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WOMAN
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
Document Scanning Lead Sheet
Jan-27-2012 12:43 pm
Case Number: PES-10-293505
Filing Date: Jan-27-2012 12:42
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PROBATE OPPOSITION/OBJECTION
IN RE: STAN KWONG IRREVOCABLE TRUST II
001P03470528
Instructions:
Please place this sheet on top of the document to be scanned.FREELAND COOPER & FOREMAN LLP
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150 Spear Street, Suite 1800
San Francisco, California 94105
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Daniel T. Bernhard (CSB #104229)
FREELAND COOPER & FOREMAN LLP
150 Spear Street, Suite 1800
San Francisco, California 94105
Telephone: (415) 541-0200
Facsimile: (415) 495-4332
Email: bernhard@freelandlaw.com
Attorneys for Defendant
JENNIFER SHUK-HAN KWOK
Executor and Trustee
SUPERIOR COURT OF TH
ppb LED
count ERIOR Coury
SAN FRANCIS
7012 J8N27 PH 7, 99 °
CLERK OF Tye courr
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IE STATE OF CALIFORNIA
IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO
UNLIMITED
JENNIFER SHUK-HAN KWOK,
Petitioner,
v.
JEANNE KWONG, individually and as a former
trustee of the Stan Kwong Irrevocable Trust IT
Respondent.
JURISDICTION
CASE NO.: PES-10-293505
DEFENDANT JENNIFER SHUK-HAN
KWOK'S OPPOSITION TO DEFENDANT
JEANNE KWONG'S MOTION FOR
RECONSIDERATION OF ORDER
REMOVING JEANNE KWONG AS
TRUSTEE OF THE STAN KWONG TRUST
Date: February 8, 2012
Time: 3:00 p.m.
Dept.: 613
OPPOSITION TO MOTION FOR RECONSIDERATION
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San Francisco, California 94105
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I. INTRODUCTION
By this motion for reconsideration, the former trustee Jeanne Kwong and her counsel
demonstrate conclusively why her removal by the Court was required to protect the Stan Kwong Trust
and its beneficiaries.
Nowhere in this motion for reconsideration does the former trustee explain or even address the
chief failure of her conduct: there is no explanation or justification of how the trustee can be permitted
to favor her interests and those of certain beneficiaries of the Stan Kwong Trust, over the interests of
other Trust beneficiaries. Nor is there any attempt to explain how the former trustee’s expenditure of
more than $600,000 of trust assets, in pursuit of goals that the primary beneficiaries actively oppose,
(and which benefit only the former trustee and others) can be justified or even excused. An alarming
amount of Trust assets have seemingly disappeared under Jeanne Kwong’s control; those losses must
stop, and need to be understood and explained. Without a neutral, competent trustee no explanation of
these trust expenditures will ever be possible. The Court’s order removing Jeanne Kwong, which she
and her lawyers ignored, is the only hope to protect and restore some order to the Stan Kwong Trust.
The decedent, Stan Kwong, left a detailed estate plan, created over seven months with expert
and well-established estate planning lawyers. The estate plan was not what Stan’s relatives had
expected or hoped. Nevertheless, it was Stan’s estate plan, and it represents his goals, intentions and
desires. That his relatives disapprove it, are angered or upset by it, is not determinative.
Tl. THE FORMER TRUSTEE HAS NOT FILED A MOTION FOR RECONSIDERATION.
‘A motion for reconsideration, pursuant to Civ. Code section 1008(a), is only proper if it is
based on “new or different facts, circumstances or law.” The former trustee’s motion is elaborate in
its presentation of "evidence," but it is completely devoid of any “new or different facts or
circumstances.” Each argument could have been made in response to the original motion brought Jast
September. Indeed, many of the issues and arguments on which the present Motion for
Reconsideration rests were made at the hearing on October 12, 2011. But none of them were made in
Jeanne Kwong’s written opposition to the motion to remove her. There are no “new facts” identified
anywhere in the motion. There are many additional facts, and newly argued facts, but none of them
are new or changed. Nor are there any “new circumstances” identified, as required by section 1008 to
(pgp sr ON TO MOTION FOR RECONSTERERTION:
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bring a motion for reconsideration. The former trustee has not identified any changed or new or
different circumstances, except that she has been removed by the Court. There is, moreover, no
attempt to argue any new or changed law. Indeed, by the plain terms of the evidence and arguments
presented, it is apparent that there is nothing new whatsoever offered in this motion.
Accordingly because this motion fails to meet the specific and strict standards for a proper
motion for reconsideration, it should and must be denied.
Il. THE COURT HAS THE ABSOLUTE RIGHT TO REMOVE A TRUSTEE TO
PRESERVE TRUST ASSETS AND PROTECT THE BENEFICIARIES.
Jeanne Kwong argues that her removal is improper because the specific terms and provisions
of the Probate Code, and in particular §17200 et seq., were not complied with in the motion to
remove her. Regardless of what motion is brought, however, and even if no motion whatsoever is
filed, the Court has the absolute right in the exercise of its broad equitable power to act in order to
protect the Trust, and especially to preserve Trust assets and to protect the beneficiaries. The Court
can act on its own motion; it is not obligated to wait while the trust is damaged, the assets are lost and
the beneficiaries deprived. Indeed, the Court has an obligation to protect the Trust and its
beneficiaries, and can act at any time as it did here to prevent the former trustee from continuing to
squander Trust assets to protect and promote her own interests, over the repeated objections of the
primary beneficiaries of the Trust.
