Court Opinion

ID: 2813064
Source: CourtListenerOpinion
Date Created: 2015-06-30 18:05:01.673266+00
Date Added: 2024-06-11T11:30:26.586470
License: Public Domain

Filed 6/30/15 Schwan v. Heiser CA1/1
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION ONE

DONNA SCHWAN et al.,
         Plaintiffs and Appellants,                                  A143400

v.                                                                   (Contra Costa County
SCOTT A. HEISER, as Cotrustee, etc., et                              Super. Ct. No. MSP14-00302)
al.,
         Defendants and Respondents.

         This appeal arises 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) at the death of Walter C. Permann and his spouse, Verla D.
Permann.1
         Following Walter’s death in 2013, plaintiffs filed a petition for a judicial
determination that they are remainder beneficiaries of the Trust. Plaintiffs asserted the
court should excuse them from the condition they be employed at Control Master
Products at the deaths of Walter and Verla because the assets of the company were sold
in 2008, rendering satisfaction of the condition impossible. Plaintiffs also challenged a
provision of the Trust allocating certain funds to Walter C. Youngman, Jr., and his spouse

         1
       As Walter and Verla share the same surname, we shall refer to them by their first
names for the sake of clarity and readability. We intend no disrespect in doing so.
(collectively, defendants) upon the deaths of Walter and Verla, arguing the allocation is
void under Probate Code2 section 21380, because Youngman, an attorney, drafted and
supervised the execution of the Trust.
       After plaintiffs moved for summary adjudication of their section 21380 claim, the
trial court issued an order finding all of their claims premature because Verla had not yet
died. Plaintiffs now argue (1) the court denied them due process by raising and
addressing the ripeness issue sua sponte, and (2) their claims are ripe for adjudication.
We agree plaintiffs’ claims are ripe and therefore need not and do not address their due
process argument.
                                   I. BACKGROUND3
       Walter was the president, director, and sole shareholder of Control Master
Products, a distributor of specialty wire and industrial cables incorporated in 1964. In
2008, Walter sold the assets of Control Master Products to Industrial Electrical Wire and
Cable, Inc. (IEWC). Walter than amended the articles of incorporation of the company,
changing its name to Custom Model Products, Inc. (Custom Model Products).
Thereafter, Walter operated Custom Model Products as a hobby model train business
until his death in 2013.
       Plaintiffs are former employees of Control Master Products. Schwan was hired by
the company in 1978 and eventually became general manager. She worked at Control
Master Products until its sale, and since then has worked for IEWC. Ostrosky worked
with Walter even before Control Master Products incorporated, and was employed as a
supervisor at the company from 1964 through 2007, when she retired due to health
problems. Between 2007 and 2013, Ostrosky occasionally performed various jobs at the
request of Walter, though it is unclear if she was directly employed by Control Master

       2
        All further statutory references are to the Probate Code unless otherwise
indicated.
       3
        The facts set forth in this section are taken from the allegations in plaintiffs’
pleadings and the terms of the Trust. We take no position as to whether plaintiffs have
proven these allegations.

                                             2
Products after her retirement. Johnson was a secretary for Control Master Products from
1997 through 2008. Following Control Master Products’ sale, she was employed by
IEWC.
       In 1999, Walter executed the Trust, which was drafted by Youngman, an attorney
who had previously represented Walter in various other legal matters. Walter was
appointed trustee, and his wife Verla, along with Youngman and Scott Heiser, were
nominated as successor cotrustees. Pursuant to the Trust, while Walter was living, the
trustee was to pay to him the entire net income of the trust estate, in addition to as much
of the principal as he requested.
       The Trust also states that upon Walter’s death, the entire income of the Trust is to
be paid for the benefit of Verla during her lifetime. Upon Verla’s death, the Trust may be
distributed among 12 beneficiaries. Schwan, Ostrosky, and Johnson are entitled to 20,
10, and 5 percent, respectively, so long as each “is employed by Control Master Products,
Inc. at the death of [Walter] and [Verla] and if not, th[e] gift shall lapse and augment the
share of the remaining beneficiaries.” Ten percent is to be distributed to Youngman if he
survives Walter and Verla, and if not, to Youngman’s spouse. If Youngman’s spouse
does not survive, the proceeds shall go to their issue by right of representation, and if
there are none, the gift will lapse and augment the share of the remaining beneficiaries.
The trustee also has the discretion to pay to any beneficiary so much of the principal up
to and including the whole of the trust, if the trustee determines the payments from the
trust “shall be insufficient . . . to provide for the reasonable support, care, and education
of such beneficiary.”
       Following Walter’s death in 2013, Youngman and Heiser advised plaintiffs that
they were not entitled to a share of the Trust estate because they were no longer
employed by Control Master Products. Plaintiffs then filed this action pursuant to
section 17200, petitioning for orders (1) determining their status as remainder
beneficiaries of the Trust, and (2) voiding the transfer of any of the Trust estate to
Youngman and his family. As to the first point, plaintiffs asserted the employment
requirement should be struck under the legal doctrines of impossibility, substantial

