Thulien v. Feight

Filed 8/30/07 Thulien v. Feight CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Placer)

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This is one of those disputes that keeps on giving--at least to the lawyers involved. This is our third opinion. Our first two forays were largely procedural. This one is substantive. At issue in these two consolidated appeals is the administration of a relatively modest trust and related estates, and an award of costs. We affirm the judgment regarding the administration issues (C051275), but reverse the cost order to the extent it awards $50,513.52 as forensic accounting costs (C052269).

Background

Drawing in part from our two prior unpublished opinions, we set the stage. (Feight v. Thulien (Jan. 31, 2002, C035920) [nonpub. opn.]; Thulien v. Feight (Mar. 18, 2003, C040306, C040307) [nonpub. opn.].)

In March 1987, Robert W. Thulien (Robert) created the Robert W. Thulien Living Trust (the Trust). The Trust named six beneficiaries: Lucille Feight (Lucille; Roberts longtime cohabitant, mistakenly identified in the Trust as Roberts sister); Roberts children by his first marriage--Ronald Thulien (Ronald; the respondent here) and Roberta Venturi; and Roberts grandchildren--Scott, Ralph and Dustin Venturi.

The Trust had about $700,000 in assets in 1999, but has apparently dwindled considerably in the intervening years. The Trust specifies that Roberts children will each receive $2,400 in income annually, that Roberts grandchildren will each receive $1,200 annually, and that the balance of the annual income will go to Lucille. If one of the named beneficiaries dies, the income share is to be divided equally between his or her children. Lucille has two adult sons, Terry Feight (Terry) and the appellant here, Theron Feight (Theron). When the last of the named beneficiaries dies, the Trust principal is to be distributed 28 percent to the descendants of Roberts children and grandchildren, and 72 percent to the descendants of Lucille. The Trust also contains provisions for discretionary distributions of principal.

The property of the Trust and related estates at issue consist essentially of some real property in Auburn (the Lake Arthur property); sale proceeds of a Berkeley condominium; a small life insurance policy on Robert; some significant investment property (stocks, which were essentially all sold for gold in 2000 by Ronald as trustee); and some personal property.

Robert died in November 1996. Pursuant to the terms of the Trust, Lucille succeeded Robert as trustee.

In December 1996, Roberts children and two of his grandchildren sought to remove Lucille as trustee. Lucille responded in June 1997 by filing a petition to clarify her trustee status. Before this petition could be resolved, Lucille died in April 1999. Following Lucilles death, her son Terry filed a petition in September 1999 to effectuate a purported settlement agreement between Lucille and the Thulien faction. Lucilles and Terrys petitions comprised trial court action S PR 1396 (Feight v. Thulien (Super. Ct. Placer County)). In our first opinion in this matter, we concluded, contrary to the trial court, that these two petitions did not violate the Trusts no contest clause.

Prior to the issuance of our first opinion, Ronald, who had become trustee of the Trust following Lucilles death in 1999, had undertaken several legal proceedings in the trial court. In September 2000, Ronald, as trustee, sued Lucilles estate, Terry, Theron, and the attorney who drafted the Trust, Eugene Schneider (Schneider), to quiet title to Trust property and for conversion-related torts involving that property. This is trial court action S CV 10608 (Thulien v. Feight (Super. Ct. Placer County)).

In early 2001, Ronald obtained appointment as the special administrator of Roberts estate. In that capacity, Ronald filed a cross-complaint in action S CV 10608 against the same defendants and on similar bases as the S CV 10608 complaint he had filed in his capacity as trustee of the Trust.

Also in 2001, Ronald, as trustee of the Trust, obtained appointment as the special administrator of Lucilles estate, based on the Trust being a potential creditor of that estate. (Prob. Code, 8461, subd. (q).)

In all of Ronalds legal endeavors, except for the cross-complaint he filed as special administrator on behalf of Roberts estate in action S CV 10608, Ronald was represented by the Law Office of Denise L. Dirks (the Dirks Law Office). Ronald retained and paid personally for separate counsel as to his cross-complaint representation in S CV 10608.

In our second opinion in this matter, we concluded that Theron had standing to petition to remove Ronald from his trustee and two special administrator posts based on alleged conflicts of interest. We further concluded that the trial court on remand could entertain the merits of Therons petition to disqualify the Dirks Law Office, since the petition to remove Ronald and the petition to disqualify the Dirks Law Office shared the same basis.

