Stadel Art Museum v. Mulvihill - Case Brief

Case Number: A165397
Court: California Court of Appeal, First Appellate District, Division Three
Date Filed: September 01, 2025

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Holding

The court held that the Boesch Trust’s language granting the trustee “sole discretion” to distribute assets “in cash or in kind” precludes a mandatory interpretation that the trustee must sell the four co‑owned properties immediately; therefore the trial court’s directive to sell “forthwith” was erroneous and is vacated, with the matter remanded for the trustee to exercise his discretionary authority consistent with the trust terms and fiduciary duties.

Narrative

Lead:
In a decision that sharpens the line between a trustee’s contractual discretion and a court’s duty to enforce a settlor’s intent, the California Court of Appeal reversed a probate court order that forced the sale of four San Francisco properties held by the Peter Boesch Revocable Trust. The ruling underscores that even where tax considerations loom large, a trust’s express grant of “sole discretion” to the trustee cannot be overridden by a lower court’s reading of a single “request” clause as a command.

Procedural backdrop:
The dispute began when Thomas Mulvihill, successor trustee of both the Boesch Trust and the co‑owner Darril Hudson Revocable Trust, filed a petition under Probate Code § 17200(b)(6) seeking the court’s guidance on how to distribute the Boesch Trust’s remaining assets—50 percent interests in four San Francisco real‑estate parcels. The Städel Art Museum, the sole residuary beneficiary of the Boesch Trust, asked that the trustee pay off the full acquisition indebtedness on each parcel and receive an in‑kind distribution of the museum’s 50 percent interests, arguing that as a tax‑exempt entity it could avoid capital‑gains tax on a subsequent sale. By contrast, the Hudson Trust’s charitable beneficiaries—San Francisco Conservatory of Music, San Francisco‑Marin Food Bank, International House at UC Berkeley, and the National LGBTQ Task Force—preferred a straight sale of the properties and a cash distribution.

The probate court, after a hearing, concluded that the Boesch Trust’s language “my trustee is requested to sell the real property” was a command, ordering Mulvihill to sell the four parcels “forthwith” and distribute the proceeds in accordance with the trust’s residual‑beneficiary clause. The Museum appealed.

Key factual matrix:

The Boesch Trust, dated March 1 1994, leaves the balance of the estate to the Städel Art Museum in Frankfurt, Germany, with a provision that “if Darril Hudson has survived me, … the gift is not deductible; I direct my trustee to restructure the gift … so that it is deductible under § 2055.”
Part 5.1.B.1 of the same trust grants the trustee “sole discretion” to make any division or distribution “in cash or in kind, … with or without adjustment for income‑tax basis.”
The Hudson Trust, created March 9 1994, holds the complementary 50 percent interests and its beneficiaries have no interest in the Boesch Trust’s assets.

Issues presented:

Whether the probate court correctly interpreted the Boesch Trust’s “requested” language as a mandatory directive to sell the properties immediately.
Whether the court improperly considered the Hudson Trust beneficiaries’ preferences in construing the Boesch Trust.
Whether the dual trusteeship created a conflict that warranted removal of Mulvihill—a claim first raised on appeal.

Court’s analysis:

Construction of the trust language
The appellate court reiterated the foundational principle that “the primary rule in construction of trusts is that the court must, if possible, ascertain and effectuate the intention of the trustor” (Crook v. Contreras (2002) 95 Cal.App.4th 1194). It emphasized that words are given their ordinary grammatical meaning unless the instrument shows a clear contrary intent (Wells Fargo Bank v. Huse (1976) 57 Cal.App.3d 927). The phrase “my trustee is requested to sell the real property” therefore reads as a permissive, not mandatory, directive. The court noted that the prefatory clause “with due consideration for the real estate market” further signals that the trustee may defer or condition a sale based on market conditions.

The “sole discretion” clause
Part 5.1.B.1’s grant of “sole discretion” is described as “the equivalent of absolute, unlimited … discretion” (Estate of Gross (1963) 216 Cal.App.2d 563). The appellate panel held that a mandatory sale would nullify this broad discretion, violating the statutory construction canon that “all parts of an instrument are to be construed … so as to give every expression some effect” (§ 21120, Probate Code). Consequently, the trustee must be allowed to consider an in‑kind distribution, a cash sale, or any hybrid scheme, provided the decision aligns with the fiduciary duties codified in §§ 16000, 16002, 16004, and the “reasonable” standard of §§ 16040, 16080.

