Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. 37-2007-00101398-PR- TR-CTL, Julia C. Ketely, Judge. Affirmed.
NARES, Acting P. J.
This appeal arises from competing probate petitions in which the parties sought to determine the proper beneficiary of a life insurance policy in the name of the deceased, Lauren Jacobson Mummy (Lauren). Her husband, Patrick R. Mummy (Patrick) filed a petition asserting the Mummy Family Trust (the family trust) was entitled to a one-half interest in the life insurance proceeds as it, along with Patrick and Lauren's daughter Ryenne Alexa Mummy (Ryenne), was listed on the insurance policy as the beneficiary. Ivor Jacobson (Ivor), Lauren's father, filed a response and objection, asserting that he and Patrick entered into an agreement that the family trust's interest in the life insurance proceeds would be transferred to a trust to be created for the benefit of Patrick and Lauren's two minor children, Ryenne and Jaide Ariana (Jaide). Joan Jacobson (Joan), Lauren's mother, thereafter filed, as trustee of the Lauren Jacobson Mummy Children's Trust (the children's trust), a petition claiming that the children's trust, whose beneficiaries were Ryenne and Jaide, was the beneficiary.
As the parties to this appeal are related and share last names, in the interests of clarity we refer to them by their first names. We intend no disrespect.
The court granted Joan's petition, finding that an agreement signed by Patrick assigning the family's trust's interest in the insurance proceeds to the children's trust was valid and enforceable and that Patrick had the power to transfer the family trust's interest in the life insurance proceeds to the children's trust.
Patrick appeals, asserting the court abused its discretion by (1) relying on extrinsic evidence relating to the parties' intent in signing the agreement, when the terms of the letter were unambiguous; and (2) finding Patrick had the power to assign the family trust's interest in the life insurance proceeds. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Family Trust
Patrick and Lauren were married in April 1997. In August 1999 Patrick and Lauren created the family trust. Lauren died in November 2005, when she was trampled by an elephant while on safari in South Africa.
Upon Lauren's death in November 2005, the family trust split into two trusts: the survivor's trust and the residuary trust. The survivor's trust consisted of Patrick's separate property and his half of the community estate. Patrick retained the discretion to revoke or amend the survivor's trust. The residuary trust consisted of Lauren's half of the community estate. Upon Lauren's death it became irrevocable and non-amendable.
Upon Lauren's death, Patrick became the surviving trustor, trustee and beneficiary of the family trust. As such, he had broad powers to manage the trust assets. The trust allowed him to settle and compromise claims against or in favor of the family trust. Upon Lauren's death he obtained a vested right to the income of the residual and survivor trust. As the sole beneficiary of the survivor's trust, he had a vested right to its principal. As sole survivor of the residuary trust, Patrick had the right to distributions of principal as necessary for his health, maintenance education and support until he remarried. The primary purpose of the family trust was to provide for Patrick, as the sole beneficiary. Ryenne and Jaide were only entitled to whatever remained in the family trust upon Patrick's death.
B. The MetLife Insurance Policy
In December 2002 Patrick and Lauren each purchased life insurance policies through Metropolitan Life Insurance Company (MetLife) in the amount of $1 million. Lauren designated the family trust and Ryenne as the beneficiaries under the policy. Jaide was not yet born, but Lauren checked a box on the application indicating that all unborn children would be considered contingent beneficiaries.
Lauren paid semi-annual premiums of $588.30. However, MetLife sent the July 2005 premium notice to an old address and it never reached Lauren or Patrick. By letter dated August 8, 2005, Paul Katz, a senior account executive at MetLife, notified Lauren of her nonpayment of the premium. However, that notice was also sent to the old address and Lauren did not receive it until approximately August 17, 2005. Upon receipt, Lauren immediately called MetLife, notifying them she intended to retain the policy in full force and effect. She then made out a check to MetLife and mailed it to Katz, per his instructions. The memo line contained the notation, "09/01/05 to 08/31/06." However, this time period was inaccurate and MetLife returned the check, this time to the correct address.