That brings us to the two consolidated present appeals. The first appeal (C051275) encompasses a petition by Ronald and a cross-petition by Theron, both filed in the summer of 2002 in trial court action S PR 3076. In his petition, Ronald requests, as pertinent here, court approval of a settlement of the S CV 10608 action and court approval for the Dirks Law Office to represent him in his various capacities. Therons cross-petition requests an accounting from Ronald as trustee, a surcharge of him, and his removal from fiduciary positions (and with that removal, the accompanying disqualification of his counsel, the Dirks Law Office). The second appeal (C052269) involves an award of costs against Theron for forensic accounting charges in action S PR 3076. We affirm as to the first appeal, and reverse as to the second.^[1]

Discussion

Appeal No. C051275

Issues

Theron contends: (1) the trial court erred in failing to remove Ronald as trustee of the Trust, and as special administrator for Roberts estate and for Lucilles estate, and in failing to disqualify the Dirks Law Office from representing Ronald in those capacities and in failing to order its attorney fees disgorged because Ronalds interests in those three capacities conflict; (2) Ronalds actions as sole trustee of the Trust are void because the Trust requires two individual trustees; (3) the trial court erroneously failed to decide the accounting validity and the surcharge claims; (4) Ronald improperly made income distributions from the Trust when there was no income to distribute; and (5) the trial court erred in approving the division of the $50,000 settlement proceeds in the S CV 10608 action.

1. Ronalds Removal and the Dirks Law Offices
Disqualification and Disgorgement

Pursuant to the terms of the Trust, Ronald became trustee following Lucilles death in April 1999. While serving as trustee, Ronald also became special administrator of Roberts estate and of Lucilles estate.

Theron contends the trial court erred in failing to remove Ronald from these three conflicting positions. We disagree. Substantial evidence supports the trial courts factual findings that these positions were not conflicting. When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881, italics in original.)

As to Ronalds allegedly conflicting positions, the trial court (i) preliminarily determined there was no conflict involving these three positions as a matter of law (reserving for evidentiary hearing the question whether there was a conflict as a matter of fact); (ii) later tentatively found a conflict; but (iii) ultimately determined, based on the evidence, the positions were not in conflict.

Ronalds allegedly three conflicting positions arose after it became apparent to Ronald, acting as trustee of the Trust after Lucilles death, that Lucille had misappropriated some of the Trust property (the Lake Arthur property; the Berkeley condominium sale proceeds) and some of Roberts personal property (a $14,000 life insurance policy and other personal property). These misappropriations prompted Ronald to sue Lucilles estate, attorney Schneider, Theron and Terry in the S CV 10608 action to recover that property to its rightful station, the Trust or Roberts estate.

But because the lawsuit in S CV 10608 involved the Trust, Roberts estate, and Lucilles estate, and because those two estates had not yet been opened and no one had sought appointment as personal representative of Lucilles estate, the trial court in the S CV 10608 action ordered that the two estates be opened.

As for the opening of Roberts estate, evidence showed that Ronald learned belatedly from attorney Schneider that Robert had a will in addition to the Trust. The will named Ronald as the personal representative of Roberts estate. Ronald was appointed as special administrator with limited powers for Roberts estate (the limited powers required court approval regarding any substantive actions involving real property).

As for the opening of Lucilles estate, Ronald was appointed special administrator with limited powers, as the Trust was a potential creditor of Lucilles estate and no one with greater priority had stepped forward as an estate representative.

With the Trust in place and these two estates now established, the litigation in S CV 10608 encompassed: (1) A complaint by Ronald as trustee of the Trust against Lucilles estate, attorney Schneider, Terry and Theron to recover property to the Trust; and (2) A cross-complaint by Ronald as special administrator of Roberts estate against these same parties to recover property to Roberts estate.

Based largely on the allegations in these two pleadings in S CV 10608, Theron asserted that Ronald exercised conflicts of interest in his trustee and two special administrator positions. Theron noted that the Trust and Roberts estate were both alleging, in their respective pleadings in the S CV 10608 action, that the Lake Arthur property and the Berkeley condominium belonged to each of them. And, Theron asked, how could Ronald, as trustee of the Trust and as special administrator for Roberts estate, sue Lucilles estate since he was also that estates special administrator?

