Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court No. GIN034571 of San Diego County, Lisa C. Schall, Judge.
NARES, Acting P. J.
This action was initiated by Jacqueline B. Reedy (Reedy), in her capacity as the trustee of the Helen Chamness Bussell Family Trust (the trust) and in her individual capacity as a beneficiary of the trust, against, among others, Todd Bussell, a beneficiary of the trust. The action sought to quiet title to a 131-acre ranch (the ranch) owned by the trust and to partition the ranch by sale. The court entered an interlocutory judgment quieting title in the trust and ordering a partition by sale.
Todd appeals the interlocutory judgment, asserting (1) the judgment violates the spendthrift provision of the trust and Probate Code sections 15300 and 15301; (2) the court erred by including an award of attorney fees and costs in the judgment; and (3) the court erred in awarding Reedy the costs of maintaining, preserving and marketing the property. We affirm.
Because several members of the Bussell family will be referenced in this opinion, for purposes of clarity we shall refer to members of the Bussell family by their first names. We intend no disrespect.
All further statutory references are to the Probate Code unless otherwise specified.
FACTUAL AND PROCEDURAL BACKGROUND
A. Background
Helen and Elmer Bussell had two children, John Bussell and Reedy. John married and had three children, Todd, Kelly, and Lisa. In 1969 Helen and Elmer moved to the ranch. Elmer died in 1980.
In 1982 Helen created the trust. It had two subtrusts, the "Initial Trust" and the "Gift Trust." The original beneficiaries were John and Reedy, each with a 50 per cent interest. Under the terms of the Gift Trust, if either John or Reedy predeceased Helen, his or her share would pass to their children. John died in February 2002, and his 50 percent interest passed at that time to his children, Todd, Kelly, and Lisa.
Following John's death in 2002, Helen amended the Initial Trust to name Reedy as the trustee and sole beneficiary. During her lifetime, Helen retained a 5 percent interest in the ranch by way of the Initial Trust. She died in 2006, passing her 5 percent interest in the ranch to Reedy.
B. Trust Provisions at Issue on Appeal
The Gift Trust contained a "spendthrift" provision that provides "[t]he interest of a beneficiary in the principal or income of any trust shall not be subject to the claims of his or her creditors...." The Gift Trust also provided that "[u]pon the Grantor's death the Gift Trust shall cease and terminate" and called for distribution and delivery of each beneficiary's interest in the trust at that time.
C. Procedural Background
In December 2003 Reedy filed this action, seeking to quiet title to the ranch. The complaint was amended to add Todd as a defendant and also to state a claim for partition by sale. Among other issues, Todd asserted that the 5 percent interest in the trust originally belonging to Helen was transferred to the Gift Trust, not the Initial Trust, upon Helen's death.
A bench trial was had, after which the court found that the 5 percent interest in the ranch belonged to the Initial Trust. Todd did not object to the remaining allocation of the beneficiaries' interests in the trust. Pursuant to the agreement of the parties, the court also ordered the ranch be partitioned for sale.
The court also found there were existing judgments in which Reedy was the judgment creditor and Todd was the judgment debtor. The court found that these liens encumbered Todd's interest in the ranch, that the liens would encumber Todd's interest in the trust "only upon distribution," and ordered that "the proceeds from the sale" of the ranch would be applied to those liens. The court also ordered that Reedy be paid "such attorney's fees and other expenses which she has incurred in commencing and prosecuting this proceeding as allowed by law" from the proceeds of the sale. (Italics added.) Finally, the court ordered that proceeds from the sale of the ranch shall be applied to "compensate [Reedy] for such expenses which she has incurred to maintain, preserve, and market the Subject Property...."
Todd objected to the court's decision, asserting, among other things, (1) the spendthrift provision of the Gift Trust prevented the judgment liens against him from attaching to his share of the sales proceeds; (2) Reedy was not entitled to attorney fees; and (3) Reedy was not entitled to recover farming losses incurred on the ranch from the sales proceeds.