Section 15642 of the Probate Code provides that, among other reasons, a trustee can be
removed "by the Court on its own motion... if it appears to the Court that that Trust property or the
interests of a beneficiary may suffer loss or injury pending a decision on a petition for removal of a
trustee and any appellate review, the Court may, on its own motion, or on petition of a co-trustee or a
beneficiary.” §15642(e) Grounds for removal include the following: "(1) where the trustee has
committed a breach of the trust...," "(4) where the trustee fails or declines to act...;" "(9) for other
good cause.” Under this provision the Court is specifically empowered to act under the circumstances
that exist here: "Among the remedies in the Probate Court's arsenal is the express power to remove
o
the trustee on its own motion, without a petition [citations omitted]... along with the express authority
to suspend a trustee pending a hearing on a petition for the trustee's removal." Schwartz v. Labow,
2
OPPOSITION TO MOTION FOR RECONSIDERATION
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164 Cal. App 4th 417, 427 (2008). Equally important, the Court has the inherent power to supervise
the administration of the trust, including the power to take remedial action as needed. Estate of
Heggstad, 16 Cal. App. 4th, 943, 951 (1993); Edwards v. Edwards, 61 Cal. App. 4th 599, 604 (1998).
' The purpose of removing a trustee is not to inflict punishment for past actions, but to preserve
the trust's assets. "The question in each case is whether the circumstances are such that the
continuance of the trustee in office would be detrimental to the trust." (2 Scott on Trusts (4th ed.
1987) § 107, at 104.) "Assuming the existence of some legally proper ground for his removal, there
need be no evidence of actual past wrongdoing by the trustee to justify his removal." Geity v. Getty,
205 Cal. App 3d 134, 140 (1988) (removal of trustee proper because personal interests conflicted with
interests of trust beneficiaries.) Removing Jeanne Kwong is not a punishment; it is the only effective
defense to the squandering of trust assets that has sapped more than $600,000 of trust assets in the last
two years, with no benefit whatsoever to the Stan Kwong Trust. Even after she is removed, the burden
on the Trust has not yet abated, apparently, in light of the extensive and fact intensive motion for
reconsideration that her lawyers have submitted.
The leading case on trustee removal continues to be Moore v. Bowes 8 Cal 2d 162 (1937).
There, the trustees were found to have borrowed $600 in anticipation that the board would raise their
salary at the next board meeting. When the board failed to approve the salary increase, the trustees
returned the amount, The Supreme Court upheld the removal. A bad intent, or even actual damage to
the trust, is not required to require or justify a trustee's removal.
"Trustees are subject to removal whenever, as here, it appears that their private
interests conflict with their trust duties, and when it also appears, as here, that
trust property has been appropriated to their own use, whether or not they purported
to aci honestly under an assumption that they would become entitled to it and the
money was returned when the contrary proved to be the fact. fd at 165
These twin issues of conflict between personal interests and trustee obligations, and the
misappropriation of trust assets here are both present here in the failed administration of the Stan
‘tt is worth noting that the result would be the same had Jeanne Kwong filed a notice of appeal. The Probate Code
specifically empowers the Court to appoint a temporary or interim trustee during the pendency of an appeal, to the
extent required to protect a trust and its assets. See, Probate Code section 1310. Clearly a trustee abusing its powers
should not be permitted to continue in power after his removal simply by filing a notice of appeal.
OPPOSITION TO MOTION FOR RECONSIDERATION
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Kwong Trust. Jeanne Kwong has consistently sought to advance her personal interests, and those of
her children, ahead of the stated desires and goals, and actual interests, of the primary beneficiaries.
In a conflict between beneficiaries over a fundamental issue, the trustee is not entitled -- or even
permitted -- to take a side, especially where, as here, she is a beneficiary with a direct self-interest.
But that is precisely what the former trustee did for more than two years. Moreover, Jeanne Kwong,
with the knowledge and assistance of her present lawyers, misappropriated hundreds of thousands of
dollars to fight a claim that was of value only to her and the secondary beneficiaries. The primary
beneficiaries repeatedly insisted that she stop using trust assets in a pursuit that had no value to them.
2H is unclear whether Jeanne Kwong intended ever to return the assets she expended to the Trust, like
the trustees in Moore v. Bowes. But that intent is irrelevant, the Moore Court held. Just how such
very large sums of money were apparently spent on legal representation is a mystery that the current
trustee will need to unravel.
Jeanne Kwok argues that her removal was improper because all beneficiaries did not receive
adequate notice under Probate Code § 17200 et seq. Specifically, Ms. Kwong complaints that her two
daughters, Kimberly and Krista, were not separately noticed on the motion, and thus had no
opportunity to be heard. Kimberly Gon has submitted a “joinder" in her mother's motion for
reconsideration. Like her mother, she argues that, because no adequate notice was provided to her, the
Court lacked jurisdiction to rule in this motion and enter an order. Like her mother, she cites no legal
authority for this sweeping argument.
While Ms. Gon states that she did not receive formal written notice, she does not say that she
did not know about the motion to remove her mother as trustee, or that she was otherwise in fact
unaware of it. She shows the same address as her mother, along with Krista Gon, (600 39th Avenue,
San Francisco) the other beneficiary of the Stan Kwong Trust who did not receive formal written
notice of the motion. Each certainly had at least constructive notice of the motion and the hearing.
Like Jeanne Kwong, they also raised no objection or issue concerning notice, scheduling or other
compliance with Probate Code Section 17200 ef seg.
2 Jeanne Kwong mysteriously argues that there are no beneficiaries in litigation with cach other. She is a beneficiary
of the Stan Kwong Trust, as is Jennifer Kwok. They are in multiple litigations with each other.
—_————— — OP POSTTION TO MOTION FOR RECONSIDERATION
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Jeanne Kwong also objects to the purported failure to permit her adequate time to respond to
the motion to remove her. While she is correct that section 17203 provides for 30-day notice for a
petition to remove a trustee, she is incorrect that this time period cannot be shortened by the Court.
The only preclusion to shortening time for hearing on a petition to remove a trustee involves a person
“other than a trustee or beneficiary, whose right, title or interest would be affected by the petition..."