On October 12, 2005, MetLife wrote to Lauren, again at the correct address, informing her that her policy had expired. Lauren again contacted Katz to find out how to reinstate the policy. He sent her a reinstatement form, which she filled out and returned to him. However, she neglected to enclose a new check with the form. On November 2, 2005, Katz wrote to Lauren confirming receipt of the reinstatement form and asking her to send a check for $588.30.
Lauren never received that letter. She left for a vacation in South Africa on November 2, 2005. On November 10, 2005, Patrick received a call from a South African park ranger, informing him that Lauren had been trampled by an elephant while on safari.
C. Claim on Policy/Agreement re Policy Proceeds
On November 11, 2005, Patrick contacted MetLife to make a claim on the policy, based upon Katz's letter requesting a check. However, MetLife took the position that the policy had lapsed and had not been reinstated by the time of Lauren's death.
Patrick contacted Lauren's father Ivor and asked for help in dealing with MetLife, because he knew Ivor was a successful businessman and thought Ivor's persistence and business acumen would be useful in dealing with MetLife. According to Ivor, he agreed to help on condition that any policy proceeds obtained be placed into a separate educational trust for Ryene and Jaide (the children's trust). Ivor agreed to front all expenses necessary to pursue the claim against MetLife, including any legal expenses or fees if such became necessary. Ivor researched the transaction's history, reviewed the relevant documentation, and met with attorneys. In January 2006 he drafted a letter to MetLife setting forth the basis for reinstating the policy (the January 2006 letter). Patrick asked Ivor to send the letter to Patrick's personal attorney, who reviewed and revised it. Patrick also reviewed, discussed, approved and signed it. Neither Patrick nor his attorney objected to any of the statements in the letter. The letter stated that the policy proceeds would be "contributed to an educational trust, for the benefit of [Lauren's] children...." Patrick also indicated that he was sending the letter in his capacity as trustee of the family trust.
In response to the letter, MetLife again rejected the claim. Patrick and Ivor agreed to find an attorney to advise and potentially represent them. Ivor interviewed at least six different attorneys. Only one firm agreed to represent them, but with a 50 percent contingency fee.
Ivor told Patrick he had a long-time friend, Ian Solomon, who worked at MetLife's New York corporate headquarters, whom he would ask for assistance. They discussed the fact they faced an uphill battle and that they might only get a fraction of the policy's face value. Patrick encouraged Ivor to pursue discussions with Solomon and agreed that any money they received would be put into the children's trust.
On May 31, 2006, Ivor and Patrick memorialized their agreement in writing (May 2006 letter agreement). The May 2006 letter agreement was titled "Metlife and The South African Legal Actions." (Italics added.) The May 2006 letter agreement first discussed a proposed action against MetLife, with Ivor agreeing to "produce materials needed, including your letter to MetLife dated January 12, 2006, arrange a fee and/or contingency based fee, with a law firm, or firms, to handle the claim against MetLife, under the $1,000,000.00 term life insurance policy, on the life of our dearest darling Lauren and assist in the prosecution of this action." (Italics added.) The agreement stated that they had a verbal commitment from a law firm to handle their claim, but also noted they were "awaiting a response from MetLife arising from the intervention of Ian Solomon before we sign an agreement with Harris Steinberg."
Ivor also agreed to produce the materials needed and arrange for a law firm to handle a "civil action" against those parties in South Africa believed responsible for Lauren's death. Ivor agreed to "fund the fees and expenses relative to these actions." (Italics added.) The May 2006 letter agreement referenced an April 2006 affidavit Patrick signed for a potential action in South Africa against those believed responsible for Lauren's death (April 2006 affidavit). In paragraph 7.1 of that affidavit, Patrick stated that, "[s]hould any action for damages pertaining to said children succeed pursuant to any claims instituted on their behalf," the proceeds of the claim would be placed "into a trust created for the benefit of said children, with the children being the sole equal beneficiaries and the trustees being myself, [Ivor] and [Joan]. [¶] The capital of the trust will be utilized for the maintenance, support and education of said children and any moneys remaining, will be distributed to said children once the trust is dissolved or upon each child attaining the age of thirty." The May 2006 letter agreement reaffirmed that, after expenses, any monies obtained in that action would be placed in a trust for the children "as referenced in [paragraph] 7.1 of your affidavit."
