Preview
849365
KEKER & VAN NEST LLP
JOHN W. KEKER - # 49092
jkeker@kvn.com
WARREN A. BRAUNIG - # 243884 ELECTRONICALLY
whraunig@kvn.com FILED
BENJAMIN BERKOWITZ - # 244441 Superior Court of California,
bberkowitz@kvn.com County of San Francisco
Se ruchy BAJORIA - # 255294 AUG 07 2014
abajorla@kvn.com Clerk of the Court
633 Battery Street BY: ELIZABETH FONG
San Francisco, CA 94111-1809 Deputy Clerk
Telephone: 415 391 5400
Facsimile: 415 397 7188
MYERS URBATSCH P.C.
PETER S. MYERS - # 115113
psmyers@myersurbatsch.com
MATTHEW R. MRAULE - # 263433
mmraule@myersurbatsch.com
625 Market Street, 4th Floor
San Francisco, California 94105
Phone: (415) 896-1500
Fax: (415) 979-0761
Attorneys for Petitioners and Respondents
BRUCE H. QVALE, FAMILY TRUSTEE AND
RESPONDENT QVALE AUTO GROUP
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF SAN FRANCISCO
In the Matter of the Case No. PTR-13-297016
Kathryn C. Qvale Exempt Marital Trust, ANSWER TO FIRST AMENDED
dated January 31, 2006 PETITION FOR CONVEYANCE OF
PROPERTY BELONGING TO TRUST;
FOR DAMAGES AND OTHER RELIEF
FOR FINANCIAL ELDER ABUSE
BY FAX
Miles Jeffrey Qvale, individually and as
trustee
vs.
Bruce H. Qvale, Qvale Auto Group, Inc., a
California corporation, and Does 1-10
1
ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
Pursuant to Code of Civil Procedure § 431.30(d), Respondents Bruce Qvale (“Bruce”),
Family Trustee, and Qvale Auto Group (“QAG”), hereby answer Miles Jeffrey Qvale’s (“Jeffs”)
First Amended Petition for Conveyance of Property Belonging to Trust; for Damages and Other
Relief for Financial Elder Abuse (“Conveyance Petition”), as follows:
RESPONSES TO SPECIFIC ALLEGATIONS IN CONVEYANCE PETITION
People
1. Admitted.
2. Admitted.
3. The final sentence of this paragraph is a legal conclusion for which no response is
required. Otherwise, admitted.
4, The first sentence of this paragraph is admitted, The second sentence is denied.
The third sentence is a legal conclusion, for which no response is required.
5. Admitted that Manatt was counsel to Kjell. Otherwise, denied.
6. Admitted.
7. Respondents lack sufficient information upon which to admit or deny this
allegation, and on that basis deny it.
Jurisdiction
8. This is a legal conclusion, for which no response is required.
Background
9. Admitted.
10. The third and fourth sentences of this paragraph are admitted. Admitted, upon
information and belief, that Kathryn and Kjell’s estate plans took advantage of the marital
deduction and divided ownership of various limited liability entities. Otherwise, denied.
11. Because the second sentence is vague as to the moment in time for which it is
alleged, Respondents deny this allegation because the 1980’s trusts referenced in this paragraph
have not always “held at least 3% of the current shares of QAG.” Otherwise, admitted.
12. Admitted.
13. Admitted.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
14. To the extent the first sentence of this paragraph alleges the intent of Kathryn and
Kjell beyond what is reflected in their trust documents, Respondents lack information sufficient
to admit or deny this allegation, and on that basis deny it. Otherwise, admitted.
15. Admitted that 5,636 shares of QAG were placed in the Exempt Marital Trust upon
Kathryn’s death. The allegations beginning with “the Exempt Marital Trust mandated...”
through the end of the paragraph are admitted. Because the allegation concerning the 5,636
shares constituting 21% of “currently outstanding shares” is vague as to the moment in time for
which it is alleged, Respondents lack information sufficient to admit or deny this allegation, and
on that basis deny it. Otherwise, denied.
16. Admitted.
17. As to the first four sentences in this paragraph, Respondents lack information
sufficient to admit or deny this allegation, and on that basis deny it. The fifth sentence constitutes
legal conclusions for which no answer is required. In any event, it is denied.
18. Admitted, upon information and belief, that Kjell requested that Jeffs shares in
QAG and QE be redeemed, so that Bruce would hold majority control of each entity. Admitted,
upon information and belief, that Jeff's QAG and QE shares on August 1, 2011 were redeemed
without discounts for lack of control or lack of marketability. As to all other allegations in this
paragraph, Respondents lack information sufficient to admit or deny these allegations, and on that
basis deny them
19. As to the first three sentences in this paragraph, Respondents lack information
sufficient to admit or deny these allegations, and on that basis deny them. Otherwise, denied.
20. Admitted.
21. Admitted that three of Kjell’s grandchildren have worked for QAG dealerships,
including Chris Qvale and Kendel Qvale. Admitted that Hiura was promoted, after Don Endo
resigned from QAG and she took over his responsibilities, and that the promotion included a
salary increase. Admitted that, Hiura received an approximately $50,000 bonus after her
promotion, as part of a year-end bonus given to several QAG employees based on their
performance. Admitted that Hiura stands to receive a $50,000 bequest as part of the January 30,
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
2013 Survivor’s Trust restatement, just as she had in every Survivor's Trust restatement dating
back to October 2007. As to the allegations that Kjell “groomed” Chris Qvale “to succeed his
father, Jeff, as president of QAG,” and that “Kjell had concluded that Chris was better suited to
head his company” than Kendel Qvale, Respondents lack information sufficient to admit or deny
these allegations, and on that basis deny them. Otherwise, denied.
22. Admitted that Hiura worked for Kjell for 15 years. Admitted that Jordan Rose
represented to Jeff and Bruce that Kjell had authorized Rose to deal with Laura as his “proxy.”
Otherwise, denied.
23. While Respondents contest that there is any legal significance to the allegation,
Respondents, upon information and belief, admit the allegation in the third sentence of this
paragraph. Otherwise, denied,
24. The first sentence of this paragraph is denied. The second sentence of this
paragraph is imprecise in its use of the phrases “active manager” and “years before,” and on that
basis is denied. The third sentence is vague as to the moment in time for which itis alleged. As
such, Respondents lack information sufficient to admit or deny this allegation, and on that basis
deny it. The fourth through sixth sentences of this paragraph are denied. The seventh and eighth
sentences of this paragraph are admitted. As to the ninth sentence of this paragraph, Respondents
lack information sufficient to admit or deny this allegation, and on that basis deny it.
25. Admitted that Kjell had an office at the company headquarters, that Kjell had two
long-time assistants named Nancy Bong and Lillian Fredriksson, and that Kjell often ate lunch
with the two of them, as well as Laura Hiura, when he was in the office. Respondents lack
information sufficient to admit or deny the second sentence of this paragraph, and on that basis,
deny it.
26. The first sentence of this paragraph is admitted. The fourth sentence of this
paragraph is denied. Respondents lack information sufficient to admit or deny the second, third,
fifth, sixth, seventh and eighth sentences of this paragraph, and on that basis, deny them.
Otherwise, denied.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
27. Admitted that Kjell would watch sporting events and read the sports page of the
newspaper in the 2012 timeframe. Otherwise, Respondents lack information sufficient to admit
or deny the allegations in this paragraph, and on that basis, deny them.
