Court Opinion

ID: 2804828
Source: CourtListenerOpinion
Date Created: 2015-06-01 21:03:43.309058+00
Date Added: 2024-06-11T12:25:48.840595
License: Public Domain

Filed 6/1/15 La Marr v. La Rocco CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN

DAYMOND ALAN LA MARR,                                                B256696

         Plaintiff and Appellant,                                    (Los Angeles County
                                                                     Super. Ct. No. BP137540)
         v.

LYNDA LEE LA ROCCO, Individually
and as Trustee, etc.,

         Defendant and Respondent.

         APPEAL from an order of the Superior Court of Los Angeles County, David J.
Cowan, Judge. Affirmed.
         Moravec, Varga & Mooney, Henry J. Moravec III, Linda M. Varga, for Plaintiff
and Appellant.
         Towle Denison Smith & Maniscalco, Charles G. Smith and Dana M. Silva for
Defendant and Respondent.
                                                    ___________
       Daymond Alan La Marr, a beneficiary of his deceased mother’s irrevocable trust,
petitioned the probate court for an order removing his sister, Lynda La Rocco, as trustee,
compelling her to return trust property to the trust and surcharging her for damages
caused by her breach of her fiduciary duties. Pursuant to the parties’ stipulation, the
court entered an order bifurcating from the other issues presented whether La Rocco had
validly exercised an option granted to her as a trust beneficiary to purchase her mother’s
home for $100,000 and whether she had breached any duty as the trustee of the trust in
facilitating that transaction. After a hearing solely on the bifurcated option issue, the
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court ruled La Rocco had acted properly as beneficiary and trustee. We affirm.
                  FACTUAL AND PROCEDURAL BACKGROUND
       1. The Family Trust
       In 1987 Agnes La Marr and Daymond H. La Marr, La Rocco and La Marr’s
parents, executed a revocable living trust, naming each other as beneficiary and successor
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trustee. After Daymond’s death in 1995, Agnes became the sole trustor and beneficiary
and amended the trust twice, once in January 1999 and again in August 2002. La Rocco,
Agnes’s daughter and caregiver, was appointed successor trustee upon Agnes’s death, at
which point the trust became irrevocable. The trustee was directed to divide the trust
estate into 10 equal shares and to distribute four shares to La Rocco, three shares to
La Marr and three shares to Michael, Agnes’s disabled son, in accordance with a special
needs subtrust.
       2. The Purchase Option
       Article 2.3.4 of the trust, also added by amendment in 2002, created an express
exception to this distribution plan, granting La Rocco the option to purchase Agnes’s
home for the sum of $100,000 in lieu of taking her distributive share: “Notwithstanding

1      The probate court’s order is appealable. (See Code Civ. Proc., § 904.1,
subd. (a)(10); Prob. Code, § 1300, subds. (a), (c).)
2     For convenience and clarity we refer to La Marr’s parents and his brother,
Michael, who all share the La Marr surname, by their first names.

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the above provisions, and prior to making distributions of the above shares, LYNDA LA
MARR LA ROCCO shall have the option of purchasing from the trust estate, subject to
any encumbrances thereon, trustor’s residence (the real property located at 1975 Kerns
Avenue, San Marino, California) for the sum of $100,000 in lieu of her above distributive
share of the trust estate. Said option shall be exercised by giving written notification of
her intent to do so within 90 days of the date of death of trustor. Once she has exercised
said option, [La Rocco] shall have 6 months from the date of said exercise to pay said
option price ($100,000) to the successor trustee, who shall then convey title to said
property to [La Rocco], free of trust, subject to any encumbrances thereon. The
remaining trust assets shall then be distributed as provided above, except that the shares
created above for the benefit of [La Rocco] shall be deemed to have lapsed (i.e.
distribution shall take place in such a manner as if [La Rocco] [had] predeceased trustor
leaving no issue then living.”
       3. Agnes’s Death and La Rocco’s Exercise of the Option
       Agnes died January 16, 2012. On April 9, 2012 La Rocco provided both her
brothers with written notice of her intent as beneficiary to exercise the purchase option in
accordance with the trust terms. In September 2012, within the six-month deadline,
La Rocco effected her purchase of the San Marino home through a multi-step escrow
transaction.
       On September 4, 2012, La Rocco, on behalf of the trust, signed a grant deed
transferring the San Marino property from the trust to herself, “Lynda L. La Rocco, a
Married Woman, as her sole and separate property.” She deposited the grant deed into an
escrow account managed by College Escrow, Inc. The initial escrow instructions dated
July 27, 2012 stated that La Rocco, in her individual capacity as buyer, would finance the
purchase through a personal loan in the amount of $200,000, secured by a deed of trust
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on the property. On September 26, 2012 La Rocco in her individual capacity

