust document was signed by J.D.

Thus, in addition to creating the Trust, the Trust document also constituted a donative

transfer document.

       The Petition alleges that J.D. delivered the donative transfer document to David.

"The delivery of the document by the donor to the donee is an act manifesting that the

donor intends the document to be presently operative, unless there is evidence that the

delivery was made for some other purpose." (Rest.3d Property, Wills and Other

Donative Transfers, § 6.2, com. u.) Further, the act of delivering the document is

sufficient to meet the requirement of delivery of the subject matter of a donative transfer,

given that delivery of a document of transfer constitutes symbolic delivery of the gift

itself: "The traditional understanding of symbolic delivery is that it is one in which the

donor gives the donee an object or item that symbolizes the subject of the gift. The

classic example of a symbolic delivery is delivery of an inter vivos donative document to

the donee." (Rest.3d Property, Wills and Other Donative Transfers, § 6.2, com. g; and

see Lefrooth v. Prentice (1927) 202 Cal. 215, 224 ["There is likewise no question but that

delivery may be symbolical such as delivery of a written instrument without physical

delivery of the securities themselves so long as the instrument is one upon which delivery

might be compelled"].)

                                              16
       Further, David signed the Trust, which included the necessary transferring

language, thereby signifying his acceptance of the gift. (See 13 Witkin, Summary of Cal.

Law (11th Ed. 2017) Personal Property, § 134, p.142 [elements of an effective gift are

(1) intent to make a gift, (2) delivery of subject matter or document of transfer,

(3) acceptance by donee unless acceptance may be inferred].)

       The allegations of the Petition thus set forth all of the elements necessary to

constitute an effective donative transfer of the Policy as between J.D. and David. As a

result, upon the execution, delivery, and acceptance of the Trust document, a valid and

enforceable gift of the Policy was made to David, as trustee of the Trust. Once this gift

was made, J.D. no longer owned the Policy; instead, it was owned in trust by David.

       If the allegations of the Petition are true, as must be assumed on demurrer, then

J.D. no longer owned the Policy as of 2010. Consequently, his attempts to effectuate

changes to the named beneficiaries of the Policy after that time were futile. In addition, it

is of no legal consequence, at least with respect to the creation of the Trust and the issue

of the donative transfer of the Policy to David in trust, that J.D. failed to subsequently

modify the change of owner and beneficiary forms that he submitted to Genworth after

his attempt to change the owner and beneficiary to David, as trustee, was initially rejected

by Genworth. Essentially, whether J.D. followed through with his duty to inform

Genworth of the change in ownership is of no legal significance, at least as far as the

transfer ownership of Policy as between J.D. and David is concerned. Indeed, the

commentary to the Restatement Third of Property discusses this precise issue. In a

situation involving the transfer of ownership of intangible personal property of which

                                             17
evidence of a claim of right is used to identify ownership (i.e., intangible property such as

a life insurance policy or stock), the Restatement Third of Property explains that a donor's

failure to transfer his or her claim to the intangible property in the manner provided by

the requirements set forth by the instrument that provides evidence of the claim (for

example, by the manner provided for on a stock certificate or with respect to a life

insurance policy) does not prevent a transfer from being accomplished as between the

donor and the donee if the necessary elements of a donative transfer are otherwise met:

          "A donor may make a gift of intangible personal property by
          delivering the instrument evidencing the claim that constitutes the
          intangible personal property. Such instruments include bonds,
          shares of stock, insurance policies, and bank passbooks. [¶] If the
          instrument provides that a transfer of the claim can be made only in
          a specified manner, the preferred method of making a gift of such
          property is to follow the specified procedure. If the specified
          procedure is not followed, however, delivery of the instrument with
          donative intent constitutes a gift as between the donor and the
          donee. The attempted restriction on transfer is for the protection of
          the one against whom the claim can be asserted." (Rest.3d Property,
          Wills and Other Donative Transfers, § 6.2, com. h, italics added.)12

12     The Restatement Second of Property states the same rule in a slightly different,
and arguably more clear, manner:
          "If intangible personal property is involved, the delivery will
          necessarily relate to the evidence of the claim that is the intangible
          personal property. The evidence of the claim may be in the form of
          shares of stock, an insurance policy, a bank passbook, or any other
          evidence of the claim. The evidence of the claim may provide that a
          transfer of the claim shall be made only in some specified manner.
          Such attempted restriction on the transfer of the claim is for the
          protection of the one against whom the claim can be asserted. A
          delivery of the evidence of the claim by the owner thereof to another
          person with the intention that such other person succeed by gift to
          the ownership of the claim accomplishes a transfer of the ownership
          as between the donor and the donee." (Rest.2d Property, Donative
          Transfers, § 31.1, com. b, italics added.)
                                             18
       Thus, although J.D.'s failure to complete the forms according to Genworth's

requirements protected Genworth from claims made against it by individuals other than

those who were identified on the forms that it had on file, the failure to properly complete

the forms could not invalidate or revoke the irrevocable gift that J.D. had previously

effectuated to David, as trustee of the Trust. Once J.D. made a donative transfer of the

policy to David, J.D. no longer owned the Policy, even if Genworth was unaware of this.