The May 2006 letter agreement also stated that "[t]he Metlife action will be brought by the Mummy Trust" with the proceeds, after expenses "being held in trust as referenced in [Patrick's] letter to Metlife dated January 12, 2006. The matters relating to this trust would similarly be as referenced in [paragraph] 7.1 of your affidavit [for the South Africa claims]." (Italics added.)
Ivor and Joan agreed to fund a trust "for up to $250,000.00, with Ryenne and Jaide as beneficiaries, to enable the trust to purchase a house for [Patrick] and the kids to live in.... [It] may be the same trust as referenced above, relating to the, South African actions and/or the MetLife matters.... The purchase of this home is subject to you and I both being satisfied that you have the ability to cover these costs, plus your living expenses, before the house is bought." (Italics added.)
The May 2006 letter agreement also stated that, "[s]hould the various lawyers involved in the South African and/or MetLife and/or house purchase matters deem it necessary or desirable to reduce the matters referenced in this letter, in a more formal document or documents, you and I agree to sign same, provided the terms reasonably replicate what this letter is intended to set out." (Italics added.)
The agreement was signed by both Ivor and Patrick.
According to Ivor, the agreement acknowledged that negotiations were pending with MetLife and that an attorney would be hired only if the negotiations concluded without success. Patrick and Ivor knew that litigation would result in less money for the children due to the high contingency fee demanded by the attorney.
D. MetLife Settles Claim
Ivor communicated with MetLife on numerous occasions, both orally and in writing, in pursuing the claim. According to Ivor, during this time period Patrick never suggested that Ivor stop negotiating with MetLife and never repudiated the May 2006 letter agreement. After approximately 10 months of negotiations, MetLife changed its position and agreed to pay on the claim in full. According to Ivor, Metlife conditioned payment on Ivor and Patrick providing a copy of the children's trust, as well as letters of guardianship for Ryennne and proof that Patrick was a trustee of the family trust.
E. Patrick Refuses To Sign Children's Trust
In August 2006, prior to MetLife agreeing to pay on the claim, Ivor presented Patrick with a draft trust agreement for his review and signature. However, Patrick refused to sign the agreement. Prior to August, Patrick had never told Ivor he did not intend to honor their agreement.
F. The Instant Litigation
In July 2007 Patrick filed a petition to determine that the family trust was entitled to the proceeds of the life insurance policy. Ivor filed an objection, asserting the May 2006 letter agreement required that the proceeds be paid into the children's trust.
In June 2008 Joan filed a counter-petition, as trustee of the children's trust, asserting that the May 2006 letter agreement applied no matter how the proceeds were obtained, through informal persuasion or litigation. Patrick filed a response, asserting the May 2006 letter agreement applied only in the event the parties recovered money as a result of formal litigation against MetLife. He also asserted he had no power or authority to assign the rights and interests of the family trust to the children's trust. Finally, he asserted his signatures on the January 2006 letter and May 2006 letter agreement were the product of Ivor's menace, duress, undue influence and fraud.
1. Patrick's testimony at trial
Patrick testified that he and Lauren intended the $1 million death benefit to primarily provide funds for the survivor (he or Lauren) to have money for immediate and future support and to purchase a home. He understood that the January 2006 letter included a reference to the proceeds going into a trust for the children only to make him appear more sympathetic to Metlife. He denied discussing with Ivor, prior to signing the letter, that policy proceeds would go into a trust for the children.
After MetLife rejected his claim, the parties contacted law firms to assist them. When they discovered the only firm that would take their case required a 50 percent contingency fee, they decided to investigate options other than litigation.
