CITIZENS BUSINESS BANK v. Carrano
189 Cal. App. 4th 1200, 117 Cal. Rptr. 3d 119 (2010)
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Rule of Law:
When the language of a trust instrument is clear and unambiguous, extrinsic evidence cannot be used to create an ambiguity or alter the plain meaning of its terms. A court will not rewrite a trust to add restrictions or exclusions that the trustors did not expressly include.
Facts:
- In 1966, Charles and Serena Papaz created the Papaz Family Trust. They had one son, Christopher.
- In 1984, Christopher fathered a child, Jonathan Carrano, with his physical therapist, Kathy Carrano, who was married to another man at the time.
- Jonathan was born in August 1985 and raised by Kathy and her husband. He was never formally adopted by Kathy's husband.
- Charles and Serena disapproved of their son Christopher's lifestyle, including his fathering children out of wedlock, and did not trust him with money.
- In 1988, the Papazes amended their trust to define 'issue' as 'lineal descendants of all degrees' and addressed adoption.
- In 1991, they amended the trust a final time with respect to the definition, clarifying that 'issue' excluded 'persons adopted into the Trustors’ bloodline' and 'persons adopted out of the Trustors’ bloodline.'
- In January 2007, after Christopher became incapacitated, Charles was informed that Jonathan was his biological grandson and acknowledged this, stating, 'I know.'
- Christopher died in June 2007, and Charles died in July 2007, creating a dispute over whether Jonathan was Christopher's 'issue' under the trust.
Procedural Posture:
- Citizens Business Bank, the trustee, filed a petition in the trial court seeking an order to ascertain the trust's beneficiaries and determine their entitlement to distribution.
- After a bench trial, the trial court found that the trust was ambiguous concerning the rights of a child in Jonathan's circumstances.
- The trial court considered extrinsic evidence of the trustors' intent and concluded that Jonathan did not fall within the definition of 'issue' as the trustors intended.
- On April 3, 2009, the trial court issued a final order excluding Jonathan from any distribution under the trust.
- Jonathan Carrano, as the appellant, appealed the trial court's order to the Court of Appeal.
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Issue:
Is the term 'issue,' defined in a trust as 'lineal descendants of all degrees' with specific exclusions only for adoption, latently ambiguous as to whether it includes a biological, lineal descendant born out of wedlock and raised in another family?
Opinions:
Majority - O'Connell, J.
No. The term 'issue' as defined in the Papaz Family Trust is not ambiguous, and therefore, its plain meaning must be enforced to include Jonathan Carrano. The paramount rule in construing a trust is to give effect to the trustor's intention as expressed within the instrument itself. Extrinsic evidence is only permissible to resolve an ambiguity, not to create one. An ambiguity exists only when the language is 'fairly susceptible' to more than one interpretation. Here, the trust, drafted by lawyers, explicitly defined 'issue' as 'lineal descendants of all degrees' and provided specific, narrow exclusions related to adoption. As Jonathan is undisputedly Christopher's lineal descendant and does not fall under any adoption exclusion, he fits the plain language of the definition. The fact that Charles and Serena did not specifically contemplate Jonathan's 'special case' does not render the clear language ambiguous. The court is not at liberty to rewrite the trust to add restrictions, such as requiring a child to be the issue of a legal marriage, which the trustors themselves did not include. If they had intended to disinherit biological grandchildren born out of wedlock, they could have explicitly said so.
Analysis:
This decision strongly reinforces the plain meaning rule in the interpretation of wills and trusts, limiting the use of extrinsic evidence. It establishes that courts will not infer an intent to exclude beneficiaries based on the trustor's perceived moral values or lifestyle disapproval if the instrument's language is clear. This precedent mandates that trustors who wish to disinherit specific classes of descendants, such as those born out of wedlock, must do so with explicit and unambiguous language. The ruling prioritizes the certainty and predictability of written legal documents over attempts to divine the unexpressed intentions of the deceased.
