Opinion
NOT TO BE PUBLISHED
Superior Court County of San Luis Obispo Super. Ct. No. PR 030179, Roger T. Picquet, Judge.
Ogden & Fricks LLP, Roy E. Ogden, Sue N. Carrasco for Plaintiff and Appellant.
James S. Graham for Objector, Appellant and Respondent.
PERREN, J.
Two appeals, which we have consolidated, are before this court. In the first appeal, the principal questions are (1) whether appellant Richard A. Carsel (Carsel), as successor trustee to the Revocable Living Trust of Charles and Adele Boudousquie (Trust), was properly surcharged for compensation he paid himself for time spent on Trust matters prior to his appointment as successor trustee; and (2) whether the residuary beneficiaries of the Trust are solely responsible for paying estate taxes.
In the second appeal, the primary issues are (1) whether Carsel is entitled to compensation from the Trust for attorney fees he incurred in defending the surcharges imposed against him in the first action, and (2) whether the first appeal stayed the probate court's order of distribution to the beneficiaries. We affirm.
FACTUAL AND PROCEDURAL HISTORY
Charles and Adele Boudousquie were residents of Arizona. They created the Charles and Adele Boudousquie Revocable Living Trust in 1989. Adele died in 2000. Charles amended the Trust on April 13, 2000, to name Carsel as successor trustee. Carsel's appointment became effective on August 7, 2001. Charles died on January 4, 2002.
The Trust makes specific bequests to 28 beneficiaries, including Carsel and his wife; and three residuary beneficiaries, objector James W. Ferguson (Ferguson) and his two sisters. The Trust contains a choice of law provision stating that the administration of the trust was to be governed by the laws of Arizona.
Carsel filed his first and final 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 July 8, 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. He also filed a notice of appeal, purporting to appeal from the entire order. Ferguson appealed that portion of the order finding that the estate tax should be apportioned only among the residuary beneficiaries.
While the appeal was pending, Carsel filed his first amended second account and report 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 account and report. 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. The court applied Arizona law, ruling that "Arizona law is clear that a trustee cannot use trust funds to defend himself against the imposition of surcharges." The court also ordered Carsel to comply with the court's previous order to distribute the Trust assets to the beneficiaries. Carsel appealed from the order.
DISCUSSION
FIRST APPEAL
I. Surcharges
A. Compensation for Pre-appointment Services
The probate court surcharged Carsel $20,020.60, the amount he withdrew from the Trust, as compensation for services performed prior to his appointment as successor trustee. Trustee compensation is governed by the terms of the Trust. The compensation provision in the Trust states that the trustee is entitled to compensation for his "services as Trustee." No provision of the Trust authorizes payments for services rendered prior to becoming the trustee. The record shows that the compensation provision in the Trust was drafted based on language that Carsel proposed.
Carsel acknowledges that no writing authorizes compensation for pre-appointment services. He contends, instead, that Charles verbally authorized his pre-appointment services and told him that he did not "want to see a bill while he was alive." Carsel also asserts "pre-trustee" services are not all that unusual, and that he was complying with Charles's direction by not submitting a bill to him.
While the assertion that Charles made oral statements contrary to the written provisions of the trust might be accurate, an oral agreement cannot supersede an integrated written agreement. (Isaak v. Mass. Indem. Life Ins. Co. (Ariz. 1981) 623 P.2d 11, 14.) Carsel is asking us to rewrite the compensation provision of the Trust. We have no authority to do so. (Ibid. [a court has no power to "'revise, modify, alter, extend, or remake'" a contract to include terms not contained therein].) Carsel had an opportunity to include a provision for compensation for pre-appointment services in the Trust but did not do so. We are bound by the Trust's unambiguous language.
Carsel also contends that Arizona law permits compensation for pre-trustee services, relying on Arizona Revised Statutes sections 14-3701 and 14-3703 and In re Estate of Gordon (Ariz.Ct.App. 2004) 87 P.3d 89. These authorities do not pertain to compensation of a trustee. Rather, they set forth the duties and powers of a personal representative named in a will. We note that although section 14-3703 imposes fiduciary duties on a personal representative similar to those imposed on a trustee, nothing in the statutes governing trustees incorporates the law pertaining to personal representatives. (§§ 14-7301 et seq.)