Ivor informed Patrick he had a long-time friend at MetLife who could perhaps help them. However, Ivor told him there was little chance that they would get a full payment on the claim. Ivor told him to expect that at most they would get a "gratis payment" of $50,000 to $100,000. Ivor suggested that if Solomon's aid led to such a gratis payment, it could perhaps be distributed to a trust for the benefit of Patrick's children. He agreed in principle, but only subject to his review of the trust document. Patrick testified that he never would have agreed to authorize the full $1 million policy benefit to be distributed to an educational trust on a recovery based on Solomon's efforts.
With regard to the May 2006 letter agreement, Patrick testified he believed that it only came into play if a lawsuit against MetLife were pursued. He stated he was willing to sign the May 2006 letter agreement only because Ivor had to front the expense money for a lawsuit and because Ivor agreed to buy a house for him, Ryenne and Jaide.
In August 2006 Ivor and Joan invited him to dinner to discuss trust documents that had been drafted. Ivor presented him with a document titled the "Lauren Sue Jacobson Children's Trust" and asked him to execute it. Patrick told Ivor that he would like to review the trust with his attorney before executing it. Ivor became "very angry" and proceeded to go over "every single line of the trust."
Shortly thereafter, Patrick reviewed the terms of the trust with his attorney, who strongly advised him against executing the agreement because it dictated that there be seven co-trustees who would serve simultaneously. Thereafter, Patrick visited Ivor at his home and told him he would not sign the trust because it did not reflect their previous discussion that Patrick, Ivor and Joan would serve as co-trustees.
Ivor never informed him that in September 2006 MetLife agreed to honor Lauren's policy. Rather, Patrick only found out about five months later when in February 2007 he contacted MetLife to inquire as to the status of the claim.
2. Court's decision
After hearing all the evidence presented at trial, the court issued oral findings, which were confirmed in a statement of decision. The court granted Joan's petition, directing payment of one-half of the MetLife proceeds into the children's trust, specifically enforcing the May 2006 letter agreement.
As stated, ante, Ryenne was the beneficiary of the other half of the policy proceeds.
The court found the May 2006 letter agreement was a valid, enforceable contract and consisted of that document, the January 2006 letter, and the April 2006 affidavit, which the parties intended to be read together. The court rejected Patrick's contention he did not have the legal capacity to assign the MetLife proceeds and expressly found that the family trust did not preclude him from entering into the May 2006 letter agreement or that agreement being enforced against him. The court found the residuary trust gave Patrick the power to assign his income rights to the children's trust and that the spendthrift provision in the family trust did not preclude him from entering into the May 2006 letter agreement.
In the oral findings made at the conclusion of trial, the court explained that Patrick had established an ambiguity in the contract, noting this often occurs when parties draft their own agreements. The court found that because the agreement referenced litigation, there was an ambiguity as to what would happen if litigation proved unnecessary.
In interpreting the contract, the court first turned to the language of the relevant documents, which it found, under Civil Code section 1642, should be read together. The court also noted that the May 2006 letter agreement "expressly references and incorporates the provisions" of the other two documents. In addressing the January 2006 letter wherein Patrick promised that any monies received from MetLife would go into the children's trust, the court noted it "makes no mention of formal litigation." The court also found the May 2006 letter agreement also did not limit itself to formal litigation: "It speaks generally about various 'MetLife matters,' 'actions' [Ivor] will 'take,' tasks he will perform, and expenses he will incur. Though the letter references the possibility of hiring a law firm and the 'prosecution' of an 'action,' there are not terms in this letter that state or suggest that these references are intended to limit the parties' obligations to formal litigation, but rather to encompass informal resolution of a claim as well." The court noted that were Ivor to hire a law firm "to 'prosecute' a claim against MetLife, among the first acts of the firm as part of such 'prosecution' would have been a letter seeking an informal, voluntary settlement." The court found that the January 2006 letter evidenced the parties' oral agreement to put any MetLife proceeds in trust for the children, and the parties conduct and Patrick's express promise in the January 2006 letter "make clear that the parties had no intention to limit the Agreement to formal litigation." The court also noted the agreement did not distinguish between what would occur if the matter was resolved through informal resolution or through litigation. The court rejected Patrick's contention that the parties' intent was that if a small amount was recovered it would go into a trust for the children, but if a large amount was recovered it would not. In doing so, the court found that if that was the parties' intent, that distinction would have been spelled out in the May 2006 letter agreement.
