Court Opinion

ID: 9367731
Source: CourtListenerOpinion
Date Created: 2023-02-01 19:02:56.644191+00
Date Added: 2024-06-11T17:16:02.998615
License: Public Domain

Filed 2/1/23 Koenig v. Koenig CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                        DIVISION TWO

VIRGINIA JUNG LUM                                          B322647
KOENIG,
                                                           (Santa Clara County
         Plaintiff and Respondent,                         Super. Ct. No. 21PR190203)

         v.

LESLEY KOENIG et al.,

     Defendants and
Appellants.

      APPEAL from an order of the Superior Court of Los
Angeles County, Julie A. Emede, Judge. Affirmed.
      Law Office of Kenneth H. Prochnow and Kenneth H.
Prochnow for Defendants and Appellants.
      Wagstaff, von Loewenfeldt, Busch & Radwick, Michael von
Loewenfeldt; Jorgenson, Siegel, McClure & Flegel and John L.
Flegel, for Plaintiff and Respondent.
      Appellants Lesley Koenig and Diana “Dee” Koenig Otte
(sometimes grandchildren)1 appeal from the probate court’s order
on the petition of respondent Virginia Jung Lum Koenig, who
sought instructions under Probate Code section 172002 regarding
a transfer of real property to the Koenig Family Trust. The issue
is whether this triggered Lesley and Dee’s right of first refusal to
purchase the property. The trial court found that the property
had not been transferred into the trust, that if a transfer had
occurred, it did not trigger a right of first refusal, and that Lesley
and Dee did not have the right to obtain the real property at no
cost. We affirm the order.

                    FACTUAL BACKGROUND
       Frederick Koenig obtained the home at 13651 Old Altos
Road, Los Altos, California (Los Altos home), in 1979 as a bequest
in the will of his mother, Marie-Luise Koenig. A provision was
included in her will that if Frederick chose to sell or otherwise
dispose of the Los Altos home, then her other son, George
Koenig,3 or her grandchildren would have a right of first refusal
to purchase the Los Altos home from Frederick. Marie-Luise’s
will allowed George or her grandchildren 60 days to exercise the
right of first refusal after they received written notice of
Frederick’s decision to sell or otherwise dispose of the Los Altos

1      In that many of the parties share the same surname, we
will refer to them by their first name. We mean no disrespect.
2     All further statutory references are to the Probate Code
unless otherwise specified.
3     In 2014 George and his son Nick both waived any claim to
the property.

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home. The right of first refusal allowed George or the grandchild
to purchase the home for the lesser of the sale price or the fair
market value of the property, as determined by an independent
appraiser. The probate court confirmed the transfer of the real
property to Frederick in a 1981 order for final distribution of
Marie-Luise’s estate.
       In 2014, while making an estate plan, Frederick filed a
petition to seek an order clarifying whether the right of first
refusal would be triggered if he transferred the Los Altos home
into a revocable trust. The trial court denied the petition on the
ground that it lacked the authority to clarify the 1981 order for
final distribution of Marie-Luise’s estate.
       Frederick then drafted a will that directed the executor to
transfer the Los Altos home to the trustee of the Koenig Family
Trust, dated September 27, 1993, so it could be added to the trust
estate. He also directed the executor to comply with the
procedures identified in the 1981 order for final distribution by
giving written notice of the transfer to the grandchildren.
       In 2018, Frederick and his wife Virginia executed an
amendment to the Koenig Family Trust in which they made a
general assignment of all real and personal property to the
Koenig Family Trust. In the amendment, they agreed that either
settlor could revoke the trust and that they could withdraw their
property from the trust without notice to the other settlor.

               PROCEDURAL BACKGROUND
      Frederick passed away on February 17, 2019. His will
designated Virginia to be the executor, and she filed a petition on
March 18, 2019, for probate of Frederick’s will.