§ 17203 There is no such person here, and Ms. Kwong has not identified one. The only interested
persons are the trustee and the beneficiaries of the Stan Kwong Trust. Accordingly, the Court can
shorten the hearing time, and that is what the Court in fact did effectively. Jeanne Kwong mentions it
nowhere in her motion for reconsideration, but after Ms. Kwok's motion to remove the trustee was
filed, and after Jeanne Kwong filed her opposition. Ms. Kwok applied ex parte to shorten the time for
the hearing date. She did so as a result of an administrative issue about advancing the hearing date for
three of the actions, because while the four separate cases are related, they are not consolidated. To
address that issue, Ms. Kwok obtained an ex parte order on or about October 7 to have the hearing
held on shortened time in Department 613.
After giving notice to opposing counsel, Ms. Kwok’'s attorney appeared ex parte on October 7
to request an order shortening the notice time to hear the motion. The only party to appear was Jeanne
Kwong through her counsel, who agreed in court to having the matters heard on shortened time on the
date noticed. This was, clearly, the perfect opportunity for counsel to complain about notice,
inadequate time and the scheduling and timing issue that now are raised in the Motion for
Reconsideration, No mention was made of these, however, and counsel readily agreed to shortening
time. (Bernhard Decl. 42).
IV WHAT IS REALLY AT STAKE HERE
Jeanne Kwong has submitted an expensive motion for reconsideration to defeat the Court’s
timely protection of the Stan Kwong Trust, and to seize control of it again. It is important to keep in
mind what is at really at stake by control of this Trust, and just how routine are the immediate
administrative needs of the Trust .
At this stage the Stan Kwong Trust has just two activities and purposes. First, under the terms
of the Trust, the assets of the Trust are to be disbursed to the Marital Trust. Jennifer Kwok is the
OPPOSTTTON TO MOTION FOR RECONSIDERATION
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trustee and the beneficiary of the Marital Trust. In addition to funding the Marital Trust, assets of the
Stan Kwong Trust are to be used to fund a so-called Bypass Trust with a maximum of $3.5 million, to
the extent that funds can pass free of federal income tax liability. It is a contingent trust, because it
can only be funded by assets exempt from federal taxation. If there are no such assets, then the
Bypass Trust cannot be funded.
There are no other proper present activities of the Stan Kwong Trust.’ By the express terms of
the Stan Kwong Trust, the “primary beneficiaries” of any Bypass Trust are Stan and Jennifer’s two
minor children. (other beneficiaries are Jeanne Kwong, her two daughters Kimberly (24) and Christa
(17); and Larry Kwong’s two daughters Amy (20) and Sara (20)) The narrow purpose of the Bypass
Trust is to pay for certain health and education costs of the beneficiaries, In other words, any Bypass
Trust created is a sort of “safety net.” If one of the beneficiaries is unable to pay for the costs of
college, for example, then the Bypass Trust could reasonably be called upon to do so, depending on
other circumstances. Or if one of the beneficiaries has special medical problems then the Bypass
Trust could reasonably to called upon to pay for those.
it is worth noting that, with the exception of Sara a high school student), the other secondary
beneficiaries have completed, or nearly completed, their college educations, and are not presently
enrolled in other formal education programs at this time. They may be in the future, but the Bypass
trust, assuming that one comes into existence, will presumably be available to address any such
needs,, based on the trustee’s discretion. But the sole use of the Bypass Trust for these secondary
beneficiaries at this time is as a kind of emergency medical insurance policy.
Because of the very limited present circumstances and the express terms of the Trust itself,
Jennifer Kwok has sought to have distributed to the Marital Trust those assets in the Stan Kwong
Trust that could not possibly be required to fund the Bypass Trust, ie., all sums in excess of $3.5
million. To this end Ms. Kwok has previously demanded that the assets be distributed, when the
Jeanne Kwong refused to do that, Ms. Kwok filed a petition to require the trustee to distribute those
3 Jeanne Kwong, of course, views it differently. One of her objections to Feng Ouyang is that Ms. Ouyang cannot be
counted on to litigate the disclaimer petition, again with Ms. Kwok, as Jeanne Kwong has. Indeed. A responsible
trustee has no business engaging in that sort of litigation. A chief virtue of any trustee other than Jeanne Kwong is
that the trust then will not pursue such improper litigation.
OPPOSITION TO MOTION FOR RECONSIDERATION
{00189528}FREELAND COOPER & FOREMAN LLP
150 Spear Street, Suite 1800
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assets in accordance with the terms of the Stan Kwong Trust. Interestingly, Jeanne Kwong
understands and admits that these “non-Bypass” assets are owed to the Marital Trust,’ despite her
continual usc of over-heated rhetoric accusing Ms. Kwok of intending to “destroy” the trust, or
“eviscerate” it.
v JEANNE KWONG’S “INTENT” CASE IS IRRELEVANT TO HER MISCONDUCT
AS A TRUSTEE
Jeanne Kwong and her lawyers have offered numerous declarations about the case that they
want to present to the Court in support of their opposition to her removal. As a result, the Court and
the parties can understand the focus and evidence of her case, even if all of the arguments and
evidence have not yet presented. It is obvious that her case turns on the purported intent of Stan
Kwong, and conveniently ignores completely Jeanne Kwong’s conduct to the trust beneficiaries.
Jeanne Kwong and her counsel focus on the purported intent in naming her as the trustee of the Stan
Kwong Trust. While the settlor’s intent and goal in selection of a trustee may have some limited
significance, in certain circumstances, it is irrelevant to the issue of whether the trustee understands
and performs her duties. Unquestionably the Settlor’s pre-eminent intent is the preservation of trust
assets so that the trust can achieve the goals that the Settlors identified and pursued in establishing the
trust in the first place. Moreover, it is the trustee's relationship with the beneficiaries that is critical,
not the relationship with the deceased Settlor.