                                               3
performance, betterment, and waiver. With respect to the second point, plaintiffs alleged
that under section 21380, the transfers to Youngman were presumptively a product of
fraud or undue influence since Youngman drafted and supervised the execution of the
Trust. Though another attorney also conducted a review of the Trust, plaintiffs maintain
the review process failed to meet the validation requirements of section 21384.
       In June 2014, plaintiffs filed a motion for summary adjudication as to their claim
regarding the disqualification of Youngman. At the conclusion of oral argument on the
motion, the court indicated it was issuing an order finding plaintiffs’ petition premature
and not ripe for adjudication. The court’s written order explained: “[T]he plain language
of the trust dictates that the death of both the trustor and his spouse must have occurred
[for plaintiffs to take]. Here, because Verla is still alive, any discussion of whether the
doctrines of impossibility, substantial performance, and betterment waive or excuse the
condition precedent is premature because any of the petitioners may predecease Verla. [¶]
Similarly, the Youngmans must survive [Walter and Verla] in order to take under the
trust.” The court stated plaintiffs could refile their claim in the future, after Verla’s death,
and the court exercised its equitable authority to deem plaintiffs’ challenge exempt from
the applicable statute of limitations.4
                                     II. DISCUSSION
A. Jurisdiction
       Defendants argue we lack jurisdiction to hear this appeal because (1) the order
finding the petition premature is not appealable, and (2) plaintiffs do not constitute an
aggrieved party and therefore lack standing to appeal. We are not persuaded.
       As to the first argument, section 1304 identifies a variety of appealable orders,
including the grant or denial of any “final order” issued pursuant to section 17200.
(§ 1304, subd. (a).) Defendants assert the trial court’s order was not final, and thus not

       4
        At the hearing, the court also indicated plaintiffs’ motion for summary
adjudication was denied because there were triable issues of fact. The court asked
defendants’ attorney to prepare an order regarding the disposition of the motion, though it
appears the parties have yet to agree on the content of that order.

                                               4
appealable, because it did not grant or refuse to grant an order under section 17200, but
merely determined plaintiffs’ petition was premature and not ripe for determination. The
contention is unavailing. A case is not justiciable in the absence of a ripe controversy.
(Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal. App. 4th 1559, 1585.)
Where a plaintiff’s claims are not ripe, the appropriate remedy is for a trial court to
dismiss the action. (Ibid.) Here, the court’s order concerning the ripeness of the action
essentially terminated the proceedings. Although the court did not expressly deny
plaintiffs’ requested order, there is no ambiguity about its intent—the court clearly
indicated the parties’ dispute would need to be resolved in another action, stating
plaintiffs could refile their claims upon Verla’s death. At the conclusion of the hearing,
the court also indicated its order disposed of the matter in its entirety, stating, “writs [and]
appeals may follow, but I don’t think I’ve got anything else in front of me.”
       Second, we find unavailing defendants’ contention that we should not address the
trial court’s ripeness determination because plaintiffs lack standing to challenge it. Only
an aggrieved party may appeal. (Code Civ. Proc., § 902.) “An aggrieved person, for this
purpose, is one whose rights or interests are injuriously affected by the decision in an
immediate and substantial way, and not as a nominal or remote consequence of the
decision.” (In re K.C. (2011) 52 Cal. 4th 231, 236.) According to defendants, plaintiffs’
interest in the Trust is not immediate and they were not injuriously affected by the trial
court’s order because their claims are not ripe. As the merits of plaintiffs’ appeal turns
on the ripeness of their claims, we find defendants’ argument circular. The concepts of
standing and ripeness are intertwined and both are issues of justiciability. (City of Santa
Monica v. Stewart (2005) 126 Cal. App. 4th 43, 59.) In this case, we cannot resolve
defendants’ standing argument without addressing the merits of the appeal.

