IFS Industries, Inc. v. Stephens

159 Cal. App. 3d 740, 205 Cal. Rptr. 915, 1984 Cal. App. LEXIS 2467
CourtCalifornia Court of Appeal
DecidedAugust 28, 1984
DocketCiv. 29548
StatusPublished
Cited by12 cases

This text of 159 Cal. App. 3d 740 (IFS Industries, Inc. v. Stephens) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
IFS Industries, Inc. v. Stephens, 159 Cal. App. 3d 740, 205 Cal. Rptr. 915, 1984 Cal. App. LEXIS 2467 (Cal. Ct. App. 1984).

Opinion

Opinion

KAUFMAN, J.

Defendants Dale J. Stephens, William M. Ray and Triangle Associates (Triangle), a partnership, purport to appeal from an order of the Riverside Superior Court removing them as the trustees of certain preneed funeral trusts, appointing a successor trustee, and ordering defendants to turn over the assets of the trusts to the successor trustee and to provide the successor trustee a complete and accurate accounting of the trusts. 1

We have determined that the order purportedly appealed from is not an appealable order. However, we have also determined that this is an appropriate case in which to treat the purported appeal as an application for a writ of mandate and that a peremptory writ of mandate should issue requiring the superior court to vacate its order.

Statutory Scheme

To facilitate an understanding of the facts and issues an introduction to the salient features of the statutory scheme regulating preneed funeral trusts and the policies of the Board of Funeral Directors and Embalmers (Board), the agency charged with their regulation, is in order. We start with a quo *745 tation from a declaration in the record from the executive secretary of the Board:

“The Board of Funeral Directors and Embalmers licenses the funeral industry in California and is charged with regulation and enforcement responsibilities relative to pre-need funeral arrangements.
“Section 7735 et seq. of the Business and Professions Code prohibits funeral directors from accepting money in advance of need unless the contract requires that all money paid directly or indirectly shall be held in trust for the purpose intended. Only a funeral director, licensed by [the] Board, is authorized to provide funeral merchandise and service. (See Business and Professions Code Section 7615.)
“If a consumer enters into a pre-need agreement with a funeral director, and delivers money to the funeral director, his agent or employee, the funeral director is required to place the money into trust within 30 days of receipt. Section 7736 of the Business and Professions Code provides that a trustee may be either a bank or three persons, one of whom may be an employee of the funeral director. In most of the three-party trusts which are reported annually to [the] Board, the funeral director or one of his or her employees serve as trustee. Also, the funeral director designates the other two trustees. As a matter of regulatory practice, the Board has always emphasized the responsibility of the funeral director to designate trustees and to replace trustees if one or more of the original trustees resigns, becomes incompetent, or acts improperly. Since the Board’s jurisdiction only extends to its own licensees, the Board has held the funeral director responsible for any improprieties committed by trustees which were appointed by the funeral director.
“As a practical matter, consumers enter into an agreement with a funeral director to provide certain merchandise and services at the time of their death. A single purpose, long-term trust instrument is established. It is not uncommon for these types of trusts to endure for 20 years or longer. During that time, the consumer at all times communicates with the funeral director regarding that trust. Since the trustees, designated by the funeral director, are usually unknown to the consumer, the funeral director is generally held to be responsible for the proper administration of the trust money. Likewise, the Board has always held the funeral director responsible for the acts of the trustees as they are chosen by the funeral director. Therefore, the Board considers it entirely proper for the funeral director to act to have trustees removed if there is any indication that the trustee may not be acting in the best interest of the trustor.”

*746 Business and Professions Code section 7735 2 provided in relevant part: “The income from the corpus may be utilized to pay for the following: The expense of administering the trust, a trustee’s fee of not to exceed twenty-five dollars ($25.00), any sales expense incurred, and to establish a reserve of not to exceed 10 percent of the corpus as a revocation fee in the event of cancellation on the part of the beneficiary. [1] None of the trust corpus or trustees’ fee shall be used for payment of any commission nor shall any of the trust corpus be used for other expenses of trust administration.” 3

Section 7737 provides in relevant part that a trust agreement is to be executed by the funeral director, the trustor and the trustee, which, with exceptions not here pertinent, shall include inter alia a provision that at any time before the funeral director has furnished the merchandise and services specified in the contract, the trustor or the beneficiary “may in writing demand and receive the return of the corpus of the trust.” Section 7737 also provides that upon filing of a certified copy of the death certificate together with proof the funeral director has furnished the merchandise and services provided for in the preneed funeral contract, the corpus of the trust shall be delivered to the funeral director.

Facts

Defendants Stephens and Ray are individuals who are principals in a general partnership known as Triangle Associates. On or about August 30, 1971, defendants entered into two written agreements with Berry Bell Mortuary, entitled “Trustee Agreement” and “Management Agreement.” On or about January 28, 1972, Palm Springs Mortuary entered into a similar set of agreements with defendants. The agreements signed by the two mortuaries were substantially identical.

The trustee agreement provided in material part that the purpose of the documents was to comply with sections 7735 et seq. regarding the holding in trust of prepaid funeral funds; that the funeral director would act as a trustee along with defendants Stephens and Ray; that defendants would perform recordkeeping, prepare necessary reports, furnish financial statements, act as advisors to the management of the trustee and provide office space *747 for the trust; that the defendants would receive as compensation for their services 25 percent of the gross income of the trust and that the agreement would remain in effect during the life of the trust.

The management agreement provided in substance that the mortuary hired the defendants to aid and advise it concerning preneed funerals, to sell preneed funerals, and to handle the collection of installment payments and the deposit of those installment payments into a trust. In exchange for these services, the mortuary agreed to pay to the defendants 20 percent (Berry Bell Mortuary) or 25 percent (Palm Springs Mortuary) of the total sales price of the preneed funeral contracts sold. This agreement was also to be irrevocable as long as any sums remained in the trust accounts.

A form declaration of trust was attached as Exhibit A to the management agreement.

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Bluebook (online)
159 Cal. App. 3d 740, 205 Cal. Rptr. 915, 1984 Cal. App. LEXIS 2467, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ifs-industries-inc-v-stephens-calctapp-1984.