The court entered an interlocutory judgment in conformance with its findings.
DISCUSSION
I. THE SPENDTHRIFT PROVISION IN THE TRUST
Todd asserts that the court erred in subjecting his portion of the sale proceeds of the ranch to the judgment liens in favor of Reedy because that portion of the order violated the spendthrift provision of the Gift Trust and sections 15300 and 15301. This contention is unavailing.
Section 15300 provides that "if the trust instrument provides that a beneficiary's interest in income is not subject to voluntary or involuntary transfer, the beneficiary's interest in income under the trust may not be transferred and is not subject to enforcement of a money judgment until paid to the beneficiary." (Italics added.) Similarly, section 15301 provides that "if the trust instrument provides that a beneficiary's interest in principal is not subject to voluntary or involuntary transfer, the beneficiary's interest in principal may not be transferred and is not subject to enforcement of a money judgment until paid to the beneficiary. [¶] (b) After an amount of principal has become due and payable to the beneficiary under the trust instrument, upon petition to the court under Section 709.010 of the Code of Civil Procedure by a judgment creditor, the court may make an order directing the trustee to satisfy the money judgment out of that principal amount. The court in its discretion may issue an order directing the trustee to satisfy all or part of the judgment out of that principal amount." (Italics added.)
As stated, ante, the Gift Trust had such a spendthrift provision that prohibited creditors from enforcing a money judgment against Todd's interest in the trust. However, as also detailed, ante, the Gift Trust terminated upon the grantor's (Helen's) death in 2006 and directed that its principal thereafter be delivered to each beneficiary of the trust, including Todd. Because the spendthrift provision necessarily terminated upon Helen's death and the termination of the Gift Trust, that provision and sections 15300 and 15301 have no application here. As the Court of Appeal stated in Frazier v. Wasserman (1968) 263 Cal.App.2d 120, 127, "the donor of a spendthrift trust can only protect his gift from the claims of the beneficiary's creditors during the life of the trust. Therefore, once the corpus of a spendthrift trust vests in the beneficiary and is placed in his hands, or under his direct control, it may not only be dissipated by the beneficiary contrary to what the donor may have wanted, but it may also be reached by the beneficiary's creditors through attachment or execution to satisfy his debts...." (Italics added.) Spendthrift provisions in trusts protect a beneficiary's interest in a trust. Once a trust is terminated and the trust corpus is distributed, however, a spendthrift provision has no application. (See 13 Witkin, Summary of Cal. Law (10th ed. 2005) Trusts, § 151, p. 716.)
Todd asserts the judgment was improper because his portion of the trust has not yet been delivered to him. However, this contention ignores the judgment which states that the judgment liens only attach to "proceeds from the sale" of the ranch and that the judgment liens would encumber Todd's interest in the trust "only upon distribution" following the sale.
Todd asserts that the court's order was improper because the only procedure available to Reedy was to file a petition under section 15301, subdivision (b), and that under section 15306.5, subdivisions (b) and (f), only a certain percentage of the amount payable to a beneficiary is subject to enforcement. However, those provisions apply where a trust is still in existence, and, during the life of the trust, money is paid to a beneficiary under its terms. (See Ahart, Cal. Practice Guide: Enforcing Judgments and Debts (The Rutter Group 2009) ¶¶ 6:1577 to 6:1579, pp. 6G-79 to 6G-81.) Under such circumstances, there are restrictions on what types of creditor claims are enforceable (i.e., child support judgments: §§ 15305, 15306), and the amount reachable by a creditor (a maximum of 25 percent of the amount payable to the beneficiary and not including any amount necessary for the beneficiary's support (§ 15306.5, subds. (b) & (c)). Again, in this case, however, the trust terminated, and these sections therefore are inapplicable.
Further, sections 15300 and 15301 apply to actions by third party creditors seeking to order a trustee to pay income or principal of a trust to satisfy a judgment. Here, the action was brought by the trustee, who herself was the judgment creditor against Todd, the beneficiary. For this additional reason sections 15300 and 15301 do not apply.