                                               5
B. Ripeness
       “[R]ipeness is a matter of law subject to de novo review.”5 (Environmental
Defense Project of Sierra County v. County of Sierra (2008) 158 Cal. App. 4th 877, 885.)
In this case, the trial court concluded plaintiffs’ claims were premature because their
interests in the trust were “indefinite.” The court reasoned plaintiffs sought to challenge
their designation as contingent remainder beneficiaries when one of the conditions
precedent had not yet occurred. But if plaintiffs are correct that the condition precedent
in the Trust must be waived, plaintiffs’ right to take is not dependent on satisfaction of
that condition and there is no need to wait to adjudicate their claims. As the ripeness of
plaintiffs’ petition is entirely dependent on the merits of their claim, we find they have
presented a judiciable controversy.
       “The ripeness requirement . . . prevents courts from issuing purely advisory
opinions. [Citation.] It is rooted in the fundamental concept that the proper role of the
judiciary does not extend to the resolution of abstract differences of legal opinion. . . .
[and] is primarily bottomed on the recognition that judicial decisionmaking is best
conducted in the context of an actual set of facts so that the issues will be framed with
sufficient definiteness to enable the court to make a decree finally disposing of the
controversy.” (Pacific Legal Foundation v. California Coastal Com. (1982) 33 Cal. 3d
158, 170.) The ripeness doctrine, however, should not prevent courts from adjudicating
matters where (1) the dispute is concrete and appropriate for immediate resolution, and
(2) delayed resolution would present a hardship to the parties. (Id. at pp. 170–173.)
       First, we focus on the ripeness of plaintiffs’ claim that they should be excused
from the employment conditions set forth in the Trust. The definiteness of this claim
turns, in large part, on the nature of plaintiffs’ interest in the Trust. As drafted, the Trust
grants each beneficiary a contingent remainder, i.e., a future interest, subject to a
condition precedent, arising in a beneficiary, who is intended to take after the natural

       5
        Defendants argue de novo review is inappropriate, but do not cite any supporting
authority. Nor do they suggest an alternative standard of review.

                                               6
termination of the preceding estate, which will occur upon the death of Verla. (See
Black’s Law Dict. (5th ed. 1979) p. 1162, col. 1.) The interest of most of the
beneficiaries is subject to the condition precedent that they, their spouse, or their issue
survive Walter and Verla. Plaintiffs’ interests in the Trust are unique as they are subject
to the condition precedent that plaintiffs be employed by Control Master Products at the
deaths of Walter and Verla.
       The crux of plaintiffs’ petition is performance of this condition precedent should
be excused or waived under the doctrines of impossibility, substantial performance, and
betterment. Plaintiffs reason the sale of Control Master Products renders performance of
the condition impossible. According to plaintiffs, once performance of the condition is
excused, there is no requirement they survive Walter and Verla in order to take under the
Trust. While their possessory interest may not vest until Verla’s death, plaintiffs assert
their right to take at that time is not subject to a survival requirement.6
       The trial court expressly declined to address whether the condition precedent set
forth in the Trust should be waived or excused, stating plaintiffs’ claims were premature
because Verla is still alive and there is a possibility plaintiffs may predecease her.
Implicit in the trial court’s reasoning is that, in the event plaintiffs predecease Verla, they
will no longer have any claim to the Trust. Thus, the court rejected plaintiffs’ claim that
the Trust does not impose a survivorship requirement, while expressly declining to reach
the merits of that claim.7 This was error. Contrary to the court’s suggestion, plaintiffs’

       6
         Defendants contend the Trust imposes on plaintiffs two conditions precedent:
(1) they must be employed by Control Master Products at Walter’s and Verla’s deaths,
and (2) they must survive Walter and Verla. According to defendants, even if plaintiffs
are excused from performing the employment condition, the survivorship condition still
applies. This argument goes to the merits of plaintiffs’ claims, which as defendants
concede, are not properly before us.
       7
         Defendants argue the trial court already determined the Trust imposed a
survivorship requirement on plaintiffs based on unambiguous terms of the Trust, pointing
to the court’s statement that “the plain language of the trust dictates that the death of both
the trustor and his spouse must have occurred.” But the court was merely explaining that
plaintiffs’ possessory interests do not vest until after the deaths of Walter and Verla.