Jeanne Kwong's "evidence" to preserve her control and further misuse of the Stan Kwong
Trust continues to be the same well-worn accusations about Ms. Kwok that she has pursued tirelessly
for years. According to Jeanne Kwong, Jennifer Kwok was a neglectful wife; she refused to get up
early; she bothered Stan about his trusts and assets; Stan was going to divorce her and pursued other
relationships. The only difference in the present motion is that proxies, in the form of third party
declarants, have been enlisted to make these predictable accusations. These fabrications are
overwhelmed by their own mean-spiritedness. They are not made true no matter how many times
4 Jeanne Kwong testifies that “[a]Ithough the Stan Kwong Trust currently contains in excess of $6 million in assets,
the Stan Kwong Trust (by its terms) can only be funded to the extent of $3.5 million (with the other $2.5 million in
assets to be distributed to Jennifer Kwok).” Jeanne Kwong Declaration in Support of Motion for Reconsideration, at
Paragraph 101.
OPPOSITION TO MOTION FOR RECONSIDERATION
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they are repeated.
Jeanne Kwong argues that Ms. Ouyang cannot be the trustee because she is “biased” and
because she has conflicts and has caused a loss of “$1.5 million” to the trust. This last allegation
evidently stems from the two promissory notes that Jeanne Kwong has been litigating for two years,
without effect. That Ms. Ouyang has refused to participate in that wrongheaded and wasteful endeavor
makes her especially suited to continue to protect the Trust’s assets as the trustee. As for her conflicts
and litigation, she was sued by Jeanne Kwong in connection with her role as a trustee of the insurance
Trust (one of the related lawsuits herein).
The objection is also made that Ms. Ouyang does not know the particular needs of the
beneficiaries, and thus is poorly suited to serve as the trustee. Jeanne Kwong relies heavily on the first
iteration of the Stan Kwong Trust ion 1998. It is worth noting in that context that Stan named his then
nine year old niece the second trustee, and institutional financial firm as the third trustee. In light of
the minimal demands currently on the Stan Kwong Trust, any responsible, neutral third-party
represented by competent counsel can certainly discharge the trustee duties. Any such responsible
third party, such as Ms. Ouyang (who Stan identified himself) would not squander hundreds of
thousands of collars on pointless litigation over the constant objections of the primary beneficiaries,
Vi CONTEMPT OF THE COURT’S DECEMBER 23, 2011 ORDER
Jeanne Kwong’s obstinacy in absolutely refusing to comply with her legal obligations
continues in her current response to the Court’s December 23, 201] Order herein. Formal notice of
that Order was given on December 29, 2011. (Bernhard Decl. (2) The Order requires, inter alia, that
Jeanne Kwong and her attorneys turn over all books and records of the trust to the current trustee Feng
Quyang “immediately.” The response by Jeanne Kwong and her counsel to this Order is predictable:
they have ignored it.
By letter dated January 6, 2012 counsel for Ms. Ouyang requested that Jeanne Kwong turn
over the books and records in accordance with the Order. (Bernhard Decl., Ex. B) A week later, on
January 13, 2012, Ms. Kwong’s lawyers responded, taking the position, without reference to any
authority, that the Court “lacked jurisdiction” to enter the Order and thus Ms. Kwong was permitted to
ignore it. (Bernhard Del., Ex. C). In response, counsel for Ms. Kwok pointed out in a letter dated
8
OPPOSITTON TO MOTION FOR RECONSIDERATION
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January 18, 2012 that no legal authority supported such a position, and none had been offered.
Moreover, because the Stan Kwong Trust is a defendant in the imminent trial, the new trustee had an
immediate need to understand in advance of that trial at least the present posture of the Stan Kwong
Trust, and require complete access to the Trust’s books and records. (Bernhard Decl., Ex. D) In
response to this letter Ms. Kwong’s attorney changed their position, and represented that they were
gathering various Trust documents and materials. (Bernhard Decl. Ex. E) Predictably, they have
refused to provide any date by which they would actually comply with the Court’s Order, although
Mr. Ouyang’ s counsel has requested that they do so no later than January 26, so that the trustee would
have time to prepare a report to the Court which is also required (within 45 days) under the Order. As
of this date, none of the books, records or other materials of the Stan Kwong Trust have been turned
over to the new trustee, so far as Ms. Kwok is aware.
The former trustee has cited no authority to justify or excuse her disregard of the Court’s
Order; there is none. Filing a motion for reconsideration does not by itself stay the Order. She could
have sought such a stay but did not. Immediate compliance with the Court's order by turning over the
books and records poses no risk whatsoever to the Trust and its assets, Compliance is simply a matter
of transferring a set of records, documents and related materials. Jeanne. Kwong and her lawyers will
not do it.
Jeanne Kwong and her counsel are incorrigible: they will continue to ignore the obligations of
the Probate Code, this Court’s Orders and most important, the best interests of the Stan Kwong Trust,
in order to preserve their stranglehold on the Trust and their instant access to, and use of, trust assets.
IV. CONCLUSION
For the foregoing reasons, Jeanne Kwong's Motion for Reconsideration of the Court's Order
Removing her as Trustee of the Stan Kwong Trust should be denied, and Jeanne Kwong should
comply immediately with all terms of the Court's order.
If the Court is so inclined to hear from the beneficiaries who have requested a hearing, such an
evidentiary hearing can be held after the other matters and petitions that are currently before the Court
iff
but have not yet been set for trial. In the interim, until any such hearing is concluded, Ms. Ouyang
OPPOSITION TO MOTION FOR RECONSIDERATION
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should continue as the current trustee.