Arizona Revised Statute section 14-3701 states: "The duties and powers of a personal representative commence on appointment. The powers of a personal representative relate back in time to give acts by the person appointed which are beneficial to the estate occurring prior to appointment the same effect as those occurring thereafter. Prior to appointment, a person named personal representative in a will may carry out written instructions of the decedent relating to the decedent's body, funeral expenses and burial arrangements. A personal representative may ratify and accept acts on behalf of the estate done by others where the acts would have been proper for a personal representative."
. Arizona Revised Statute section 14-3703 states in part: "A. A personal representative is a fiduciary who shall observe the standards of care applicable to trustees as described by § 14-7302 and the duties of accounting applicable to trustees as provided in § 14-7303. . . . [¶] B. A personal representative shall not be surcharged for acts of administration or distribution if the conduct in question was authorized at the time."
In re Estate of Gordon, supra, 87 P.3d 89 held that the personal representative of an estate may be reimbursed for attorney fees incurred in defending against a beneficiary's claim that the fees were unreasonable upon a showing of good faith.
All statutory references are to the Arizona Revised Statutes unless otherwise indicated.
Carsel's argument that he is entitled to compensation under the doctrine of quantum meruit also is without merit. Arizona law provides that the doctrine has no application where, as here, an explicit contract exists. (Advance Leasing & Crane Co., Inc. v. Del E. Webb Corp. (Ariz.Ct.App. 1977) 573 P.2d 525, 526.) This principle applies in probate matters. (See Sanders v. Boyer (Ariz.Ct.App. 1980) 613 P.2d 1291, 1297 ["Under Arizona law the long-standing general rule has been that attorney's fees are not allowed except where expressly provided for by either statute or contract. . . . [¶] . . . [¶] 'This rule holds true even though the estate may have substantially benefited from the attorney's services'"].)
B. Compensation for Travel Time
The probate court surcharged Carsel $8,100 he paid himself for time he spent traveling to and from Arizona on Trust business after he was appointed successor trustee. Carsel argues he was entitled to be compensated for travel time because the Trust states that the trustee shall be "'entitled to reimbursement for his expenses incurred while serving as Successor Trustee, including travel costs.'" The court disagreed, finding that the term "travel costs" does not include compensation for travel time.
The parties have not cited, and we have not found, any statute or case law that has interpreted "travel expenses" or "travel costs" to include travel time. The single case Carsel cites does not support his position. In Schweiger v. China Doll Restaurant, Inc. (Ariz.Ct.App. 1983) 673 P.2d 927, the court interpreted an attorney fee provision in a lease. The language relied on by Carsel appears in dicta, during the court's discussion of the type of attorney activities for which compensation might be authorized. The court cited, as an example, "Guidelines for Compensation of Attorneys Appointed to Represent Indigent Persons in Criminal Appeals in the Court of Appeals and Supreme Court" (Ariz. Supreme Ct., Sept. 1, 1982), in which "travel time where necessary" was listed as one of the types of services that may be included in a fee application. (Schweiger, at p. 932.) The court cautioned: "[W]e do not attempt to address special concerns which may exist in fee applications based upon statutes limiting or restricting the amount of fees which may be awarded. . . . We are concerned only with determining reasonable attorneys' fees in commercial litigation." (Id. at pp. 930-931, fns. omitted.)
The probate court did not abuse its discretion in surcharging Carsel for money he withdrew from the trust to compensate himself for travel time.
C. Compensation for Time Spent on Issues Raised by Ferguson
We review rulings on trustee's fees to determine whether the court abused its discretion. (Finkbeiner v. Gavid (2006) 136 Cal.App.4th 1417, 1422.)
The probate court surcharged Carsel $4,500 for 20 hours of time spent on issues raised by Ferguson. The court found the time spent to be "inordinate." Carsel asserts the surcharge was unwarranted because the time he spent and the billing rate he charged, $225 per hour, were authorized by the Trust. The Trust provides that the trustees shall receive "compensation for their services … based on their then hourly billing rate . . . ." This provision does not, however, authorize Carsel to receive compensation for excessive time spent on Trust matters.
