Opinion
2d Civil No. B227188
01-10-2012
RICHARD A. CARSEL, as Successor Trustee, etc., Plaintiff and Respondent, v. JAMES W. FERGUSON, Defendant and Appellant.
James. S. Graham for Defendant and Appellant. Richard A. Carsel, P.C. and Richard A. Carsel for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. PR030179)
(San Luis Obispo County)
A beneficiary of a trust appeals from an order of the trial court denying his request to surcharge the trustee of the trust in the amount of $162,992.71, plus interest, for the trustee's untimely compliance with court orders mandating distribution of trust assets. We affirm.
FACTUAL AND PROCEDURAL HISTORY
Charles and Adele Boudousquie created the Charles and Adele Boudousquie Revocable Living Trust (Trust) in 1989. Adele died in 2000, and Charles died in 2002. Before his death, Charles appointed respondent Richard Carsel (Carsel) as successor trustee of the Trust, effective August 7, 2001. The Trust makes specific bequests to 28 beneficiaries, including Carsel and his wife; and 3 residuary beneficiaries, appellant James W. Ferguson (Ferguson) and his 2 sisters.
Prior Appeals
Carsel filed his first accounting on June 10, 2003, in which he requested an order approving (1) a $30,000 reserve; (2) distribution of all the assets remaining in the Trust, $1,700,185.99, excluding the reserve; (3) payments he had made to himself in the amount of $136,955, for trustee and attorney fees and costs; and (4) a plan to charge the remainder beneficiaries with all the estate taxes in the amount of $115,308. The accounting showed withdrawals from the Trust included fees for services Carsel had performed prior to the effective date of his appointment as successor trustee, as well as compensation for trustee services he performed after becoming successor trustee.
Ferguson filed objections to the accounting, asserting Carsel was not entitled to the funds he had withdrawn from the Trust and that estate taxes should be apportioned among all the beneficiaries of the Trust.
The probate court issued an order and statement of decision on June 22, 2005, which surcharged Carsel a total of $35,486.90 and ordered him to reimburse the Trust "forthwith," ruled that only the residuary beneficiaries should bear the burden of the estate taxes, directed Carsel to hold back a reserve of $30,000, approved a distribution of 100 percent ($1,300,000) to the specific beneficiaries (excluding a contested bequest not relevant to this appeal), and a distribution of the remainder ($300,185.99) to the residuary beneficiaries.
Carsel reimbursed the Trust with the amount of the surcharge but made no distributions to the beneficiaries. He also filed a notice of appeal, purporting to appeal from the entire order. Ferguson appealed that portion of the order concluding that the estate tax should be apportioned only among the residuary beneficiaries.
While the appeal was pending, Carsel filed his second accounting on February 16, 2006. In response, Ferguson filed objections requesting that Carsel be surcharged for failing to make any distribution from the Trust and for withdrawing $136,955 from the Trust for trustee and attorney fees, an amount greater than the $30,000 reserve.
On April 26, 2006, Carsel filed his third accounting. Ferguson filed objections and requested that Carsel be further surcharged for making no distribution to any beneficiary and for withdrawing additional funds for trustee and attorney fees and costs in the amount of $51,189.78.
On May 8, 2006, Carsel filed a petition for instructions asking that he be granted an order (1) authorizing a 70 percent distribution ($910,000) to the specific beneficiaries, (2) approving no distribution to the remainder beneficiaries, and (3) permitting $744,759.16 to be held back from the remaining assets on hand as of March 31, 2006. Ferguson filed objections asserting the order Carsel requested was contrary to the July 8, 2005, order requiring a distribution of $300,185.99 to the remainder beneficiaries. Ferguson also asserted that Carsel had standing to appeal only that part of the July 8 order that surcharged him. Ferguson then filed a petition to compel distribution and impose additional surcharges on Carsel for failing to limit his expenditures to the $30,000 reserve.
On November 21, 2006, the probate court issued an order finding it had jurisdiction to enforce the unappealed portions of its prior order, including the distribution plan, to the extent the plan was not impacted by Carsel's appeal of the surcharges and Ferguson's appeal of the estate tax issue. The order states in part:
"With respect to the issue whether the Trustee has the right to charge the Trust for fees and expenses relating to the surcharge against him imposed by the Statement of Decision, of [sic] for the Ex Parte Petition for Instructions, the Court finds that he does not. He has the right to charge the Trust, at most, only for fees that relate to the tax issues raised by the cross-appeal. By paying all of his attorney fees out of the Trust without prior court order, the Trustee effectively obtained a loan from the Trust. The Trustee had no right to make such a loan to himself, and doing so constitutes a conflict of interest.
