Patton v. Walter CA2/6 ( 2022 )

Filed 12/5/22 Patton v. Walter CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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has not been certified for publication or ordered published for purposes of rule 8.1115.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 SIX
JACK T. PATTON, 2d Civil No. B293694
(Super. Ct. No. 56-2007-
Plaintiff, Cross-Appellant 00288787-PR-PW-VTA)
and Respondent. (Ventura County)
v.
SALLY PATTON WALTER, et
al.,
Defendants, Cross-
Respondents and Appellants,
Sally Patton Walter, individually and as trustee of
the Patton Family Trust dated February 7, 2002, and Jodi Patton
Ream appeal from orders of the probate court overruling their
objections to their brother Jack Patton’s Supplement to
Complaint for Imposition of Constructive Trust and Petition to
Determine Entitlement to Share of Trust Assets and referring
the matter to a referee.1 Jack Patton cross-appeals, contending
the probate court should have entered an order distributing
certain assets to him, without reference to a referee. We conclude
the probate court erred. Jack’s Supplement to Complaint for
Imposition of Constructive Trust and related petitions are based
on the same cause of action he alleged in a prior civil action, In re
Lowell T. Patton Trust, Ventura Sup. Ct. No. 56-2007-00288787.
The final judgment in that action precludes litigation of the
claims alleged here. Accordingly, we reverse the probate court’s
order of September 20, 2018 appointing a referee, and its order of
October 10, 2018 rejecting appellants’ objections to respondent’s
petitions. Our resolution of the appeal renders Jack’s cross-
appeal moot.
Facts and Procedural History
In 2002, Lowell T. Patton and his wife, Mary Lou
Patton, signed pour-over wills and established the Patton Family
Trust. The Patton Family Trust was revocable during the joint
lifetimes of the settlors, Lowell and Mary Lou. On the death of
the first settlor, it divided into three trusts: a Survivor’s Trust
(A), a Decedent’s Trust (B) and a Qualified Terminable Interest
Trust or Marital Trust (C). Trusts B and C became irrevocable on
the death of the first settlor and provided for a life estate to the
surviving settlor. After the survivor passed away, the remainder
would be divided equally between their three children, appellants
Sally Patton Walter and Jodi Patton Ream, and respondent Jack
T. Patton.
Lowell and Mary Lou also established three
charitable remainder unitrusts (CRUTs). These irrevocable
1 Like the trial court and the parties, we use the first names
of the parties for clarity, intending no disrespect.
2
trusts pay income to the Pattons’ three children for a defined
period of time and then distribute the remainder to designated
charities. The Pattons owned a minor league baseball team. To
fund the CRUTs, they incorporated the team and transferred the
shares of stock into each CRUT.
Mary Lou died in April 2002. By the summer of
2003, Lowell was dissatisfied with the 2002 estate plan. Among
other things, he came to believe that the lawyers and estate
planner who designed it had used the CRUTs to sell the baseball
team without his consent. Sally and Jodi agreed with their
father. Jack, who worked as the team’s general manager,
supported the sale and worked with the lawyers to close the
transaction. After the sale closed, in November 2004, Jack’s
CRUT received 60% of the proceeds. The CRUTs established for
Sally and Jodi each received 20%.
In October 2003, Lowell granted his power of
attorney to Sally. With respect to his employee retirement and
other benefits, the power of attorney states: “The agent is
authorized to establish one or more [IRAs] and employee benefits
plans . . . on my behalf, to contribute to any IRA or plan held in
my name, to roll over or direct transfers of plan benefits into
other retirement plans or IRA accounts . . . , to manage the
account, to withdraw from any account without limitation, to
select or change payment options and to apply for and make any
elections under any IRA or employee benefit plan in which I am a
participant . . . , to take possession of all such benefits, and to
distribute such benefits to or for my benefit. The agent shall
have the power to designate and change beneficiaries who are
either my spouse or my descendants or their spouses, except the
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agent may not designate himself or herself without a showing
that such designation is my intention.”