Thus, although J.D.'s later decision to name the respondents as beneficiaries through the

change of beneficiary forms provided by Genworth may have protected Genworth from

claims for damages made by individuals or entities not identified on the forms on the

ground that it had wrongfully distributed the proceeds, David's naming the respondents as

beneficiaries on the Genworth documents did nothing to alter David's legal right to

possess the Policy, and, ultimately, its proceeds, as trustee of the Trust.

       The recent opinion in Carne, supra, 246 Cal.App.4th at pp. 563–564 is illustrative

on this point, although Carne involved the transfer of real property into a trust, whereas

this case involves the transfer of intangible personal property into a trust. In Carne, the

decedent was the settlor and trustee of an original trust, which was revocable during his

lifetime. (Id. at p. 552.) However, the decedent later executed a second trust that named

someone other than the decedent as trustee. (Id. at p. 560.) The decedent stated in the

second trust that he was transferring the property listed on an attached schedule to the

trustee of that trust, and the property listed on the attached schedule included the parcel of

real property that was at issue in the case. (Id. at pp. 551–552.)

                                              19
       In considering the claim of a successor trustee to the second trust who was

attempting to confirm that the real property described in a schedule attached to the trust

had in fact been transferred into the second trust, the trial court concluded that the

decedent's conduct had failed to effectuate any actual transfer of the property into the

second trust because the decedent had failed to execute a separate deed transferring the

property from the first trust to the second trust at the time he executed the second trust.

(Carne, supra, 246 Cal.App.4th at pp. 554–555.) The appellate court in Carne reversed,

concluding that the second trust was itself a document of transfer sufficient to effectuate a

valid transfer of property from the decedent to the trustee of the second trust. (Id. at pp.

558–559, 563–564.) The appellate court reasoned that because the first trust was a

revocable living trust, the decedent owned the property as the sole trustee of the first trust

at the time he executed the second trust. As a result, at the time the decedent executed

the second trust, he had the power to transfer the property, and his signature on the

second trust, which included the necessary transferring language to establish his intent to

immediately transfer title to the trustee of the second trust, was sufficient to convey good

title from the earlier trust to the later trust, despite the absence of a separate deed of

                                               20
transfer or other formalities typically associated with the conveyance of real property.

(Id. at p. 564.) The appellate court in Carne thus concluded that a trust document that

included transferring language demonstrating an intent to convey property to another

individual, as trustee, was sufficient, as between the decedent and the trustee identified in

the second trust, to effectuate a transfer of real property, despite the fact that the

decedent had failed to execute a separate deed transferring ownership of the land.

       If a trust document can be sufficient to effectuate the valid transfer of real

property from a settlor to a trustee, despite the failure of the decedent to complete the

usual formalities required to transfer title to land, it seems clear that a trust document can

similarly effectuate the valid transfer of intangible personal property in the form of a life

insurance policy from a settlor to a trustee, even absent the settlor's completion of the

otherwise usual formalities associated with transferring ownership of a life insurance

policy vis-à-vis a life insurance company's records.13

       Because the allegations of the Petition can support a finding that a valid,

irrevocable trust was created and that J.D. completed a donative transfer of his personal

property (i.e., the Policy) by the "transferring" language in the Trust document and his

13      We recognize that this result may seem surprising to some who are unfamiliar
with trust law and the law of donative transfers of personal property. However, it must
be stressed that there are substantial and significant consequences that flow from the
creation of an irrevocable trust, such as the one that J.D. created here. Once such a trust
is created and a valid transfer of property is made to the trust, the settlor no longer has
any right to possess or otherwise dispose of the property placed in an irrevocable trust,
such that that individual has no ability to reverse course or change his or her mind later.
                                              21
delivery of that document to David, the next question that we must address is whether

David may bring an action against the respondents to recover Trust property. Although

the trial court appeared to believe that David was limited to a claim against J.D. (or his

estate, given that he is now deceased), for J.D.'s failure to complete the necessary

paperwork with respect to Genworth, once it is clear that the allegations of the Petition

can support a finding that a valid transfer of the property was made on December 31,

2009, it also becomes clear that David may bring an action to recover Trust property

against third parties who wrongfully possess that property.