All further statutory references are to the Civil Code unless otherwise specified.
The court also concluded that the agreement did not require unanimity among the children's trust trustees for decisions on behalf of the children and ordered a majority rule provision be included in the trust. The court found that Ivor had delivered the bargained-for consideration and substantially performed under the agreement. In doing so, the court noted that without Ivor's persistence there would be no policy proceeds.
The court found there was no evidence of fraud or undue influence. The court noted that it was Patrick who approached Ivor for assistance and that Patrick was college educated, owned several successful businesses, and had access to attorneys, one of whom assisted in finalizing the terms of the January 2006 letter. The court was not persuaded that Patrick was vulnerable due to grief, given his inconsistent conduct following Lauren's death, including travelling to Seattle, Mexico and Las Vegas, and the fact he began dating another woman, whom he eventually married, within months of Lauren's funeral.
Finally, the court found that the purpose of the children's trust should be for not only their education, but also their ongoing maintenance and support as reflected in the April 2006 affidavit.
The court denied all relief sought in Patrick's petition.
DISCUSSION
I. PRINCIPLES OF CONTRACT INTERPRETATION
In ASP Properties Group v. Fard, Inc. (2005) 133 Cal.App.4th 1257, this court discussed the principles governing contract interpretation, and explained that "'[t]he precise meaning of any contract... depends upon the parties' expressed intent, using an objective standard. [Citations.] When there is ambiguity in the contract language, extrinsic evidence may be considered to ascertain a meaning to which the instrument's language is reasonably susceptible. [Citation.]... [¶] We review the agreement and the extrinsic evidence de novo, even if the evidence is susceptible to multiple interpretations, unless the interpretation depends upon credibility. [Citation.] If it does, we must accept any reasonable interpretation adopted by the trial court. [ Citation.]' [Citation.] '[W]here... the extrinsic evidence is not in conflict, construction of the agreement is a question of law for our independent review. [Citation.]' [Citations.] In contrast, '[i]f the parol evidence is in conflict, requiring the resolution of credibility issues, we would be guided by the substantial evidence test. [Citation.]' [Citation.] However, extrinsic evidence is not admissible to ascribe a meaning to an agreement to which it is not reasonably susceptible." (Id. at pp. 1266-1267.) "Extrinsic evidence can include the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties." (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 980.)
II. ANALYSIS
A. Court's Admission of Extrinsic Evidence To Interpret Agreement
Patrick asserts the court abused its discretion in admitting extrinsic evidence to interpret the May 2006 letter agreement because its terms were unambiguous. Specifically, Patrick asserts the May 2006 letter agreement unambiguously only contemplated funding the children's trust with any MetLife proceeds recovered should a "legal action" be commenced. This contention is unavailing.
In Pacific Gas & El. Co. v. G. W. Thomas Drayage etc. (1968) 69 Cal.2d 33, 37, the California Supreme Court explained the test for admissibility of extrinsic evidence to explain the meaning of a writing: "The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible." "Although extrinsic evidence is not admissible to add to, detract from, or vary the terms of a written contract, these terms must first be determined before it can be decided whether or not extrinsic evidence is being offered for a prohibited purpose. The fact that the terms of an instrument appear clear to a judge does not preclude the possibility that the parties chose the language of the instrument to express different terms." (Id. at p. 39.) "Accordingly, rational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intention of the parties. [Citations.] Such evidence includes testimony as to the 'circumstances surrounding the making of the agreement... including the object, nature and subject matter of the writing... ' so that the court can 'place itself in the same situation in which the parties found themselves at the time of contracting.' [Citations.] If the court decides, after considering this evidence, that the language of a contract, in the light of all the circumstances, is 'fairly susceptible of either one of the two interpretations contended for... ' [citations], extrinsic evidence relevant to prove either of such meanings is admissible.' " (Id. at pp. 39-40, fns. omitted.)