Carsel also relies on two Arizona statutes. Section 14-7233(C)(24) permits a trustee to employ persons with special skills to assist in administration of a trust. Section 14-7404(A) states: "A court shall not change a fiduciary's decision to exercise or not exercise a discretionary power conferred by this Article unless it determines that the decision was an abuse of the fiduciary's discretion. A court shall not determine that a fiduciary abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion." Carsel argues these statutes require a finding of bad faith before surcharges are assessed; the court made no such finding; and, thus, all of his acts were authorized and compensable. We are not persuaded.
Carsel overlooks section 14-7206, which gives the court broad discretion to disapprove excessive trustee compensation. Section 14-7206 states in part: "On petition of an interested person, . . . the court may review . . . the reasonableness of the compensation determined by the trustee for his own services. Any person who has received excessive compensation from a trust may be ordered to make appropriate refunds." Arizona case law is in accord. (See, e.g., In re CVR 1997 Irrevocable Trust (Ariz.Ct.App. 2002) 42 P.3d 605, 608 [appellate court reviews probate court's award of attorney fees "only for abuse of discretion"].)
Carsel argues his right to due process was violated because the court failed to specify in its order the precise charges the court found excessive. This argument is belied by the record. Carsel submitted 71 pages of billing records with his first accounting. The court stated that the surcharge applied to a payment Carsel made to himself on or about March 31, 2003, of $4,500, representing payment for 20 hours of time related to issues raised by Ferguson. More specific findings are not required. (Code Civ. Proc., § 662; and see Republic Indemnity Co. v. Empire Builders Corp. (1985) 167 Cal.App.3d 1163, 1167 [a statement of decision need do no more than give reasons that state the grounds upon which the judgment rests].)
Substantial evidence supports the court's finding that Carsel spent an excessive amount of time responding to Ferguson's objections. The probate court did not abuse its discretion in ordering Carsel to reimburse the Trust for funds he withdrew to compensate himself for this time.
II. Judicial Notice of Arizona Law; Opportunity to Respond to Law Relied on by the Court
Citing Evidence Code section 455, Carsel contends he was denied due process because the court refused to take judicial notice of the Arizona cases he cited and, instead, based its decision on "undisclosed" Arizona law. Section 455 does not support Carsel's position.
Evidence Code section 455, subdivision (b) states in part: "If the trial court resorts to any source of information not received in open court, . . . such information and its source shall be made a part of the record in the action and the court shall afford each party reasonable opportunity to meet such information before judicial notice of the matter may be taken."
In its statement of decision, the court explained the reason it imposed the surcharges: "[T]he Court is obligated to measure the ability to recover compensation for such services by the standard rules of trusts, estates and contracts. The obvious place for the provision of such compensation is the Trust itself or its amendments. But the compensation provision in the Ninth Amendment states that Petitioner is entitled to compensation only for his 'services as Trustee. . . .' No provision of the Trust authorizes payment to be made for services rendered prior to becoming the Trustee. Under the law of Arizona which applies to this issue, the compensation provision may not be re-written under the guise of interpretation. (Isaak v. Mass. Indem. Life Ins. Co. [supra] 623 P.2d 11, 14 ['It is not within the power of this court to "revise, modify, alter, extend, or remake" a contract to include terms not agreed upon by the parties'].) The compensation provision in the Ninth Amendment was drafted based on language which Petitioner proposed. See e-mail dated April 3, 2000, Graham Declaration, Exhibit 15. In the absence of a written agreement between Petitioner and BOUDOUSQUIE allowing Petitioner to be paid for such compensation, the burden was on Petitioner to demonstrate his entitlement to such compensation by a preponderance of admissible and competent evidence. But the Court finds that Petitioner failed to meet his burden of proof in this regard."
The probate court based its decision on fundamental rules of contract interpretation, citing applicable Arizona law. The absence in the statement of decision of cases cited by Carsel does not show that the court did not consider them. It shows only that the court did not find them persuasive. Nothing in the law requires the court to provide an extended discussion of the cases it found inapplicable. (See, e.g., People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [any matter to be judicially noticed must be relevant to a material issue].) The statement of decision issued by the court fully complies with California law (Code Civ. Proc., § 662), and nothing more was required.