Third‑party interests
The court found no basis for the probate court to weigh the Hudson Trust beneficiaries’ preferences when interpreting the Boesch Trust, because the Hudson Trust is a separate instrument and its beneficiaries are “third persons” with respect to the Boesch Trust. The duty of loyalty under § 16002(a) obliges the trustee to act solely in the interest of the Boesch Trust’s beneficiaries—in this case, the Museum.

Conflict‑of‑interest and trustee removal
The appellate panel declined to address the removal issue because it was not raised below and therefore was procedurally barred. Nonetheless, the opinion outlined the statutory framework for removal under Probate Code § 15642 and the limited circumstances in which a court may act on “good cause” (Estate of Bixby (1961) 55 Cal.2d 819). The court invited the parties, on remand, to raise any properly pled conflict‑of‑interest claim under § 16005, which obligates a trustee who serves two trusts with potentially adverse interests to resign or eliminate the conflict.

Disposition and directive:
The appellate court vacated the probate court’s order, remanded the case, and instructed the trial court to issue a new order directing Mulvihill to exercise his discretionary authority under part 5.1.B.1. The remand also preserves the possibility that the court may later consider a petition to remove the trustee if a conflict‑of‑interest claim is properly presented.

Impact and unresolved questions:
This decision reinforces the sanctity of a trustee’s discretionary language, even where tax planning motives are compelling. Practitioners should scrutinize trust instruments for “sole discretion” clauses and be prepared to argue that a “request” does not equate to a command. The ruling also signals that appellate courts will not entertain new grounds—such as trustee removal—unless they are preserved in the trial record, preserving the procedural rigor of probate litigation.

Unresolved is how California courts will balance dual‑trusteeship conflicts when the interests of co‑owners diverge sharply, especially in co‑ownership structures involving charitable beneficiaries with differing tax positions. Future cases may need to clarify whether § 16005’s conflict‑of‑interest prohibition extends to situations like Mulvihill’s, where the conflict is not a direct personal gain but a statutory disparity in tax consequences between two trusts.

Referenced Statutes and Doctrines

Probate Code §§ 17200, 15642, 16000, 16002, 16004, 16005, 16040, 16080 – governing petitions, trustee removal, fiduciary duties, and discretion.
Internal Revenue Code § 2055 – referenced in the Boesch Trust’s tax‑deductibility provision.
Probate Code §§ 21120, 21121 – construction principles requiring every expression to have effect.

Key Cases Cited

Crook v. Contreras, 95 Cal.App.4th 1194 (2002) – trust‑construction hierarchy.
Wells Fargo Bank v. Huse, 57 Cal.App.3d 927 (1976) – ordinary meaning of trust language.
Estate of Gross, 216 Cal.App.2d 563 (1963) – definition of “sole discretion.”
Estate of Dodge, 6 Cal.3d 311 (1971) – independent construction of trust instruments.
Avalos v. Perez, 196 Cal.App.4th 773 (2011) – forfeiture of issues not raised at trial.
Ballard v. Uribe, 41 Cal.3d 564 (1986) – record requirements for appellate review.
Elena S. v. Kroutik, 247 Cal.App.4th 570 (2016) – necessity of a reporter’s transcript.
Burch v. George, 7 Cal.4th 246 (1994) – distinction between questions of law and fact in trust cases.
O’Neal v. Stanislaus County Employees’ Retirement Assn., 8 Cal.App.5th 1184 (2017) – fiduciary duty of loyalty.
Uzyel v. Kadisha, 188 Cal.App.4th 866 (2010) – trustee’s duty to avoid improper influence.
Estate of Bixby, 55 Cal.2d 819 (1961) – reluctance to remove a settlor‑appointed trustee.
Estate of Gilliland, 73 Cal.App.3d 515 (1977) – standards for removal on “good cause.”

These authorities collectively shape the appellate court’s reasoning that a trustee’s statutory discretion must be honored unless the trust instrument unmistakably commands otherwise, and that procedural preservation remains essential for raising new grounds such as removal.