Court Opinion

ID: 4324662
Source: CourtListenerOpinion
Date Created: 2018-10-25 23:01:39.696136+00
Date Added: 2024-06-11T14:19:41.357280
License: Public Domain

Filed 10/25/18
                           CERTIFIED FOR PUBLICATION

             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                             FIRST APPELLATE DISTRICT

                                      DIVISION ONE

 DONNA SCHWAN et al.,
         Plaintiffs and Appellants,                A151070

 v.                                                (Contra Costa County
 VERLA D. PERMANN, as Trustee, etc.,               Super. Ct. No. MSP14-00302)
 et al.,
         Defendants;
 LOUISE K. MORRIS,
         Defendant and Appellant.

 DONNA SCHWAN et al.,
                                                   A151073
         Plaintiffs and Appellants,
 v.
 VERLA D. PERMANN, as Trustee, etc.,
 et al.,
         Defendants;
 WALTER C. YOUNGMAN,
         Defendant and Appellant.

        This is the second appeal arising out of a dispute between various beneficiaries of
The Walter C. Permann Separate Property Trust (Trust). Pursuant to the express terms of
the Trust, Donna Schwan, Eileen Ostrosky, and Alexis Johnson (collectively, plaintiffs)
are entitled to certain proceeds from the Trust if they are employed by Control Master
Products, Inc. (Control Master Products or company) at the death of Walter C. Permann,
the owner, and his spouse, Verla D. Permann.1
       Following a bench trial, the probate court excused Schwan’s and Johnson’s
noncompliance with the employment condition because the assets of the company were
sold in 2008, rendering satisfaction of the condition impossible. However, the court did
not excuse Ostrosky’s noncompliance because she retired prior to the sale of the
company. The court also held the bequests to Walter C. Youngman, Jr., Walter’s
longtime friend and tax attorney, and his family were void. Three appeals were
subsequently filed.2 First, Louise K. Morris, another Trust beneficiary, appealed from the
court’s ruling upholding the bequests to Schwan and Johnson. Second, Ostrosky
appealed from the adverse determination regarding her bequest. And, third, Youngman
appealed from the adverse determination regarding his bequest. Schwan and Johnson
subsequently filed a cross-appeal regarding an alleged ambiguity in the statement of
decision regarding the survivorship provision. We reverse and remand for the probate
court to make further findings and to clarify its statement of decision as herein directed.
We otherwise affirm the court’s order.
                                   I. BACKGROUND
       Walter owned and operated Control Master Products, a successful wire and cable
distributing business. Walter’s first wife was actively involved in the operations of
Control Master Products until her death. Verla, Walter’s second wife, was not involved
in the operations of Control Master Products.

       1
         As Walter and Verla share the same surname, we shall refer to them by their
first names for ease of reference.
       2
         These appeals are from the probate court’s statement of decision, filed on
February 17, 2017. Because the probate court did not subsequently enter a formal
judgment or order, we exercise our discretion to treat the court’s statement of decision as
an appealable order and, for procedural purposes, hereafter refer to the statement of
decision interchangeably as the “order.” (See Pangilinan v. Palisoc (2014)
227 Cal.App.4th 765, 769; see generally Eisenberg, Cal. Practice Guide: Civil Appeals
and Writs (The Rutter Group 2017) ¶ 2:257.1, p. 2-153.)

                                              2
       Prior to 1999, Walter had a will that bequeathed gifts to Ostrosky and Schwan, as
well as Nancy Olinger, who had been Walter’s personal secretary. Those gifts were
conditioned on Ostrosky, Schwan, and Olinger being “an employee and/or director of
CONTROL MASTER PRODUCTS, INC., at [Walter’s] death.” At the time the will was
drafted, Walter had no intention of selling Control Master Products and wanted to reward
certain employees who remained with the company until his death.
       In 1999, Walter established the Trust, which was drafted by Youngman. The
Trust replaced Walter’s prior will. The Trust provided for various distributions “Upon
the death [of] Trustor’s spouse, or upon . . . Trustor’s death if the Trustor’s spouse does
not survive him.” These distributions included ones to Schwan, Ostrosky, and Johnson if
each “is employed by Control Master Products, Inc. at the death of Trustor and his spouse
and if not, this gift shall lapse and augment the share of the remaining beneficiaries under
this paragraph.” Prior to the Trust’s formation, Olinger retired from Control Master
Products and she was not a named beneficiary in the Trust. The Trust named Schwan as
a special trustee with some authority in running Control Master Products.
       The Trust also included a bequest to Youngman. Because of this bequest, R. Kent
Brewer, a now-retired family law attorney who practiced in the same building as
Youngman, reviewed the Trust with Walter before it was executed. Brewer concluded
Youngman had not coerced or otherwise pressured Walter into the bequest, and executed
a certificate of independent review (certificate of review).
       While drafting the Trust, Walter stated he wanted a financial incentive to keep
Schwan, Ostrosky, and Johnson employed at Control Master Products following his death
because he was concerned Verla could not run the company. The bequests also were
designed to thank individuals who “materially assisted him in his business life and to the
level of success he now enjoys.” The Trust, as with his prior will, was created with the
expectation that Walter would own Control Master Products at the time of his death.
       The Trust beneficiaries—including Schwan, Ostrosky, and Johnson—were
individuals with whom Walter, Verla, or Walter’s first wife, had a significant
relationship. Walter hired Schwan in 1978, and she eventually became general manager