The evidence, however, showed that Roberts estate was represented in the S CV 10608 action by separate counsel paid for by Ronald personally, and that Roberts estate immediately abandoned any claim to the Lake Arthur property and apparently to the Berkeley condominium sale proceeds as well.

As for the issue of Lucilles estate, because Ronald could not both sue and represent Lucilles estate in action S CV 10608, the Public Administrator was quickly appointed special administrator of Lucilles estate to represent the estate in that action.

Pursuant to the Trusts complaint in S CV 10608, the Trust, among other things, recovered the Lake Arthur property (netting $143,000) and traced the Berkeley condominium sale proceeds. Pursuant to the cross-complaint of Roberts estate in S CV 10608, that estate recovered personal property, including the $14,000 life insurance policy. The Trust and Roberts estate in S CV 10608 settled with Lucilles estate as to the misappropriated Trust property, and settled with attorney Schneider for $50,000. The trial court determined this settlement was in good faith and divided the $50,000 settlement proceeds between the Trust and Roberts estate.

We conclude there is substantial evidence to support the trial courts factual findings that Ronald did not exercise conflicts of interest regarding his one trustee and two special administrator positions. We do so in light of the court-ordered establishment of the estates involving Robert and Lucille; the limited nature of Ronalds powers as the special administrator for those two estates; the appropriate allocation of property requests between Roberts estate and the Trust in action S CV 10608; the appointment of the Public Administrator to represent Lucilles estate in S CV 10608; the determination of good faith settlement in S CV 10608; the court-approved division of settlement proceeds in that action; and the trial courts oversight of all these proceedings. Consequently, the trial court did not err in failing to remove Ronald from these three positions.

For these same reasons, the trial court did not err in failing to disqualify the Dirks Law Office from representing Ronald in these capacities and disgorging its fees for that representation (the Dirks Law Office did not represent Ronald in the S CV 10608 action as the special administrator for Roberts estate or as the special administrator for Lucilles estate). As we said in our second opinion in this matter, Theron sought to disqualify Ronalds counsel, the Law Office of Denise L. Dirks . . . based on the conflicts of interest he alleged against Ronald. Theron also sought to have that law office . . . disgorge its fees. . . . [] . . . [] . . . The trial court . . . recognized . . . that the disqualification motion and the removal motion shared the same basis. (Thulien v. Feight, supra (C040306, C040307 [nonpub. opn.].)

2. Dual Trustees

Theron claims that Ronalds actions as a sole trustee are void because the Trust required two individual trustees. Based on our interpretation of the Trust in light of nonconflicting extrinsic evidence, we disagree. (See Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866 [setting forth this standard of review]; Appleton v. Waessil (1994) 27 Cal.App.4th 551, 556 [same].)

The Trust states that upon Roberts (the settlors) death, the Settlors trusteeship shall be filled severally by the following successor Trustee(s) in the order in which their names appear: Lucille Z. Feight[;] Ronald L. Thulien[;] Scott Venturi[.] (Italics added.) But the Trust also provides that [i]f no corporate fiduciary is serving as a trustee, there must, at all times, be a minimum of two individual trustees, unless the Settlor acts as the sole trustee. [] If there is only one individual trustee serving in the trusteeship, other than the Settlor, and no additional successor trustees are named by a beneficiary, the sole individual trustee shall forthwith name a corporate fiduciary to act as a co-trustee. Finally, the Trust states as to an unfulfilled trusteeship, [i]n the event no successor trustee is designated . . . , then any beneficiary may petition [the] court . . . , ex parte, to designate a successor trustee.

Consequently, the Trust provides that the trustee position shall be filled severally by Lucille and then by Ronald, but also provides that there must be at least two individual trustees if there is no corporate fiduciary serving as a trustee. The evidence showed that Ronald, as an individual trustee, tried to name two corporate fiduciaries to act as a cotrustee with him--including Wells Fargo Bank, which was designated as a possible corporate fiduciary in the Trust. Each corporate fiduciary declined the overture because the Trust was mired in litigation. The evidence also showed that Theron, as a beneficiary, never invoked the ex parte procedure for designating another trustee, though he had several years to do so; and that Lucille acted as a sole individual trustee under at least the implicit direction of attorney Schneider, who had drafted the Trust.

In light of the Trusts provisions concerning successor trustees and the nonconflicting evidence just recounted, we conclude that Ronalds actions as trustee cannot be deemed void as a violation of those Trust provisions.