28. The first sentence of this paragraph, upon information and belief, is admitted. The
second sentence, upon information and belief, is denied. The third, fourth and fifth sentences of
this paragraph accurately quote and summarize Dr. Smith’s report, and are therefore admitted.
The sixth sentence of this paragraph is imprecise and misleading in that it suggests Dr. Smith
suggested written summaries or responses be provided to Him (instead of Kjell), and on that basis
is denied. Also, the sixth sentence, insofar as it alleges what Dr. Smith did or did not do, includes
allegations for which Respondents lack information sufficient to admit or deny, and on that basis,
is denied, However, it is admitted, upon information and belief, that Dr. Smith was not provided
with copies of the actual documents to be executed. The seventh sentence of this paragraph is a
legal conclusion for which no response is required. In any event, it is denied.
29. Respondents lack information sufficient to admit or deny that one of the
documents Kjell signed on October 10, 2012 was a “second codicil” but admit that Kjell executed
various other estate planning documents following Dr. Smith’s evaluation. The second sentence
of this paragraph is a legal conclusion for which no response is required. In any event, it is
denied.
30. Admitted, upon information and belief, that Jeff noticed a deposition of Dr. Smith
for March 13, 2014, and a deposition of Manatt’s custodian of records for March 6, 2014. As to
all other allegations in this paragraph, Respondents lack information sufficient to admit or deny
these allegations, and, on that basis, deny them.
31. The first sentence of the paragraph is admitted, upon information and belief. The
fifth and sixth sentences of the paragraph accurately summarize and quote Dr. Smith’s report, and
on that basis, are admitted. The seventh sentence of the paragraph. is denied. The second, third,
and fourth sentences include allegations for which Respondents lack information sufficient to
admit or deny, and on that basis, are denied.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
32. The first sentence of the paragraph is imprecise in its use of the phrases “major
changes” and “long-established,” and on that basis, Respondents lack information sufficient to
admit or deny that allegation, and therefore deny it. Admitted that the 2013 Changes included
changes to Kjell’s estate plan. The second sentence of this paragraph is admitted, except insofar
as it implies the specific bequest of the notes was a “change” to Kjell’s then-existing state plan,
which implication is false and denied. The remaining sentences of this paragraph are denied.
33. The first sentence of the paragraph is denied. The second sentence of the
paragraph is a legal conclusion to which no response is required. In any event, it is denied.
34. Admitted, upon information and belief, that Hiura stands to receive a $50,000
bequest as part of the January 30, 2013 Survivor’s Trust restatement, just as she had in every
Survivor’s Trust restatement dating back to October 2007. Otherwise, denied.
35. Admitted that payments were made by QAG to the Exempt Marital Trust, pursuant
to the notes, in 2012 and 2013. Admitted that, while the Exempt Marital Trust reimbursed Kjell
for tax payments and accounting bills he paid on behalf of that trust, no interest income was
transferred to Kjell in connection with the notes. The remainder of this paragraph is a legal
conclusion for which no response is required. In any event, it is denied.
36. Admitted that Dr. Smith was engaged to perform an evaluation of Kjell, and that
he did so. Denied that he was engaged by Manatt. The second sentence of this paragraph, upon
information and belief, is admitted. Respondents lack information sufficient to admit or deny the
allegations in the third sentence of this paragraph, and on that basis, deny them. Admitted that
the remainder of the paragraph accurately summarizes and quotes from Dr. Smith’s report.
37. The first and second sentences of this paragraph are admitted, upon. information
and belief. The remainder of the paragraph includes allegations for which Respondents lack
information sufficient to admit or deny them, and, on that basis, deny them.
38. Admitted that Bruce had control of both QE and QAG at the time of the 2012
redemption. Admitted that ARBM is a separate auto dealership owned principally by Bruce, with
stores in the East Bay. Otherwise, denied.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
39. The first sentence of this paragraph, as alleged, is denied. Admitted, upon
information and belief, that Jeff's counsel engaged in negotiations concerning QAG. The second
sentence of this paragraph is admitted.
40. Denied.
41. The first sentence of this paragraph is admitted, upon information and belief,
except that the amount of the cash payment is denied. The second sentence of this paragraph is
denied, The third sentence of this paragraph is denied. The fourth sentence of this paragraph is
imprecise in its reference to “the grandchildren’s shares,” which renders the allegation
incomprehensible. For that reason, Respondents lack information sufficient to admit or deny this
allegation, and on that basis, deny it. The fifth and sixth sentences of this paragraph are denied.
The seventh sentence of this paragraph constitutes a legal conclusion, to which no response is
required. in any event, it is denied.
42. Denied.
43, Denied.
FIRST CLAIM FOR RELIEF
(Conveyance of Property Belonging to Trust)
44, This is not a factual allegation for which any response is required.
45. The statements in this paragraph are legal conclusions for which no response is
required.
46. The last sentence of this paragraph, beginning “As stated above, this
transaction...”, is denied. Otherwise, admitted.
47, Denied.
48. The statements in this paragraph are legal conclusions for which no response is
required. In any event, they are denied.
SECOND CLAIM FOR RELIEF
(Financial Elder Abuse against Bruce and Does 1-10)
49. This is not a factual allegation for which any response is required.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
50. The statements in this paragraph are legal conclusions for which no response is
required,
51. The statements in this paragraph are legal conclusions for which no response is
required. In any event, they are denied.
52. The statements in this paragraph are legal conclusions for which no response is
required. In any event, they are denied.
53. The statements in this paragraph are legal conclusions for which no response is
required, In any event, they are denied.
54. The statements in this paragraph are legal conclusions for which no response is
required. In any event, they are denied. The prayer for judgment is and relief is not a factual
statement for which a respense is required. In any event, Respondents deny that Jeff is entitled to
any such relief.
GENERAL ALLEGATIONS SUPPORTING AFFIRMATIVE DEFENSES
1. Bruce is the president of QAG and has held that position since July 2011. Prior to
that time, Jeff had served as president of QAG. In or around August 2011, Jeff voluntarily agreed
to be redeemed of his QAG stock and interests in Qvale Enterprises LLC (QE), an entity that
owned a portion of QAG. Since that time, Jeff has had no ownership interest in QAG or QE.
2. In October 2011, Jeff, Bruce and Donald Endo, then the CEO of QAG, were
designated as attorneys-in-fact for Kjell under a springing Durable Power of Attorney for
Management of Property and Personal Affairs, which was executed by Kjell. In October 2012,
Kjell modified the Power of Attorney to designate Laura Hiura as the third attorney-in-fact, to
teplace Mr. Endo. Laura, Jeff and Bruce were also designated by Kjell as successor trustees for
the Kjell H. Qvale Survivor’s Trust. Jeff and Bruce were designated by Kjell and his wife
Kathryn Qvale as successor trustees for two marital trusts created at the time of our Kathryn’s
death in 2005. From February 2005 until around July 2013, when Kjell was found to lack
capacity to administer his daily financial affairs, Kjell was the sole trustee for the Survivor’s
Trust, the Exempt Marital Trust, and the Nonexempt Marital Trust. Separately, Jeff, Laura and
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
Bruce were designated as co-trustees for Generation Skipping Tax (GST) trusts established after
Kathryn’s death for the benefit of Jeff's and Bruce’s children (Kjell’s grandchildren).