                                              3
of Control Master Products. Walter served as Schwan’s mentor during her time with the
company, and Schwan felt he treated her like a daughter. During her time at the
company, Schwan joined Walter for cruises, dinners, picnics, the theater, and birthday
and anniversary celebrations.
       Ostrosky began working for Control Master Products in 1962 and retired from the
company in 2007. She retired because she was no longer able to handle the physical
aspects of her employment. Ostrosky often socialized with Walter, including going on
cruises and trips and having dinner together. They continued to socialize after Walter
sold the company, including trips and going to dinner, and frequently communicated.
       Johnson was hired as a secretary for Control Master Products in 1997, but her
duties increased over time. During her employment with the company, Johnson
socialized with Walter, such as going out to lunch and dinner. Walter also brought her
and her children gifts from his travels.
       Walter attributed much of his success to his employees, and highly valued their
loyalty. He repeatedly informed Schwan, Ostrosky, and Johnson they were beneficiaries
in the Trust and would be “taken care of.”
       In 2008, Walter sold the assets of Control Master Products to Industrial Electric
Wire & Cable, Inc. (IEWC). The sale was negotiated over a four-year period, but none of
the plaintiffs were aware of Walter’s intentions to sell the company until shortly before
the deal closed. As part of the purchase agreement, IEWC acquired “all rights in and to
the name ‘Control Master Products, Inc.’ and any and all derivations thereof,” and
imposed on Walter a covenant not to compete. IEWC required the noncompete
agreement to prevent Walter from inducing former Control Master Products employees to
leave IEWC. The purchase agreement also obligated Control Master Products to
terminate all of its employees. Schwan and Johnson were then hired by IEWC the day
after the sale closed, and Schwan continues to work at IEWC.
       Following the asset sale, Walter changed the name of his company to Custom
Model Products and sold model trains. Ostrosky performed some limited work for
Custom Model Products, for which she was paid in cash. Walter also continued to make

                                             4
statements suggesting Schwan, Ostrosky, and Johnson were beneficiaries in the Trust.
For example, when Johnson expressed concern regarding her employment following the
sale, Walter informed her that she was “taken care of” in the Trust. Similarly, shortly
before his death, Walter informed Schwan that she would receive more than his close
relative, Scott Heiser.
       Plaintiffs jointly filed a petition to determine their status as beneficiaries and to
challenge Youngman’s right to inherit (petition). The petition sought to have the
employment condition “stricken and excused as a matter of law” on various grounds,
including “ ‘impossibility.’ ” Plaintiffs further argued the bequest to Youngman was
disqualified under Probate Code section 21380 because Youngman drafted the Trust.
       The petition was contested by beneficiaries Louise Morris and Youngman. Verla
and Scott Heiser, as cotrustees, took “no position with regard to the relief sought by the
petitioners . . . .” The probate court issued an order concluding the dispute was not ripe
because one of the conditions precedent—Verla’s death—had not yet occurred. On
appeal, this court reversed the probate court’s ruling. (Schwan v. Heiser (Jun. 30, 2015,
A143400) [nonpub. opn.].)3 In doing so, however, we expressly noted the substantive
legal issues remained “for the trial court to decide.”
       On remand, the probate court conducted a multiday bench trial. Following trial,
the court issued a tentative decision and proposed statement of decision. The court found
Youngman and his family were “disqualified from any gift under the trust,” Ostrosky’s
gift “lapsed due to failure to comply with the terms of the trust before the sale of the
company,” and Schwan’s and Johnson’s gifts “remain valid and enforceable, but only
after Verla[’s] death, and only if Ms. Schwan and Ms. Johnson survive [Verla].” All
parties raised various objections to the tentative decision and proposed statement of

       3
           We take judicial notice of our prior decision. (Evid. Code, § 452, subd. (d).)

                                               5
decision. The court subsequently issued its final statement of decision, which reached the
same conclusions. The parties timely appealed.4
                                     II. DISCUSSION
A. Interpretation of the Trust
       “The basic rule in the interpretation and construction of any will is that the
intention of the testator must be carried out as nearly as possible. [Citations.] In
ascertaining the testator’s intent, courts employ an objective test: the intention to be
determined is that which is actually expressed in the language of the will. [Citations.]
‘ “The intention which an interpretation of a will seeks to ascertain is the testator’s
intention as expressed in the words of the will, not some undeclared intention which may
have been in his [or her] mind.” [Citation.]’ [Citation.] [¶] Another fundamental rule of
the interpretation and construction of wills requires that every word should be considered
and given some effect, if possible. [Citation.] ‘The words of a will are to receive an
interpretation that will give every expression some effect, rather than one that will render
any of the expressions inoperative . . . .’ [Citation.] Moreover, the words used in a will
must be given their ordinary, commonsense interpretation.” (Estate of Simoncini (1991)
229 Cal.App.3d 881, 888–889.)
       “A reviewing court may exercise its independent judgment in interpreting an
instrument provided that extrinsic evidence regarding interpretation is not conflicting.
[Citation.] ‘The reviewing court has the duty to independently interpret the will when . . .
the credibility of extrinsic evidence or the resolution of a conflict in the evidence’ is not
in issue. [Citation.] Thus, the reviewing court must exercise independent judgment to
interpret a will where . . . conflicting inferences may be drawn from uncontroverted
evidence.” (Estate of Guidotti (2001) 90 Cal.App.4th 1403, 1406.)

       4
        Morris and Youngman filed separate appeals (case Nos. A151070, A151073,
respectively) which were consolidated by this court on May 31, 2017.

                                               6
       1. The Trust Language
       The Trust provided Schwan, Ostrosky, and Johnson would each receive a
percentage of the Trust if they are “employed by Control Master Products, Inc. at the
death of Trustor and his spouse and if not, this gift shall lapse and augment the share of
the remaining beneficiaries under this paragraph.” Neither the probate court nor the
parties conclude the Trust contains a patent ambiguity. However, the court found the
employment condition contained a latent ambiguity because it failed to “clearly express
the settlor’s intent concerning a sale of the company.” Morris contends the court erred in
so holding because it improperly sought to discern Walter’s underlying motivations.
       We find Estate of Dye (2001) 92 Cal.App.4th 966 instructive. There, the
decedent’s will provided the estate be given to his wife as her “ ‘sole and separate
property.’ ” (Id. at p. 979.) But the decedent’s wife predeceased him. (Id. at p. 970.)
Decedent’s son subsequently claimed the phrase “ ‘sole and separate property’ ” was
ambiguous and argued two “adopted-away” sons should not inherit. (Id. at pp. 979, 970.)
The son attempted to introduce evidence demonstrating his father believed his
relationship to the adopted-away children had been severed and indicated the remaining
son would inherit the estate. (Id. at p. 977.) The court found such evidence did not create
an ambiguity “because they fail to raise a semantically plausible alternative candidate of
meaning.” (Ibid.) The court further explained: “When courts speak of using extrinsic
evidence to rebut a presumption, this means evidence that a decedent’s expression in a
will actually has a different meaning than first appears, or a “latent” ambiguity. [Estate
of] Dodge [(1971) 6 Cal.3d 311] is a good example. Lawyers use ‘personalty’ or
‘personal property’ in contrast to ‘realty’ and ‘real property.’ However, some people use
‘personal property’ to mean tangible personal effects, such as clothing, jewelry and so
forth. Thus, when a will gives the ‘personal property’ to somebody, somebody else could
come in with evidence outside the corners of the will to show what the decedent thought
the word meant. [Citation.] . . . [¶] But an ambiguity, whether patent or latent, must
reside in the will.” (Id. at pp. 977–978.) The court concluded the son’s position “is not a
reasonable construction of the language, but an effort to insert new language and ideas