"Had the Trustee limited himself to the $30,000 reserved permitted by the Statement of Decision, he would have been able to make the distribution mandated by paragraph 3 of the Statement of Decision. . . . The court cannot imagine a clearer direction to Mr. Carsel. Under the circumstances, the solution is to compel the Trustee to submit to the court his counsel's monthly billing records, highlighted to substantiate attorney's fees paid by the trust only to defend the tax proration issues that are on appeal. That information must be filed with the court within 15 days of the of the date of this order. After reviewing this information, the Court will decide whether to approve the payment of those specific fees, especially to the extent those fees exceed the $30,000 reserve allowed by the Court. The Trustee is further ordered to repay the Trust all sums above the allowed [reserve] that have been paid out of the Trust for attorney fees relating to the appeal and the Petition for Instructions. That repayment is to be made forthwith." Carsel appealed from the order.
In a prior unpublished opinion, we upheld both the June 2005 and the November 2006 orders in their entirety. With respect to Carsel's failure to comply with the order of distribution, we stated: "Whether or not any penalty should be imposed for Carsel's failure to comply with the order of distribution is an issue to be decided by the probate court." (Carsel v. Ferguson (March 17, 2008) consolidated 2d Civil Nos. B185600 & B195453 [nonpub. op.], pp. 13-14.)
After the opinion became final in May 2008, Carsel commenced to make distributions to the beneficiaries. Carsel had reimbursed the trust in the amount of $22,000 on December 6, 2006, and repaid an additional $90,000 to the trust on April 29, 2008.
Current Appeal
On August 3, 2009, Ferguson filed a petition to compel trustee to account and for final distribution. Ferguson also requested that Carsel be found in contempt of court pursuant to Code of Civil Procedure section 1209, subdivision (a)(5), that monetary sanctions pursuant to Code of Civil Procedure section 177.5 be imposed for Carsel's failure to comply with the June 2005 order of distribution, and that Carsel be ordered to pay the costs Ferguson incurred in the prior appeals.
On December 1, 2009, Carsel filed a fourth accounting and opposition to the petition for contempt and monetary sanctions. Carsel submitted his declaration stating he had been advised by his attorneys that he could not make a distribution while the prior appeals were pending. Carsel also pointed out that he had attempted to obtain court orders during the pendency of the appeals to make partial distributions, but was unsuccessful. The fourth accounting was for the period April 1, 2006, through October 31, 2009, and was accompanied by a request for approval of an additional $15,144.61 in trustee fees and repayment of $30,692.61, which Carsel asserted was an overpayment of surcharge amounts which he had previously repaid to the Trust. He also submitted billing statements for the covered period, but explained that the billing records in many cases did not differentiate between time spent on the surcharge litigation and time spent on the estate tax issue. In addition, Carsel's billing entries did not differentiate between time he spent on trust administration matters and time spent on litigation. Therefore, for each ambiguous entry, Carsel allocated approximately one-half the fee to trust administration and the other one-half to litigation.
Ferguson objected to the accounting on the ground that Carsel failed to comply with that portion of the November 21, 2006, order to submit his monthly billing records to substantiate attorney fees incurred for the estate tax proration issues. Although Carsel submitted his and his attorney's billing records, Carsel claimed it was impossible to differentiate between the time spent on the tax proration issue and the surcharge litigation. For this omission, Ferguson asserted that Carsel should be surcharged for all fees paid since April 1, 2003 ($188,124.78) for the periods covered by the second and third accountings and $86,847.93 for the period covered by the fourth accounting, subject to credit for the $112,000 that Carsel had previously reimbursed the Trust. Ferguson further objected to Carsel's request that he be repaid $30,692.61 and his request for additional compensation in the amount of $15,144.61. Ferguson asserted that, if Carsel had complied with the initial order to distribute the trust proceeds on June 22, 2005, he would not have incurred additional fees and he had failed to substantiate the amount of time spent of the estate tax issue. Ferguson requested that Carsel be sanctioned in the amount of $2,500 pursuant to Code of Civil Procedure section 177.5.
Carsel filed a reply stating that his request for additional compensation in the amount of $15,144.61 should be reduced to $11,700.86. He offered to waive any claim for further compensation if the $112,000 surcharge he had previously paid was found to be appropriate.