3. The 2012 redemption was initiated by Kjell as an estate tax-saving mechanism.
As of the summer of 2012, the Exempt Marital Trust owned approximately 21% of the shares of
QAG, while the Nonexempt Marital Trust, through its interests in QE, owned another
approximately 22% of QAG. Per Kjell’s then-current estate plan, Bruce was the named
beneficiary of those QAG and QE interests.
4, In or around September 2012, Kjell, as trustee for the Exempt and Nonexempt
Marital Trusts, entered into redemption agreements with QAG whereby the QAG shares in the
Exempt Marital Trust, and the QE interests held in the Nonexempt Marital Trust, were exchanged
for promissory notes payable to those trusts. The value placed on the redeemed QAG shares from
the Exempt Marital Trust (and the QE interests) was calculated based on an independent, third-
party appraisal, then discounted based on the lack of control and lack of marketability associated
with those shares, These discount rates were likewise calculated by an independent, third-party
firm. The redemption effectively “froze” the value of the QAG/QE interests in Kjell’s estate, for
estate planning purposes.
Ss. As the President of QAG and voting member of QE, Bruce signed papers that
effectuated those transactions. Kjell was represented by Manatt in connection with those
transactions: QAG and QE were not. Kjell, QAG, and QE were all advised of the potential
conflict, based on Manatt’s prior representation of QAG and QE, and signed a conflict waiver as
part of the redemptions. Bruce believed that Kjell understood what he was doing, and the
consequences and effects of the redemptions. Bruce did not demand, pressure or unduly
influence Kjell to undertake the 2012 redemptions.
6. Contrary to the allegations in the Conveyance Petition, this 2012 redemption did
not “strip” or “terminate” Kjell’s grandchildren as beneficiaries of Kjell’s estate. Upon
information and belief, based on exercises of powers of appointment by Kjell in 2011, the 21%
block of shares in the Exempt Marital Trust were appointed to Bruce, not to the grandchildren, in
Kjell’s estate plan. Thus, when Kjell redeemed the Marital Trust shares, that simply meant that
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
Bruce stood to inherit promissory notes instead of QAG shares. Jeff's repeated allegations that the
2012 redemption benefitted Bruce at the expense of the GST trusts, or Kjell’s grandchildren, are
therefore false.
7. indeed, the indirect effect of the 2012 redemptions on Kjell’s grandchildren was a
positive one. As a result of the redemption, and the removal of those shares from the pool of
outstanding QAG stock, the grandchildren’s combined percentage of ownership of QAG
increased from approximately 24%, prior to the redemption, to approximately 34%, Likewise,
the ultimate size of Jeffs inheritance (as the residual beneficiary) increased as a result of the 2012
redemptions, because the value of QAG includable in Kjell’s estate was frozen at an historic
value.
8. At the time of the 2012 redemptions, Bruce was not a trustee for any of the
Exempt Marital Trust, the Nonexempt Marital Trust or the Survivor’s Trust.
9. Further, the 2012 redemptions did not transfer the promissory notes to Bruce, or
forgive the obligations of QAG and QE to pay them, QAG owes payment on those notes to the
Exempt and Nonexempt Marital Trusts, and has dutifully made payments on them, per the
agreed-upon terms. As part of Kjell’s estate planning, including October 10, 2012 exercises of
appointment that Jeff has not challenged in this litigation, Kjell ultimately appointed those
promissory notes to Bruce as part of his estate plan (just as he previously had appointed to Bruce
the QAG and QE interests that were redeemed in September 2012). However, Bruce was not a
party to those exercises of appointment, and nor was QAG.
10. The 2012 redemption was part of an effort by Kjell to reduce or limit the size of
his taxable estate. Throughout 2012, Jeff and Jeffs emissary Richard Pimentel repeatedly sought
to convince Kjell to gift securities and real estate to Jeff, and business interests to Bruce, in order
to remove assets from Kjell’s taxable estate. Jeff and Richard Pimentel discussed this with Bruce.
At no point during that process did Jeff ever share with Bruce that Jeff suspected Kjell was not
competent to be making decisions about his estate, or that he believed Kjell was potentially
subject to undue influence by his sons.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
ik. Similarly, upon information and belief, and as detailed at Jeff's July 8, 2014
deposition, throughout February and March 2013, Jeff repeatedly met with Kjell, one-on-one, to
attempt to convince Kjell to revise his estate plan in favor of Jeff.
12. The 2002 Family Trust, which spawned the Exempt Marital Trust, the Nonexempt
Marital Trust, and the grandchildren’s GST trusts, granted the trustees broad discretion in
handling the assets of those trusts. Specifically, section 20.2 of that trust stated:
The discretionary powers granted to the Trustee under this Trust
Agreement shall be absolute. This means that the Trustee can act
arbitrarily, so long as he or she does not act in bad faith, and that no
requirement of reasonableness shall apply to the exercise of his or
her absolute discretion. This does not mean that the Trustee may do
as he or she pleases, but rather that the Trustors want the Trustee to
use his or her own personal, subjective best judgment. For this
purpose, the Trustors waive the requirement that the Trustee's
conduct at all times must satisfy the standard of judgment and care
exercised by a reasonable, prudent person.
See Apr. 4, 2014 RJN 1 (2002 Family Trust), § 20.2.
13. The 2002 Family Trust also addresses the disclosure obligations of the trustees of
such trusts during Kjell’s lifetime. Section 19.7 of the 2002 Family Trust, entitled “Disclosure to
Beneficiaries,” and applicable to the two marital trusts and to the GST trusts, states:
During the Trustors’ lifetimes, the Trustee shall have no duty to
provide any information regarding the trust to anyone other than
the Trustors. After the Deceased Spouse’s death, the Trustee shall
have no duty to provide any information regarding the trust or
subtrusts created under this Trust Agreement to anyone other than
the Surviving Spouse, except as required by law. Probate Code
§§16060 and 16061 shall not apply to any trust created under this
Trust Agreement until after the death of the Surviving Spouse.
Prior to the death of the Surviving Spouse, the Trastee shall have
no duty to disclose to any beneficiary other than the Surviving
Spouse the existence of this trust or any information about its terms
or administration, except as required by law.
See id., § 19.7.
14. The Conveyance Petition contains numerous false allegations and misstatements.
Upon information and belief, Jeff has brought this petition, without probable cause or good faith,
in order to obtain negotiating leverage against Bruce and extract concessions in the disposition of
Kjell’s estate.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
AFFIRMATIVE DEFENSES
Bruce and QAG assert the following affirmative defenses to the claims for relief made
against them in the Petition, without admitting they have the burden of proof on any of the issues
raised below:
First Affirmative Defense
{Failure to State a Claim for Relief)
(As to All Causes of Action)
Respondents incorporate by reference the General Allegations 1-14 stated above as if fully
set forth here.
Jeff's allegations fail to state a claim for relief under the Civil Code, Probate Code or the
Welfare & Institutions Code,
Second Affirmative Defense
(Unclean Hands)
(As to All Causes of Action)
Respondents incorporate by reference the General Allegations 1-14 stated above as if fully
set forth here.
Jeffs claims are barred by the doctrine of unclean hands. Throughout 2012, upon
information and belief, Jeff sought to convince Kjell, directly and through Kjell’s attorneys and
consultants, to remove assets from the estate by gifting them to Jeff. Kjell gifted Jeff more than
$7.5 million in cash and marketable securities to Jeff in the second half of 2012. Upon
information and belief (including Jeff's statements at his deposition), throughout February and
March 2013, Jeff sought to convince Kjell to change his estate plan in Jeff's favor. To the extent
Jeff alleges that Kjell’s capacity was diminished in the fall of 2012, and Kjell was susceptible to
undue influence, Jeffs attempts to unduly influence his father constitute inequitable conduct that
should bar Jeff from obtaining relief.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
Third Affirmative Defense
(Bad Faith)
(As to All Causes of Action)
Respondents incorporate by reference the Genera! Allegations 1-14 stated above as if fully
set forth here.