                                             7
into the will. ‘The instrument is silent upon the possibility of the wife predeceasing the
testator. If he had contemplated a substitutional gift over he should have made such
intention clearly appear.’ [Citations.] ‘Therefore, if having ascertained in the instant
case that the provisions of the will are not reasonably susceptible of two or more
meanings, we conclude that the only meaning to which the words expressed by testatrix
are reasonably susceptible results in intestacy, we must give effect to her will
accordingly.’ ” (Id. at p. 979; accord Citizens Business Bank v. Carrano (2010)
189 Cal.App.4th 1200, 1207–1208 [court cannot rewrite trust to attach restrictions to a
term the settlors did not expressly include, especially when the term was not ambiguous];
Estate of Canfield (1967) 256 Cal.App.2d 647, 654 [“The fact that fate, as it often does,
thereafter proved decedent to have been mistaken in making this supposed assumption
[(that father would predecease his young children)] does not authorize a trial or appellate
court to rewrite a will under the guise of construing it to determine what the testator
might have intended if he had survived to a later date and had written it in the light of
subsequent developments.”].)
       Here, plaintiffs are not seeking to interpret the term “employed.” Nor is
“employed” reasonably interpreted as “not employed if the company is sold.” Instead,
plaintiffs’ construction of the employment condition would insert a new concept into the
Trust. Moreover, the probate court concluded Walter did not anticipate selling his
company. He thus could not have intended the word “employed” to include any
exception in the event of such a sale. We are limited to “ ‘ “the testator’s intention as
expressed in the words of the will . . . .” ’ ” (Estate of Simoncini, supra, 229 Cal.App.3d
at p. 889.) Accordingly, we find the Trust’s requirement that plaintiffs be employed at
the time of Walter’s and Verla’s deaths unambiguous.5

       5
        In so ruling, we do not opine on whether an ambiguity exists regarding the
phrase “Control Master Products.” (See part II.A.2.b.ii., post.)

                                              8
       2. Impossibility6
       The probate court concluded Walter’s sale of the company excused Schwan’s and
Johnson’s failure to comply with the employment condition contained in the Trust
because they were employed by the company until the date of the sale. The court further
concluded Walter’s subsequent failure to modify the Trust did not demonstrate an intent
for the gifts to lapse. Morris contends the court erred because it improperly relied on a
repealed Probate Code section, California cases predating the repeal, and inapplicable
out-of-state authority. She argues such authority “is contrary to modern California law.”
              a. Whether California Recognizes Impossibility as Excusing a Condition
                 Precedent
       Probate Code former section 142 stated: “ ‘A condition precedent in a Will is one
which is required to be fulfilled before a particular disposition takes effect. It is to be
deemed performed when the testator’s intention has been substantially, though not
literally, complied with. Nothing vests until such condition is fulfilled, except where
fulfillment is impossible, in which case the disposition vests, unless the condition was the
sole motive thereof and the impossibility was unknown to the testator or arose from an
unavoidable event subsequent to the execution of the Will.’ ” (Estate of Catlett (1953)
117 Cal.App.2d 315, 317.) It is undisputed Probate Code former section 142 was
repealed by the California Legislature in 1982.
       Contrary to Morris’s suggestion, we cannot conclude the doctrine of impossibility
was rejected by the repeal of Probate Code former section 142. In repealing that section,
the California Law Revision Commission (commission) stated: “Former Section 142 is
not continued. The former section was not a modern statement of the law.” (Tentative
Recommendation Relating to Wills and Intestate Succession (Nov. 1982) 16 Cal. Law
Revision Com. Rep. (1982) p. 2504 (1982 Tentative Recommendation).) The

       6
        We are unaware of any authority, nor have the parties cited any such authority,
holding a condition precedent must be found ambiguous before a court may consider
whether the condition should be excused for impossibility. Accordingly, we next address
whether the condition should be excused.

                                               9
commission further stated those “matters” contained in former section 142—including
impossibility—“are left to case law development.” (1982 Tentative Recommendation, at
p. 2504.)
       The commission’s observation that Probate Code former section 142 “was not a
modern statement of the law” is entirely accurate even looking solely at California cases.
Former section 142 imposed a number of constraints on the use of impossibility to excuse
conditions precedent. But in Estate of Pelletier (1963) 221 Cal.App.2d 347, which
concerned a condition of continued employment, the court took a more expansive view,
identifying “[t]hree basic principles of testamentary construction,” including that a
“testamentary instrument is to be examined with a view to discovering the decedent’s
testamentary intent,” and that “a liberal construction be given a testamentary disposition
in favor of a beneficiary who was an employee of the testator.” (Id. at p. 350.) The court
further observed that “ ‘ “uniform attitude of the courts of various jurisdictions . . . are
favorable to the employee.” ’ ” (Id. at p. 351.)
       The introduction to the commission’s report is also telling. The commission
commenced by stating “no thorough substantive revision for over a century” had been
made to California’s law of wills and intestate succession. (1982 Tentative
Recommendation, supra, 16 Cal. Law Revision Com. Rep., p. 2318.) “It remains a
nineteenth century code in its premises, its phraseology, and its excessive detail.” (Ibid.)
As a consequence, “technical requirements” often invalidated wills, “even where there is
no reasonable doubt that the testator intended the instrument as his or her will.” (Ibid.)
Similarly, “[o]ther provisions of existing law set forth mechanical rules that produce[d]
results that [were] inconsistent with the testator’s intent.” (Ibid.) There had, however,
“been many changes in the American family and in public attitudes since the last major
revision” of the Probate Code in 1872, and “[a]s a result, the California Probate Code
[was] overdue for a comprehensive revision.” (1982 Tentative Recommendation, at
pp. 2318–2319.) “The proposed law,” the commission explained, would “make probate
more efficient and expeditious” and, more importantly for our purposes, “provide rules
that are more likely to carry out the intent of the testator.” (Id. at p. 2319.) Furthermore,