3. Failing to Decide Accounting Validity and
Surcharge Claims; Contention on Income Distributions

Theron contends the trial court erroneously failed to decide the validity of the accounting as well as the surcharge claims, and the case should be remanded to do so. We disagree.

As for the accounting, Ronald, as trustee, had a professional accounting firm prepare an extensive, comprehensive accounting of the Trust that covered the period from just after Lucilles death (April 13, 1999) to September 10, 2002, as well as subsequent, semiannual accountings (these subsequent accountings were not disputed).

In its statement of decision, the trial court stated: Theron has conceded at trial that [the Trust] has suffered no damages by any imprudent investments through its trustee, Ronald. At trial, Theron dropped his request for Ronalds removal as trustee for mismanagement of trust assets, conspiracy, and for failure to account. Ronalds accountings as trustee have all been accepted. The accounting for the period from April 13, 1999[,] to September 10, 2002[,] is settled. Then the trial court concluded: The trust accounting for the period from April 13, 1999[,] to September 10, 2002[,] is hereby approved and settled.

Contrary to Therons contention, then, the trial court did not fail to decide the validity of the accounting. The court approved and settled the disputed accounting covering the period from April 13, 1999, to September 10, 2002. This particular accounting was comprehensive, covering all aspects of the Trusts property--assets, liabilities, receipts, disbursements, attorney fees, and trustee fees.

As for the surcharge claims, Theron contended: the attorney fees charged in action S PR 1396 (the action involving Lucilles and Terrys petitions) and action S CV 10608 (the action involving Ronalds complaint and cross-complaint as trustee and special administrator, respectively) were excessive; Ronalds trustee fees were excessive; and Ronald improperly made income distributions to the Thulien-Venturi beneficiaries when there was no trust income to distribute.

At one point in its statement of decision, the trial court stated, under the heading Issue of Trusteeship, that Theron has abandoned or dropped all causes of action except for the requests for (1) trustees [Ronalds] removal for conflicts of interest and (2) the disqualification of the Law Offices of Denise L. Dirks. Later in the statement of decision, the trial court [o]rder[ed], [a]djudge[d] and [d]ecree[d] that [n]o surcharge is ordered against the Trustee.

Again, then, the trial court did not fail to decide the surcharge claims. The trial court denied those claims. Based on the abandonment language just quoted, however, Theron asserts that the trial court erroneously found that he had abandoned his surcharge claims. But that abandonment language does not mention surcharge and was placed under the statement of decision heading of Issue of Trusteeship. Surcharge is mentioned in the trial courts conclusionary phrasing, where such claims are denied.

Furthermore, at an early point during the trial, Therons counsel explained to the trial court what was at issue: [F]rom our standpoint, our key issue is the removal of the trustee, appointment of an impartial trustee to manage the [T]rust in an appropriate fashion. And in connection with that, we are seeking to surcharge the trustee for some misadventures with [T]rust funds. (Italics added.) In light of this explained connection, the trial court may have included the surcharge claims within its statement of decision description of Therons nonabandoned cause of action for the trustees removal for conflicts of interest.

Admittedly, the trial court failed to set forth its factual and legal bases for denying the surcharge claims, as required in a proper statement of decision. (Code Civ. Proc., 632.) But Theron failed to object to this deficiency, as required by statement of decision procedure. (Cal. Rules of Court, rule 3.1590(f), formerly rule 232(d) [objections to proposed statement of decision]; see 7 Witkin, Cal. Procedure (4th ed. 1997) Trial, 402, pp. 462-463, 407, p. 467 [a principal step[] in the procedure for issuing a statement of decision includes the filing and hearing of objections]; contrast, In re Marriage of Hargrave (1985) 163 Cal.App.3d 346, 353-354 [party was provided no explanation of the factual and legal basis of the decision despite partys objections]; Miramar Hotel Corp. v. Frank B. Hall & Co. (1985) 163 Cal.App.3d 1126, 1129 [trial court deprived party of an opportunity to make objections to statement of decision].) Theron has forfeited any contention along these lines in light of his failure to object in the trial court.