In February 2005, Lowell revoked the Survivor’s
Trust (A) of the 2002 Patton Family Trust and created the Lowell
T. Patton Trust (the 2005 Trust). He also executed a new pour-
over will, naming the 2005 Trust as his sole beneficiary. Sally is
the trustee of the 2005 Trust. She and Jodi are its sole
beneficiaries; Jack is excluded. About eight months later, in
October 2005, Lowell signed a Designation of Beneficiary naming
the 2005 Trust as the beneficiary of his IRAs and of the Lowell T.
Patton Profit Sharing Plan. Sally also signed the document as
his power of attorney.
Lowell filed lawsuits against the charitable
beneficiaries of the CRUTs. He also sued the lawyers and the
estate planner, alleging causes of action for breach of fiduciary
duty, professional negligence, fraud on various theories and elder
financial abuse. After Lowell’s death, Sally amended the
complaint to name Jack as a defendant, on the theory that he
aided and abetted the wrongdoing of the other defendants. The
claims against most of the charities were settled. We have
recently resolved the remaining claims in a related appeal,
Walter, et al. v. Estate Strategies, Inc., et al., No. B280172.
Lowell died in April 2007. Sally presented his 2005
will for probate. Jack filed petitions to contest the 2005 will and
trust, and for an accounting, all on the theories that, in 2005,
Lowell lacked capacity to change his 2002 will and trust and that
the changes were the result of undue influence by Sally and Jodi.
Jack also filed a complaint for imposition of a
constructive trust in which he alleged that he and his sisters
were named as beneficiaries of Lowell’s profit sharing plan and
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IRAs in a 1999 Designation of Beneficiaries. Jack further alleged
that the October 2005 Designation of Beneficiary was void
because Lowell was not competent when he signed it and Sally’s
power of attorney did not include the authority to change the
beneficiaries of the Retirement Assets. In his prayer for relief,
Jack requested, “That the court determine that the [2005
Designation of Beneficiary] is not a valid or enforceable Revised
Beneficiary Designation, and that assets of the decedent shall
pass by prior [1999 Designation of Beneficiaries] executed by
decedent at a time when he was fully competent and not subject
to undue influence.”
Jack’s trust and will contests and his complaint
relating to the Retirement Assets were consolidated. After a 34-
day non-jury trial, the trial court issued a statement of decision
which became its “final decision and judgment.” The trial court
found that Lowell’s revocation of his 2002 Survivor’s Trust (A),
execution of the 2005 will and establishment of the 2005 Trust
were not the product of undue influence and that these
documents reflected Lowell’s “own free will and intent.” Lowell
intended to exclude Jack as a beneficiary of the 2005 Trust and
had personal reasons for doing so, including Jack’s participation
in the sale of the baseball team. The 2005 will and trust are
“fully valid and enforceable.”
The trial court further found that the October 5, 2005
Designation of Beneficiary was not valid or enforceable because
Lowell lacked capacity when he signed it. Sally’s power of
attorney did not authorize her to designate the 2005 Trust as the
beneficiary of the Retirement Assets. As a result, the 2005
Designation of Beneficiary did not “achieve a valid testamentary
transfer.”
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Although the trial court found the 2005 Designation
of Beneficiary invalid, it did not impose a constructive trust on
the Retirement Assets because it found Jack “proved no
entitlement to such . . . relief.” It noted that, “Counsel advised
the trial court that they will ask the Probate Court to determine
what IRAs and retirement plans are encompassed by the 10/5/05
Designation of Beneficiary; to ascertain the effect of the same
assets being covered by other testamentary instruments; and to
judge whether or not the retirement monies pass into the 2/17/05
Lowell T. Patton Trust through Lowell’s 2/21/05 pour-over will.”
The trial court did not, however, issue a declaratory judgment
that Jack is entitled to any portion of the Retirement Assets nor
did the judgment expressly reserve that issue for consideration
by the probate court or remand the matter to the probate court
for that purpose.