Dated: Januarye£}, 2012
o
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Attomeys for
JENNIFER SHUK-HAN KWOK
——_——— — UPPOSTTTON TO MOTION FOR RECONSIDERATION
Preview
WOMAN SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO Document Scanning Lead Sheet Jan-27-2012 12:43 pm Case Number: PES-10-293505 Filing Date: Jan-27-2012 12:42 Juke Box: 001 Image: 03470528 PROBATE OPPOSITION/OBJECTION IN RE: STAN KWONG IRREVOCABLE TRUST II 001P03470528 Instructions: Please place this sheet on top of the document to be scanned.FREELAND COOPER & FOREMAN LLP nA & BW NHN = corm Na A Bw ~ 150 Spear Street, Suite 1800 San Francisco, California 94105 moNM eM NN N NN NR SF = BS SA A FF Yow NY He SG Oo we a Daniel T. Bernhard (CSB #104229) FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 Telephone: (415) 541-0200 Facsimile: (415) 495-4332 Email: bernhard@freelandlaw.com Attorneys for Defendant JENNIFER SHUK-HAN KWOK Executor and Trustee SUPERIOR COURT OF TH ppb LED count ERIOR Coury SAN FRANCIS 7012 J8N27 PH 7, 99 ° CLERK OF Tye courr by: ‘ PePUy ctppn IE STATE OF CALIFORNIA IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO UNLIMITED JENNIFER SHUK-HAN KWOK, Petitioner, v. JEANNE KWONG, individually and as a former trustee of the Stan Kwong Irrevocable Trust IT Respondent. JURISDICTION CASE NO.: PES-10-293505 DEFENDANT JENNIFER SHUK-HAN KWOK'S OPPOSITION TO DEFENDANT JEANNE KWONG'S MOTION FOR RECONSIDERATION OF ORDER REMOVING JEANNE KWONG AS TRUSTEE OF THE STAN KWONG TRUST Date: February 8, 2012 Time: 3:00 p.m. Dept.: 613 OPPOSITION TO MOTION FOR RECONSIDERATION {00159605}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 a Dw B WN mw oN NY NY NY RN YM NY SF Se Ee Se Ee Se oa A A & Ob NHN = Se we DH FS YY I. INTRODUCTION By this motion for reconsideration, the former trustee Jeanne Kwong and her counsel demonstrate conclusively why her removal by the Court was required to protect the Stan Kwong Trust and its beneficiaries. Nowhere in this motion for reconsideration does the former trustee explain or even address the chief failure of her conduct: there is no explanation or justification of how the trustee can be permitted to favor her interests and those of certain beneficiaries of the Stan Kwong Trust, over the interests of other Trust beneficiaries. Nor is there any attempt to explain how the former trustee’s expenditure of more than $600,000 of trust assets, in pursuit of goals that the primary beneficiaries actively oppose, (and which benefit only the former trustee and others) can be justified or even excused. An alarming amount of Trust assets have seemingly disappeared under Jeanne Kwong’s control; those losses must stop, and need to be understood and explained. Without a neutral, competent trustee no explanation of these trust expenditures will ever be possible. The Court’s order removing Jeanne Kwong, which she and her lawyers ignored, is the only hope to protect and restore some order to the Stan Kwong Trust. The decedent, Stan Kwong, left a detailed estate plan, created over seven months with expert and well-established estate planning lawyers. The estate plan was not what Stan’s relatives had expected or hoped. Nevertheless, it was Stan’s estate plan, and it represents his goals, intentions and desires. That his relatives disapprove it, are angered or upset by it, is not determinative. Tl. THE FORMER TRUSTEE HAS NOT FILED A MOTION FOR RECONSIDERATION. ‘A motion for reconsideration, pursuant to Civ. Code section 1008(a), is only proper if it is based on “new or different facts, circumstances or law.” The former trustee’s motion is elaborate in its presentation of "evidence," but it is completely devoid of any “new or different facts or circumstances.” Each argument could have been made in response to the original motion brought Jast September. Indeed, many of the issues and arguments on which the present Motion for Reconsideration rests were made at the hearing on October 12, 2011. But none of them were made in Jeanne Kwong’s written opposition to the motion to remove her. There are no “new facts” identified anywhere in the motion. There are many additional facts, and newly argued facts, but none of them are new or changed. Nor are there any “new circumstances” identified, as required by section 1008 to (pgp sr ON TO MOTION FOR RECONSTERERTION: (00159528)FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 wow wy BY YN NR N YF = = SF SF FE eo SS & & € GBS | Ss CG we ADH FF Y bring a motion for reconsideration. The former trustee has not identified any changed or new or different circumstances, except that she has been removed by the Court. There is, moreover, no attempt to argue any new or changed law. Indeed, by the plain terms of the evidence and arguments presented, it is apparent that there is nothing new whatsoever offered in this motion. Accordingly because this motion fails to meet the specific and strict standards for a proper motion for reconsideration, it should and must be denied. Il. THE COURT HAS THE ABSOLUTE RIGHT TO REMOVE A TRUSTEE TO PRESERVE TRUST ASSETS AND PROTECT THE BENEFICIARIES. Jeanne Kwong argues that her removal is improper because the specific terms and provisions of the Probate Code, and in particular §17200 et seq., were not complied with in the motion to remove her. Regardless of what motion is brought, however, and even if no motion whatsoever is filed, the Court has the absolute right in the exercise of its broad equitable power to act in order to protect the Trust, and especially to preserve Trust assets and to protect the beneficiaries. The Court can act on its own motion; it is not obligated to wait while the trust is damaged, the assets are lost and the beneficiaries deprived. Indeed, the Court has an obligation to protect the Trust and its beneficiaries, and can act at any time as it did here to prevent the former trustee from continuing to squander Trust assets to protect and promote her own interests, over the repeated objections of the primary beneficiaries of the Trust. Section 15642 of the Probate Code provides that, among other reasons, a trustee can be removed "by the Court on its own motion... if it appears to the Court that that Trust property or the interests of a beneficiary may suffer loss or injury pending a decision on a petition for removal of a trustee and any appellate review, the Court may, on its own motion, or on petition of a co-trustee or a beneficiary.” §15642(e) Grounds for removal include the following: "(1) where the trustee has committed a breach of the trust...," "(4) where the trustee fails or declines to act...;" "(9) for other good cause.” Under this