                                              10
“[b]y drawing freely from the Uniform Probate Code, the proposed law [would] promote
national uniformity.” (Ibid., fn. omitted.) These comments indicate the revision of the
Probate Code, including the repeal of former section 142, was intended to put the focus
on the testator’s intent and to endeavor to keep California law in the national mainstream.
The commission’s specific comment as to the repeal of former section 142—that “[t]he
former section was not a modern statement of the law” and “[t]he matters which the
former section governed are left to case law development”—promotes both objectives.
(1982 Tentative Recommendation, at p. 2504.) The excusing of conditions precedent due
to impossibility is grounded in implementing the testator’s intent, and the development of
this principle through case law will assist in keeping California’s law consistent with the
national norm. Accordingly, we look to case law and secondary sources to explain the
state of the law at the time former section 142 was repealed.
       In 1985—the same year the revisions to California’s Probate Code took effect—
the American Law Reports published an article entitled, “Effect of impossibility of
performance of condition precedent to testamentary gift.” (Annot. (1985) 40 A.L.R.4th
193.) We find this article instructive as to the “modern statement of law” at the time the
Legislature repealed Probate Code former section 142 because it “collects and analyzes
the state and federal cases in which the courts have discussed the effect of impossibility
of performance of a condition precedent to a testamentary gift.” (Annot., supra,
40 A.L.R.4th at p. 198, § 1[a], fns. omitted.) The background summary noted: “The
modern tendency is to follow the rule that whether a gift is effective depends on a
determination of what the testator intended if the condition became impossible to perform
or what the testator probably would have intended if the testator had foreseen that the
condition would become impossible to perform.” (Id. at p. 199, § 2[a].) Similarly, the
1983 version of the Restatement of Property stated impossibility of performing a
condition precedent for a donative transfer generally excused the condition provided that
result complied with the ascertained intent of the testator. (Rest.2d Property, § 5.2.)
       Courts, however, have varied in whether to excuse a condition precedent regarding
ongoing employment when a testator’s act or failure to act caused the impossibility.

                                             11
(Annot., supra, 40 A.L.R.4th 193.) For example, in Estate of Pelletier, supra,
221 Cal.App.2d 347, decedent’s will required the beneficiary to be in the decedent’s
employ at the time of his death. (Id. at pp. 348–349.) After the will was executed, the
decedent liquidated most of his businesses. (Id. at p. 349.) At the time of the decedent’s
death, the beneficiary was performing limited tasks for him but had not been paid for
such work. (Id. at p. 350.) The court found the beneficiary was continuously employed
part-time by the decedent, and such work was the only possible employment available.
(Id. at p. 351.) Noting the prevailing tendency of the courts to give a liberal construction
to a testamentary disposition in favor of a beneficiary who was an employee of the
testator, the court held that the beneficiary satisfied the employment condition because
the decedent’s liquidation of his businesses made it impossible for the beneficiary to
resume the position he had when the will was executed. (Id. at p. 352.)
       Reese Estate (1958) 19 Pa.D. & C.2d 299 [1958 Pa. Dist. & Cnty. Dec. Lexis 16]
and In re Bridge’s Estate (1953) 41 Wn.2d 916 [253 P.2d 394] (Bridge), reached similar
conclusions. In Reese, a testatrix bequeathed to her daughter free rent for one year of the
apartment they shared provided the daughter continuously resided with the testatrix until
her death. (19 Pa.D. & C.2d at p. 300.) However, prior to the testatrix’s death, she was
admitted to a hospital and then, by her wish, taken to the home of her son. (Id. at p. 301.)
The court concluded, “To penalize [the daughter] by denying her a year’s free rent
because she was not living under the same roof with her mother for such a short period of
time after having been with her for nine years, would indeed be an inexcusable
forfeiture.” (Ibid.) The court noted any noncompliance was “entirely the doing of
testatrix,” and commented the daughter “could not be chargeable with such punitive
consequences” for a situation over which the daughter had a minimal influence. (Id. at
p. 302.)
       Likewise, in Bridge, a will bequeathed money to certain individuals, provided if
any of the individuals “ ‘are now employed by me or the Mary Bridge Hospital and are
not so employed at the time of my decease,’ ” then such bequests would lapse. (Bridge,
supra, 253 P.2d at p. 396.) Subsequent health issues required the decedent to retire and

                                             12
liquidate his business. (Id. at p. 397.) The court noted: “ ‘There is obvious justice in not
holding the devisee or legatee responsible for the consequences of a breach of or failure
to perform, a condition, where such breach or failure is not due to fault on his part, and
where it is clear that such a contingency was not within the testator’s contemplation.
And at bottom the question always is whether it was the testator’s intention that an
involuntary breach of condition should operate to defeat the gift.’ ” (Id. at p. 402, italics
added by Bridge.) In applying this rule, the court concluded the beneficiaries were close
associates and friends and the purpose was to benefit them. (Id. at pp. 403–404.) It noted
“there [was] no indication that [the decedent] was aware at the time he executed the will
that there was even a possibility that his medical business would be terminated before his
death.” (Id. at p. 403.) Instead, the court found the decedent’s motive for the
employment condition was to limit bequests in the event a beneficiary was terminated or
voluntarily left his or her employment. (Id. at pp. 403–404.) In light of the decedent’s
motive for the bequest and “literal compliance therewith being impossible,” the court
excused the condition and upheld the bequests.7 (Bridge, at p. 404.)

