Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court Nos. OPR4193 & RPR 01521 of San Bernardino County. Mary E. Fuller, Judge.
Law offices of Sal Briguglio, Sal Briguglio for Defendant and Appellant.
Sonnenschein Nath & Rosenthal, Alan T. Yoshitake and Martin J. Foley for Defendant and Appellant.
Greines, Martin, Stein & Richland, Marc J. Poster for Defendant and Appellant.
Loeb & Loeb, David C. Nelson for Plaintiff and Respondent.
OPINION
RAMIREZ P.J.
Defendant and appellant Jack Masi (Masi) challenges the trial court’s orders removing him as trustee of two family trusts and surcharging him for certain fees he paid to himself and his attorneys from the these trusts. Specifically, Masi contends the trial court: 1) lacked jurisdiction as to one of the two trusts; 2) erred when it admitted into evidence the report of the court-appointed accounting expert; and 3) abused its discretion when it surcharged him for trustee and attorney fees. As discussed below, we affirm the trial court’s judgment in full.
Facts and Procedure
1. Overview of Trusts, Current Litigation and Masi Plaza Project
Masi and Constance DeRosa (DeRosa) are the children of Sebastian Masi (Sebastian) and Jennie Masi (Jennie), whose parallel testamentary trusts are the subject of two superior court cases. These two cases were later consolidated for a trial that took place over 16 days in June, July and August 2007. This appeal concerns the outcome of that trial.
Masi served as executor of Sebastian’s estate from Sebastian’s death in 1982 until the estate was settled in 1984 and Masi became trustee of Sebastian’s trust. Masi also served as conservator for Jennie from 1995 until her death in 1999. Masi then served as executor of Jennie’s estate from 1999 until the estate was settled by stipulation between the parties in 2005. At this time Masi became trustee of Jennie’s trust.
The current litigation pursued by DeRosa, beginning with two petitions filed in 2001 (one regarding Jennie’s estate, the other regarding Sebastian’s trust) and a third filed in 2006 (regarding both trusts), concerns whether: 1) Masi should be removed as trustee/executor; 2) Masi should be made to keep proper records and provide an accounting; 3) Masi was abusing his discretion by committing trust assets to the Masi Plaza project, engaging in excessive borrowing, and paying excessive salaries and fees from trust assets; and 4) upon Jennie’s death, Masi was required to have divided the trust assets into two equal shares, one each for Masi and DeRosa.
The main assets of the trusts were two parcels of vacant land in Rancho Cucamonga: 1) a 2.5-acre parcel located on the corner of Rochester Avenue and Foothill Boulevard; and 2) a 70 percent interest in a 24.5-acre parcel surrounding the 2.5-acre corner parcel. Masi owned the remaining 30 percent interest in the 24.5-acre parcel. Beginning in 1988, Masi undertook to develop these parcels into a project known as “Masi Plaza, ” which included retail stores, restaurants and at least one gas station. The development took place in stages “so that the parcels developed in each stage could financially assist in the development of later stages.”
In 2006, Masi sold the project for $58,100,000. The pay-off amount on the loans at that time was $32,270,531.73. Commissions, management and other fees paid to Michael Scandiffio totaled $5,404,000. The total profit on the project was approximately $20 million.
Michael Scandiffio had considerable commercial development experience and began working with Masi to develop the Masi Plaza project in the early 1990’s. Over the course of the project, the trusts paid Scandiffio approximately $7 million.
In developing the Masi Plaza, Masi created a number of partnerships and sub-partnerships, whose ownership interests and relationships are set forth in Appendix A. The major concern of this current litigation, as well as previous litigation, is whether Masi kept sufficient records regarding trust assets, that is, the Masi Plaza project and the various partnerships created to finance and build the project, and whether Masi gave DeRosa sufficient, understandable, financial information about the trusts and the assets, as required by Probate Code section 16061. DeRosa also sought to have Masi surcharged for various fees paid to him and others by the trusts, and to have the court determine whether Masi was wasting trust assets by pursuing the Masi Plaza project and encumbering the trusts’ real property with loans.