The parties filed trial briefs and written closing arguments after agreeing that no evidentiary issues required a hearing. On May 27, 2010, the court issued its ruling, stating in part:
"There does not appear to be any objection to the Fourth and Final Accounting, except to the extent that compensation to the Trustee is involved. The Trustee has dismissed his claims to additional compensation. The Court now enters this order approving the Fourth Account and Report . . . . [¶] . . .[¶]
"This leaves the issue of Petitioner's remaining request for surcharges, penalties and attorney fees. With respect to those requests, the Court rules as follows:
"The Court rejects Petitioner's request to impose surcharges representing all compensation for services rendered by the Trustee or Trustee's attorney going back to April 1, 2003. No good cause has been shown for an order of that magnitude. The disputes between these parties primarily arose out of, and relate to, Carsel's attempt to charge the Trust for costs and fees incurred in (unsuccessfully) defending himself against the original surcharge order. In its November 21, 2006, ruling, the Court made it clear that Carsel was not allowed to charge the Trust for his defense, nor was he allowed to charge the Trust for his Ex Parte Petition for Instructions (because that Petition sought to alter the clear terms and directives of the prior Order to make distributions to the specific and residuary beneficiaries). In that Order, Carsel was directed to submit billing records breaking out the amounts incurred in defending himself against the surcharge Order, as opposed to those amounts incurred in successfully defending against the cross-appeal on tax issues. Carsel failed to comply with the Court's Order, and instead attempted to 'estimate' the amount of fees incurred on the cross-appeal. This Court should, and does, reject any such estimates. It appears from the briefs and documents submitted by the parties, however, that Carsel returned all such fees, including those fees related to both the defense on surcharge issues and the cross-appeal, and has waived any additional compensation. This should be sufficient. [¶] . . . [¶]
"Under the circumstances present in this case, this Court believes that such sanctions are appropriate, and hereby assesses sanctions in the amount of $950 to be paid by Carsel to the Court within 30 days of service of this ruling.
"After careful consideration of all of the facts set forth in the moving and opposing papers, the Court declines to impose further sanctions against Carsel, whether for contempt or under Probate Code §1002 or Code of Civil Procedure §1218(a). Under all of the circumstances, the Court finds that the substantial surcharges imposed in this case, and the further sanctions awarded under Code of Civil Procedure §177.5, are sufficient."
Ferguson filed a motion to vacate the ruling under Code of Civil Procedure section 663. The motion was denied.
On appeal, Ferguson asserts that (1) the 2010 order improperly modified the November 2006 order, which was res judicata, because that order stated that Carsel had "the right to charge the Trust, at most, only for fees that relate to the tax issues." Therefore, the order "necessarily precluded Carsel from seeking compensation on any other ground including, but not limited to, the trust administration basis upon which his estimate was made that he could retain 10% of the fees he paid himself and his attorney after June 1, 2005"; (2) time spent on trust administration matters was not permitted by the November 2006 order; (3) by not following the procedure mandated by the court in its November 2006 order for substantiating the amount of fees relating to the estate tax issue, Carsel failed to meet his burden of proof and "impliedly waived" his opportunity to demonstrate how much of the fees he paid himself could be retained; (4) in finding no good cause had been shown for an order surcharging Carsel for all fees he had been paid beginning on April 1, 2003, the probate court disregarded the plain meaning of the November 2006 order; (5) no evidence in the record supports the court's conclusion that "Carsel has returned all such fees related to both the defense on surcharge issues and the cross-appeal." Instead, the evidence shows that of the $274,992.71 that Carsel had paid himself and his attorney from April 1, 2003, through October 31, 2006, he had paid back just $112,000; and (6) the court improperly accepted Carsel's "estimate" of the amount of attorney fees incurred on the cross-appeal.
Carsel asserts the trial court did not err because (1) three different attorneys told him that the distribution order had been stayed by the appeal and he could not make distributions while the appeal was pending; (2) the Trust Agreement and applicable law specifically authorized the trustee to pay trustee and attorney fees directly from the Trust estate without prior court order; therefore, Ferguson's objections to Carsel's doing so was without legal support and unnecessarily raised the fees Carsel and his attorney incurred; (3) in the November 2006 order, the court reserved the right to review Carsel's billing records and determined whether to approve payment of the fees incurred on the tax proration issue and the court ordered Carsel to repay the Trust all sums that have been paid out of the Trust for attorney fees relating to the appeal and the petition for instructions; (4) substantial evidence supported the court's decision to offset trustee fees against any possible unpaid surcharge; (5) the billing records and fourth accounting and report submitted to the court were substantial evidence supporting the court's finding that Carsel had repaid all the surcharge fees imposed; (6) the November 2006 ruling only speaks to legal fees on appeal; legal fees in the trial court were never addressed and the surcharge of $112,000 previously paid covers all fees on appeal; and (7) the payment of $112,000 and waiver of fees in the amount of $31,246.70 complied with the November 2006 order.