       7
         Other cases have reached similar conclusions when third party conduct prevented
a legatee from meeting a condition precedent. For example, in Wooster School Corp. v.
Hammerer (Fla.Dist.Ct.App. 1982) 410 So.2d 524, a trust provided a gift to an individual
provided he be employed by the grantor at the time of the grantor’s death. (Id. at p. 525.)
The grantor’s nephew sent a letter terminating the employee’s employment. (Ibid.) The
court noted, “generally speaking, where a testamentary gift is subject to a valid condition,
performance thereof is required.” (Id. at p. 526.) “But where it becomes impossible for
the condition to be performed without the fault of the donee, performance should be
excused unless it be determined that performance of the condition was the controlling
motive for the testator’s making of the bequest. [Citation.] The determining inquiry
should be whether the testator’s intent in making a bequest was to benefit the donee or to
obtain strict performance of some important act in any and all events, with the donee
being paid, by way of the bequest, for performing the act.” (Id. at p. 527.) The court
concluded: “Hammerer had worked for [grantor] for some seven years, caring for her
every need. As a result, she had showered many gifts upon Hammerer and his family.
She had given him money, educated his children, and helped him purchase a home,
among other things. She apparently had no relatives who were as close to her as
Hammerer. . . . Thus, the implicit finding of the court that [grantor] intended the gift to
vest even if the condition precedent was not performed through no fault of Hammerer is

                                              13
       In contrast to the above authorities, some cases have voided gifts where a
testator’s act or failure to act made performance of a condition precedent impossible. For
example, in Colvin v Pairpoint (1887) 9 Ky.L.Rptr. 191 [1887 WL 1123], a testatrix
bequeathed to a legatee a certain sum of money if he should continue to live with her and
care for her. (Id. at p. 192.) The legatee, while continuing to care for the testatrix until
her death, ceased to live with the testatrix because she “ ‘ceas[ed] to keep house, and
ha[d] no place for him to stay with her.’ ” (Ibid.) The court concluded the legatee failed
to meet the condition precedent because he failed to provide the companionship and
personal presence required by the condition. (Id. at p. 193; accord Perry v. Brown (1912)
34 R.I. 203 [83 A. 8, 18] [“the clause under discussion was intended not primarily as a
gratuity to [the employee], but rather as a provision for the support of [decedent’s
husband] in a contingency which has not occurred”].)
       However, the weight of authority suggests at the time the Legislature repealed
Probate Code former section 142, the “modern rule” recognized impossibility as an
exception to the general rule enforcing conditions precedent. Morris has not identified
any authority to suggest California—or any jurisdiction—has since rejected this
approach. In fact, in Estate of Hilton (1988) 199 Cal.App.3d 1145, 1178, our colleagues
in the Second Appellate District noted, “It is a settled canon of California jurisprudence
that because the law favors early vesting of estates, conditions precedent are distained.”
This statement undermines Morris’s assertion that we must strictly construe conditions
precedent. Accordingly, the probate court properly considered whether impossibility
excused the employment condition in the Trust.

supported by the record.” (Ibid.; see Estate of Carpenter v. Dinneen (Ct. Chancery Del.,
Apr. 11, 2007) 2007 WL 2813784, *10–*11 [trust conditioned gift on ongoing
employment; court refused to void gifts despite employees’ termination because “the
evidence is sufficient to support a reasonable, but not conclusive, inference that [grantor]
intended that a dismissal without good cause would not necessarily preclude [employees]
from receiving the specified gift”].)

                                              14
              b. Intent of Testator
       The authority discussed above make clear the initial inquiry is whether
employment until death was the decedent’s controlling motive in imposing the condition.
(See, e.g., Martin v. Young (Md.Ct.App. 1983) 462 A.2d 77, 80 [“The question to be
asked . . . ‘is whether the testator’s primary concern was the betterment of the individual
or the performance of the condition.’ ”]; Wooster School Corp. v. Hammerer, supra,
410 So.2d at p. 527 [“But where it becomes impossible for the condition to be performed
without the fault of the donee, performance should be excused unless it be determined
that performance of the condition was the controlling motive for the testator’s making of
the bequest.”].) This approach is in accord with the Legislature’s purpose in amending
the Probate Code. The California Law Revision Commission noted, “These changes are
designed primarily to simplify the administration of an intestate estate and to carry out
more effectively the intent of the decedent.” (1982 Tentative Recommendation, supra,
16 Cal. Law Revision Com. Rep., p. 2305; accord Selected 1983 Cal. Legislation,
Administration of Estates (1983) 15 Pacific L.J. 423, 445, fn. omitted [“Chapter 842
makes substantial revisions in the Probate Code concerning wills, intestate succession,
and related matters. Among the most significant changes made by Chapter 842 is the
strengthening of provisions aimed at effectuating the intentions of the testator when
construing a will.”].)
       Courts have considered various factors in assessing a testator’s intent, including
whether (1) the will showed the testator anticipated the impossibility and nonetheless
made the gift contingent on the performance of the condition; (2) the testator provided for
a gift over to other beneficiaries in the event of a failure to perform the condition;
(3) performance of the condition was the testator’s controlling motive in making the
bequest; (4) the testator knew of the impossibility of performing the condition prior to his
or her death; (5) the testator, the donee, or a third person caused the impossibility and
whether (a) that person’s act was volitional or nonvolitional, or (b) that person was the
intended beneficiary of the performance of the condition; (6) the testator or the intended
beneficiary of the performance of the condition waived its performance; (7) there was