3      The initial instructions dated July 27, 2012 and supplemental escrow instructions
dated September 26, 2012 stated the total consideration for the transaction would be
$300,000, comprised of a $200,000 loan secured by a deed of trust and a $100,000

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consummated a personal loan of $200,000 from Timothy C. Harrison and Lauri E.
Harrison, signed a promissory note and a deed of trust covering the property in favor of
the Harrisons to secure the loan and deposited that deed of trust in the escrow account.
On September 27, 2012, in accordance with their obligations under the note, the
Harrisons deposited $200,000 into the escrow account. Then, on Friday, September 28,
2012, after the escrow officer confirmed the receipt of the loan proceeds, the grant deed
and deed of trust were recorded with the Los Angeles County Recorder’s Office; the
escrow officer also arranged on that date to have the $100,000 purchase price wired to the
trust’s bank account. Those funds were credited to the trust’s bank account on Monday,
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October 1, 2012. In November 2012 La Rocco refinanced her $200,000 loan by
obtaining a new loan from a different lender, secured by a new deed of trust, and
repaying the Harrisons in full.
       4. La Marr’s Petition for Removal, Return of Trust Property and Surcharge
       On November 1, 2012 La Marr petitioned to remove La Rocco as trustee and
surcharge her for breaching her fiduciary duty to the trust. The petition alleged La Rocco
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had misappropriated trust assets by using the house, the most significant trust asset, as
collateral to obtain the loan she needed to exercise the purchase option. As a result, he
alleged, she deprived him and his brother of the shares in the house they would have

“equity credit,” defined as “gift equity between family members” in lieu of a down
payment and closing costs. Both sets of instructions, however, which La Rocco claimed
reflected a mistake by the escrow company regarding the $100,000 for the trust, were
later superseded by new instructions that stated La Rocco would finance the purchase
with a $200,000 secured personal loan. Those amended instructions did not mention any
“equity credit.”
4      La Rocco explained the remaining funds from the loan were used to pay closing
costs and close an existing line of credit on the house.
5      The parties agreed the largest asset of the trust was Agnes’s San Marino home, but
disagreed as to the home’s value. La Marr supplied evidence the value as of June 2013
was nearly $1.5 million, while La Rocco insisted without citing supporting evidence that
the value was closer to $400,000.