Jeffs claims are brought in bad faith, without probable cause, to obtain negotiating
leverage against his brother and former employer.
Fourth Affirmative Defense
(Justification)
(As to All Causes of Action)
Respondents incorporate by reference the General Allegations 1-14 stated above as if fully
set forth here.
Jeff's claims are barred because, at all relevant times, Bruce and QAG acted justifiably,
reasonably, and in good faith, Bruce and QAG believed that Kjell was acting of his own volition,
and that the transaction was fulfilling Kjell’s properly held intent.
Fifth Affirmative Defense
(No Breach of Duty)
{Applicable to First Cause of Action)
Respondents incorporate by reference the General Allegations 1-14 stated above as if fully
set forth here,
Kjell did not breach any duty of loyalty to any beneficiary or other party by engaging in
the 2012 Redemption. Bruce did not breach any duties of loyalty or disclosure to any beneficiary
or other party by engaging in the 2012 Redemption.
Sixth Affirmative Defense
(Estoppel)
(As to All Causes of Action)
Respondents incorporate by reference the General Allegations 1-14 stated above as if fully
set forth here.
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016849365
By soliciting and obtaining gifts from Kjell in the same time period he accuses of Bruce
and QAG of elder abuse for participating in a business transaction with Kjell, Jeff is estopped
from arguing now that Kjell is a victim of undue influence and elder abuse.
Seventh Affirmative Defense
(Laches)
Respondents incorporate by reference the General Allegations 1-14 stated above as if fully
set forth here.
Jeff knew of the 2012 redemption, at or near the time of the redemption, and unreasonably
delayed in bringing this petition, or otherwise challenging such redemption. Jeffs delay has
caused prejudice to QAG, which has operated for almost two years under the presumption that the
redemption was valid and lawful.
Dated: August 7, 2014 KEKER & VAN NEST LLP
By: _/s/ Warren A. Braunig
WARREN A. BRAUNIG
Attorneys for Petitioners and Respondents
BRUCE H. QVALE, FAMILY TRUSTEE,
and Respondent OVALE AUTO GROUP
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ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE
OF PROPERTY BELONGING TO TRUST
Case No. PTR-13-297016349365.01
CURB ee ey Gi vu Ge a
VERIFICATION -BY FAX
. I, Bruce H. Qvale, declare as follows:
I have read the foregoing Respondents” Answerto First Amended Petition for.- :
: Conveyance of Property. Belonging to Trust and know the contents thereof 1 certify. that the :
factual statements contained therein are true of my-own knowledge, except:as to those rations
which’ are therein stated upon my: information ‘or belief, and.as.to those: matters, I believe them to. :
be. tne:
A declare under.penalty of perjury under the laws of the State of California that the
foregoing istrue and. correct.
xecuted this Ye day of f August 2014, in n Palm Beach Gardens, Florida.
~ BRUCE OVATE
LAS.
“ANSWER ‘LO FIRST: AMENDED PETITION FOR, CONVEYANCE
OF PROPERTY BELONGING-TO.TRUST ">:
“Case No. PTR=13-297016 ©827733.02
2 A ww WK
PROOF OF SERVICE BY ELECTRONIC TRANSMISSION,
EMAIL VIA PDF FILE AND UNITED STATES MAIL
I am employed in the City and County of San Francisco, State of California in the office ofa
member of the bar of this court at whose direction the following service was made. I am over the
age of eighteen years and not a party to the within action. My business address is Keker & Van
Nest LLP, 633 Battery Street, San Francisco, CA 94111-1809.
On August 7, 2014, I served the following documents described as:
« ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF
PROPERTY BELONGING TO TRUST; FOR DAMAGES AND OTHER RELIEF
FOR FINANCIAL ELDER ABUSE; AND VERIFICATION
-by serving a true copy of the above-described documents in the following manner:
| pan es Tee
BY LEXIS NEXIS® FILE & SERVE
| een |
On the date executed below, I electronically served the documents described above via
Lexis Nexis® File & Serve on the recipients designated on the ‘Transaction Receipt
located on the via Lexis Nexis® File & Serve website.
PE
BY E-MAIL VIA PDF FILE
|
by E-MAIL VIA PDF FILE, by transmitting on this date via e-mail a true and correct copy
scanned into an electronic file in Adobe “pdf? format, The transmission was reported as
complete and without error.
Edward Koplowitz George Montgomery
MacInnis, Donner & Koplowitz Friedman, McCubbin, Spalding,
465 California Street, Suite 222 Bilter Roosevelt & Montgomery
San Francisco, CA 94104 425 California Street, 25th Floor
eakatt(@aol.com San Francisco, CA 94104
george@fomlaw.com
Ronald Hayes Malone Peter L, Muhs
9098 Mustang Court Richard J. Collier
Petaluma, CA 94954 Cooper, White & Cooper LLP
ron@circleoakequine.com 201 California Street, 17th Floor
San Francisco, CA 94111-5002
muhs@cwelaw.com
regllier@ewclaw.com
1
PROOF OF SERVICE
Case No. PTR-13-297016827733.02
Dominic J. Campisi
Andrew Zabronsky
Evans, Latham & Campisi
One Post Street, Suite 600
San Francisco, CA 94104
dcampisi@ele-law.com
AZabronsky@elc-law.com
Monica Dell’Osso
Burnham Brown
A Professional Corporation.
P.O. Box 119
Oakland, CA 94604
mdellosso@burnhambrown.com
ne TT TT TT |
BY UNITED STATES MAIL
tenner
by regular UNITED STATES MAIL by placing Copy in a sealed envelope addressed as
shown below. | am readily familiar with the practice of Keker & Van Nest LLP for
Nancy Bong
23 Kingston Place
Walnut Creek, CA 94596
Karen Duarteau
2600 Nicasio Valley Road
Nicasio, CA 94946
Rita Jelincic
25385 Palomares Road
Castro Valley, CA 94552
Hubert Gely
3532 Sacramento St., #2
San Francisco, CA 94118
Caroline Paige Qvale
461 -- 2” Street, C227
San Francisco, CA 94107
Connor Hammond Qvale
98 Via Poinciana Lane
Boca Raton, FL 33487
Blake Henry Qvale
336 E. 18th St., Apt. E-2 °
New York, NY 10003
collection and processing of correspondence for mailing. According to that practice, items
are deposited with the United States Postal Service at San Francisco, California on that same
day with postage thereon fully prepaid. 1 am aware that, on motion of the party served,
service is presumed invalid if the postal cancellation date or the postage meter date is more
than one day after the date of deposit for mailing stated in this affidavit.
Lillian Fredriksson.
1318 Hale Drive
Concord, CA 94518
Don Endo
21000 Glenwood Drive
Castro Valley, CA 94552
Raymonde Gely
3532 Sacramento St., #2
San Francisco, CA 94118
Kendel Hailey Qvale
3500 Scott St.
San Francisco, CA 94123 ~
- Norma Hepworth
P.O. Box 871
Hailey, ID 83333
Roger Hansen
868 East 2830 South
Hagerman, ID 83332
2
PROOF OF SERVICE
Case No, PTR-13-297016827733.02
Cc we ND A BR WN
now wR RRR es
BexBRRR BH FF 8 Se A BAA BO KH KD
Executed on August 7, 2014, at San Francisco, California.