                                 3
       Lesley and Dee, Frederick’s daughters from a previous
marriage, then filed a petition under section 850 on August 12,
2019, to request that the Los Altos home be transferred out of the
probate estate. They claimed a right to the Los Altos home
following their discovery that Frederick had transferred the Los
Altos home to the Koenig Family Trust in the 2018 amendment
to the trust. They alleged that this transfer allowed them to
exercise their right of first refusal and obtain the Los Altos home
at no cost to them because Frederick had received no money
when he transferred the Los Altos home into the trust.
       Before the trial court made a decision on the section 850
petition, Virginia filed a petition under section 17200 on May 18,
2021, requesting a determination whether the general
assignment of assets in the 2018 amendment to the Koenig
Family Trust had triggered the right of first refusal. On
August 23, 2021, the trial court granted relief to Virginia on her
petition by finding that the assignment did not transfer the Los
Altos home into the trust. The order added that, even if the Los
Altos home had been transferred to the trust, the transfer was
not a sale or disposition of the Los Altos home for the purposes of
the right of first refusal in Marie-Luise’s will.
       Lesley and Dee filed a timely notice of appeal of the order
on Virginia’s petition on October 21, 2021. As to Lesley and Dee’s
separate petition for relief under section 850, the trial court
stayed proceedings until the decision on this appeal.

                         DISCUSSION
I.    Standard of review
      The probate court has wide discretion to make any order
and take any action necessary or proper to dispose of matters

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presented by a petition under section 17200. (Manson v.
Shepherd (2010) 188 Cal.App.4th 1244, 1258.) The applicable
standard of review, therefore, is abuse of discretion. (Ibid.)
       This standard, however, is not a unified standard; the
deference it calls for varies according to the aspect of a trial
court’s ruling under review. (Manson v. Shepherd, supra, 188
Cal.App.4th at p. 1259.) The trial court’s findings of fact are
reviewed for substantial evidence, its conclusions of law are
reviewed de novo, and its application of the law to the facts is
reversible only if arbitrary and capricious. (Ibid.)
       The main question presented in this appeal is whether the
trial court correctly concluded that Frederick did not trigger the
right of first refusal in Marie-Luise’s will by amending the
Koenig Family Trust in 2018. “The interpretation of a will or
trust instrument presents a question of law unless interpretation
turns on the credibility of extrinsic evidence or a conflict therein.”
(Burch v. George (1994) 7 Cal.4th 246, 254.) Lesley and Dee argue
that we should use the de novo standard of review because we are
interpreting a phrase in a will. This is the standard we use here
because we are reviewing the trial court’s conclusions of law with
regard to the interpretation of a will and trust. Further, there is
no indication in the record that the parties offered or the trial
court used any extrinsic evidence to determine the meaning of
the will or trust documents. Courts may utilize extrinsic evidence
to aid in construing a will or trust if it first finds that the will is
ambiguous. (Estate of Dodge (1971) 6 Cal.3d 311, 318.) The order
does not indicate that the trial court made any such finding of
ambiguity; therefore, we assume that the trial court followed the
mandate of section 21102 and relied exclusively upon “[t]he
intention of the transferor as expressed in the instrument.” We,

                                  5
therefore, use the de novo standard because the interpretation of
the will and trust involves solely conclusions of law.
II.    Principles of will and trust interpretation
       The rules governing the construction and interpretation of
wills and trusts are set out in part 1 of division 11 of the Probate
Code. The intention of the transferor, “as expressed in the
instrument,” controls our interpretation. (§ 21102.) The words of
an instrument are to be given their ordinary and grammatical
meaning. (§ 21122.)
       Where there are provisions in a will or trust that appear to
conflict, the different parts “are to be construed in relation to
each other and so as, if possible, to form a consistent whole.”
(§ 21121.) Further, “[t]he words of an instrument are to receive
an interpretation that will give every expression some effect,
rather than one that will render any of the expressions
inoperative.” (§ 21120.)
       Bearing these principles in mind, we turn to the language
of Marie-Luise’s will and the 2018 amendment and restatement
of the Koenig Family Trust to determine whether Lesley and
Dee’s right of first refusal arose in 2018.
III. No right of first refusal in 2018 on transfer into the
       Koenig Family Trust
       Paragraph “SIXTH” of Marie-Luise’s will contains the right
of first refusal for the Los Altos home:
              “If my son FREDERICK and any of my
       grandchildren survive me for 30 days and
       FREDERICK inherits my residence situated in Santa
       Clara County, California, and commonly known as
       13651 Old Altos Road, Los Altos, California, he shall
       give written notice to my grandchildren and my son,