Carsel also asserts the court erred in not considering the declaration of Mr. Asimou, an Arizona attorney. The declaration contains Asimou's interpretation of certain provisions of Arizona law governing trustees. A fundamental rule of statutory construction is that the interpretation of a statute is a pure question of law for the court to decide. (See, e.g., Reno v. Baird (1998) 18 Cal.4th 640, 660.) The court did not abuse its discretion in rejecting the expert's declaration. (See Summers v. A.L. Gilbert Co. (1999) 69 Cal.App.4th 1155, 1178 ["There are limits to expert testimony, not the least of which is the prohibition against admission of an expert's opinion on a question of law"].)
III. Apportionment of Estate Taxes
Ferguson appeals from that portion of the court's order finding that estate taxes should be apportioned among the residuary beneficiaries. He contends that the court erred in applying Arizona, rather than California, law to this issue, and that California tax apportionment statues and policy require that estate taxes be apportioned among all the beneficiaries of the Trust.
The parties agree that apportionment of estate taxes is governed by the provisions of the Trust. Section 4.06 of the Trust states that the Trust shall be construed under Arizona law. In addition, section 2.09 states in part: "Any death taxes paid by Trustee under direction or discretion must be paid out of property subject to the tax paid and may not be paid from property excluded from death tax or property used as a deduction in calculating the death tax to be paid."
The court's order states: "This issue is governed by Arizona law. . . . It is unfortunate that the Trust and Will are not as clear or coherent as they could have been but, nonetheless, the Court finds the language clear enough to determine the intent of the trustor . . . . The Court finds that the argument that the estate tax should be apportioned solely against the interests of the remainder beneficiaries is persuasive and in direct compliance with Arizona law on this issue."
Ferguson argues that, even if Arizona law applies, section 2.09 of the Trust shows an intent to apportion estate taxes among all beneficiaries. The probate court disagreed, finding persuasive Carsel's interpretation that section 2.09 deals only with the source of estate taxes, not apportionment of those taxes among the beneficiaries.
Because the Trust does not contain a provision directing how taxes are to be apportioned, under Arizona law, the presumption that the trustor intended the remainder beneficiaries to pay the tax applies. (See In re Naarden Trust (Ariz.Ct.App. 1999) 990 P.2d 1085, 1087 [Arizona law provides that in the "absence of either a statute or common law, . . . our courts rely on the RESTATEMENT for guidance"]; In re Estate of Mason (Ariz.Ct.App. 1997) 947 P.2d 886, 889 ["until changed by the legislature, we hold that the common-law or residuary rule remains the law in Arizona and applies to estates involving probate and nonprobate assets"].) The court did not err in applying Arizona law to this issue.
SECOND APPEAL
I. Surcharge for Attorney Fees and Costs Incurred in Prior Action
The probate court surcharged Carsel the amount he withdrew from the Trust for attorney fees and costs he incurred in defending the surcharges imposed in the earlier action. In its order, the court cited several cases and the Restatement Second for the rule that a trustee is not entitled to be indemnified for attorney fees against good faith suits by a beneficiary and that fiduciaries are not entitled to payment of attorney fees from trust or estate funds incurred in defending actions that do not benefit the estate. (See In re Schuster's Estate (Ariz. 1929) 281 P. 38; In re Guardianship of Styer (Ariz.Ct.App. 1975) 536 P.2d 717; In re Estate and Guardianship of Purton (Ariz.Ct.App. 1968) 441 P.2d 561; Rest.2d Trusts, § 245.)
Carsel correctly points out that one of the cases cited by the probate court, Arizona Title Ins. & Trust Co. v. Hunter (Ariz.Ct.App. 1968) 435 P.2d 47, was vacated by the Arizona Supreme Court and has no precedential value.
Carsel argues these authorities are inapposite and again makes the argument that by relying on them rather than the cases he cited, the court violated his right to due process. Carsel relies on the following three provisions of the Trust: Section 3.0311 allows the Trustee "[t]o employ and compensate attorneys." Section 3.0312 authorizes the Trustee "[t]o pay . . . all costs, expenses, taxes and charges of the Trust and the Trust Estate, including reasonable compensation and commissions to Trustee." Section 3.0313 permits the Trustee "[t]o commence or defend litigation . . . with respect to the Trust or the Trust Estate."