[declare under penalty of perjury under the laws of the State of California that the above is true
and correct, Nae, ,
By
Maureen L. Stone
3
PROOF OF SERVICE,
Case No, PTR-13-297016
Preview
849365 KEKER & VAN NEST LLP JOHN W. KEKER - # 49092 jkeker@kvn.com WARREN A. BRAUNIG - # 243884 ELECTRONICALLY whraunig@kvn.com FILED BENJAMIN BERKOWITZ - # 244441 Superior Court of California, bberkowitz@kvn.com County of San Francisco Se ruchy BAJORIA - # 255294 AUG 07 2014 abajorla@kvn.com Clerk of the Court 633 Battery Street BY: ELIZABETH FONG San Francisco, CA 94111-1809 Deputy Clerk Telephone: 415 391 5400 Facsimile: 415 397 7188 MYERS URBATSCH P.C. PETER S. MYERS - # 115113 psmyers@myersurbatsch.com MATTHEW R. MRAULE - # 263433 mmraule@myersurbatsch.com 625 Market Street, 4th Floor San Francisco, California 94105 Phone: (415) 896-1500 Fax: (415) 979-0761 Attorneys for Petitioners and Respondents BRUCE H. QVALE, FAMILY TRUSTEE AND RESPONDENT QVALE AUTO GROUP SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SAN FRANCISCO In the Matter of the Case No. PTR-13-297016 Kathryn C. Qvale Exempt Marital Trust, ANSWER TO FIRST AMENDED dated January 31, 2006 PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST; FOR DAMAGES AND OTHER RELIEF FOR FINANCIAL ELDER ABUSE BY FAX Miles Jeffrey Qvale, individually and as trustee vs. Bruce H. Qvale, Qvale Auto Group, Inc., a California corporation, and Does 1-10 1 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 Pursuant to Code of Civil Procedure § 431.30(d), Respondents Bruce Qvale (“Bruce”), Family Trustee, and Qvale Auto Group (“QAG”), hereby answer Miles Jeffrey Qvale’s (“Jeffs”) First Amended Petition for Conveyance of Property Belonging to Trust; for Damages and Other Relief for Financial Elder Abuse (“Conveyance Petition”), as follows: RESPONSES TO SPECIFIC ALLEGATIONS IN CONVEYANCE PETITION People 1. Admitted. 2. Admitted. 3. The final sentence of this paragraph is a legal conclusion for which no response is required. Otherwise, admitted. 4, The first sentence of this paragraph is admitted, The second sentence is denied. The third sentence is a legal conclusion, for which no response is required. 5. Admitted that Manatt was counsel to Kjell. Otherwise, denied. 6. Admitted. 7. Respondents lack sufficient information upon which to admit or deny this allegation, and on that basis deny it. Jurisdiction 8. This is a legal conclusion, for which no response is required. Background 9. Admitted. 10. The third and fourth sentences of this paragraph are admitted. Admitted, upon information and belief, that Kathryn and Kjell’s estate plans took advantage of the marital deduction and divided ownership of various limited liability entities. Otherwise, denied. 11. Because the second sentence is vague as to the moment in time for which it is alleged, Respondents deny this allegation because the 1980’s trusts referenced in this paragraph have not always “held at least 3% of the current shares of QAG.” Otherwise, admitted. 12. Admitted. 13. Admitted. 2 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 14. To the extent the first sentence of this paragraph alleges the intent of Kathryn and Kjell beyond what is reflected in their trust documents, Respondents lack information sufficient to admit or deny this allegation, and on that basis deny it. Otherwise, admitted. 15. Admitted that 5,636 shares of QAG were placed in the Exempt Marital Trust upon Kathryn’s death. The allegations beginning with “the Exempt Marital Trust mandated...” through the end of the paragraph are admitted. Because the allegation concerning the 5,636 shares constituting 21% of “currently outstanding shares” is vague as to the moment in time for which it is alleged, Respondents lack information sufficient to admit or deny this allegation, and on that basis deny it. Otherwise, denied. 16. Admitted. 17. As to the first four sentences in this paragraph, Respondents lack information sufficient to admit or deny this allegation, and on that basis deny it. The fifth sentence constitutes legal conclusions for which no answer is required. In any event, it is denied. 18. Admitted, upon information and belief, that Kjell requested that Jeffs shares in QAG and QE be redeemed, so that Bruce would hold majority control of each entity. Admitted, upon information and belief, that Jeff's QAG and QE shares on August 1, 2011 were redeemed without discounts for lack of control or lack of marketability. As to all other allegations in this paragraph, Respondents lack information sufficient to admit or deny these allegations, and on that basis deny them 19. As to the first three sentences in this paragraph, Respondents lack information sufficient to admit or deny these allegations, and on that basis deny them. Otherwise, denied. 20. Admitted. 21. Admitted that three of Kjell’s grandchildren have worked for QAG dealerships, including Chris Qvale and Kendel Qvale. Admitted that Hiura was promoted, after Don Endo resigned from QAG and she took over his responsibilities, and that the promotion included a salary increase. Admitted that, Hiura received an approximately $50,000 bonus after her promotion, as part of a year-end bonus given to several QAG employees based on their performance. Admitted that Hiura stands to receive a $50,000 bequest as part of the January 30, 3 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 2013 Survivor’s Trust restatement, just as she had in every Survivor's Trust restatement dating back to October 2007. As to the allegations that Kjell “groomed” Chris Qvale “to succeed his father, Jeff, as president of QAG,” and that “Kjell had concluded that Chris was better suited to head his company” than Kendel Qvale, Respondents lack information sufficient to admit or deny these allegations, and on that basis deny them. Otherwise, denied. 22. Admitted that Hiura worked for Kjell for 15 years. Admitted that Jordan Rose represented to Jeff and Bruce that Kjell had authorized Rose to deal with Laura as his “proxy.” Otherwise, denied. 23. While Respondents contest that there is any legal significance to the allegation, Respondents, upon information and belief, admit the allegation in the third sentence of this paragraph. Otherwise, denied, 24. The first sentence of this paragraph is denied. The second sentence of this paragraph is imprecise in its use of the phrases “active manager” and “years before,” and on that basis is denied. The third sentence is vague as to the moment in time for which itis alleged. As such, Respondents lack information sufficient to admit or deny this allegation, and on that basis deny it. The fourth through sixth sentences of this paragraph are denied. The seventh and eighth sentences of this paragraph are admitted. As to the ninth sentence of this paragraph, Respondents lack information sufficient to admit or deny this allegation, and on that basis deny it. 25. Admitted that Kjell had an office at the company headquarters, that Kjell had two long-time assistants named Nancy Bong and Lillian Fredriksson, and that Kjell often ate lunch with the two of them, as well as Laura Hiura, when he was in the office. Respondents lack information sufficient to admit or deny the second sentence of this paragraph, and on that basis, deny it. 26. The first sentence of this paragraph is admitted. The fourth sentence of this paragraph is denied. Respondents lack information sufficient to admit or deny the second, third, fifth, sixth, seventh and eighth sentences of this paragraph, and on that basis, deny them. Otherwise, denied. 