“... 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.)
Masi took no trustee fees from 1982 to 1990. He began to take trustee fees in 1991. At about the same time, Masi retired from his job with the Air Force as a personnel management specialist making about $65,000 per year when his position was moved from Norton Air Force Base to Washington D.C.
2. The Trusts
Sebastian died in 1982. In accordance with his will, the court in case number PW 4193 (later changed to OPR 4193) established a testamentary trust with Masi as trustee (the “Sebastian trust”). The Sebastian trust was to be held and administered for Jennie’s benefit for the remainder of her life. Upon Jennie’s death, the Sebastian trust was to be divided into two equal shares for the benefit of Masi and DeRosa. Each beneficiary was to receive the net income of the trust. If the trustee considered the income insufficient, then as much of the trust principal as necessary for the proper health, support, maintenance and education of each beneficiary could be used. Upon the death of each of Masi and DeRosa, his or her share is to pass to DeRosa’s children.
Jennie died in 1999. In accordance with her will, the court in case No. RPR01521 (the “Jennie Case”) eventually established a testamentary trust, again with Masi as trustee (the “Jennie trust”). The other relevant terms of the Jennie trust are the same as those of the Sebastian trust.
As trustee, Masi was given broad authority over the trust property, which included a substantial amount of real estate. Regarding the real estate, the trust granted the trustee the right to improve, sell, exchange, subdivide, grant easements, and encumber to secure funds for its improvement. The trust also provided that the property could be commingled with the property of others to facilitate investment or management.
3. The Sebastian Trust Proceedings
In December 1993, DeRosa filed a petition to compel trustee to account for the Sebastian trust. In November 1994, DeRosa filed a supplemental petition asking to have Masi removed as trustee. In June 1995, the trial court dismissed without prejudice the petition seeking the accounting because DeRosa was only a contingent beneficiary. In December 1995, the parties entered into and filed a stipulation regarding the supplemental petition seeking to remove Masi as trustee that: 1) dismissed the action without prejudice; 2) tolled the statute of limitations; and 3) provided that Masi would provide DeRosa with financial information regarding the Masi Plaza, with at least 10 days notice before taking significant actions or executing key documents.
As set forth in Esslinger v. Cummins (2006) 144 Cal.App.4th 517, 524-525 (Esslinger), a contingent beneficiary now has standing to petition the probate court for an order compelling the trustee to provide an account under Probate Code section 16061.
4. The Jennie Trust Proceedings.
In April 2000, DeRosa filed an objection to Masi’s appointment as executor of Jennie’s will. DeRosa argued that Masi had mismanaged the Sebastian trust, was incapable of properly performing the duties of executor, and had failed to comply with previous court orders to confer with DeRosa and to keep her reasonably informed of the status and plans of the trust. In May 2000, DeRosa withdrew her objection to appointment of Masi as executor on conditions which became part of an order signed by Judge Jeffrey King in case number RPR 01521. The principal condition was that DeRosa be given access to financial and other records of the Jennie Estate, the Masi Plaza project and its partnerships and related ownership entities, the Sebastian trust, the Jennie conservatorship, and any other business and legal entity which holds any assets, debts or ownership interest of Sebastian or Jennie and their trusts, estates or other interests. The trial court retained jurisdiction to enforce this arrangement.
5. First Two Petitions in the Current Litigation and 2005 Stipulated Order
On September 28, 2001, DeRosa filed two petitions, one to remove Masi as executor of the Jennie Estate (RPR 01521) and one to remove Masi as trustee of the Sebastian trust (OPR 4193). Both petitions cited Masi’s failure to keep adequate records and refusal to provide the required accountings. Both petitions bore the captions and case numbers for both the Sebastian Proceedings and the Jennie Proceedings. Both petitions were set for hearing at the same date and time in the courtroom of Judge King, who had jurisdiction over the Jennie Estate.