The trial court later clarified, in response to
objections by Sally and Jodi, that it, “makes no finding with
respect for the need for Sally Patton Walter, as the POA-holder,
to use a beneficiary designation to effectuate a transfer of
Lowell’s ‘IRA and employee benefits’ assets to the 2/17/05 Lowell
T. Patton Trust. The trial court’s ruling is limited to the issue
presented to it, which was whether the 10/5/05 beneficiary
designation validly effectuated that transfer.” The trial court
“affirm[ed] its Statement of Decision as its final decision and
judgment in these consolidated cases.” Jack filed a Notice of
Entry of Judgment on July 10, 2013. Neither party appealed.
More than two years after the entry of this judgment,
Jack filed in the probate court a “Supplement to Complaint for
Imposition of Constructive Trust [Civil Code § 2224]; Petition for
Delivery of Property Pursuant to Probate Code § 850(a)(2)(C).”
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The pleading sought an order that he is a beneficiary of the
Retirement Assets, an accounting, and distribution to him of his
share of the Retirement Assets. Appellants answered the
Supplement to Complaint after being ordered by the probate
court to do so. Their answer admits that all three Patton siblings
were named as contingent beneficiaries of a profit sharing plan
and trust established by Lowell Patton.
Sally filed a declaration in which she stated that she
used her power of attorney to terminate Lowell’s profit sharing
plan (one of the Retirement Assets) in October 2005. Funds from
that plan were deposited into accounts for Lowell’s benefit,
including an IRA and an annuity fund. Sally stated that she was
“unaware of any account maintained for the benefit of my father
that included Jack Patton as a direct or contingent beneficiary.”
After reviewing the parties’ briefs, the probate court
overruled appellants’ objections based on res judicata, collateral
estoppel, laches and the statute of limitations. It reasoned that
the trial judge in the civil action “denied the remedy of
constructive trust to Jack Patton, but referred the determination
of the entitlement to retirement funds back to the Probate Court
for determination. The decision denying the remedy of
constructive trust was not res judicata of the issue of entitlement
to retirement funds. The court did grant the remedy of
invalidation of the [2005] designation.”
It found Jack’s claims were not barred by collateral
estoppel because “there was no finding against Jack Patton on
the merits of his claims. His claimed remedy was denied on
procedural grounds, but a remedy is not a cause of action, it is a
remedy.” The probate court concluded Jack’s claim was not
barred by a statute of limitations because he filed his Supplement
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to Complaint within two years of learning appellants continued
to deny his right to a share of the Retirement Assets and because
the “existence of the litigation since 2008 has tolled any other
statutes of limitations.” The probate court referred all remaining
issues to a referee for resolution.
Contentions
Sally, Jodi and the Patton Family Trust contend the
probate court erred as a matter of law because the final judgment
in the prior action precludes continued litigation on matters that
were decided or could have been decided in that judgment. Jack
contends his claim to a share of the Retirement Assets is still
alive because the prior judgment recognizes that he is a
beneficiary of the Retirement Assets even if he is not entitled to
the imposition of a constructive trust on those assets.
Standard of Review
The probate court concluded that Jack’s Supplement
to Complaint and related petitions are not barred by the
doctrines of res judicata and collateral estoppel, by any statute of
limitations or by the doctrine of laches. We review these
conclusions de novo. (Aryeh v. Canon Business Solutions, Inc.
(2013) 55 Cal.4th 1185, 1191; Ghirardo v. Antonioli (1994) 8
Cal.4th 791, 799; Smith v. ExxonMobil Oil Corp. (2007) 153
Cal.App.4th 1407, 1414-1415.)
Discussion
In his Complaint for Imposition of Constructive Trust
in the prior action, Jack alleged that he was originally an
alternate beneficiary of the Retirement Assets and that the 2005
Designation of Beneficiary was signed by Lowell when he lacked
testamentary capacity and under the undue influence of Sally
and Jodi. He asked the trial court to “determine that the [2005
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Designation of Beneficiary] is not a valid or enforceable
[designation], and that the assets of the decedent shall pass by
prior Original Beneficiary Designation . . . .” The judgment in the
prior action found that Sally and Jodi did not exercise undue
influence over Lowell, but that the 2005 Designation of
Beneficiaries was invalid because Lowell lacked testamentary
capacity when he signed it and Sally’s power of attorney did not
authorize her to name the 2005 Trust, rather than individuals, as
beneficiary of the Retirement Assets. The trial court found Jack
had not proven he was entitled to the imposition of a constructive
trust. It made no finding on the question whether he is entitled
to a share of the Retirement Assets, nor did it expressly reserve
that question for determination by the probate court.