4 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 27. Admitted that Kjell would watch sporting events and read the sports page of the newspaper in the 2012 timeframe. Otherwise, Respondents lack information sufficient to admit or deny the allegations in this paragraph, and on that basis, deny them. 28. The first sentence of this paragraph, upon information and belief, is admitted. The second sentence, upon information and belief, is denied. The third, fourth and fifth sentences of this paragraph accurately quote and summarize Dr. Smith’s report, and are therefore admitted. The sixth sentence of this paragraph is imprecise and misleading in that it suggests Dr. Smith suggested written summaries or responses be provided to Him (instead of Kjell), and on that basis is denied. Also, the sixth sentence, insofar as it alleges what Dr. Smith did or did not do, includes allegations for which Respondents lack information sufficient to admit or deny, and on that basis, is denied, However, it is admitted, upon information and belief, that Dr. Smith was not provided with copies of the actual documents to be executed. The seventh sentence of this paragraph is a legal conclusion for which no response is required. In any event, it is denied. 29. Respondents lack information sufficient to admit or deny that one of the documents Kjell signed on October 10, 2012 was a “second codicil” but admit that Kjell executed various other estate planning documents following Dr. Smith’s evaluation. The second sentence of this paragraph is a legal conclusion for which no response is required. In any event, it is denied. 30. Admitted, upon information and belief, that Jeff noticed a deposition of Dr. Smith for March 13, 2014, and a deposition of Manatt’s custodian of records for March 6, 2014. As to all other allegations in this paragraph, Respondents lack information sufficient to admit or deny these allegations, and, on that basis, deny them. 31. The first sentence of the paragraph is admitted, upon information and belief. The fifth and sixth sentences of the paragraph accurately summarize and quote Dr. Smith’s report, and on that basis, are admitted. The seventh sentence of the paragraph. is denied. The second, third, and fourth sentences include allegations for which Respondents lack information sufficient to admit or deny, and on that basis, are denied. 5 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 32. The first sentence of the paragraph is imprecise in its use of the phrases “major changes” and “long-established,” and on that basis, Respondents lack information sufficient to admit or deny that allegation, and therefore deny it. Admitted that the 2013 Changes included changes to Kjell’s estate plan. The second sentence of this paragraph is admitted, except insofar as it implies the specific bequest of the notes was a “change” to Kjell’s then-existing state plan, which implication is false and denied. The remaining sentences of this paragraph are denied. 33. The first sentence of the paragraph is denied. The second sentence of the paragraph is a legal conclusion to which no response is required. In any event, it is denied. 34. Admitted, upon information and belief, that Hiura stands to receive a $50,000 bequest as part of the January 30, 2013 Survivor’s Trust restatement, just as she had in every Survivor’s Trust restatement dating back to October 2007. Otherwise, denied. 35. Admitted that payments were made by QAG to the Exempt Marital Trust, pursuant to the notes, in 2012 and 2013. Admitted that, while the Exempt Marital Trust reimbursed Kjell for tax payments and accounting bills he paid on behalf of that trust, no interest income was transferred to Kjell in connection with the notes. The remainder of this paragraph is a legal conclusion for which no response is required. In any event, it is denied. 36. Admitted that Dr. Smith was engaged to perform an evaluation of Kjell, and that he did so. Denied that he was engaged by Manatt. The second sentence of this paragraph, upon information and belief, is admitted. Respondents lack information sufficient to admit or deny the allegations in the third sentence of this paragraph, and on that basis, deny them. Admitted that the remainder of the paragraph accurately summarizes and quotes from Dr. Smith’s report. 37. The first and second sentences of this paragraph are admitted, upon. information and belief. The remainder of the paragraph includes allegations for which Respondents lack information sufficient to admit or deny them, and, on that basis, deny them. 38. Admitted that Bruce had control of both QE and QAG at the time of the 2012 redemption. Admitted that ARBM is a separate auto dealership owned principally by Bruce, with stores in the East Bay. Otherwise, denied. 6 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 39. The first sentence of this paragraph, as alleged, is denied. Admitted, upon information and belief, that Jeff's counsel engaged in negotiations concerning QAG. The second sentence of this paragraph is admitted. 40. Denied. 41. The first sentence of this paragraph is admitted, upon information and belief, except that the amount of the cash payment is denied. The second sentence of this paragraph is denied, The third sentence of this paragraph is denied. The fourth sentence of this paragraph is imprecise in its reference to “the grandchildren’s shares,” which renders the allegation incomprehensible. For that reason, Respondents lack information sufficient to admit or deny this allegation, and on that basis, deny it. The fifth and sixth sentences of this paragraph are denied. The seventh sentence of this paragraph constitutes a legal conclusion, to which no response is required. in any event, it is denied. 42. Denied. 43, Denied. FIRST CLAIM FOR RELIEF (Conveyance of Property Belonging to Trust) 44, This is not a factual allegation for which any response is required. 45. The statements in this paragraph are legal conclusions for which no response is required. 46. The last sentence of this paragraph, beginning “As stated above, this transaction...”, is denied. Otherwise, admitted. 47, Denied. 48. The statements in this paragraph are legal conclusions for which no response is required. In any event, they are denied. SECOND CLAIM FOR RELIEF (Financial Elder Abuse against Bruce and Does 1-10) 49. This is not a factual allegation for which any response is required. 7 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 50. The statements in this paragraph are legal conclusions for which no response is required, 51. The statements in this paragraph are legal conclusions for which no response is required. In any event, they are denied. 52. The statements in this paragraph are legal conclusions for which no response is required. In any event, they are denied. 53. The statements in this paragraph are legal conclusions for which no response is required, In any event, they are denied. 54. The statements in this paragraph are legal conclusions for which no response is required. In any event, they are denied. The prayer for judgment is and relief is not a factual statement for which a respense is required. In any event, Respondents deny that Jeff is entitled to any such relief. GENERAL ALLEGATIONS SUPPORTING AFFIRMATIVE DEFENSES 1. Bruce is the president of QAG and has held that position since July 2011. Prior to that time, Jeff had served as president of QAG. In or around August 2011, Jeff voluntarily agreed to be redeemed of his QAG stock and interests in Qvale Enterprises LLC (QE), an entity that owned a portion of QAG. Since that time, Jeff has had no ownership interest in QAG or QE. 2. In October 2011, Jeff, Bruce and Donald Endo, then the CEO of QAG, were designated as attorneys-in-fact for Kjell under a springing Durable Power of Attorney for Management of Property and Personal Affairs, which was executed by Kjell. In October 2012, Kjell modified the Power of Attorney to designate Laura Hiura as the third attorney-in-fact, to teplace Mr. Endo. Laura, Jeff and Bruce were also designated by Kjell as successor trustees for the Kjell H. Qvale Survivor’s Trust. Jeff and Bruce were designated by Kjell and his wife Kathryn Qvale as successor trustees for two marital trusts created at the time of our Kathryn’s death in 2005. From February 2005 until around July 2013, when Kjell was found to lack capacity to administer his daily financial affairs, Kjell was the sole trustee for the Survivor’s Trust, the Exempt Marital Trust, and the Nonexempt Marital Trust. Separately, Jeff, Laura and 8 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 Bruce were designated as co-trustees for Generation Skipping Tax (GST) trusts established after Kathryn’s death for the benefit of Jeff's and Bruce’s children (Kjell’s grandchildren). 