As Patrick admits in his opening brief, the trial in this matter involved "two distinctly different interpretations" of the May 2006 letter agreement. The testimony at trial showed that Patrick contended the letter called for the proceeds of the Metlife policy to fund the children's trust only if they were obtained by formal litigation, while Ivor contended the proceeds would go to the children's trust whether obtained by formal litigation or informal resolution. Thus, the court was required to consider extrinsic evidence before making a threshold determination of whether the May 2006 letter agreement was ambiguous. The question is not whether the court erred in admitting the extrinsic evidence, but whether it (1) erred in determining the agreement was ambiguous, and (2) whether it thereafter erred in adopting Ivor's interpretation.
Indeed, Patrick, "having not objected at trial, cannot now take exception to the court's receipt of extrinsic evidence, but [he] may argue on appeal that such extrinsic evidence conflicts with any interpretation to which the instrument is reasonably susceptible." (Tahoe National Bank v. Phillips (1971) 4 Cal.3d 11, 23-24.)
B. The May 2006 Letter Agreement Is Ambiguous
The letter is ambiguous as while it refers to "legal action" and uses the term "prosecute," it also repeatedly refers to the dispute with Metlife as the "matter." Further, although the May 2006 letter agreement explains the terms under which Ivor would institute and prosecute litigation against Metlife, it also states that the parties agreed to hold off signing a retainer with a law firm while they continued to negotiate with MetLife. The May 2006 letter agreement also references the January 2006 letter, wherein Patrick informed MetLife any payment on his claim would go into the children's trust. Patrick admitted in his testimony that if there were a negotiated settlement with MetLife, the money would go to an educational trust for the children, but claimed this would only apply if he received $50,000 to $100,000. However, the May 2006 letter agreement does not make this distinction.
The court also considered the circumstances surrounding the May 2006 letter agreement, including the January 2006 letter, the April affidavit, and the discussions between the parties leading up to the contract, in determining the terms of that agreement were ambiguous. We conclude, based upon the document itself and the extrinsic evidence considered, that the court correctly determined the May 2006 letter agreement was ambiguous. Therefore, the court did not err in admitting extrinsic evidence to determine the parties' intent.
C. Substantial Evidence Supports the Court's Interpretation of the Agreement
Having concluded the court properly determined the May 2006 letter agreement is ambiguous, we now must determine whether the court erred in interpreting the May 6 letter agreement to mean that the parties agreed to place any monies received from MetLife into the children's trust whether through formal litigation or informal resolution.
In making this determination, we must uphold the court's interpretation if supported by substantial evidence. (In re Marriage of Fonstein (1976) 17 Cal.3d 738, 746-747.) "Under the substantial evidence standard of review, our review begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the trial court's factual determinations." (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 501.)
"Substantial evidence, of course, is not synonymous with 'any' evidence, but is evidence which is of ponderable legal significance. It must be 'reasonable in nature, credible, and of solid value; it must actually be "substantial" proof of the essentials which the law requires in a particular case.' [Citations.] Thus, the focus is on the quality, not the quantity of the evidence. Very little solid evidence may be 'substantial,' while a lot of extremely weak evidence might be 'insubstantial.' " (Toyota Motor Sales U.S.A. v. Superior Court (1990) 220 Cal.App.3d 864, 871.)
As detailed, ante, the court found that the parties' agreement consisted of three documents intended to be read together: the May 2006 letter agreement, the January 2006 letter and the April affidavit. In doing so, the court relied on the fact the May 2006 letter agreement "expressly references and incorporates the provisions" of the other two documents. The court also relied on section 1642, which provides that "[s]everal contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together."