Jack’s “Supplement to Complaint,” filed in the
probate court, alleged Sally and Jodi had taken the position that
the Retirement Assets “pass under the will” of their father,
denying Jack had any interest in those assets. He asked the
probate court, “For an order that he is a beneficiary under the
retirement plans,” “for an accounting of the . . . plan benefits” and
for “distribution to [Jack] of his share of said plan assets.”
The doctrine of res judicata, or claim preclusion,
“precludes the relitigation of a cause of action that previously was
adjudicated in another proceeding between the same parties or
parties in privity with them.” (Federation of Hillside & Canyon
Assns. v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1202.)
Res judicata applies if: (1) the decision in the prior proceeding is
final and on the merits; (2) the present proceeding is on the same
cause of action as the prior proceeding; and (3) the party against
whom the doctrine is asserted was a party or in privity with a
party to the prior proceeding. (Boeken v. Philip Morris USA, Inc.
9
(2010) 48 Cal.4th 788, 797 (Boeken).) Where these criteria are
met, res judicata bars the litigation not only of issues that were
actually decided in the prior action, but also issues that could
have been decided in that action. (Federation of Hillside &
Canyon Assns., supra, at p. 1202; see also Ideal Hardware &
Supply Co. v. Department of Employment (1952) 114 Cal.App.2d
443, 447 [prior judgment is a bar to subsequent action on the
same cause of action and “all matters that were litigated or that
could have been litigated”].) The doctrine applies in probate
matters as it does in civil actions. (Estate of Dito (2011) 198
Cal.App.4th 791, 801-802.)
California defines a cause of action by applying the
“‘primary rights’” theory, “under which the invasion of one
primary right gives rise to a single cause of action.” (Slater v.
Blackwood (1975) 15 Cal.3d 791, 795.) The primary right “‘is
simply the plaintiff’s right to be free from the particular injury
suffered. . . .’” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th
888, 896, quoting Crowley v. Katleman (1994) 8 Cal.4th 666, 681-
682.) Under the primary right theory, “‘[a] cause of action . . .
arises out of an antecedent primary right and corresponding duty
and the delict or breach of such primary right and duty by the
person on whom the duty rests. “Of these elements, the primary
right and duty and the delict or wrong combined constitute the
cause of action in the legal sense of the term. . . .”’” (Boeken,
supra, 48 Cal.4th at pp. 797-798, quoting McKee v. Dodd (1908)
152 Cal.637, 641.)
Here, the primary right asserted by Jack in the prior
action is the right to a share of the Retirement Assets as a
beneficiary of Lowell’s IRAs and profit sharing plans. The
corresponding duty is Sally’s duty as Lowell’s trustee, executor
10
and agent under the power of attorney to distribute the
Retirement Assets according to Lowell’s instructions. The alleged
breach of duty is Sally’s refusal to distribute Jack’s share of the
Retirement Assets to him. Jack alleges the same primary right,
duty and breach in the Supplement to Complaint. We conclude
the Supplement to Complaint alleges the same cause of action as
the prior Complaint for Imposition of Constructive Trust.
Jack contends his Supplement to Complaint is not
barred by res judicata because, although the prior judgment
denied him the remedy of a constructive trust, it also established
that he is a beneficiary of the Retirement Assets. In his view, the
prior judgment found that a wrong had been committed – the
attempted change in beneficiaries – and left the remedy for that
wrong to be decided by the probate court. But the prior judgment
did not include those findings. The judgment does not state that
Jack is a beneficiary of the Retirement Assets or that a prior
designation of beneficiaries governs distribution of those assets.