DISCUSSION
The 2010 Order Did Not Improperly Modify the 2006 Order
Ferguson asserts that the May 2010 order improperly modifies the final November 2006 order. Carsel asserts that the May 2010 order is not a modification, but merely an implementation of the November 2006 order. We agree with Carsel.
With respect to attorney fees, the November 2006 order required Carsel to submit billing records segregating attorney fees incurred for the surcharge issue and fees incurred for the tax proration issue. The order states that the court would determine whether to approve payment of the fees after he reviewed the billing records. Res judicata, of course, applies only when the court has made a final determination on an issue. (Montegani v. Johnson (2008) 162 Cal.App.4th 1231, 1238.) Where, as here,"'". . . anything further in the nature of judicial action on the part of the court is essential to a final determination of the rights of the parties, the decree is interlocutory."' [Citation.]" (Id. at p. 1237.)
Ferguson also argues that "time spent on trust administration matters was not permitted" by the November 2006 order. This crabbed reading of the order is without merit. In Roraback v. Roraback (1940) 38 Cal.App.2d 592, the court stated: "The true measure of an order, however, is not an isolated phrase appearing therein, but its effect when considered as a whole. [Citations.] In construing orders they must always be considered in their entirety, and the same rules of interpretation will apply in ascertaining the meaning of a court's order as in ascertaining the meaning of any other writing. If the language of the order be in any degree uncertain, then reference may be had to the circumstances surrounding, and the court's intention in the making of the same. [Citations.]" (Id. at p. 596; accord, Leonoff v. Monterey County Bd. of Supervisors (1990) 222 Cal.App.3d 1337, 1361-1362; see also, Estate of Careaga (1964) 61 Cal.2d 471, 475 ["'the rule with respect to orders and judgments is that the entire record may be examined to determine their scope and effect'"].)
The record demonstrates that only pre-appointment trust administration fees were at issue in the prior litigation. The court ordered a surcharge on that amount in June 2005, this court upheld the order, and it was paid. Nowhere in the November 2006 order were fees for trust administration mentioned. In the May 2010 order, the court declined to impose a surcharge on any other trust administration fees because it believed Carsel's repayment of $112,000 to the Trust was sufficient.
Substantial Evidence Supports the Order
Denying Further Surcharges
Ferguson asserts that the trial court erred in denying his request that Carsel be surcharged for all fees he retained since the inception of his appointment as successor trustee to punish him for failing to comply with the order for distribution and failing to present records segregating attorney fees between the prior surcharge issue and the estate tax issue. We disagree.
A probate court's surcharge order is reviewed for abuse of discretion. (Estate of Bonaccorsi (1999) 69 Cal.App.4th 462, 467.) Similarly, we review the trial court's decision as to whether to grant trustee fees and attorney fees and costs for abuse of discretion. Thus, we will reverse the trial court on appeal only if the appellant shows an abuse of discretion and a manifest miscarriage of justice. (Estate of Gump (1991) 1 Cal.App.4th 582, 597.)
In reviewing the court's surcharge order for abuse of discretion, we defer to the court's factual findings if supported by substantial evidence. (Estate of Bonaccorsi, supra, 69 Cal.App.4th at p. 470.) In reviewing a challenge to the sufficiency of the evidence, we review the record as a whole, resolving all conflicts and indulging all legitimate ad reasonable inferences in favor of the prevailing party, to determine whether substantial evidence supports the judgment. (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571.) "Substantial evidence" in this regard does not mean "any evidence." (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873.) Rather, to be substantial, the evidence must be "of ponderable legal significance, . . . reasonable in nature, credible, and of solid value.'" (Ibid.)If there is substantial evidence, contradicted or uncontradicted, that will support the finding, it must be upheld regardless of whether the evidence is subject to more than one interpretation. (Western States Petroleum Assn., supra, at p. 571 ["'When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court'"]; Von Beltz v. Stuntman, Inc. (1989) 207 Cal.App.3d 1467, 1481 [reviewing court may not reweigh the evidence].)
When we review for abuse of discretion, "[t]he test is not whether we would have made a different decision had the matter been submitted to us in the first instance. Rather, the discretion is that of the trial court, and we will only interfere with its ruling if we find that under all the evidence, viewed most favorably in support of the trial court's action, no judge reasonably could have reached the challenged result." [Citation.] (Estate of Billings (1991) 228 Cal.App.3d 426, 430.)
Ferguson cites no authority supporting his argument that Carsel's untimely compliance with the order of distribution and his inability to segregate time spent on the surcharge issue from that spent on the estate tax issue should result in his being paid no trustee or attorney fees at all. That is not the law. "A trustee is entitled to the repayment out of the trust property for the following: [¶] (a) Expenditures that were properly incurred in the administration of the trust. [¶] (b) To the extent that they benefited the trust, expenditures that were not properly incurred in the administration of the trust." (Prob. Code, § 15684.)