3. The 2012 redemption was initiated by Kjell as an estate tax-saving mechanism. As of the summer of 2012, the Exempt Marital Trust owned approximately 21% of the shares of QAG, while the Nonexempt Marital Trust, through its interests in QE, owned another approximately 22% of QAG. Per Kjell’s then-current estate plan, Bruce was the named beneficiary of those QAG and QE interests. 4, In or around September 2012, Kjell, as trustee for the Exempt and Nonexempt Marital Trusts, entered into redemption agreements with QAG whereby the QAG shares in the Exempt Marital Trust, and the QE interests held in the Nonexempt Marital Trust, were exchanged for promissory notes payable to those trusts. The value placed on the redeemed QAG shares from the Exempt Marital Trust (and the QE interests) was calculated based on an independent, third- party appraisal, then discounted based on the lack of control and lack of marketability associated with those shares, These discount rates were likewise calculated by an independent, third-party firm. The redemption effectively “froze” the value of the QAG/QE interests in Kjell’s estate, for estate planning purposes. Ss. As the President of QAG and voting member of QE, Bruce signed papers that effectuated those transactions. Kjell was represented by Manatt in connection with those transactions: QAG and QE were not. Kjell, QAG, and QE were all advised of the potential conflict, based on Manatt’s prior representation of QAG and QE, and signed a conflict waiver as part of the redemptions. Bruce believed that Kjell understood what he was doing, and the consequences and effects of the redemptions. Bruce did not demand, pressure or unduly influence Kjell to undertake the 2012 redemptions. 6. Contrary to the allegations in the Conveyance Petition, this 2012 redemption did not “strip” or “terminate” Kjell’s grandchildren as beneficiaries of Kjell’s estate. Upon information and belief, based on exercises of powers of appointment by Kjell in 2011, the 21% block of shares in the Exempt Marital Trust were appointed to Bruce, not to the grandchildren, in Kjell’s estate plan. Thus, when Kjell redeemed the Marital Trust shares, that simply meant that 9 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 Bruce stood to inherit promissory notes instead of QAG shares. Jeff's repeated allegations that the 2012 redemption benefitted Bruce at the expense of the GST trusts, or Kjell’s grandchildren, are therefore false. 7. indeed, the indirect effect of the 2012 redemptions on Kjell’s grandchildren was a positive one. As a result of the redemption, and the removal of those shares from the pool of outstanding QAG stock, the grandchildren’s combined percentage of ownership of QAG increased from approximately 24%, prior to the redemption, to approximately 34%, Likewise, the ultimate size of Jeffs inheritance (as the residual beneficiary) increased as a result of the 2012 redemptions, because the value of QAG includable in Kjell’s estate was frozen at an historic value. 8. At the time of the 2012 redemptions, Bruce was not a trustee for any of the Exempt Marital Trust, the Nonexempt Marital Trust or the Survivor’s Trust. 9. Further, the 2012 redemptions did not transfer the promissory notes to Bruce, or forgive the obligations of QAG and QE to pay them, QAG owes payment on those notes to the Exempt and Nonexempt Marital Trusts, and has dutifully made payments on them, per the agreed-upon terms. As part of Kjell’s estate planning, including October 10, 2012 exercises of appointment that Jeff has not challenged in this litigation, Kjell ultimately appointed those promissory notes to Bruce as part of his estate plan (just as he previously had appointed to Bruce the QAG and QE interests that were redeemed in September 2012). However, Bruce was not a party to those exercises of appointment, and nor was QAG. 10. The 2012 redemption was part of an effort by Kjell to reduce or limit the size of his taxable estate. Throughout 2012, Jeff and Jeffs emissary Richard Pimentel repeatedly sought to convince Kjell to gift securities and real estate to Jeff, and business interests to Bruce, in order to remove assets from Kjell’s taxable estate. Jeff and Richard Pimentel discussed this with Bruce. At no point during that process did Jeff ever share with Bruce that Jeff suspected Kjell was not competent to be making decisions about his estate, or that he believed Kjell was potentially subject to undue influence by his sons. 10 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 ik. Similarly, upon information and belief, and as detailed at Jeff's July 8, 2014 deposition, throughout February and March 2013, Jeff repeatedly met with Kjell, one-on-one, to attempt to convince Kjell to revise his estate plan in favor of Jeff. 12. The 2002 Family Trust, which spawned the Exempt Marital Trust, the Nonexempt Marital Trust, and the grandchildren’s GST trusts, granted the trustees broad discretion in handling the assets of those trusts. Specifically, section 20.2 of that trust stated: The discretionary powers granted to the Trustee under this Trust Agreement shall be absolute. This means that the Trustee can act arbitrarily, so long as he or she does not act in bad faith, and that no requirement of reasonableness shall apply to the exercise of his or her absolute discretion. This does not mean that the Trustee may do as he or she pleases, but rather that the Trustors want the Trustee to use his or her own personal, subjective best judgment. For this purpose, the Trustors waive the requirement that the Trustee's conduct at all times must satisfy the standard of judgment and care exercised by a reasonable, prudent person. See Apr. 4, 2014 RJN 1 (2002 Family Trust), § 20.2. 13. The 2002 Family Trust also addresses the disclosure obligations of the trustees of such trusts during Kjell’s lifetime. Section 19.7 of the 2002 Family Trust, entitled “Disclosure to Beneficiaries,” and applicable to the two marital trusts and to the GST trusts, states: During the Trustors’ lifetimes, the Trustee shall have no duty to provide any information regarding the trust to anyone other than the Trustors. After the Deceased Spouse’s death, the Trustee shall have no duty to provide any information regarding the trust or subtrusts created under this Trust Agreement to anyone other than the Surviving Spouse, except as required by law. Probate Code §§16060 and 16061 shall not apply to any trust created under this Trust Agreement until after the death of the Surviving Spouse. Prior to the death of the Surviving Spouse, the Trastee shall have no duty to disclose to any beneficiary other than the Surviving Spouse the existence of this trust or any information about its terms or administration, except as required by law. See id., § 19.7. 14. The Conveyance Petition contains numerous false allegations and misstatements. Upon information and belief, Jeff has brought this petition, without probable cause or good faith, in order to obtain negotiating leverage against Bruce and extract concessions in the disposition of Kjell’s estate. iW ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 AFFIRMATIVE DEFENSES Bruce and QAG assert the following affirmative defenses to the claims for relief made against them in the Petition, without admitting they have the burden of proof on any of the issues raised below: First Affirmative Defense {Failure to State a Claim for Relief) (As to All Causes of Action) Respondents incorporate by reference the General Allegations 1-14 stated above as if fully set forth here. Jeff's allegations fail to state a claim for relief under the Civil Code, Probate Code or the Welfare & Institutions Code, Second Affirmative Defense (Unclean Hands) (As to All Causes of Action) Respondents incorporate by reference the General Allegations 1-14 stated above as if fully set forth here. Jeffs claims are barred by the doctrine of unclean hands. Throughout 2012, upon information and belief, Jeff sought to convince Kjell, directly and through Kjell’s attorneys and consultants, to remove assets from the estate by gifting them to Jeff. Kjell gifted Jeff more than $7.5 million in cash and marketable securities to Jeff in the second half of 2012. Upon information and belief (including Jeff's statements at his deposition), throughout February and March 2013, Jeff sought to convince Kjell to change his estate plan in Jeff's favor. To the extent Jeff alleges that Kjell’s capacity was diminished in the fall of 2012, and Kjell was susceptible to undue influence, Jeffs attempts to unduly influence his father constitute inequitable conduct that should bar Jeff from obtaining relief. 