Nor did the judgment remand, transfer or otherwise
“carve out” the issue of Jack’s available remedies for adjudication
by the probate court. (See, e.g., Northrop Corp. v. Chaparral
Energy (1985) 168 Cal.App.3d 725, 730; 7 Witkin, Cal. Procedure
(6th ed. 2021), Judgment, § 411, p. 931.) The statement of
decision notes, “Counsel advised the trial court that they will ask
the Probate Court to determine what IRAs and retirement plans
are encompassed by the 10/5/05 Designation of Beneficiary; to
ascertain the effect of the same assets being covered by other
testamentary instruments; and to judge whether or not the
retirement monies pass into the 2/17/05 Lowell T. Patton Trust
through Lowell’s 2/21/05 pour-over will.” No reference to this
advice was included in the minute order enumerating the trial
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court’s findings after trial, the “conclusions” section of its
statement of decision, the June 28, 2013 order overruling
appellants’ objections to the statement of decision, or the Notice
of Entry of Judgment. We conclude the prior judgment did not
refer any issues to the probate court for resolution.
Jack’s status as a beneficiary and his entitlement to a
share of the Retirement Assets were not outside the scope of the
issues presented to the trial court in the prior action. His
complaint asked the court to determine “that assets of the
decedent shall pass by” the 1999 Designation of Beneficiaries.
When that determination was not made, Jack could have objected
to the statement of decision or appealed. He did not and the
judgment became final. The judgment now precludes continued
litigation over issues that were actually decided or could have
been decided in the prior judgment. (Tensor Group v. City of
Glendale (1993) 14 Cal.App.4th 154, 160 [prior judgment
conclusive on any matter “‘within the scope of the action, related
to the subject matter and relevant to the issues, so that it could
have been raised . . .’”].)
Jack contends the prior judgment was not a final
judgment on the merits of his cause of action but was, instead,
only a determination that he was not entitled to a specific
remedy. He relies on the general rule that, “If the plaintiff, with
a good cause of action, seeks a remedy to which he or she is not
entitled . . . judgment may be rendered against the plaintiff.
Nevertheless, the plaintiff may sue again on the same cause of
action.” (7 Witkin, supra, Judgments, § 441, p. 974.) This rule
applies where “the judgment, although final, is not on the merits.
Recovery was denied not for substantive defects in the plaintiff’s
claim but for procedural reasons.” (Ibid.)
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The prior judgment here was entered after a trial on
the merits, not for “procedural reasons.” The trial court found
Jack did not carry his burden to prove that he was entitled to a
constructive trust. This is a finding on the merits, not the
process. Although the trial court failed to make express findings
on every issue presented to it, its final judgment is “‘res
judicata on matters which were raised or could have been raised,
on matters litigated or litigable.’” (Bucur v. Ahmad (2016) 244
Cal.App.4th 175, 185–186, quoting Thibodeau v. Crum (1992) 4
Cal.App.4th 749, 755.)
Because the judgment in the prior action precludes
relitigation of Jack’s entitlement to a share of the Retirement
Assets, the trial court erred when it rejected appellants’ res
judicata objection and referred the matter to a referee. It is
unnecessary for us to reach appellants’ remaining contentions.
Cross Appeal
Our resolution of the res judicata issue renders Jack’s
cross-appeal moot. Our discussion of res judicata principles
dictates that whatever rights Jack may have had to the assets
(which he claims are one-third his) are now precluded by reason
of the finality of Ventura Superior Court case no. 56-2007-
00288787.
Disposition
The order dated September 20, 2018 (Order for
Referral to Lawrence Sorensen) and the order dated October 10,
2018 (Partial Order re: Petition to Determine Entitlement to
Share of Trust Assets; Petition for Delivery of Property Pursuant
to Probate Code section 850(1)(2)(c)) are reversed. The cross-
appeal is dismissed as moot. Costs to appellants.
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NOT TO BE PUBLISHED.
YEGAN, J.
We concur:
GILBERT, P. J.
BALTODANO, J.
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Glen Reiser, Judge
Superior Court County of Ventura
______________________________
Smith law Firm and Craig R. Smith, for Defendants,
Cross-Respondents and Appellants.
Thomas E. Olson, for Plaintiff, Cross-Appellant and
Respondent.