Patrick does not assert that the court erred in interpreting the documents together. Rather, he focuses on what he terms the "plain and ordinary meaning" of the terms "prosecute" and "actions" contained in the May 2006 letter agreement. However, Patrick provides no definition of these terms. While one definition of "prosecute" is "to institute legal proceedings," it is also defined as "to follow to the end: pursue until finished." (Merriam-Webster Online Dict. (2010) [as of March 15, 2010].) Similarly, "action" can mean "the initiating of a proceeding in a court of justice by which one demands or enforces one's right," or "a thing done: deed." (Merriam-Webster Online Dict., supra, [as of March 15, 2010].)
Patrick also ignores the circumstances surrounding the execution of the May 2006 letter agreement. Section 1647, upon which the court relied in reaching its decision, provides: "A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates." In considering this factor, the court concluded that Patrick had earlier reached an oral agreement with Ivor that any proceeds obtained from MetLife, whether by formal litigation or informal resolution, would be placed in the children's trust. As the court found, "the parties' conduct thereafter in reliance on that oral agreement and [Patrick's] promise in the January [2006] letter make clear that the parties had no intention to limit the [May 2006 letter agreement] to formal litigation." There is ample evidence to support this interpretation.
Patrick criticizes the court's reliance on section 1655, which provides that "[s]tipulations which are necessary to make a contract reasonable, or conformable to usage, are implied, in respect to matters concerning which the contract manifests no contrary intention." In doing so, Patrick asserts there can be no implication from terms in the May 2006 letter agreement that Ivor intended that the terms "actions" "legal actions" and "MetLife actions" could include "any process that could be employed in order to cause MetLife to honor Lauren's policy." However, the court properly concluded that because the documents did not distinguish between what would happen if there was formal litigation, or informal resolution, there was an implied stipulation the agreement was not limited to formal litigation. Patrick is again arguing the meaning of those terms are clear and unambiguous, a contention we have rejected.
Patrick asserts that Ivor's interpretation of the meaning of the May 2006 letter agreement was unreasonable. In particular, he attacks Ivor's testimony that his intent in signing the May 2006 letter agreement was that any money obtained, whether from MetLife or an action in South Africa, and whether through negotiation or litigation, would be placed in the children's trust. Patrick argues that this intent is at odds with the term "actions." As we have explained, ante, however, the word "action" is not limited to a legal proceeding. Moreover, Patrick ignores the circumstances surrounding the agreement, including the January 2006 letter. Further, the court observed the testimony of Patrick and Ivor, and found Ivor's understanding of the agreement credible, and Patrick's not. In particular, the court found that Patrick's contention that monies would go into the children's trust only if a small amount were obtained through informal resolution untenable, particularly as the May 2006 letter agreement did not distinguish between where monies would go based upon a dollar amount. In assessing the substantial evidence supporting the court's decision, we will not reweigh the court's credibility determinations. (White v. Inbound Aviation (1999) 69 Cal.App.4th 910, 927.)
D. Authority To Assign MetLife Proceeds
Patrick asserts that as trustee of the family trust he did not have the power to assign the MetLife proceeds to the children's trust, and a spendthrift provision precluded him, as a beneficiary, from assigning the residuary trust's assets. We reject these contentions.
1. Authority to assign proceeds
As detailed, ante, the family trust gave Patrick, as trustee, broad powers to manage, convey, control, exchange, partition, and divide trust assets. It specifically authorized him to "compromise or adjust claims or litigation against or in favor of the trust," and to employ agents to carry out the trust's purposes. Similarly, the Probate Code recognizes a trustee's power to settle claims. (Prob. Code, § 16242.)
While conceding that the trust gave him these powers and that he is also vested with such powers by statute, Patrick claims the assignment of the proceeds to the children's trust exceeded his powers because (1) the assignment did not constitute compensation to Ivor, (2) the assignment was not consideration for the settlement of the MetLife claim, (3) the assignment defeated Lauren's testamentary intent, and (4) the assignment amounted to an unreasonable exercise of his discretionary powers. These contentions are unavailing.