12 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 Third Affirmative Defense (Bad Faith) (As to All Causes of Action) Respondents incorporate by reference the Genera! Allegations 1-14 stated above as if fully set forth here. Jeffs claims are brought in bad faith, without probable cause, to obtain negotiating leverage against his brother and former employer. Fourth Affirmative Defense (Justification) (As to All Causes of Action) Respondents incorporate by reference the General Allegations 1-14 stated above as if fully set forth here. Jeff's claims are barred because, at all relevant times, Bruce and QAG acted justifiably, reasonably, and in good faith, Bruce and QAG believed that Kjell was acting of his own volition, and that the transaction was fulfilling Kjell’s properly held intent. Fifth Affirmative Defense (No Breach of Duty) {Applicable to First Cause of Action) Respondents incorporate by reference the General Allegations 1-14 stated above as if fully set forth here, Kjell did not breach any duty of loyalty to any beneficiary or other party by engaging in the 2012 Redemption. Bruce did not breach any duties of loyalty or disclosure to any beneficiary or other party by engaging in the 2012 Redemption. Sixth Affirmative Defense (Estoppel) (As to All Causes of Action) Respondents incorporate by reference the General Allegations 1-14 stated above as if fully set forth here. 13 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016849365 By soliciting and obtaining gifts from Kjell in the same time period he accuses of Bruce and QAG of elder abuse for participating in a business transaction with Kjell, Jeff is estopped from arguing now that Kjell is a victim of undue influence and elder abuse. Seventh Affirmative Defense (Laches) Respondents incorporate by reference the General Allegations 1-14 stated above as if fully set forth here. Jeff knew of the 2012 redemption, at or near the time of the redemption, and unreasonably delayed in bringing this petition, or otherwise challenging such redemption. Jeffs delay has caused prejudice to QAG, which has operated for almost two years under the presumption that the redemption was valid and lawful. Dated: August 7, 2014 KEKER & VAN NEST LLP By: _/s/ Warren A. Braunig WARREN A. BRAUNIG Attorneys for Petitioners and Respondents BRUCE H. QVALE, FAMILY TRUSTEE, and Respondent OVALE AUTO GROUP 14 ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST Case No. PTR-13-297016349365.01 CURB ee ey Gi vu Ge a VERIFICATION -BY FAX . I, Bruce H. Qvale, declare as follows: I have read the foregoing Respondents” Answerto First Amended Petition for.- : : Conveyance of Property. Belonging to Trust and know the contents thereof 1 certify. that the : factual statements contained therein are true of my-own knowledge, except:as to those rations which’ are therein stated upon my: information ‘or belief, and.as.to those: matters, I believe them to. : be. tne: A declare under.penalty of perjury under the laws of the State of California that the foregoing istrue and. correct. xecuted this Ye day of f August 2014, in n Palm Beach Gardens, Florida. ~ BRUCE OVATE LAS. “ANSWER ‘LO FIRST: AMENDED PETITION FOR, CONVEYANCE OF PROPERTY BELONGING-TO.TRUST ">: “Case No. PTR=13-297016 ©827733.02 2 A ww WK PROOF OF SERVICE BY ELECTRONIC TRANSMISSION, EMAIL VIA PDF FILE AND UNITED STATES MAIL I am employed in the City and County of San Francisco, State of California in the office ofa member of the bar of this court at whose direction the following service was made. I am over the age of eighteen years and not a party to the within action. My business address is Keker & Van Nest LLP, 633 Battery Street, San Francisco, CA 94111-1809. On August 7, 2014, I served the following documents described as: « ANSWER TO FIRST AMENDED PETITION FOR CONVEYANCE OF PROPERTY BELONGING TO TRUST; FOR DAMAGES AND OTHER RELIEF FOR FINANCIAL ELDER ABUSE; AND VERIFICATION -by serving a true copy of the above-described documents in the following manner: | pan es Tee BY LEXIS NEXIS® FILE & SERVE | een | On the date executed below, I electronically served the documents described above via Lexis Nexis® File & Serve on the recipients designated on the ‘Transaction Receipt located on the via Lexis Nexis® File & Serve website. PE BY E-MAIL VIA PDF FILE | by E-MAIL VIA PDF FILE, by transmitting on this date via e-mail a true and correct copy scanned into an electronic file in Adobe “pdf? format, The transmission was reported as complete and without error. Edward Koplowitz George Montgomery MacInnis, Donner & Koplowitz Friedman, McCubbin, Spalding, 465 California Street, Suite 222 Bilter Roosevelt & Montgomery San Francisco, CA 94104 425 California Street, 25th Floor eakatt(@aol.com San Francisco, CA 94104 george@fomlaw.com Ronald Hayes Malone Peter L, Muhs 9098 Mustang Court Richard J. Collier Petaluma, CA 94954 Cooper, White & Cooper LLP ron@circleoakequine.com 201 California Street, 17th Floor San Francisco, CA 94111-5002 muhs@cwelaw.com regllier@ewclaw.com 1 PROOF OF SERVICE Case No. PTR-13-297016827733.02 Dominic J. Campisi Andrew Zabronsky Evans, Latham & Campisi One Post Street, Suite 600 San Francisco, CA 94104 dcampisi@ele-law.com AZabronsky@elc-law.com Monica Dell’Osso Burnham Brown A Professional Corporation. P.O. Box 119 Oakland, CA 94604 mdellosso@burnhambrown.com ne TT TT TT | BY UNITED STATES MAIL tenner by regular UNITED STATES MAIL by placing Copy in a sealed envelope addressed as shown below. | am readily familiar with the practice of Keker & Van Nest LLP for Nancy Bong 23 Kingston Place Walnut Creek, CA 94596 Karen Duarteau 2600 Nicasio Valley Road Nicasio, CA 94946 Rita Jelincic 25385 Palomares Road Castro Valley, CA 94552 Hubert Gely 3532 Sacramento St., #2 San Francisco, CA 94118 Caroline Paige Qvale 461 -- 2” Street, C227 San Francisco, CA 94107 Connor Hammond Qvale 98 Via Poinciana Lane Boca Raton, FL 33487 Blake Henry Qvale 336 E. 18th St., Apt. E-2 ° New York, NY 10003 collection and processing of correspondence for mailing. According to that practice, items are deposited with the United States Postal Service at San Francisco, California on that same day with postage thereon fully prepaid. 1 am aware that, on motion of the party served, service is presumed invalid if the postal cancellation date or the postage meter date is more than one day after the date of deposit for mailing stated in this affidavit. Lillian Fredriksson. 1318 Hale Drive Concord, CA 94518 Don Endo 21000 Glenwood Drive Castro Valley, CA 94552 Raymonde Gely 3532 Sacramento St., #2 San Francisco, CA 94118 Kendel Hailey Qvale 3500 Scott St. San Francisco, CA 94123 ~ - Norma Hepworth P.O. Box 871 Hailey, ID 83333 Roger Hansen 868 East 2830 South Hagerman, ID 83332 2 PROOF OF SERVICE Case No, PTR-13-297016827733.02 Cc we ND A BR WN now wR RRR es BexBRRR BH FF 8 Se A BAA BO KH KD Executed on August 7, 2014, at San Francisco, California. [declare under penalty of perjury under the laws of the State of California that the above is true and correct, Nae, , By Maureen L. Stone 3 PROOF OF SERVICE, Case No, PTR-13-297016