"'[A]mong the ordinary powers and duties of a trustee of a private trust are those of doing all acts necessary and expedient to collect, conserve and protect the property of the trust, to maintain and defend the integrity of the trust for the benefit of the beneficiaries and to employ such assistants as may be necessary for said purposes.' [Citation.] If litigation is necessary for the preservation of the trust, the trustee is entitled to reimbursement for his or her expenditures from the trust; however, if the litigation is specifically for the benefit of the trustee, the trustee must bear his or her own costs incurred, and is not entitled to reimbursement from the trust.' [Citation.]" (Terry v. Conlon (2005) 131 Cal.App.4th 1445, 1461.)
"Attorneys hired by a trustee to aid in administering the trust are entitled to reasonable fees paid from trust assets. Preparing the accounting and responding to the beneficiaries' objections to that accounting are aspects of trust administration." (Kasperbauer v. Fairfield (2009) 171 Cal.App.4th 229, 235.) This includes attorney fees incidental to litigation that benefits the trust. (Thomas v. Gustafson (2006) 141 Cal.App.4th 34, 44; see also, Estate of Cassity (1980) 106 Cal.App.3d 569, 574 [trustee entitled to reimbursement of legal expenses in defending his accounting even though he committed breaches of trust].)
Carsel submitted all his billing records to the court, explained that the billing method used did not segregate between administration and litigation issues and that the $112,000 he repaid the Trust was based on his detailed review of those records.
"To enable the trial court to determine whether attorney fees should be awarded and in what amount, an attorney should present '(1) evidence, documentary and oral, of the services actually performed; and (2) expert opinion, by [the applicant] and other lawyers, as to what would be a reasonable fee for such services.' [Citations.]" (Martino v. Denevi (1986) 182 Cal.App.3d 553, 558-559.) Although time records and detailed billing statements are not required, a certain amount of detail is. (Ibid.)
The May 2010 order was based on the court's review of the documents submitted in this matter, including Carsel's billing records and the many petitions and objections submitted by the parties during the course of the entire accounting period. The trial judge is deemed an expert on the value of legal services and the judge in this case could rely on his own experience about reasonable and proper fees. (Donahue v. Donahue (2010) 259 Cal.App.4th 182, 276 ["It is true that judges themselves are deemed to be experts on the value of legal services, and may rely on their own experience about reasonable and proper fees, without resort to expert testimony. In many cases the trial court will be aware of the nature and extent of the attorney's services from its observation of the trial proceedings and the pretrial and discovery proceedings reflected in the file"]; see also Martino v. Denevi, supra, 182 Cal.App.3d at p. 559.)
The record does not indicate that the amount Carsel received for his services was unreasonable or that the number of attorneys or the number of hours worked was excessive. The billing records Carsel submitted contained sufficient detail for the court to make a determination of whether the fees Carsel retained fairly compensated him for his services. The trial court found the billing records sufficient to arrive at a fair and equitable compensation. We have reviewed the material submitted to the trial court and conclude it was well within the trial court's discretion to refuse to further surcharge Carsel.
Ferguson's arguments concerning purported factual errors in the court's ruling are not persuasive. "The court's statement of decision is sufficient if it fairly discloses the court's determination as to the ultimate facts and material issues in the case. [Citations.]'' (Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1380; see also Bauer v. Bauer (1996) 46 Cal.App.4th 1106, 1118 [trial court "is not required to make an express finding of fact on every factual matter controverted at trial, where the statement of decision sufficiently disposes of all the basic issues in the case"]; In re Marriage of Garrity & Bishton (1986) 181 Cal.App.3d 675, 686-687 [trial court's statement of decision is required only to state ultimate rather than evidentiary facts].) Ferguson has failed to identify any material issues or ultimate facts left unaddressed by the court's statement of decision.
The order of the trial court is affirmed. No costs are awarded on appeal.
NOT TO BE PUBLISHED.
PERREN, J.
We concur:
GILBERT, P.J.
COFFEE, J.
Martin J. Tangeman, Judge
Superior Court County of San Luis Obispo
James. S. Graham for Defendant and Appellant.
Richard A. Carsel, P.C. and Richard A. Carsel for Plaintiff and Respondent.
Estate of Redfield (2011) 193 Cal.App.4th 1526, cited by Ferguson in his reply brief, is factually inapposite and does not support his res judicata argument. The issue in that case was whether a final, unappealed order approving settlement of a will contest could subsequently be modified.