As to the first contention, neither party has asserted, and the court did not find, that the assignment was compensation to Ivor. Therefore this contention is irrelevant to our analysis.
In his second argument, Patrick argues the May 2006 letter agreement could not be considered consideration for the compromise of the MetLife claim because the children's trust "was non-existent when the Agreement was signed" and "amounted to an unrelated third party to this dispute." However, whether or not the children's trust had been created at the time of the May 2006 letter agreement is irrelevant to whether or not Patrick had the authority to assign the MetLife policy proceeds. The recipient of the funds is also irrelevant to this issue. What is relevant is whether there was adequate consideration for the agreement. The court found that Ivor's efforts and expenses constituted adequate consideration for the agreement. It was the assignment itself that involved Patrick's authority to compromise claims. Patrick points to no authority holding that he, as trustee, did not have the power to agree, as a condition of compromising the claim against MetLife, that the proceeds would go to the children's trust.
Patrick next argues that the assignment was inconsistent with Lauren's testamentary intent, but cites to nothing in the record to support such a claim, and makes no argument as to why it was inconsistent. The trust in fact establishes that Lauren and Patrick's intent was to vest the surviving trustee with broad authority to dispose of the trust assets as the trustee deemed appropriate.
Patrick's fourth argument is that the May 2006 letter agreement is "null and void as an unreasonable exercise of his powers" as trustee of the family trust. However, Patrick failed to raise this contention in the trial court, and it is therefore waived. (People ex rel. Dept. of Transportation v. Superior Court (2003) 105 Cal.App.4th 39, 46.)
Moreover, the trial court's findings support the conclusion that his actions were reasonable. Because the policy had lapsed, the chances of recovering any policy proceeds were admittedly low. Moreover, as the court found, without Ivor's assistance, there likely would have been no recovery. As detailed, ante, Patrick had the authority, as trustee of the family trust, to enter into the May 2006 agreement. Accordingly, Patrick acted within his discretion as trustee of the family trust in entering the May 2006 letter agreement.
2. Spendthrift provision
Patrick argues that a spendthrift provision in the family trust precluded him, as beneficiary of the family trust, from assigning his interest in the trust. This contention is unavailing.
A spendthrift provision in a trust is designed to protect assets of a trust from a beneficiary's creditors by providing that a beneficiary's interest may not be alienated or assigned to third party creditors. (Young v. McCoy (2007) 147 Cal.App.4th 1078, 1088, fn. 11.) Here, however, Patrick, as trustee, was the creditor of a claim against MetLife. Therefore, the spendthrift provision is inapplicable.
Moreover, Probate Code section 15304, subdivision (a) provides that "[i]f the settlor is a beneficiary of a trust created by the settlor and the settlor's interest is subject to a provision restraining the voluntary or involuntary transfer of the settlor's interest, the restraint is invalid against transferees or creditors of the settlor." It is undisputed that Patrick was both the settlor and beneficiary of the trust. Therefore, under this Probate Code section as well, the spendthrift provision is inapplicable.
In support of his position that the spendthrift provision in the family trust barred him from transferring the policy proceeds to the children's trust, Patrick relies on Laycock v. Hammer (2006) 141 Cal.App.4th 25 (Laycock). That case is inapposite.
In Laycock, the decedent purchased a life insurance policy and, 13 years prior to his death, assigned the proceeds to an irrevocable life insurance trust. (Laycock, supra, 141 Cal.App.4that p. 27.) The plaintiff was a third party creditor who tried to attach the life insurance proceeds. The court held that under Probate Code section 18200, because the settlor had irrevocably assigned the life insurance proceeds to the trust, the third-party creditor could not reach those assets. (Laycock, supra, at p. 31.)
Here, again, we are not concerned with a third party creditor seeking to attach trust principal. Patrick, as trustee, was the creditor of a claim against MetLife, which he compromised by agreeing to use the life insurance proceeds to fund the children's trust.
DISPOSITION
The judgment is affirmed. Respondent shall recover her costs on appeal.
WE CONCUR: AARON, J. IRION, J.