provision the Court is specifically empowered to act under the circumstances that exist here: "Among the remedies in the Probate Court's arsenal is the express power to remove o the trustee on its own motion, without a petition [citations omitted]... along with the express authority to suspend a trustee pending a hearing on a petition for the trustee's removal." Schwartz v. Labow, 2 OPPOSITION TO MOTION FOR RECONSIDERATION 400159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 eee 164 Cal. App 4th 417, 427 (2008). Equally important, the Court has the inherent power to supervise the administration of the trust, including the power to take remedial action as needed. Estate of Heggstad, 16 Cal. App. 4th, 943, 951 (1993); Edwards v. Edwards, 61 Cal. App. 4th 599, 604 (1998). ' The purpose of removing a trustee is not to inflict punishment for past actions, but to preserve the trust's assets. "The question in each case is whether the circumstances are such that the continuance of the trustee in office would be detrimental to the trust." (2 Scott on Trusts (4th ed. 1987) § 107, at 104.) "Assuming the existence of some legally proper ground for his removal, there need be no evidence of actual past wrongdoing by the trustee to justify his removal." Geity v. Getty, 205 Cal. App 3d 134, 140 (1988) (removal of trustee proper because personal interests conflicted with interests of trust beneficiaries.) Removing Jeanne Kwong is not a punishment; it is the only effective defense to the squandering of trust assets that has sapped more than $600,000 of trust assets in the last two years, with no benefit whatsoever to the Stan Kwong Trust. Even after she is removed, the burden on the Trust has not yet abated, apparently, in light of the extensive and fact intensive motion for reconsideration that her lawyers have submitted. The leading case on trustee removal continues to be Moore v. Bowes 8 Cal 2d 162 (1937). There, the trustees were found to have borrowed $600 in anticipation that the board would raise their salary at the next board meeting. When the board failed to approve the salary increase, the trustees returned the amount, The Supreme Court upheld the removal. A bad intent, or even actual damage to the trust, is not required to require or justify a trustee's removal. "Trustees are subject to removal whenever, as here, it appears that their private interests conflict with their trust duties, and when it also appears, as here, that trust property has been appropriated to their own use, whether or not they purported to aci honestly under an assumption that they would become entitled to it and the money was returned when the contrary proved to be the fact. fd at 165 These twin issues of conflict between personal interests and trustee obligations, and the misappropriation of trust assets here are both present here in the failed administration of the Stan ‘tt is worth noting that the result would be the same had Jeanne Kwong filed a notice of appeal. The Probate Code specifically empowers the Court to appoint a temporary or interim trustee during the pendency of an appeal, to the extent required to protect a trust and its assets. See, Probate Code section 1310. Clearly a trustee abusing its powers should not be permitted to continue in power after his removal simply by filing a notice of appeal. OPPOSITION TO MOTION FOR RECONSIDERATION {00159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, Califomia 94105 n wk WwW YN mow NM oN NM oN ON ON ON Se Se Fe Se SF Se Se Ss So G9 AA RB Oo Nh Se SF Owe re DH FF YY NY Kwong Trust. Jeanne Kwong has consistently sought to advance her personal interests, and those of her children, ahead of the stated desires and goals, and actual interests, of the primary beneficiaries. In a conflict between beneficiaries over a fundamental issue, the trustee is not entitled -- or even permitted -- to take a side, especially where, as here, she is a beneficiary with a direct self-interest. But that is precisely what the former trustee did for more than two years. Moreover, Jeanne Kwong, with the knowledge and assistance of her present lawyers, misappropriated hundreds of thousands of dollars to fight a claim that was of value only to her and the secondary beneficiaries. The primary beneficiaries repeatedly insisted that she stop using trust assets in a pursuit that had no value to them. 2H is unclear whether Jeanne Kwong intended ever to return the assets she expended to the Trust, like the trustees in Moore v. Bowes. But that intent is irrelevant, the Moore Court held. Just how such very large sums of money were apparently spent on legal representation is a mystery that the current trustee will need to unravel. Jeanne Kwok argues that her removal was improper because all beneficiaries did not receive adequate notice under Probate Code § 17200 et seq. Specifically, Ms. Kwong complaints that her two daughters, Kimberly and Krista, were not separately noticed on the motion, and thus had no opportunity to be heard. Kimberly Gon has submitted a “joinder" in her mother's motion for reconsideration. Like her mother, she argues that, because no adequate notice was provided to her, the Court lacked jurisdiction to rule in this motion and enter an order. Like her mother, she cites no legal authority for this sweeping argument. While Ms. Gon states that she did not receive formal written notice, she does not say that she did not know about the motion to remove her mother as trustee, or that she was otherwise in fact unaware of it. She shows the same address as her mother, along with Krista Gon, (600 39th Avenue, San Francisco) the other beneficiary of the Stan Kwong Trust who did not receive formal written notice of the motion. Each certainly had at least constructive notice of the motion and the hearing. Like Jeanne Kwong, they also raised no objection or issue concerning notice, scheduling or other compliance with Probate Code Section 17200 ef seg. 2 Jeanne Kwong mysteriously argues that there are no beneficiaries in litigation with cach other. She is a beneficiary of the Stan Kwong Trust, as is Jennifer Kwok. They are in multiple litigations with each other. —_————— — OP POSTTION TO MOTION FOR RECONSIDERATION 400159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 nN KR YN NY NY NY N N YW YF SF BF SF PY SF DD oa aA am & ON = FS BD we aD HH FF YY Jeanne Kwong also objects to the purported failure to permit her adequate time to respond to the motion to remove her. While she is correct that section 17203 provides for 30-day notice for a petition to remove a trustee, she is incorrect that this time period cannot be shortened