Court Opinion

ID: 6342840
Source: CourtListenerOpinion
Date Created: 2022-05-20 20:02:23.126881+00
Date Added: 2024-06-11T09:19:25.633312
License: Public Domain

Filed 5/20/22 In re The Joseph Schrage Revocable Trust CA2/7
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 SEVEN

In re THE JOSEPH SCHRAGE                                    B313199
REVOCABLE TRUST                                             (Los Angeles County Super.
                                                            Ct. No.19STPB08564)

LEONARD SCHRAGE,

         Plaintiff and Respondent,

         v.

ALEXIS TAYLOR SCHRAGE, as
former trustee,

         Defendant and Appellant.

      APPEAL from a judgment and order of the Superior Court
of Los Angeles County, Clifford L. Klein, Brenda Penny and
Robert S. Wada, Judges. Reversed and remanded with
directions.
      Randall S. Waier for Defendant and Appellant.
     Mitchell Silberberg & Knupp, Allan B. Cutrow, and
Andrew C. Spitser for Plaintiff and Respondent.
                  __________________________

      Alexis Taylor Schrage, former trustee of the Joseph
Schrage Revocable Trust (Trust), appeals from a May 18, 2021
probate court judgment granting Leonard Schrage’s petition
under Probate Code section 8501 for an order that the proceeds
from the life insurance policies in the name of Leonard’s deceased
brother Joseph Schrage are subject to Leonard’s claim based on a
2019 civil judgment Leonard obtained against Joseph and
another brother, Michael Schrage.2 Alexis also appeals from the
probate court’s order granting Leonard’s ex parte application to
suspend Alexis’s powers as trustee and to appoint an interim
successor trustee.
      While this appeal was pending, on September 2, 2021 we
reversed the 2019 judgment, concluding Leonard did not have
standing to assert an individual cause of action against Joseph
and Michael for breach of fiduciary duty. (Schrage v. Schrage
(2021) 69 Cal.App.5th 126, 158.)
      We invited the parties to submit supplemental briefs on
whether Alexis’s appeal is now moot. Leonard argues that
although Alexis’s appeal from the probate court judgment based
on the 2019 judgment is moot, we should exercise our discretion

_____________________

1    Further undesignated statutory references are to the
Probate Code.
2     Because the family members share the same last name, we
use their first names to avoid confusion.

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to consider the appeal because Leonard plans to seek leave to file
an amended complaint restating his civil claim as a derivative
action, and further, other potential creditors will be in a similar
position. He also contends Alexis’s appeal of the order
suspending her trustee powers is not moot because his petition
was based in part on Alexis squandering the assets of the Trust.
Alexis argues both aspects of her appeal are moot because
Leonard is no longer a creditor with respect to the Trust, and as
to Leonard’s claim Alexis should not be allowed to serve as
trustee, he no longer has standing to assert this argument on
behalf of other creditors or beneficiaries. Alexis urges us to
reverse the probate court judgment and the order suspending her
trustee powers because dismissing the appeal would have the
effect of affirming the judgment and order.
       We agree with Alexis that her appeal is now moot. Because
dismissing her appeal would have the effect of affirming the
probate court judgment, we reverse the judgment and remand for
the probate court to dismiss Leonard’s section 850 petition as
moot. As to the order suspending Alexis’s powers as trustee and
appointing an interim successor trustee, we reverse the order and
remand for further proceedings regarding the appointment of an
interim successor trustee (or successor trustee).

      FACTUAL AND PROCEDURAL BACKGROUND

A.    The Civil Lawsuit
      Leonard, Joseph, and Michael owned Sage Automotive
Group, which in turn owned and operated multiple car
dealerships. In April 2015 Leonard filed a lawsuit against
Joseph and Michael asserting claims against the brothers and

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14 corporate entities in the Sage Automotive Group for
involuntary dissolution of the entities and breach of fiduciary
duty arising from Joseph and Michael’s alleged self-dealing and
mismanagement of the businesses. (Schrage v. Schrage, supra,
69 Cal.App.5th at p. 133.) On March 12, 2019 Leonard obtained
a $31 million judgment against Joseph and Michael (2019
judgment). (Id. at p. 135.)