                                              15
substantial compliance with the terms of the condition; and (8) the testator’s purpose in
making the gift would more likely be fulfilled by requiring or by not requiring literal
compliance with the condition. (See Annot., supra, 40 A.L.R.4th 193 [collecting cases];
accord Rest.2d Property, § 5.2, com. g, p. 243 [failure to revoke instrument when testator
has actual knowledge that performance of condition is impossible subsequent to
execution of will but before death “normally tends to support an inference that the gift
was to take effect despite the inevitable failure of its terms”].)
       Here, the court properly considered relevant evidence regarding Walter’s motive
for the employment condition. Based on its assessment of the evidence presented, the
court “decline[d] to infer that [Walter’s] failure to modify the trust prove[d] an intent that
the gifts lapse.” The court concluded Schwan and Johnson “complied with the terms of
the trust so far as was possible, and any further performance is excused.” The court,
however, declined to excuse Ostrosky’s performance because she retired prior to the sale.
Morris contests the court’s holding as to Schwan and Johnson, whereas Ostrosky disputes
the court’s holding as to herself. We address each in turn.
                      i. Donna Schwan and Alexis Johnson
       Morris contends the court erred in excusing Schwan and Johnson from any further
performance of the employment condition. She first argues Walter voluntarily sold the
business five years prior to his death and could have subsequently amended the Trust.
She contends his failure to do so evidences an intent for the gifts to lapse.
       Undoubtedly, Walter’s ability—and failure—to amend the Trust is a relevant
factor that weighs against the doctrine of impossibility. But our task is not to assess
whether there is conflicting evidence regarding Walter’s intent. Nor is it to assess
whether another court could have reached an alternate conclusion based on the evidence
presented. Rather, our inquiry is limited to whether substantial evidence supports the
probate court’s judgment. As noted in ASP Properties Group, L.P. v. Fard, Inc. (2005)
133 Cal.App.4th 1257, 1266 (ASP Properties Group), a case cited by Morris, “Under the
substantial evidence standard of review, ‘we must consider all of the evidence in the light
most favorable to the prevailing party, giving it the benefit of every reasonable inference,

                                              16
and resolving conflicts in support of the [findings]. [Citations.] [¶] It is not our task to
weigh conflicts and disputes in the evidence; that is the province of the trier of fact. Our
authority begins and ends with a determination as to whether, on the entire record, there
is any substantial evidence, contradicted or uncontradicted, in support of the judgment.
Even in cases where the evidence is undisputed or uncontradicted, if two or more
different inferences can reasonably be drawn from the evidence this court is without
power to substitute its own inferences or deductions for those of the trier of fact, which
must resolve such conflicting inferences in the absence of a rule of law specifying the
inference to be drawn.’ ”
       Here, the probate court made various factual findings.8 The findings relevant to
this appeal include: (1) Walter did not intend to sell the company and did not anticipate
ever selling it at the time the Trust was drafted; (2) the basis for requiring plaintiffs to
work for the company was both to reward them for past, present, and future contributions
and to ensure they continued working for the benefit of Walter or his surviving spouse;
(3) once he sold the company, Walter’s purpose in imposing the condition had been
served; (4) Walter believed plaintiffs were “ ‘taken care of’ ” in the Trust despite his sale
of the company; and (5) Schwan and Johnson complied with the terms of the Trust “so
far as was possible.” The court also expressed concern regarding Youngman’s role in
failing to amend the Trust because he substantially benefitted if plaintiffs’ gifts failed.
Accordingly, substantial evidence supports the probate court’s decision to excuse Schwan
and Johnson from the employment condition.
       Morris next asserts the factual findings support her position rather than the probate
court’s conclusions. But her arguments primarily contend different inferences should be

       8
         Morris asserts she is not challenging any of the probate court’s “evidentiary
rulings or factual findings, but only the application of trust law to such facts.”
Accordingly, we need not assess whether substantial evidence supports the probate
court’s factual findings.

                                              17
drawn from the evidence.9 And, as noted above, “ ‘if two or more different inferences
can reasonably be drawn from the evidence this court is without power to substitute its
own inferences or deductions for those of the trier of fact.’ ” (ASP Properties Group,
supra, 133 Cal.App.4th at p. 1266.)
       Finally, Morris’s reply brief asserts certain factual findings are actually erroneous
legal conclusions. We disagree. The court was not interpreting the Trust when it
concluded Walter did not intend for the gifts to lapse in this instance. Rather, it was
assessing the “intent of the person imposing the restraint.” (Rest.2d Property, § 5.2,
p. 238.) This is inherently a factual inquiry. And substantial evidence supports the
probate court’s conclusion that Walter did not intend for the gifts to lapse.
       While the express language of the employment condition is unambiguous, the
probate court properly considered whether the doctrine of impossibility of performance
applied. The court concluded Schwan and Johnson “complied with the terms of the trust
so far as was possible.” Impossibility, due to Walter’s unilateral decision to sell the
company, excused any further performance. Substantial evidence supports this finding.
                     ii. Eileen Ostrosky
       Unlike Schwan and Johnson, Ostrosky retired prior to the sale of the company. As
a result, the probate court concluded “her compliance [with the condition] was not
rendered impossible by the sale of the company, but by her retirement. While she was
suffering from myriad health problems, she did not show that it was impossible for her to
continue to work.” The court held Ostrosky failed to meet the condition of the gift and
her performance was not excused. Ostrosky argues the court erred because (1) her health

       9
         For example, she does not dispute Walter did not intend to sell the company and
did not anticipate ever selling it. But she contends the condition indicated he expected
there may be unanticipated circumstances in which plaintiffs would not be working for
him. She notes Walter could have limited the condition to certain events but did not do
so. While Morris’s interpretation is one possibility, the probate court’s interpretation—
that Walter did not intend for the condition to apply in the event of a sale because he
intended to own the company at his death—is equally possible.

                                             18
required her retirement, which made further employment an “ ‘impossibility’ ”; and
(2) she was employed by Walter until his death.
       Ostrosky contests how the probate court weighed the evidence in assessing
Walter’s intent. But for the same reason Morris’s challenges to the factual findings fail,
so too must Ostrosky’s. (See, e.g., ASP Properties Group, supra, 133 Cal.App.4th at
p. 1266 [“ ‘if two or more different inferences can reasonably be drawn from the
evidence this court is without power to substitute its own inferences or deductions for
those of the trier of fact’ ”].) Here, the court found Ostrosky could work despite her
health problems. The evidence also demonstrated another long-term employee of the
company, Nancy Olinger, was included in the preexisting will. However, she retired and
was omitted from the subsequent Trust. This evidence could reasonably suggest Walter
was aware of the possibility of retirement and did not intend for the employment
condition to be waived in such an event. (Accord Rest.2d Property, § 5.2, com. d, p. 240
[“Generally an inference that the transferor intended to excuse from performance is not
justified where the impossibility arises out of a volitional act of the transferee.”].)
Testimony also demonstrated Walter wanted the gifts to be connected to plaintiffs’
ongoing employment with his company. Accordingly, substantial evidence supports the
probate court’s conclusion that Ostrosky’s noncompliance was caused by her own
conduct, i.e., her decision to retire.10 While Ostrosky cites contradictory evidence, such
as Walter’s statements that she is “in the trust,” “ ‘this court is without power to
substitute its own inferences or deductions for those of the trier of fact.’ ” (ASP
Properties Group, at p. 1266.)
       Ostrosky also argues she was, in fact, employed by Walter at the time of his death,
thus satisfying the employment condition. Ostrosky objected to the proposed statement
of decision on this basis, noting in part (1) she entered into an agreement with Walter