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      GEORGE in the event he thereafter desires to sell or
      otherwise dispose of my residence to someone other
      than one or more of my grandchildren. Delivery of
      such notice to my grandchildren and GEORGE shall
      be deemed to be an offer by FREDERICK to sell my
      said residence as provided below. Within 60 days
      after the receipt of said notice, my grandchildren and
      GEORGE shall have a ‘right of first refusal’ to
      purchase my residence for the lesser of the following
      amounts: (1) the selling price, or (2) the fair market
      value of the property at that time, as determined by
      an independent appraiser acceptable to all parties.”4

4     When the probate of Marie-Luise’s will occurred, the
probate court issued on June 3, 1981, an “ORDER AND DECREE
SETTLING AND CONFIRMING FIRST AND FINAL REPORT
AND WAIVER OF ACCOUNT OF EXECUTOR AND OF FINAL
DISTRIBUTION OF ESTATE AND ALLOWANCE OF FEES TO
EXECUTOR’S ATTORNEYS FOR THEIR ORDINARY
SERVICES,” i.e., a decree of distribution. “A decree of
distribution is a judicial construction of the will arrived at by the
court ascertaining the intent of the testator. . . . Once final, the
decree supersedes the will . . . and becomes the conclusive
determination of the validity, meaning and effect of the will, the
trusts created therein and the rights of all parties thereunder.”
(Estate of Callnon (1969) 70 Cal.2d 150, 156, citations and
footnote omitted.) The probate court’s decree of distribution
restated the relevant portions of paragraph SIXTH of Marie-
Luise’s will. It did not include any judicial construction of the
terms in the will or any language ascertaining the intent of
Marie-Luise. As a result, the probate court’s decree does not
include any conclusion determination on the meaning of the right

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       “‘A right of first refusal is a contractual right to purchase
property in the event the owner decides to sell.’” (J&A Mash &
Barrel, LLC v. Superior Court (2022) 74 Cal.App.5th 1, 34.) The
holder of the right merely has the preference to purchase the
property over other purchasers if the owner of the property
“‘elects to sell the property.’” (Ibid.) It is a conditional right that
arises when the specified conditions exist. (Ibid.)
       The contract terms dictate the particular circumstances
that will trigger the right. (Hartzheim v. Valley Land & Cattle
Co. (2007) 153 Cal.App.4th 383, 389.) The question presented is
primarily one of contract interpretation. (Ibid.) Unless
interpretation turns upon the credibility of extrinsic evidence,
interpretation of a contract is purely a judicial function. (Ibid.)
       “‘“‘When a dispute arises over the meaning of contract
language, the first question to be decided is whether the language
is “reasonably susceptible” to the interpretation urged by the
party. If it is not, the case is over. [Citation.] If the court decides
the language is reasonably susceptible to the interpretation
urged, the court moves to the second question: what did the
parties intend the language to mean?’”’” (Hartzheim v. Valley
Land & Cattle Co., supra, 153 Cal.App.4th at pp. 389-390.)
       In Marie-Luise’s will, the specified condition that triggers
the right of first refusal is when Frederick “. . . desires to sell or
otherwise dispose of my residence to someone other than one or
more of my grandchildren.” We begin, therefore, by determining
whether the language of paragraph SIXTH is reasonably

of first refusal. Since the parties cite to the will when analyzing
the right of first refusal in their papers, we will cite to the will
and not the decree to avoid confusion and maintain consistency.