B.    The Trust and Leonard’s Section 850 Petition
      Joseph established the Trust in 2011, designating himself
as the trustee. Joseph’s three children—Alexis, Lili Schrage, and
Pilar Schrage—are the beneficiaries of the Trust. Joseph died on
May 10, 2019. Upon Joseph’s death, David R. Schneider became
the successor trustee. On July 24, 2019 Schneider filed a petition
to probate Joseph’s will, which listed the value of Joseph’s estate
as approximately $30,000. However, according to Leonard, the
Trust received at least $9 million in life insurance proceeds as the
beneficiary of several life insurance policies in Joseph’s name.
The trust assets, including the insurance proceeds, were
distributed in equal shares to separate trusts for Alexis, Lili, and
Pilar. In August 2019 Alexis, Lili, and Pilar agreed to remove
Schneider as trustee and to appoint Alexis as the successor
trustee.
      On September 10, 2019 Leonard filed a verified petition
pursuant to section 8503 seeking an order declaring the insurance

_____________________

3    Under section 850, subdivision (a)(3)(C), an “interested
person” may file a petition seeking an order “[w]here the property

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benefits and other assets of the Trust to be subject to Leonard’s
claim as Joseph’s creditor.

C.     Leonard’s Petitions To Prevent Alexis From Spending Trust
       Assets and To Suspend Alexis as Trustee and Appoint
       Interim Successor Trustee
       On May 18, 2020 Leonard filed a petition requesting an
order barring Alexis from spending, distributing, or encumbering
any assets of Joseph’s estate other than for payment of routine
estate administration expenses. After a hearing, the probate
court granted the petition, and on October 26, 2020 the court
entered an order providing the requested relief.
       On February 1, 2021 Leonard filed a verified ex parte
petition under sections 15642, subdivision (e), and 17206,4
requesting the probate court suspend Alexis’s powers as trustee
and appoint an interim successor trustee, or in the alternative,

_____________________

of the trust is claimed to be subject to a creditor of the settlor of
the trust.” Leonard also relied on section 855, which provides,
“An action brought under this part may include claims, causes of
action, or matters that are normally raised in a civil action to the
extent that the matters are related factually to the subject matter
of a petition filed under this part.”
4     Section 15642, subdivision (e), provides for suspension of
the powers of a trustee “to the extent the court deems necessary.”
Section 17206 provides, “The court in its discretion may make
any orders and take any other action necessary or proper to
dispose of the matters presented by the petition, including
appointment of a temporary trustee to administer the trust in
whole or in part.”

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appoint a special trustee to preserve the life insurance proceeds.
Leonard alleged Alexis violated the probate court’s October 26,
2020 order by using trust assets to rent a house for $14,000 per
month; pay her two sisters’ rent; pay for an expensive Hawaiian
vacation; purchase or lease two expensive vehicles; and purchase
expensive purses. Leonard argued Alexis’s “suspension is
warranted to protect the Trust (and Leonard, as a likely future
creditor of the Trust) from future harm, since Alexis has proven
herself incapable of resisting the temptation to spend Trust
assets.” (Boldface omitted.) Leonard proposed the court appoint
James W. Sullivan, a licensed professional fiduciary, as the
interim successor trustee or special trustee.
      In her verified objections to the petition, Alexis argued
Leonard lacked standing to bring the petition because
section 17200, subdivision (b)(20), provides that “nothing in this
paragraph shall provide standing to bring an action concerning
the internal affairs of the trust to a person whose only claim to
the assets of the decedent is as a creditor.” Further, Alexis
argued Leonard did not have standing under section 15642,
because he was not the settlor, cotrustee, or beneficiary of the
Trust. (See § 15642, subd. (a) [“A trustee may be removed in
accordance with the trust instrument, by the court on its own
motion, or on petition of a settlor, cotrustee, or beneficiary under
Section 17200.”].) Alexis denied the allegations she used trust
assets to pay for her rent, the cars, her vacation, or her purses.
      The probate court5 granted Leonard’s ex parte petition,
stating in its minute order, “The powers of trustee Alexis Schrage

_____________________

5     Judge Clifford L. Klein.

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are suspended, and James W. Sullivan is appointed as an interim
successor trustee, with bond to be set at $7,440,000. [¶] The
trustee is to provide Hankey Investment Company with 10 days
notice before paying any judgments. [¶] Pursuant to Probate
Code section 1310(b), notwithstanding an appeal of this order as
to any judgment entered in this case, to prevent further injury or
loss to the trust, the temporary trustee may exercise the powers
as if no appeal is pending. The directions in this order are not
stayed due to any appeal of the granting of the ex parte petition.
[¶] The trustee is authorized to pay Christopher Carico,
appointed as an expert pursuant to Evidence Code section 730,
fees of $12,670.” The court6 entered a final order granting the ex
parte petition on April 22, 2021.