                                               7
claims would not be mooted if they predeceased Verla. In such an event, a later action by
plaintiffs’ estates would present the same issues plaintiffs raise now, including whether
the Trust imposes a survivorship requirement on plaintiffs and whether the employment
conditions set forth in the Trust should be waived. In short, delaying the action will not
resolve the issues presented.
       Defendants argue resolution of plaintiffs’ claims should be delayed because there
may be nothing left in the Trust upon Verla’s death. But Verla is entitled to only the net
income from the Trust, and there is no indication the Trust’s administrative costs will
exceed its income. At oral argument, defendants asserted, for the first time, that Verla is
also entitled to take the entire principal of the Trust during her lifetime. They cited to the
provision of the Trust granting the trustee discretion to pay to “any beneficiary” any
portion of the Trust’s principal where payments from the trust, together with other
income or resources of the beneficiary, are “insufficient in the discretion of the Trustee to
provide for the reasonable support, care and education of such beneficiary.” Setting aside
that we need not consider arguments not raised in the briefs, we are unconvinced. As the
trial court dismissed this action sua sponte, there is no evidence in the record concerning
the value of the Trust or whether the Trust’s income is adequate to meet Verla’s needs.8
To the extent the Trust’s principal is significant, it is also seems unlikely the trustee
would need or want to deplete the entire principal of the Trust in order to supplement
Verla’s income. Thus, at this point, it is entirely speculative whether Verla will outlive
the Trust’s principal.
       Moreover, delayed resolution of the petition may pose a substantial hardship on
plaintiffs. In time, witnesses may pass away and evidence may disappear, making it
more difficult to conduct discovery concerning Walter’s intent in drafting the Trust.
Defendants contend the trial court need not consider extrinsic evidence because the plain

Nowhere in the court’s order does it conclude the trust requires plaintiffs to survive
Walter and Verla in order to take.
       8
        In answering defendants’ newly raised contention at oral argument, appellant
represented that the Trust’s principal is approximately $20 million.

                                               8
language of the Trust is clear and unambiguous. At the same time, defendants argue any
proposed construction of the bequest to plaintiffs is not properly before us because the
trial court did not construe those provisions below. We agree with the latter point, and
we decline to opine on whether the introduction of extrinsic evidence is necessary or
proper. Defendants also contend delay would not prejudice plaintiffs because the parties
have already taken several depositions and exchanged documents, and plaintiffs filed a
motion for summary adjudication on one of their claims. However, it remains unclear
whether the period for discovery has expired or whether plaintiffs have had a fair
opportunity to collect the evidence they require for each and every one of their claims.
       Our discussion thus far has focused on plaintiffs’ claim that they are entitled to
take under the Trust. Plaintiffs’ section 21380 claim concerning Youngman’s right to
take is less concrete since the gift to Youngman is expressly conditioned upon him, his
wife, or his issue surviving Walter and Verla, and there is a possibility Verla will outlive
them all. But this dispute is not so abstract as to warrant dismissal. To the extent the
Youngmans do have children or grandchildren, it seems likely they would survive Verla.
Also, indefinitely delaying the adjudication of the section 21380 claim may prejudice
plaintiffs, as evidence concerning Youngman’s role in drafting the Trust, as well as
evidence concerning the purportedly independent review of Youngman’s work, may
disappear with time. Moreover, judicial economy counsels against continuing the
proceedings on the section 21380 claim while allowing plaintiffs’ other claims to
proceed.
       In sum, we conclude the court erred in dismissing plaintiffs’ claims as premature.
However, we do not hold the doctrines of impossibility, substantial performance, or
betterment apply in this case. Nor do we hold plaintiffs should be excused from the
condition concerning their employment at Control Master Products, or even that the Trust
does not impose a survivorship requirement on plaintiffs. These are all issues for the trial
court to decide.
                                   III. DISPOSITION
       The order of the trial court concerning ripeness is reversed.

                                              9
                                 _________________________
                                 Margulies, Acting P.J.

We concur:

_________________________
Dondero, J.

_________________________
Banke, J.

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