                                  8
susceptible to the meaning Lesley and Dee give it, i.e., that the
2018 amendment and restatement of the Koenig Family Trust
triggered the right of first refusal.
      In 2018, Frederick and Virginia amended and restated the
Koenig Family Trust, which had been executed on September 27,
1993, and then amended on December 20, 1998, June 1, 2010,
and May 1, 2015. The trust identifies the trust property as that
described in “Schedule A,” which is labeled “General Assignment
of Assets to Revocable Trust.” In Schedule A, Frederick and
Virginia assign, transfer, and convey the following to Frederick
and Virginia, as trustees of the Koenig Family Trust:
      “all right, title, and interest in and to all real
      property in the United States and all personal
      property, tangible and intangible, now owned or
      hereafter acquired by them jointly or individually,
      including, by way of illustration and not by way of
      limitation, all of their jewelry, clothing, household
      furniture and furnishings, personal automobiles,
      books, and other tangible articles of a personal
      nature; real property; publicly traded or privately
      held stocks, bonds, or other securities; partnership
      interest, whether as a general or as a limited partner;
      sole proprietorships; deeds of trust; safe deposit
      boxes; and certificates of deposits, bank accounts,
      brokerage accounts and other similar accounts,
      excluding IRAs and any employer plans, as those
      plans are defined in Internal Revenue Code Sections
      401-416.”
      The transfer of all right, title, and interest in and to all real
property to the trust is not a sale because there is no exchange of
consideration. However, the transfer to the trust could be a
disposal of Frederick’s interest in the Los Altos home. “Dispose
of” means “‘[t]o transfer or part with, as by giving or selling.’”

                                   9
(People v. Splawn (1985) 165 Cal.App.3d 553, 558.) The phrase
“all real property” would apply to Frederick’s interest in the Los
Altos home. Since Frederick assigned, transferred, and conveyed
his interest in “all real property,” which included his interest in
the Los Altos home, this transfer in Schedule A could be
interpreted as a disposal of his interest in the Los Altos home.5
       In her will, however, Marie-Luise identified the particular
circumstances that created the right of first refusal as Frederick
selling or otherwise disposing of the Los Altos home to someone
other than one or more of her grandchildren. Here, Frederick
transferred the property to his family trust. A trust is not a legal
entity. (Boshernitsan v. Bach (2021) 61 Cal.App.5th 883, 891.)
Since the trust is not a legal entity, the transfer of his property to
the trust was not the disposal of the Los Altos home to someone
other than one or more of Marie-Luise’s grandchildren.
       Further, under the heading labeled “Administration,” the
trust states in section 1.3 that either settlor may, without notice
to the other settlor, revoke any trust or withdraw property from
any trust created by the trust document. A revocable trust is a
trust that the person who creates it, generally called the settlor,
can revoke during the person’s lifetime. (Barefoot v. Jennings

5     The 2018 amendment and restatement plus accompanying
Schedule A are sufficient to transfer the real property into the
Koenig Family trust because they are writings signed by
Frederick to transfer the property from him, as settlor, to him, as
trustee. (Estate of Heggstad (1993) 16 Cal.App.4th 943, 950 [“[A]
written declaration of trust by the owner of real property, in
which he names himself trustee, is sufficient to create a trust in
that property, and that the law does not require a separate deed
transferring the property to the trust.”].)

                                 10
(2020) 8 Cal.5th 822, 826.) This language in section 1.3 of the
2018 amendment and restatement establishes that the Koenig
Family Trust is a revocable living trust.
       When settlors transfer property to a revocable living trust,
such property “is considered the property of the settlor for the
settlor’s lifetime.” (Estate of Giraldin (2012) 55 Cal.4th 1058,
1065–1066.) “‘[A] revocable inter vivos trust is recognized as
simply “a probate avoidance device,”’ and, ‘when property is held
in this type of trust, the settlor and lifetime beneficiary “‘has the
equivalent of full ownership of the property.’”’” (Boshernitsan v.
Bach, supra, 61 Cal.App.5th at pp. 891-892.)
       The transfer of Frederick’s interest in the Los Altos home
to a revocable trust, therefore, was not the disposal of the
property to someone other than Marie-Luise’s children.6 Instead,
the Los Altos home was considered the property of Frederick, the
settlor, during his lifetime and he had the equivalent of full
ownership of the property.