In April 2005, the trial court entered an order pursuant to a stipulation between Masi and DeRosa. This 2005 Stipulated Order bore the captions and case numbers for both the Sebastian Proceedings (OPR 4193) and the Jennie Proceedings (RPR 01521). However, the 2005 Stipulated Order itself referred only to the action filed regarding the Jennie Proceedings. The 2005 Stipulated Order provided that: 1) the administration of the Jennie Estate would be closed; 2) the assets of the Jennie Estate would be transferred to Masi in his capacity as trustee of the Jennie trust; and 3) DeRosa’s claims against Masi concerning the management of the assets of the Jennie Estate and his removal as executor would proceed without prejudice against Masi in his capacity as trustee of the Jennie trust.
In January 2006, Masi filed a motion in limine arguing that the court did not have subject matter jurisdiction over DeRosa’s 2001 petition to remove him as trustee of the Sebastian trust because there was no open or active case pending before the court relating to the Sebastian trust. At a hearing held on April 25, 2006, Commissioner Crawley denied the motion. After viewing: 1) the caption on the April 2005 stipulation, which referred to both the Jennie Estate and the Sebastian trust; and 2) the contents of the April 2005 stipulation, which provided that the Jennie Estate would pour over into the Jennie trust and that all objections to the Jennie Estate would survive as to the Jennie trust, but did not refer to the Sebastian trust, the court stated that the two trusts “were both intended to be objects of this lawsuit.” The court accepted the reasoning of DeRosa’s counsel that the documents for the Jennie and Sebastian trusts were created by identical “mirror image” wills. Further, the wills provided that, upon the death of both Sebastian and Jennie, two new trusts should have been created to replace the Jennie and Sebastian trusts. The two trusts, which had yet to be created at the time of this hearing, would have been a trust for Masi in which he had a life estate with the remainder to DeRosa’s children, and the other for DeRosa, in which she had a life estate with the remainder to her children.
6. Third and Final Petition in the Current Litigation
November 2006, DeRosa filed a supplement to her two 2001 petitions, which petitions sought Masi’s removal as trustee of the Sebastian trust and as executor of the earlier Jennie Estate, now the Jennie trust. In the supplement, DeRosa alleged that Masi had: 1) failed to divide the remaining trust assets into two equal shares, one for Masi and the other for DeRosa; 2) failed to keep adequate records; 3) refused to provide DeRosa with an accurate accounting; 4) failed to consult with DeRosa in major trust decisions; and 5) abused his discretion by committing trust assets to the Masi Plaza project, engaging in excessive borrowing, and paying excessive salaries and fees from trust assets. DeRosa asked that Masi be removed as trustee. For the first time, DeRosa also asked that Masi be surcharged for excessive fees paid to himself and Michael Scandiffio, excessive costs for the development of the real properties owned by the trusts, and unjustified tax penalties caused by Masi’s poor record keeping.
In December 2006, the trial court ordered Masi to divide the combined assets of the trusts equally into two new trusts, one for the benefit of Masi (the “Jack Masi trust”) and the other for the benefit of DeRosa (the “Constance DeRosa trust”).