       There is no doubt that a trustee may file a petition seeking the transfer of trust

property. (§ 850.) Section 850 provides in relevant part: "(a) The following persons

may file a petition requesting that the court make an order under this part: [¶] . . . [¶]

(3) The trustee or any interested person in any of the following cases: [¶] (A) Where the

trustee is in possession of, or holds title to, real or personal property, and the property, or

some interest, is claimed to belong to another. [¶] (B) Where the trustee has a claim to

real or personal property, title to or possession of which is held by another. [¶]

(C) Where the property of the trust is claimed to be subject to a creditor of the settlor of

the trust." (Italics added.) Section 850 specifically contemplates that a trustee may bring

an action to recover trust property that is held by anyone other than the trustee; it does not

limit recovery to a certain class of people, nor does it purport to prevent a trustee from

recovering trust assets from third parties who wrongfully possess them. Rather, "[t]he

statutory scheme's purpose is to effect a conveyance or transfer of property belonging to a

                                              22
decedent or a trust or another person under specified circumstances, to grant any

appropriate relief to carry out the decedent's [or settlor's] intent, and to prevent looting

of . . . estates. [Citations.] It provides the probate court with a mechanism to determine

rights in property belonging to a decedent or to someone else. [Citation.]" (Estate of

Kraus (2010) 184 Cal.App.4th 103, 117–118.)

        David, as trustee, is claiming entitlement to personal property that was distributed

to respondents by Genworth pursuant to the later beneficiary designation that J.D.

submitted. Because David, in his capacity as trustee, is making a claim to the proceeds of

the Policy on the ground that they belong to the Trust, he may bring this action to request

that the court order those to whom the proceeds of the Policy were distributed convey or

transfer those proceeds to him. (See § 856 ["Except as provided in Sections 853 and 854,

if the court is satisfied that a conveyance, transfer, or other order should be made, the

court shall make an order authorizing and directing the personal representative or other

fiduciary, or the person having title to or possession of the property, to execute a

conveyance or transfer to the person entitled thereto, or granting other appropriate

relief"].)

        In addition, David's Petition relies on section 17200, which also clearly authorizes

his action. Subdivision (a) of section 17200 provides that "[e]xcept as provided in

Section 15800, a trustee or beneficiary of a trust may petition the court under this chapter

                                              23
concerning the internal affairs of the trust or to determine the existence of the trust."14

(Italics added.) David is clearly seeking a determination that the Trust exists; as we have

already stated, assuming that the allegations of the Petition are true, he would be entitled

to a determination that the Trust does indeed exist. Further, his Petition seeks the

assistance of the court "concerning the internal affairs of the trust," given that section

17200, subdivision (b) specifically provides that "[p]roceedings concerning the internal

affairs of a trust include, but are not limited to, proceedings for any of the following

purposes: [¶] . . . [¶] (16) Authorizing or directing transfer of a trust or trust property to

or from another jurisdiction." It is possible that at least some of the proceeds belonging

to the trust were directed to respondents who live outside of the court's jurisdiction, and

that therefore, the court would have to direct a transfer of that trust property from another

jurisdiction.15

       Finally, David seeks a penalty to be imposed against the respondents pursuant to

section 859. Section 859 provides: "If a court finds that a person has in bad faith

wrongfully taken, concealed, or disposed of property belonging to a conservatee, a minor,

an elder, a dependent adult, a trust, or the estate of a decedent, or has taken, concealed, or

disposed of the property by the use of undue influence in bad faith or through the

14      Section 15800 generally provides that for revocable trusts, unless the instrument
provides otherwise, during the time that the trust is revocable, the person holding the
power to revoke, and not the beneficiaries, "has the rights afforded beneficiaries under
this division," and the duties of the trustee are owed to the person holding the power to
revoke, not the beneficiaries.

15   Specifically, the Petition lists the names and addresses of the respondents, some of
whom are alleged to live outside of California.
                                              24
commission of elder or dependent adult financial abuse, as defined in Section 15610.30

of the Welfare and Institutions Code, the person shall be liable for twice the value of the

property recovered by an action under this part." When it is established that property is

recoverable under section 850 and that the party who took the property acted in bad faith,

a section 859 penalty may be imposed. (Estate of Young (2008) 160 Cal.App.4th 62, 89.)

Thus, in the event that David were to prevail on his claim to recover the proceeds of the

Policy on behalf of the Trust, we see nothing that would prevent David from requesting a

court determination as to whether the respondents took those proceeds wrongfully and in

bad faith.

       It is therefore clear that David may name the respondents in his Petition, and that

the respondents are proper parties to this action brought pursuant to the Probate Code. If

David can establish the facts alleged in the Petition, then it would be clear that J.D.

created an irrevocable trust, and properly funded it, when he delivered to David the

transferring document (i.e., the Trust document itself, which included the transferring

language). If the Trust was created, then David's entitlement to the proceeds of the life

insurance policy that was an asset of the Trust would be established, and he would be

able to seek the court's assistance in having those proceeds conveyed to him in his

capacity as trustee. The trial court therefore should not have sustained the respondents'

demurrer to David's Petition.

                                             25
                                          IV.

                                    DISPOSITION

      The judgment is reversed. David is entitled to costs on appeal.

                                                                    AARON, J.

WE CONCUR:

NARES, Acting P. J.

GUERRERO, J.

                                          26