D.     The Probate Court’s Ruling and Entry of Judgment on
       Leonard’s Section 850 Petition
       Leonard moved for summary adjudication of the first cause
of action of his section 850 petition in which he argued he had
standing to assert a claim to the insurance proceeds based on the
2019 judgment he obtained against Joseph. On March 16, 2021
the probate court7 granted Leonard’s motion, reasoning there
were insufficient assets in Joseph’s estate to satisfy Leonard’s
claim, and thus, the insurance proceeds were subject to Leonard’s
claim as creditor of Joseph, the settlor of the Trust. The probate
court dismissed without prejudice the two remaining causes of

_____________________

6     Judge Brenda J. Penny.
7     Judge Klein.

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action in Leonard’s section 850 petition. On May 18, 2021 the
court8 entered judgment in favor of Leonard on his section 850
petition, stating, “All proceeds (up to the Judgment Amount[9]) of
any life insurance policy in the name of Joseph Schrage for which
the Trust is or was a named beneficiary (the ‘Life Insurance
Proceeds’) are subject to the claims of Leonard Schrage as a
creditor of Joseph Schrage, the Settlor of the Trust.”
       On May 21, 2021 Alexis timely appealed the April 22, 2021
order and May 18, 2021 judgment.10

                          DISCUSSION

      “‘“An appellate court will not review questions which are
moot and which are only of academic importance.”’” (Delta
Stewardship Council Cases (2020) 48 Cal.App.5th 1014, 1053;
accord, Eye Dog Foundation v. State Board of Guide Dogs for the
Blind (1967) 67 Cal.2d 536, 541 [“‘“[T]he duty of this court, as of
every other judicial tribunal, is to decide actual controversies by a
judgment which can be carried into effect, and not to give
opinions upon moot questions or abstract propositions, or to
_____________________

8     Judge Robert S. Wada.
9     The judgment amount was listed as $30,725,572.55.
10     Alexis appealed the April 5, 2021 order dismissing without
prejudice the two remaining claims in Leonard’s section 850
petition, but she does not address this portion of her appeal in
her opening brief. Although Alexis appeals from the March 16,
2021 minute order granting Leonard’s summary adjudication
motion, we treat her appeal as an appeal from the May 18
judgment.

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declare principles or rules of law which cannot affect the matter
in issue in the case before it.”’”].) “‘“[W]hen, pending an appeal
from the judgment of a lower court, and without any fault of the
[opposing party], an event occurs which renders it impossible for
this court, if it should decide the case in favor of [defendant], to
grant him any effectual relief whatever, the court will not proceed
to a formal judgment, but will dismiss the appeal”’ as moot.”
(People v. DeLeon (2017) 3 Cal.5th 640, 645; accord, Parkford
Owners for a Better Community v. County of Placer (2020)
54 Cal.App.5th 714, 722.)
        “Ordinarily . . . when a case becomes moot pending an
appellate decision ‘the court will not proceed to a formal
judgment, but will dismiss the appeal.’” (Paul v. Milk Depots,
Inc. (1964) 62 Cal.2d 129, 134 (Paul); accord, Coalition for a
Sustainable Future in Yucaipa v. City of Yucaipa (2011)
198 Cal.App.4th 939, 943 (Yucaipa) [“the usual disposition of a
moot appeal is dismissal”].) However, because the dismissal of an
appeal “‘is in effect an affirmance of the judgment or order
appealed from,’” in some circumstances the appropriate remedy is
to reverse the judgment instead of dismissing the appeal. (Paul,
at p. 134; see Yucaipa, at pp. 944-945.) Although Paul relied on
former Code of Civil Procedure section 955, which was repealed
in 1968 (Stats. 1968, ch. 385, § 1), courts have continued to hold
that dismissal of an appeal as moot constitutes an affirmance of
the judgment. (See In re Jasmon O. (1994) 8 Cal.4th 398, 413
[“Normally the involuntary dismissal of an appeal leaves the
judgment intact.”].)
       Paul, supra, 62 Cal.2d 129 is instructive. There, the
Supreme Court concluded the Director of Agriculture’s appeal
from the denial of injunctive relief and civil penalties against a

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processing distributor of milk became moot because the
distributor lost its license and became insolvent, and a new
marketing regulation superseded the earlier challenged
regulation. (Id. at pp. 131-133.) The Supreme Court reversed the
judgment as moot instead of dismissing the appeal. The Supreme
Court explained, “As we do not reach the merits of the appeal in
the case at bench, it is appropriate to avoid thus ‘impliedly’
affirming a judgment which holds unconstitutional a regulation
of the Director of Agriculture promulgated pursuant to the Milk
Stabilization Act. Since the basis for that judgment has now
disappeared we should ‘dispose of the case, not merely of the
appellate proceeding which brought it here.’ [Citations.] That
result can be achieved by reversing the judgment solely for the
purpose of restoring the matter to the jurisdiction of the superior
court, with directions to the court to dismiss the proceeding.” (Id.
at p. 134.)
       Likewise, the Court of Appeal in Yucaipa concluded a
qualified reversal, rather than dismissal of the appeal, was the
appropriate disposition where the issues were rendered moot by
subsequent events. (Yucaipa, supra, 198 Cal.App.4th at p. 947.)
In Yucaipa, a citizen organization appealed the denial of its writ
petition in which it challenged a city’s approval of a proposed
shopping center. (Id. at p. 941.) While the appeal was pending,
the developer and the store abandoned the project because of
litigation between them, and the city rescinded its approval.
(Ibid.) The Yucaipa court concluded the subsequent events
rendered the appeal moot and, as in Paul, reversal of the
judgment as moot was “‘appropriate to avoid . . . “impliedly”
affirming a judgment which’ legitimizes a project that no longer
exists.” (Yucaipa, at p. 945.) The court explained in its