       10
          Ostrosky also argues substantial compliance excuses the condition. But this
argument, like impossibility, is based on weighing the evidence regarding Walter’s intent
and fails for the same reason.

                                              19
where she agreed to be on call and work for Walter; and (2) she worked when Walter
called her and last worked in July 2013. The final statement of decision did not
specifically address these objections and instead stated, “While she worked a few hours
for Walt and Custom Model Products, she was not an employee of Control Master
Products either after the sale, or at Walt’s death.”
       In order for Ostrosky’s argument to potentially succeed, she must show her past
work for Custom Model Products gave rise to an employee-employer relationship and
that relationship existed at the time of Walter’s death. Moreover, she must show her
employment relationship with Custom Model Products satisfies the Trust’s condition
requiring her to be employed by “Control Master Products, Inc.” On the latter point, we
believe it may be appropriate to consider whether a latent ambiguity exists with regard to
the phrase “Control Master Products, Inc.”—i.e., did the phrase mean a company
operating under that name (regardless of the operator), or did it mean Walter’s company
(regardless of whether it subsequently changed names).
       While a statement of decision “need only recite ultimate facts supporting the
judgment being entered” (People v. Orange County Charitable Services (1999)
73 Cal.App.4th 1054, 1071), the statement of decision is entirely silent as to these issues.
Because these issues involve factual inquires, we remand for the probate court to decide
in the first instance.
       3. Modification
       “In 1986, the Legislature substantially revised the Probate Code and ‘codified the
common law equitable power of trial courts to modify the terms of a trust instrument
where such modification is necessary to serve the original intentions of the trustors.
[Citation.]’ [Citation.] Though this revision was intended to impose ‘comprehensive’
rules for modifying trusts [citation], the sections enacted do not expressly provide that
they are the exclusive means to do so. Thus, ‘the broader equitable power of trial courts
to modify or reform a trust is preserved by operation of [Probate Code] section 15002,
which expressly provides: “Except to the extent that the common law rules governing

                                              20
trusts are modified by statute, the common law as to trusts is the law of this state.” ’ ”
(Bilafer v. Bilafer (2008) 161 Cal.App.4th 363, 368, fn. omitted.)
       Probate Code section 15409, subdivision (a) provides: “On petition by a trustee or
beneficiary, the court may modify the administrative or dispositive provisions of the trust
. . . if, owing to circumstances not known to the settlor and not anticipated by the settlor,
the continuation of the trust under its terms would defeat or substantially impair the
accomplishment of the purposes of the trust.”11 Similarly, “ ‘California courts have long
had the equity power to modify the terms of a trust where such modification is necessary
to preserve the trust or serve the original intentions of the trustor. . . .’ ” (Ike v. Doolittle
(1998) 61 Cal.App.4th 51, 80, italics added by Ike.) While the California Supreme Court
in Adams v. Cook (1940) 15 Cal.2d 352, 361, noted “the court may modify the terms of
the trust to accomplish the real intent and purpose of the trustors,” it clarified this
statement in Moxley v. Title Ins. & Trust Co. (1946) 27 Cal.2d 457. In Moxley, the
Supreme Court explained such modification is typically exercised only in “exceptional
situations in which modification was decreed in order to carry out, rather than to defeat,
the primary purpose of the trustor as expressed in the trust instrument.” (Id. at p. 468; see
also Ike v. Doolittle, supra, 61 Cal.App.4th at p. 81.)
       Ostrosky raises similar arguments with respect to both Probate Code
section 15409 and the court’s equitable powers. She contends Walter did not anticipate
her health issues and retirement, and would not have required her to continue
employment as a condition to inheriting. Because of these allegedly unanticipated issues,
Ostrosky claims the court should have modified the employment condition in the Trust to
instead condition the bequest on her employment until retirement. She further argues the
circumstances in this instance are “peculiar” and “exceptional” because the drafting

       11
         Probate Code section 15409, subdivision (a) states a court may modify a trust
“On petition by a trustee or beneficiary.” Neither party has meaningfully briefed whether
it was appropriate for the probate court to raise section 15409 sua sponte when it was not
included as a ground for relief in Ostrosky’s petition. Accordingly, we consider the issue
waived and assume for purposes of this appeal that section 15409 was properly raised.

                                               21
attorney was a donee. But this argument fails for the same reason her impossibility
argument fails—namely, “ ‘if two or more different inferences can reasonably be drawn
from the evidence this court is without power to substitute its own inferences or
deductions for those of the trier of fact.’ ” (ASP Properties Group, supra,
133 Cal.App.4th at p. 1266.) The probate court considered the evidence and concluded
Ostrosky’s health and retirement were reasonably within the scope of issues anticipated
by Walter. Accordingly, her modification argument fails.12
B. Youngman’s Appeal
       The trial court disqualified the bequest to Youngman under Probate Code
section 21380, subdivision (a), which establishes a rebuttable presumption that gifts to
“[t]he person who drafted the instrument” are the “product of fraud or undue influence.”
The court noted at the time the Trust was created, drafter-beneficiaries were allowed
provided another attorney completed a certificate of review. However, the statutory
scheme was amended in 2010 to add Probate Code section 21384, which imposed an
“independent attorney” requirement on the review process, and the trial court found the
amendment retroactive. Because the certificate of review failed to comply with Probate
Code section 21384, the court invalidated the bequest to Youngman.13
       Youngman does not contest the trial court’s analysis regarding the validity of the
certificate of review or the retroactive application of Probate Code section 21384. We
therefore need not, and do not, address whether section 21384 is retroactive. Instead, he
solely contends plaintiffs lack standing to challenge his status as a Trust beneficiary
because the probate court erred in excusing the employment condition as to Schwan and
Johnson. However, we affirm the probate court’s holding excusing the condition as to

        We need not address Schwan’s and Johnson’s modification arguments because
       12

we conclude they were excused from the employment condition based on the doctrine of
impossibility. (See part II.A.2.b.i., ante.)
       13
          In so holding, the court made specific findings that “the gift to [Youngman] was
not the product of any affirmative fraud or undue influence. [Youngman] and [Walter]
had a long-standing, friendly, trusting relationship, which was both professional and
social. No one pressured [Walter] into these provisions.”