by the Court. The only preclusion to shortening time for hearing on a petition to remove a trustee involves a person “other than a trustee or beneficiary, whose right, title or interest would be affected by the petition..." § 17203 There is no such person here, and Ms. Kwong has not identified one. The only interested persons are the trustee and the beneficiaries of the Stan Kwong Trust. Accordingly, the Court can shorten the hearing time, and that is what the Court in fact did effectively. Jeanne Kwong mentions it nowhere in her motion for reconsideration, but after Ms. Kwok's motion to remove the trustee was filed, and after Jeanne Kwong filed her opposition. Ms. Kwok applied ex parte to shorten the time for the hearing date. She did so as a result of an administrative issue about advancing the hearing date for three of the actions, because while the four separate cases are related, they are not consolidated. To address that issue, Ms. Kwok obtained an ex parte order on or about October 7 to have the hearing held on shortened time in Department 613. After giving notice to opposing counsel, Ms. Kwok’'s attorney appeared ex parte on October 7 to request an order shortening the notice time to hear the motion. The only party to appear was Jeanne Kwong through her counsel, who agreed in court to having the matters heard on shortened time on the date noticed. This was, clearly, the perfect opportunity for counsel to complain about notice, inadequate time and the scheduling and timing issue that now are raised in the Motion for Reconsideration, No mention was made of these, however, and counsel readily agreed to shortening time. (Bernhard Decl. 42). IV WHAT IS REALLY AT STAKE HERE Jeanne Kwong has submitted an expensive motion for reconsideration to defeat the Court’s timely protection of the Stan Kwong Trust, and to seize control of it again. It is important to keep in mind what is at really at stake by control of this Trust, and just how routine are the immediate administrative needs of the Trust . At this stage the Stan Kwong Trust has just two activities and purposes. First, under the terms of the Trust, the assets of the Trust are to be disbursed to the Marital Trust. Jennifer Kwok is the OPPOSTTTON TO MOTION FOR RECONSIDERATION {00159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 Bw oN trustee and the beneficiary of the Marital Trust. In addition to funding the Marital Trust, assets of the Stan Kwong Trust are to be used to fund a so-called Bypass Trust with a maximum of $3.5 million, to the extent that funds can pass free of federal income tax liability. It is a contingent trust, because it can only be funded by assets exempt from federal taxation. If there are no such assets, then the Bypass Trust cannot be funded. There are no other proper present activities of the Stan Kwong Trust.’ By the express terms of the Stan Kwong Trust, the “primary beneficiaries” of any Bypass Trust are Stan and Jennifer’s two minor children. (other beneficiaries are Jeanne Kwong, her two daughters Kimberly (24) and Christa (17); and Larry Kwong’s two daughters Amy (20) and Sara (20)) The narrow purpose of the Bypass Trust is to pay for certain health and education costs of the beneficiaries, In other words, any Bypass Trust created is a sort of “safety net.” If one of the beneficiaries is unable to pay for the costs of college, for example, then the Bypass Trust could reasonably be called upon to do so, depending on other circumstances. Or if one of the beneficiaries has special medical problems then the Bypass Trust could reasonably to called upon to pay for those. it is worth noting that, with the exception of Sara a high school student), the other secondary beneficiaries have completed, or nearly completed, their college educations, and are not presently enrolled in other formal education programs at this time. They may be in the future, but the Bypass trust, assuming that one comes into existence, will presumably be available to address any such needs,, based on the trustee’s discretion. But the sole use of the Bypass Trust for these secondary beneficiaries at this time is as a kind of emergency medical insurance policy. Because of the very limited present circumstances and the express terms of the Trust itself, Jennifer Kwok has sought to have distributed to the Marital Trust those assets in the Stan Kwong Trust that could not possibly be required to fund the Bypass Trust, ie., all sums in excess of $3.5 million. To this end Ms. Kwok has previously demanded that the assets be distributed, when the Jeanne Kwong refused to do that, Ms. Kwok filed a petition to require the trustee to distribute those 3 Jeanne Kwong, of course, views it differently. One of her objections to Feng Ouyang is that Ms. Ouyang cannot be counted on to litigate the disclaimer petition, again with Ms. Kwok, as Jeanne Kwong has. Indeed. A responsible trustee has no business engaging in that sort of litigation. A chief virtue of any trustee other than Jeanne Kwong is that the trust then will not pursue such improper litigation. OPPOSITION TO MOTION FOR RECONSIDERATION {00189528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 wR RY NNN KR NY NY Se Be Be Oe Se ee eo aA mW RF Yb NN &— SD OD we IND HM FF YY assets in accordance with the terms of the Stan Kwong Trust. Interestingly, Jeanne Kwong understands and admits that these “non-Bypass” assets are owed to the Marital Trust,’ despite her continual usc of over-heated rhetoric accusing Ms. Kwok of intending to “destroy” the trust, or “eviscerate” it. v JEANNE KWONG’S “INTENT” CASE IS IRRELEVANT TO HER MISCONDUCT AS A TRUSTEE Jeanne Kwong and her lawyers have offered numerous declarations about the case that they want to present to the Court in support of their opposition to her removal. As a result, the Court and the parties can understand the focus and evidence of her case, even if all of the arguments and evidence have not yet presented. It is obvious that her case turns on the purported intent of Stan Kwong, and conveniently ignores completely Jeanne Kwong’s conduct to the trust beneficiaries. Jeanne Kwong and her counsel focus on the purported intent in naming her as the trustee of the Stan Kwong Trust. While the settlor’s intent and goal in selection of a trustee may have some limited significance, in certain circumstances, it is irrelevant to the issue of whether the trustee understands and performs her duties. Unquestionably the Settlor’s pre-eminent intent is the preservation of trust assets so that the trust can achieve the goals that the Settlors identified and pursued in establishing the trust in the first