In support of his position, Todd cites Kelly v. Kelly (1938) 11 Cal.2d 356, in which a husband beneficiary of a spendthrift trust entered into a property settlement agreement with his wife, assigning to her 50 percent of his interest in the trust. The California Supreme Court held this was an invalid assignment in violation of the spendthrift provision. (Id. at p. 363.) However, here there was no assignment or attempt to enforce a judgment in violation of the spendthrift provision of the trust made while the trust was in existence. As stated, ante, the Gift Trust terminated in 2006, and the spendthrift provision terminated at that time as well.
II. ATTORNEY FEES AND COSTS
Todd asserts that (1) the court erred by including an award of fees and costs in an interlocutory judgment, and (2) there is insufficient evidence the fees incurred were for the common benefit of the trust and were reasonable in amount. We reject these contentions.
Todd asserts that Code of Civil Procedure section 874.010, subdivision (a), which allows on a judgment of partition an award of "attorney's fees incurred or paid by a party for the common benefit" did not allow the court to award Reedy fees in the interlocutory judgment of partition, but only upon a final judgment in this matter. However, the court's interlocutory judgment only ordered fees and costs deducted from the partition sale "as allowed by law." Therefore, there has been no award of fees as it has yet to be determined if fees and costs are "allowed by law" in this matter. If and when Reedy seeks her attorney fees in this matter, Todd may challenge the request on the basis they are not awardable under the facts of this case. At this juncture, however, Todd's challenge is premature. (See In re Marriage of Folb (1975) 53 Cal.App.3d 862, 877, disapproved on other grounds in In re Marriage of Fonstein (1976) 17 Cal.3d 738, 749 [matters occurring after entry of an interlocutory judgment cannot be considered on an appeal from that judgment].)
Todd asserts that Reedy is estopped from asserting this issue is premature because in a prior appeal between the parties (Reedy v. Bussell (April 2, 2009, G040277) [nonpub. opn.]), Reedy asserted Todd had waived the right to contend he had been deprived of his right to a jury trial by failing to raise that issue in a prior appeal. However, no issue of the right to a jury trial has been raised by this appeal, nor has an argument been made that any issue should have been raised in an earlier appeal. Thus, the doctrine of estoppel is not applicable here.
On November 6, 2009, we granted Todd's unopposed request for judicial notice of this appeal, which arose from an action in the Superior Court of Orange County.
Todd also asserts that fees are inappropriate in this case because no evidence has been introduced to demonstrate that the fees were reasonable and for the common benefit of the trust. Todd's argument is premature. As stated, ante, no award has yet been made regarding attorney fees and costs. Following entry of the final judgment in this matter, if Reedy makes an application for fees and costs, Todd may argue that they are not available under the facts of this case and may dispute the amount. However, at this juncture Todd's dispute concerning fees is not cognizable on appeal.
III. EXPENSES INCURRED FOR OPERATION OF THE RANCH
Todd asserts it was improper for the court to order that proceeds from the sale of the ranch be applied "to compensate [Reedy for] such expenses which she has incurred to maintain, preserve, and market the subject property...." Specifically, Todd asserts this portion of the order is improper because it is being "improperly interpreted by Reedy as allowing her to recoup the losses purportedly incurred over the years in the operation of the subject property."
However, Todd's assertion is again premature. How Reed purportedly "interprets" the language of this portion of the interlocutory order is not properly before us on this appeal. Reedy has not applied for, and the court has not awarded, such expenses. When and if Reedy brings an application for reimbursement of expenses she has incurred to "maintain, preserve, and market" the ranch, Todd will be entitled to argue certain expenses are not recoverable and challenge by appeal any award thereafter. This issue is also not properly before us on this appeal. (In re Marriage of Folb, supra, 53 Cal.App.3d at p. 877.)
DISPOSITION
The judgment is affirmed. Reedy shall recover her costs on appeal.
WE CONCUR: McINTYRE, J, AARON, J.