                                10
disposition, “This reversal does not imply that the judgment was
erroneous on the merits, but is solely for the purpose of returning
jurisdiction over the case to the superior court by vacating the
otherwise final judgment solely on the ground of mootness.” (Id.
at p. 947.)
       Similar to Paul and Yucaipa, Alexis’s appeal of the probate
court judgment has been rendered moot by subsequent events. In
his section 850 petition, Leonard alleged he was entitled to the
life insurance proceeds and other trust assets because he was a
creditor of Joseph, the settlor of the Trust, based on the 2019
judgment. The probate court judgment stated the life insurance
proceeds “are subject to the claims of Leonard Schrage as a
creditor of Joseph Schrage, the Settlor of the Trust.” But due to
our reversal of the 2019 judgment in Schrage v. Schrage, supra,
69 Cal.App.5th 126,11 Leonard is no longer a creditor, removing
the basis for the probate court judgment. His argument that the
trial court may allow him to amend his complaint to allege a
derivative action and obtain a new judgment is speculative.
Because dismissing the appeal would impliedly affirm Leonard’s

_____________________

11    Michael and Joseph appealed the 2019 judgment on the
basis that Leonard lacked standing to assert his cause of action
for breach of fiduciary duty because the cause of action was based
on injury to the Sage Automotive Group, not to Leonard, and
therefore the action should have been brought as a derivative
action. (Schrage v. Schrage, supra, 69 Cal.App.5th at p. 148.) On
September 2, 2021 we issued our decision and reversed the
judgment for lack of standing. (Id. at pp. 158.) The remittitur
was issued and filed in the superior court on January 11, 2022,
and the decision is now final.

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right to a claim against the life insurance proceeds, which issue
we have not addressed on the merits, we reverse the probate
court judgment and direct the probate court to dismiss Leonard’s
section 850 petition as moot.
       Likewise, the April 22, 2021 order, which suspended
Alexis’s trustee powers and appointed an interim successor
trustee, has been rendered moot by our reversal of the 2019
judgment. In his ex parte petition Leonard sought to protect his
claim to the life insurance proceeds by seeking the suspension of
Alexis’s trustee powers to prevent her from squandering the
assets of the Trust. But Leonard no longer has standing to
challenge whether Alexis should continue to serve as trustee
because he no longer has a claim to the trust assets as a creditor
of the settlor of the Trust. (See § 48, subd. (a)(1) [defining an
“‘interested person’” to include “[a]n heir, devisee, child, spouse,
creditor, beneficiary, and any other person having a property
right in or claim against a trust estate or the estate of a decedent
which may be affected by the proceeding.”].) We therefore
conditionally reverse the April 22, 2021 order to avoid impliedly
affirming the order suspending Alexis’s powers as trustee.
       However, we note that under section 15642, subdivision (a),
the probate court may remove or suspend a trustee on its own
motion. (Blech v. Blech (2019) 38 Cal.App.5th 941, 955 [probate
court may remove a trustee or suspend a trustee’s power “based
on a trustee’s misconduct”]; Schwartz v. Labow (2008)
164 Cal.App.4th 417, 427 [“[a]mong the remedies in the probate
court’s arsenal is the express power to remove a trustee on its
own motion”].) Because multiple bases were raised for the
suspension of Alexis’s trustee powers and appointment of an
interim successor trustee, and it appears there may be other

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creditors of Joseph, we remand for the probate court to determine
whether Alexis’s powers as trustee should be restored and the
order appointing an interim successor trustee be rescinded.

                         DISPOSITION

      We reverse the probate court judgment and remand for the
probate court to dismiss Leonard Schrage’s section 850 petition
as moot. We reverse the April 22, 2021 order as moot and
remand for further proceedings on the appointment of an interim
successor trustee (or successor trustee). The parties are to bear
their own costs.

                                         FEUER, J.

We concur:

             PERLUSS, P. J.

             WISE, J.*

_____________________

*     Judge of the Alameda County Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

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