In 2007, DeRosa’s three petitions against Masi were eventually tried together over sixteen court days before Judge Mary Fuller. The court issued its long and detailed statement of decision on December 18, 2007. The court entered judgment on January 11, 2008. The court made the following orders: 1) removed Masi as trustee of both the Jack Masi and the Constance DeRosa trusts; 2) appointed DeRosa trustee of the Constance DeRosa trust; 3) ordered the parties to agree upon a professional trustee for the Jack Masi trust; 4) ordered Masi to pay his own attorney fees; 5) ordered Masi to reimburse the trusts for almost 26 percent of the trustee fees paid to him to reflect his ownership interest in the Masi Plaza development; 6) ordered Masi to reimburse the trusts for interest on loan proceeds out of which he paid himself fees; 7) ordered Masi to reimburse the trusts for the $30,000 portion of a $60,000 loan he took on Jennie’s residence, which he used for attorney fees when DeRosa sought an accounting; 8) ordered Masi to “account for the distribution of the Masi Commerce Center Partners from 1996 through 2007”; 9) ordered Masi to account for distributions made to or within Masi Commerce Center Partners II from 1996 to 2007; 10) ordered Masi to account for distributions made to or within Masi Rochester Associates from 1996 to 2007; 11) allowed DeRosa to seek further orders of the court if Masi “either fails to account for the sale proceeds or the distributions made as ordered above, or if in doing so it is discovered that the funds were not properly allocated”; and 12) ordered Masi “to take no actions with trust funds pending resolution of the above orders.” This appeal followed.
The court days were June 11-12, 14-15, July 23-27 and August 2, 3, and 6-10, 2007.
On January 31, 2008, Masi filed two notices of appeal, one under the caption and case number for the Sebastian Proceedings and the other under the Jennie Proceedings. This Court consolidated these appeal by order dated March 14, 2008.
Discussion
1. Should this Appeal Be Dismissed for Lack of a Final Judgment?
As a preliminary matter, we review DeRosa’s contention that the judgment is not final and thus not appealable. DeRosa relies on case law depicting a final judgment as one in which “no issue is left for future consideration except the fact of compliance or noncompliance” and a non-final judgment as one “where 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....” (Los Angeles County Pioneer Society v. Historical Society of Southern California (1953) 40 Cal.2d 852, 858 (Pioneer Society).)
DeRosa argues that the judgment is not final in three respects. First, the judgment directs that a replacement trustee be selected and appointed, but is not final because it defers the actual selection and appointment. Code of Civil Procedure, section 904.1, subdivision (a)(10), provides that an appeal may be taken, “[f]rom an order made appealable by the provisions of the Probate Code....” Probate Code section 1300, subdivision (g), provides that an order removing or discharging a fiduciary is an appealable order. The court’s order does just that-it removes Masi as a fiduciary. We agree with Masi that the case to which DeRosa cites for her argument of nonappealability, Pioneer Society does not in any way support her argument. This is because the probate court in that case reserved jurisdiction to “from time to time ‘make such other and further orders as are competent, lawful and proper for a complete determination of this action.’” (Pioneer Society, supra, 40 Cal.2d at p. 858.) Here, the trial court made no such reservation and set forth the specific method for the selection of the trustee to be appointed by the court.
“I am ordering the parties to agree upon a professional trustee for the Jack Masi [t]rust within 30 days of the entry of this judgment and all trust assets are to be turned over to the professional trustee. If the parties cannot agree upon a professional trustee, each side is to submit three names and the court will make the choice. I am making this order to alleviate any possible future claims of animosity in the management of the trust between brother and sister based on the long history of this dispute.”
Second, the judgment orders Masi to provide accountings in a number of categories, such as proceeds from the sale of properties, legal and trustee fees paid, and distributions from the various partnership entities. The trial court directs DeRosa to seek additional orders from the court if Masi does not account as ordered or the accountings show that funds were misallocated. DeRosa contends that a judgment ordering a party to account is not appealable. However, as set forth in Esslinger, supra, 144 Cal.App.4th at pages 522-523, an order to account is appealable when it expressly or implicitly decides other issues that could be the subject of an appealable probate order. In Esslinger, the probate court ordered the trustee to provide an accounting to a remainder beneficiary. The trustee appealed. The appellate court held that the judgment was appealable because the probate had determined, in effect, that the remainder beneficiary had a right to an accounting. This determination, in turn, was appealable as an order determining the existence of a power, duty or right under a trust under Probate Code sections 1304, subdivision (a) and 17200, subdivision (b)(2). Here, as in Esslinger, the trial court’s order decided an issue that could be, and is, the subject of an appealable order, namely the order removing Masi as trustee, as discussed above.