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received had the option not been exercised. Over the next several months, La Marr filed
six supplemental petitions alleging additional facts and other breaches of fiduciary duties.
       5. The Court’s Bifurcation of, and Hearing on, the Option Issue
       On January 27, 2014, following a stipulation of the parties, the court bifurcated the
option issue—defined as whether La Rocco had “validly exercise[d] the [o]ption to
purchase the [t]rust [h]ome in accordance with the terms of the trust”—from the other
issues presented in the petitions and ordered that issue adjudicated first. The court stayed
discovery on the remaining issues, ordered a briefing schedule and set a hearing date of
March 14, 2014. Although La Rocco submitted extrinsic evidence with her trial brief to
explain Agnes’s intent, she and La Marr agreed, and the court found, the trust language
was unambiguous and the issue presented was one of law. After full briefing and a
hearing, the probate court ruled, based on the undisputed facts of La Rocco’s transaction
as detailed above, that La Rocco had validly exercised the option without breaching her
fiduciary duty to the trust. La Marr filed a timely notice of appeal.
                                      DISCUSSION
       1. Governing Law and Standard of Review
       The trustee has a duty to administer the trust in accordance with the terms of the
trust and his or her fiduciary obligations to trust beneficiaries. (Moeller v. Superior Court
(1997) 16 Cal.4th 1124, 1131; Moxley v. Title Ins. & Trust Co. (1946) 27 Cal.2d 457,
463.) Absent an ambiguity in the trust instrument and conflicting extrinsic evidence as to
the meaning of the ambiguous terms, the interpretation of language in a trust is a question
of law subject to de novo review. (Johnson v. Greenelsh (2009) 47 Cal.4th 598, 604;
Burck v. George (1994) 7 Cal.4th 246, 254.) In addition, although the trial court’s factual
findings are generally reviewed for substantial evidence, when, as here, the court’s
findings are based on undisputed facts, the question is a legal one subject to the appellate
court’s independent review. (Brach v. Omni Loan Co., Ltd. (2008) 164 Cal.App.4th
1312, 1320; Laidlaw Waste Systems, Inc. v. Bay Cities Services, Inc. (1996)
43 Cal.App.4th 630, 635.)

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         2. The Probate Court Properly Ruled La Rocco Had Validly Exercised the Option
         La Marr contends La Rocco violated the terms of the trust and engaged in
unlawful self dealing when, as trustee, she transferred the house to herself in her
individual capacity before paying the $100,000 to the trust. La Marr fundamentally
mischaracterizes the transaction. Contrary to La Marr’s contention, La Rocco’s mere
execution of the grant deed on behalf of the trust did not prematurely transfer the
property from the trust to La Rocco. A transfer of real property is not legally effective
until the deed is delivered. (Civ. Code, § 1054 [“[a] grant takes effect, so as to vest the
interested intended to be transferred, only upon its delivery by the grantor”]; Miller v.
Jansen (1943) 21 Cal.2d 473, 476; Whitney v. American Ins. Co. (1900) 127 Cal. 464,
467.) By placing the grant deed in the escrow account, La Rocco, as trustee, ensured that
delivery would not occur until the performance of the escrow condition—that is, the
deposit of $200,000 into escrow on behalf of La Rocco in her individual capacity, with
$100,000 of that sum designated for payment to the trust. (See Civ. Code, § 1057 [“A
grant may be deposited by the grantor with a third person, to be delivered on performance
of a condition, and, on delivery by the depositary, it will take effect. While in the
possession of the third person, and subject to condition, it is called an escrow.”].)
La Rocco neither prematurely conveyed trust property nor breached any duty to the trust
merely by signing the grant deed and depositing it into the escrow account. She would
have been required to do the same no matter how she had arranged to pay the purchase
price.
         La Marr alternatively contends that, if the grant deed was ineffective at the time
La Rocco signed it, then she invalidly used trust property—property she did not yet
own—as collateral to obtain a personal loan; and she was only able to do this by using
her position as trustee to sign the grant deed to herself before she paid any money to the
trust. This argument, too, misapprehends the nature of the transaction as well as
La Rocco’s distinct roles as trustee and beneficiary. Neither La Rocco’s execution of the
grant deed as trustee nor her execution of the deed of trust to the Harrisons in her
individual capacity as beneficiary actually took effect until delivery of the deeds by the

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escrow officer. (See Civ. Code, § 1057 [grant deed deposited in escrow is not in effect
until delivery by the depositary].) Once the escrow officer confirmed receipt of the
$200,000 and thus satisfaction of the escrow condition, the officer transferred the
property to La Rocco in her individual capacity and, at the same time, conveyed the deed
of trust to the Harrisons. The simultaneous nature of the transaction resulted in La Rocco
using only her own property as collateral to secure the loan, not trust property. (See
generally Claussen v. First American Title Guaranty Company (1986) 186 Cal.App.3d
429, 437 [“An escrow is typically the mutual exchange of instruments through a third
party and delivery to each party is conditioned on deposit by the other party. [Citations.]
An escrow imposes concurrent conditions which are mutually dependent, requiring
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simultaneous performance”].)
       La Marr disputes the characterization of the transaction as simultaneous, observing
the conveyance to La Rocco actually occurred before the money was received by the
trust. La Marr is correct that the conveyances of both the grant deed and the deed of trust
encumbering the property were effected and recorded on September 28, 2012, while the
$100,000 was not actually credited to the trust’s bank account until Monday, October 1,
2012. But, the escrow officer did not deliver the grant deed to La Rocco prior to receipt
of the purchase price. To the contrary, the escrow officer waited until the escrow
condition had been fulfilled—deposit of $200,000 into the escrow—before arranging for
the conveyances to be recorded and $100,000 of the loan proceeds to be deposited in the
trust bank’s account. Although, due to the nature of business realities—time for checks
to clear and deposits to be credited—the money was not actually credited to the trust’s
bank account until the next business day, this alone does not evidence a breach of