6      One court has found that a transfer of property to a
revocable trust did not “dispose of or part with an asset” for the
purposes of a fraudulent conveyance because the property is still
reachable by creditors. (Gagan v. Gouyd (1999) 73 Cal.App.4th
835, 842, disapproved with regards to holdings concerning
marital settlement agreements in the context of fraudulent
concealment in Mejia v. Reed (2003) 31 Cal.4th 657, 669.) Lesley
and Dee suggest Frederick made the transfer to the Koenig
Family Trust to thwart the intent of Marie-Luise in her will.
Since the transfer to a revocable trust could not dispose of his
interest in the Los Altos home, it did not thwart Marie-Luise’s
intent because her grandchildren could still reach it and exercise
their right of first refusal once an actual sale or disposal of the
Los Altos home occurred.

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       The trial court, therefore, correctly found that the transfer
of the Los Altos home to the Koenig Family Trust in 2018 was not
a sale or disposition of the property for the purposes of Marie-
Luise’s will. We thus affirm the trial court’s order that granted
Virginia’s petition.
       The trial court, however, did err in part when it found that
the Los Altos home was not made an asset of the Koenig Family
trust. The unambiguous language in Schedule A to the 2018
amendment and restatement shows that Frederick transferred
his rights and interest in all real property to the trust. This
would include his interest in the Los Altos home.
       However, any error was not prejudicial because the 2018
transfer did not create the circumstances for Lesley and Dee to
obtain a right of first refusal that would allow them to purchase
the Los Altos home at no cost to them. After the 2018 transfer,
Frederick had the equivalent of full ownership of the Los Altos
property. No other party had control, possession, or an ownership
interest in the Los Altos property. Since the home had not been
sold or disposed of to someone other than the grandchildren of
Marie-Luise, the 2018 transfer did not trigger Leslie and Dee’s
right of first refusal.
       The trial court, thus, correctly granted Virginia’s petition
and found that Lesley and Dee’s right to first refusal did not arise
in 2018 when Frederick transferred the property to himself as
trustee of the Koenig Family Trust.
IV. Grandchildren have a right of first refusal to
       purchase the property, but not to receive it without
       cost
       Lesley and Dee also argue that the trial court erred when it
found that they cannot receive the property for no cost. In

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paragraph 4 of its order, the trial court found “Paragraph
SIXTH A of the Last Will of Marie-Luise Koenig dated June 7,
1979 contains an option for [Lesley and Dee] to purchase the
Property upon the happening of certain conditions, not to receive
it for free.”
        A review of Marie-Luise’s will reveals this is the correct
interpretation of the manner for exercising the right of first
refusal. Paragraph SIXTH has two sections, part A and part B.
Part A applies if Frederick is alive and he seeks to sell or dispose
of the Los Altos home. If Lesley and Dee then decide to exercise
the right of first refusal, the price to purchase the property is “the
lesser of the following amounts: (1) the selling price, or (2) the
fair market value of the property at that time, as determined by
an independent appraiser acceptable to all parties.” Part A does
not state that the grandchildren have any right to receive the
property free. Instead, as the trial court found, Lesley and Dee
have the right to purchase the property at the price specified in
paragraph SIXTH, part A, of Marie-Luise’s will.
        Part B of paragraph SIXTH applies after Frederick dies
and in other specified circumstances that do not fall within
paragraph A.7 In these specified circumstances, the

7     These include Frederick being adjudicated a bankrupt, a
guardian or conservator being appointed for Frederick’s estate,
Frederick making an assignment for the benefit of creditors, an
interest being transferred or awarded to a spouse pursuant in a
dissolution, property settlement, or separation agreement, or
Frederick’s spouse disposing of an interest in the property for the
benefit of someone other than Frederick or Marie-Luise’s
grandchildren.

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grandchildren have the right of first refusal, but the purchase
price is the fair market value.
       The trial court, therefore, correctly found that Marie-
Luise’s will does not allow Lesley and Dee to receive the Los Altos
home at no cost to them.

                        DISPOSITION
     We affirm the trial court’s order. Each side is to bear their
own costs.

                                     ________________________
                                     CHAVEZ, J.

We concur:

________________________
LUI, P. J.

________________________
BENKE, J.*

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

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