place. Moreover, it is the trustee's relationship with the beneficiaries that is critical, not the relationship with the deceased Settlor. Jeanne Kwong's "evidence" to preserve her control and further misuse of the Stan Kwong Trust continues to be the same well-worn accusations about Ms. Kwok that she has pursued tirelessly for years. According to Jeanne Kwong, Jennifer Kwok was a neglectful wife; she refused to get up early; she bothered Stan about his trusts and assets; Stan was going to divorce her and pursued other relationships. The only difference in the present motion is that proxies, in the form of third party declarants, have been enlisted to make these predictable accusations. These fabrications are overwhelmed by their own mean-spiritedness. They are not made true no matter how many times 4 Jeanne Kwong testifies that “[a]Ithough the Stan Kwong Trust currently contains in excess of $6 million in assets, the Stan Kwong Trust (by its terms) can only be funded to the extent of $3.5 million (with the other $2.5 million in assets to be distributed to Jennifer Kwok).” Jeanne Kwong Declaration in Support of Motion for Reconsideration, at Paragraph 101. OPPOSITION TO MOTION FOR RECONSIDERATION {00159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 they are repeated. Jeanne Kwong argues that Ms. Ouyang cannot be the trustee because she is “biased” and because she has conflicts and has caused a loss of “$1.5 million” to the trust. This last allegation evidently stems from the two promissory notes that Jeanne Kwong has been litigating for two years, without effect. That Ms. Ouyang has refused to participate in that wrongheaded and wasteful endeavor makes her especially suited to continue to protect the Trust’s assets as the trustee. As for her conflicts and litigation, she was sued by Jeanne Kwong in connection with her role as a trustee of the insurance Trust (one of the related lawsuits herein). The objection is also made that Ms. Ouyang does not know the particular needs of the beneficiaries, and thus is poorly suited to serve as the trustee. Jeanne Kwong relies heavily on the first iteration of the Stan Kwong Trust ion 1998. It is worth noting in that context that Stan named his then nine year old niece the second trustee, and institutional financial firm as the third trustee. In light of the minimal demands currently on the Stan Kwong Trust, any responsible, neutral third-party represented by competent counsel can certainly discharge the trustee duties. Any such responsible third party, such as Ms. Ouyang (who Stan identified himself) would not squander hundreds of thousands of collars on pointless litigation over the constant objections of the primary beneficiaries, Vi CONTEMPT OF THE COURT’S DECEMBER 23, 2011 ORDER Jeanne Kwong’s obstinacy in absolutely refusing to comply with her legal obligations continues in her current response to the Court’s December 23, 201] Order herein. Formal notice of that Order was given on December 29, 2011. (Bernhard Decl. (2) The Order requires, inter alia, that Jeanne Kwong and her attorneys turn over all books and records of the trust to the current trustee Feng Quyang “immediately.” The response by Jeanne Kwong and her counsel to this Order is predictable: they have ignored it. By letter dated January 6, 2012 counsel for Ms. Ouyang requested that Jeanne Kwong turn over the books and records in accordance with the Order. (Bernhard Decl., Ex. B) A week later, on January 13, 2012, Ms. Kwong’s lawyers responded, taking the position, without reference to any authority, that the Court “lacked jurisdiction” to enter the Order and thus Ms. Kwong was permitted to ignore it. (Bernhard Del., Ex. C). In response, counsel for Ms. Kwok pointed out in a letter dated 8 OPPOSITTON TO MOTION FOR RECONSIDERATION {00159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 we January 18, 2012 that no legal authority supported such a position, and none had been offered. Moreover, because the Stan Kwong Trust is a defendant in the imminent trial, the new trustee had an immediate need to understand in advance of that trial at least the present posture of the Stan Kwong Trust, and require complete access to the Trust’s books and records. (Bernhard Decl., Ex. D) In response to this letter Ms. Kwong’s attorney changed their position, and represented that they were gathering various Trust documents and materials. (Bernhard Decl. Ex. E) Predictably, they have refused to provide any date by which they would actually comply with the Court’s Order, although Mr. Ouyang’ s counsel has requested that they do so no later than January 26, so that the trustee would have time to prepare a report to the Court which is also required (within 45 days) under the Order. As of this date, none of the books, records or other materials of the Stan Kwong Trust have been turned over to the new trustee, so far as Ms. Kwok is aware. The former trustee has cited no authority to justify or excuse her disregard of the Court’s Order; there is none. Filing a motion for reconsideration does not by itself stay the Order. She could have sought such a stay but did not. Immediate compliance with the Court's order by turning over the books and records poses no risk whatsoever to the Trust and its assets, Compliance is simply a matter of transferring a set of records, documents and related materials. Jeanne. Kwong and her lawyers will not do it. Jeanne Kwong and her counsel are incorrigible: they will continue to ignore the obligations of the Probate Code, this Court’s Orders and most important, the best interests of the Stan Kwong Trust, in order to preserve their stranglehold on the Trust and their instant access to, and use of, trust assets. IV. CONCLUSION For the foregoing reasons, Jeanne Kwong's Motion for Reconsideration of the Court's Order Removing her as Trustee of the Stan Kwong Trust should be denied, and Jeanne Kwong should comply immediately with all terms of the Court's order. If the Court is so inclined to hear from the beneficiaries who have requested a hearing, such an evidentiary hearing can be held after the other matters and petitions that are currently before the Court iff but have not yet been set for trial. In the interim, until any such hearing is concluded, Ms. Ouyang OPPOSITION TO MOTION FOR RECONSIDERATION 400159528}FREELAND COOPER & FOREMAN LLP 150 Spear Street, Suite 1800 San Francisco, California 94105 bow eR YN HRN KR |= Fe SP SC TF Ss Be FA Fon fF So we aA DM FY should continue as the current trustee. Dated: Januarye£}, 2012 o 400159528) Attomeys for JENNIFER SHUK-HAN KWOK ——_——— — UPPOSTTTON TO MOTION FOR RECONSIDERATION