                                             22
Schwan and Johnson due to impossibility. (See part II.A.2.b.i., ante.) As Youngman
notes, only “interested person[s]” have legal standing to contest the provisions of a will
or trust. (Estate of Plaut (1945) 27 Cal.2d 424, 425–426; Estate of Molera (1972)
23 Cal.App.3d 993, 998.) Because Schwan and Johnson continue to have an interest in
the Trust’s residue, they have standing to challenge Youngman’s beneficiary status.
       Youngman next contends if this court finds Schwan and Johnson lacked standing
to challenge his status, the subsequent award of attorney fees and costs must be reversed.
Schwan and Johnson raise a host of arguments in response. We need not address those
issues. Because we conclude Schwan and Johnson have standing to challenge
Youngman’s status, Youngman has not identified any basis for reversing the attorney
fees and costs award.
C. Survivorship Provision Language
       Schwan’s and Johnson’s cross-appeal asserts the probate court’s ruling regarding
the survivorship provision is ambiguous. With regard to the survivorship provision, the
probate court ruled, “The gifts to Donna Schwan and Alexis Johnson remain valid and
enforceable, but only after Verla Permann’s death, and only if Ms. Schwan and Ms.
Johnson survive Ms. Permann.” Schwan and Johnson contend this phrasing improperly
suggests both Schwan and Johnson must survive Verla for either to inherit. They instead
assert the survivorship provision “should only apply as to an individual Respondent;
requiring that she alone survive Verla in order to take in the future.” (Underscoring
omitted.) In response, Morris contends Schwan and Johnson waived this issue by failing
to raise it with the probate court.
       Pursuant to Code of Civil Procedure section 634, an appellant must “bring any
ambiguities and omissions in the statement of decision to the trial court’s attention.”
(Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 58.) “If the party
challenging the statement of decision fails to bring omissions or ambiguities in it to the
trial court’s attention, then, under Code of Civil Procedure section 634, the appellate
court will infer the trial court made implied factual findings favorable to the prevailing
party on all issues necessary to support the judgment, including the omitted or

                                             23
ambiguously resolved issues. [Citations.] The appellate court then reviews the implied
factual findings under the substantial evidence standard.” (Id. at pp. 59–60.)
       Here, Schwan and Johnson filed objections to the proposed statement of decision.
Those objections relate to the probate court’s general imposition of a survival
requirement and do not raise the issue briefed by Schwan and Johnson in their cross-
appeal.
       No party actually contends the Trust requires some type of joint survivorship.14 It
is thus unclear what “implied factual findings” we must infer. For purposes of this
analysis, however, we shall assume the probate court intended to require such joint
survivorship. If true, we must infer the probate court made implied factual findings that
the Trust required joint survivorship. However, our inquiry does not end there. We must
“review[] the implied factual findings under the substantial evidence standard.”
(Fladeboe v. American Isuzu Motors Inc., supra, 150 Cal.App.4th at p. 60.) Here, such
findings are not supported by substantial evidence. The court’s interpretation of the
survivorship provision was based on the Trust’s language. Neither the statement of
decision nor Morris identified any other evidence interpreting the survivorship provision.
The language of the Trust imposes separate survival provisions on both Schwan and
Johnson, and nothing in the Trust suggests these separate provisions should be joined in
some manner. Accordingly, no evidence, let alone substantial evidence, supports an
interpretation that would require both Schwan and Johnson to survive Verla in order to
inherit.

       14
          Likewise, we doubt the probate court intended to require both Schwan and
Johnson to survive Verla for either to inherit. The statement of decision’s substantive
analysis of the survivorship provision concluded “while the Court has excused or
modified the portion of the employment condition that is not consistent with [Walter’s]
intent, there is no basis for further excusing the other condition on the gift, i.e., that the
employees survive Walter and Verla.” This language suggests the probate court was
merely enforcing the survivorship provisions as set forth in the Trust.

                                               24
                                  III. DISPOSITION
       We reverse the probate court’s order and remand for findings as to whether Eileen
Ostrosky’s work for Custom Model Products satisfied the Trust’s employment condition.
We also modify page 37, lines 7–9 of the statement of decision to instead read as follows:
“(1)(a) The gift to Donna Schwan remains valid and enforceable, but only after Verla
Permann’s death, and only if Ms. Schwan survives Ms. Permann; [¶] (1)(b) The gift to
Alexis Johnson remains valid and enforceable, but only after Verla Permann’s death, and
only if Ms. Johnson survives Ms. Permann.” The court’s order is otherwise affirmed.
Donna Schwan and Alexis Johnson may recover their costs on appeal. (Cal. Rules of
Court, rule 8.278(a)(1), (2).)

                                           25
                                     ____________________________
                                     Margulies, Acting P.J.

We concur:

_____________________________
Dondero, J.

_____________________________
Banke, J.

A151070, A151073
Schwan v. Morris

                                26
Trial Court: Contra Costa County Superior Court

Trial Judge: Hon. Edward G. Weil

Counsel:

Hanson Bridgett LLP, Gary A. Watt, Michael B. McNaughton and Josephine K. Mason
for Defendants and Appellants Louise K. Morris and Walter C. Youngman, Jr.

James K. Perry for Plaintiffs and Appellants Donna Schwan, Alexis Johnson and Eileen
Ostrosky.

                                         27