6       La Rocco’s focus on the date the transaction was recorded, September 28, 2012, as
the date the transfer became legally effective is correct, albeit not for the reason she
advances. The deed was delivered on September 28, 2012. It is the delivery that results
in the legal transfer of property, not the date the transaction is recorded. (Stewart v. Silva
(1923) 192 Cal. 405, 410; see Civ. Code, § 1217 [“an unrecorded instrument is valid as
between the parties thereto and those who have notice thereof”]; Casey v. Gray (1993)
13 Cal.App.4th 611, 614 [same].)

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fiduciary duty on La Rocco’s part, nor an invalid exercise of her option as beneficiary. It
certainly did not cause any damage to the trust.
       La Marr’s reliance on several trust provisions (articles 2.3.4, 4.1.2 and 5.3) is also
misplaced. None of those provisions precluded La Rocco’s conduct either as trustee or
beneficiary. Article 2.3.4 granted La Rocco as beneficiary the option to purchase the San
Marino home for $100,000 in lieu of her distribution and permitted her to exercise the
option prior to the distribution of the rest of the estate. Nothing in that article dictated the
manner in which La Rocco could provide the purchase price; certainly, nothing
prohibited her from obtaining a personal loan to exercise the option.
       Article 4.1.4 permitted the trustee “[t]o borrow money for any valid trust purpose;
to place, replace, renew or extend any encumbrance upon any trust property by mortgage,
deed of trust, pledge or otherwise.” The scope of that provision is irrelevant; for La
Rocco did not encumber trust property. As explained, she encumbered her own property
concurrently with the delivery of the grant deed and funding of her personal loan, a
transaction that was possible because of the way the escrow was structured.
       Article 5.3 is similarly immaterial. That article, a spendthrift provision, prohibited
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trust beneficiaries from encumbering trust property prior to distribution. (See Chatard v.
Oveross (2009) 179 Cal.App.4th 1098, 1104 [purpose of spendthrift provision is to
protect income and principal interests of beneficiaries from third party claims as long as
the income or principal is properly held by trust].) As discussed, however, La Rocco,
crafted the transaction to encumber the property simultaneously with, rather than prior to,
distribution to her. She did not encumber property while it remained in the trust.
       Finally, La Marr suggests La Rocco improperly used monies from what would
otherwise be his and his brother’s distribution to pay trust costs. Those issues were not

7       Article 5.3 provides in part: “SPENDTHRIFT PROVISION: Excepting those
instances where a trustee hereunder is exercising the power to borrow money, place,
replace, renew or extend any encumbrance upon any trust property by mortgage, deed of
trust, pledge or otherwise, or establish lines of credit pursuant to Article 4 of this trust; no
interest in the principal or income of any trust created under this trust instrument shall be
encumbered or pledged before actual receipt by a beneficiary. . . .”

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litigated in the first part of the bifurcated hearing, and we do not consider them. We hold
only that the court properly found as a matter of law that La Rocco had validly exercised
her purchase option without breaching any fiduciary duty she owed to the other trust
beneficiaries.
                                     DISPOSITION
       The order is affirmed. La Rocco is to recover her costs on appeal.

                                                 PERLUSS, P. J.

       We concur:

                 ZELON, J.

                 IWASAKI, J.*

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

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