Carsel also cites provisions of Arizona statutes governing trustees as follows: Section 14-7233 states in part: "A. From the time of creation of the trust until final distribution of the assets of the trust, a trustee has the power to perform, without court authorization, . . . the powers specified in subsection C of this section. [¶] . . . [¶] C. A trustee has the power . . . to: [¶] . . . [¶] 20. Pay . . . compensation of the trustee and other expenses incurred in the collection, care, administration and protection of the trust. [¶] . . . [¶] 24. Employ persons, including attorneys, . . . even if they are associated with the trustee, to advise or assist the trustee in the performance of his administrative duties, to act without independent investigation on their recommendations . . . . [¶] 25. Prosecute or defend actions, claims or proceedings for the protection of trust assets and of the trustee in the performance of his duties."
As before, Carsel cites statutes and case law governing personal representatives. He cites section 14-3720, which provides: "If any personal representative or person nominated as personal representative defends or prosecutes any proceeding in good faith, whether successful or not he is entitled to receive from the estate his necessary expenses and disbursements including reasonable attorneys' fees incurred." He also cites section 14-3703(B), which states: "A personal representative shall not be surcharged for acts of administration or distribution if the conduct in question was authorized at the time." He again cites In re Estate of Gordon, supra, 87 P.3d 89, holding that the personal representative of an estate may be reimbursed for attorney fees incurred in defending against a beneficiary's claim that the fees were unreasonable upon a showing of good faith. Carsel argues that the authorities governing personal representatives apply because he was nominated personal representative in Charles's will.
Carsel also relies on "uncontroverted evidence," consisting of statements by Charles that he wanted strong opposition to Ferguson's anticipated litigation and that he appointed Carsel because he wanted an experienced attorney to be his successor trustee because Ferguson was an attorney and he expected him to sue.
Resolution of the issue is governed by the principles above stated regarding Carsel's withdrawals from the Trust to pay himself for pre-appointment services. We briefly recap those principles here. Charles's oral representations cannot be considered because the Trust is an integrated agreement. The personal representative statutes do not apply here because these actions involve Carsel's entitlement to attorney fees in his position as successor trustee. The statute that does apply is section 14-7206, which states: "[T]he court may review . . . the reasonableness of the compensation determined by the trustee for his own services. Any person who has received excessive compensation from a trust may be ordered to make appropriate refunds." Moreover, Carsel did not request a statement of decision; thus, his contention that the court failed to explain its ruling is not well taken. (See, e.g., Tyler v. Children's Home Society (1994) 29 Cal.App.4th 511, 551 [a "'judgment or order of the lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness.'. . . Parties wishing to avoid inferences in favor of the judgment must obtain a statement of decision"].)
The probate court did not abuse its discretion in finding that Carsel was not entitled to attorney fees and costs for defending against the surcharges. We will not disturb the court's exercise of discretion. (See In re Estate of Brown (Ariz.Ct.App. 1983) 670 P.2d 414, 418 ["Whether and to what extent such fees should be allowed is a question best left to the probate court to decide in the sound exercise of its discretion on a case-by-case basis"]; see also id. at p. 419 ["We do not hold that as a matter of fact and law [that an attorney is] entitled to an award of fees in [a probate case]"].)
II. Carsel's Failure to Comply with the Order of Distribution
The final issue involves a determination of whether the July 8, 2005, order of distribution was stayed by the filing of this appeal. In view of the contentions made by Carsel in his first appeal, we deem the appeal to be only from the surcharges although the notice of appeal is broader in scope. (Estate of Doescher (1963) 217 Cal.App.2d 104, 105, fn. 1; Dow v. Superior Court (1956) 140 Cal.App.2d 399, 402.) Therefore, the order of distribution was not stayed by the appeal. (See Dow, at p. 405 [the court "has jurisdiction to take such steps and proceedings as may be appropriate to the enforcement and carrying out of the unappealed portions" of its statement of decision].) 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.
The orders of the probate court are affirmed. Costs are awarded to respondent.
We concur: GILBERT, P.J., COFFEE, J.