In any event, as for the surcharge claim regarding excessive attorney fees, Theron, in his opening brief on appeal, remarks that [u]nfortunately, this appeal has too many other issues to examine [such] fees in detail. As for the surcharge claim regarding excessive trustee fees, an accountant testified at trial that, in his experience, the hourly rate for trustees ranges from $50 per hour to $200 per hour to a percentage of the estate; Ronald charged $60 per hour, a very reasonable rate, the accountant added. The accountant also noted that Ronald kept detailed records of his time and activities which were delineated in the 1999-2002 accounting. And as for the surcharge claim involving income distributions to the Thulien-Venturi parties--totaling $33,600 over a four-year period when there was no trust income--there was evidence showing that these distributions were erroneous but could be justified as discretionary distributions of principal under the terms of the Trust. This latter point addresses Therons contention that Ronald improperly made income distributions from the Trust when there was no income to distribute.

4. The Division of the $50,000 Settlement
Proceeds in S CV 10608

Theron contends the trial court erred in approving the division of the $50,000 settlement proceeds obtained from defendant/cross-defendant attorney Schneider in the S CV 10608 action.

At a hearing on this division, it was undisputed that Lucilles estate had no interest in these proceeds. The court ordered $35,000 of the proceeds to Roberts estate and the remaining $15,000 to the Trust, both of which had been damaged by attorney Schneiders actions in apparently permitting Lucille to take property from the estate and from the Trust. This division meant that the Trust had recovered $158,000 pursuant to the S CV 10608 action (the bulk of which comprised the Lake Arthur property), and the estate had recovered $35,000.

Theron has forfeited any contention in this regard because he failed to provide in his brief a separate heading for it, or any argument or authority to support it. (Cal. Rules of Court, rule 8.204(a)(1)(B), formerly rule 14(a)(1)(B); Opdyk v. California Horse Racing Bd. (1995) 34 Cal.App.4th 1826, 1830-1831, fn. 4; People v. Gidney (1937) 10 Cal.2d 138, 142-143.)

We shall affirm the judgment in C051275.^[2]

Appeal No. C052269

In this appeal, Theron challenges an award of a cost item to Ronald, as the prevailing party, for forensic accounting in the amount of $50,513.52. We agree with Therons challenge and will strike this cost item from the cost order.

The evidence showed that almost the entire amount of this challenged cost item comprised the bill of the professional accounting firm that Ronald hired to prepare the accountings for the Trust. The remaining amount of the cost item covered the accountants expert testimony at trial.

Ronald argues that Therons cross-petition here demanded an accounting of the Trust, which made a forensic accounting reasonably necessary to the conduct of this litigation and therefore recoverable as a cost. (Code Civ. Proc., 1032, 1033.5.)

Not so. Under trust administration law, a trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration (Prob. Code, 16060), and on reasonable request by a beneficiary, the trustee shall provide the beneficiary with a report of information about the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particulars relating to the administration of the trust relevant to the beneficiary's interest . . . . (Prob. Code, 16061). (See also Strauss v. Superior Court (1950) 36 Cal.2d 396, 401 [a trustee has a duty to the beneficiaries to provide them complete and accurate information relative to the administration of the trust, upon reasonable request]; Prob. Code, 16062, subds. (a), (b) [when trustee accountings are mandated; not applicable here because the Trust was executed before July 1, 1987].)

Accordingly, Ronald, as trustee, has a duty to provide accountings upon reasonable request. Theron, as beneficiary, reasonably demanded that that duty be performed. When it was not, Theron filed his cross-petition to compel it. Consequently, that portion of the challenged cost item comprising the professional accounting firms bill for the accounting of the Trust is a cost of the Trust, not a cost of the suit, and therefore not recoverable as a litigation cost from Theron.

As for the remaining portion of the challenged cost item, which pertains to that accountants expert testimony at trial, that portion too is not recoverable. Under Code of Civil Procedure section 1033.5, subdivision (a)(8), only [f]ees of expert witnesses ordered by the court are allowable as costs. The accountants testimony was not ordered by the court. We strike from the cost award the cost item for forensic accounting in the amount of $50,513.52.

Disposition

The judgment in C051275 is affirmed. Costs of appeal in C051275 are awarded to Ronald. The cost order in C052269 is reversed to the extent it awards the cost item for forensic accounting in the amount of $50,513.52; that item and amount are stricken from the order; in all other respects, the cost order is affirmed. Costs of appeal in C052269 are awarded to Theron.

DAVIS , J.

We concur:

BLEASE , Acting P.J.

RAYE , J.

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^[1] We take judicial notice, as did the trial court, of the trial court actions in this matter.

^[2] In light of this resolution, we deny Therons request in C051275 to consider an award of attorney fees and costs to him.