“Since there is no specific evidence at this time as to unaccounted funds, damages, or tax penalties the court will deny Petitioner’s request for reimbursement. If Respondent either fails to account for the sale proceeds or the distributions made as ordered above, or if in doing so it is discovered that the funds were not appropriately allocated, Petition may seek further orders of the court.”
Third, DeRosa argues that the judgment, which orders Masi to pay the trusts unspecified amounts as determined by the ordered accountings and, if necessary, further proceedings cannot be final or appealable until all of the foregoing has been completed. However, the court has left Masi with nothing left to do. Despite the language of the judgment itself, the court was quite clear that the accounting was to be done by DeRosa and the successor trustee, rather than by Masi himself:
“THE COURT: Well, we’re talking about the accounting is going to be done through the trustee that is, the two trustees are going to be working together, Ms. DeRosa and whoever is the either appointed or agreed upon trustee for Jack Masi. It’s not going to be Jack Masi doing it, because at that point I’ve removed him as trustee.”
Further, as Masi points out, DeRosa could effectively delay or prevent Masi from appealing the court orders by simply delaying the accounting.
2. Jurisdiction over Sebastian Trust and Statute of Limitations for Pre-1998 Conduct
Masi contends the trial court lacked jurisdiction over the Sebastian trust because it was the subject of a separate proceeding before another judge of the same court. Masi characterizes that proceeding as “pending.” In fact, the matter was dismissed without prejudice in December 1995, by stipulation of the parties. Case law is very clear that dismissal of an action, even without prejudice, deprives a court of jurisdiction over the action. “Following entry of a dismissal of an action by a plaintiff under Code of Civil Procedure section 581, a ‘trial court is without jurisdiction to act further in the action [citations] except for the limited purpose of awarding costs and statutory attorney’s fees.’ [Citations.]” (Harris v. Billings (1993) 16 Cal.App.4th 1396, 1405) The court in Harris v. Billings cited a string of cases to support its conclusion that the trial court had no jurisdiction to vacate a dismissal without prejudice or to enter a new order dismissing the case with prejudice. We find this rule of law applied to this set of facts to be dispositive-the Sebastian trust proceeding was dismissed by stipulation in December 1995 and so Judge King did not retain jurisdiction.
As Masi points out, he unsuccessfully sought a stay and writ relief from this Court on this jurisdictional issue. This court denied the petition and request for stay, commenting that, “Any error appears to be one of record keeping or clerical tracking rather than jurisdiction.” (Court file, case No. E040737)
Out of an abundance of caution, DeRosa ably argues a number of other points as to why jurisdiction over the Sebastian trust did not lie exclusively with the judge and/or department from which the case was dismissed in 1995. We do not find it necessary to discuss the probable merits of these points because Masi simply did not carry his burden as appellant to establish, with citations to pertinent statute and case law, that a matter that is dismissed without prejudice in one department of a superior court cannot later be re-filed in another department of the same court.
a. Statute of Limitations
Masi briefly argues that the statute of limitations to petition for a surcharge is three years, per Probate Code, section 16460, and thus the trial court could not surcharge him for conduct occurring prior to 1998. DeRosa counters that Masi does not adequately support his argument and thus we should disregard it.
“Furthermore, the statute of limitations to petition for a surcharge is three years. (Prob. Code, § 16460.) Even if the court had jurisdiction over the Sebastian Masi trust, which it did not, its inquiry based on a new petition filed in 2001 should have been limited to administration of the trust from 1998 onward, not from the creation in 1982.”
Probate Code, section 16460 provides, in pertinent part:
“Unless a claim is previously barred by adjudication, consent, limitation, or otherwise: [¶] (1) If a beneficiary has received an interim or final account in writing, or other written report, that adequately discloses the existence of a claim against the trustee for breach of trust, the claim is barred as to that beneficiary unless a proceeding to assert the claim is commenced within three years after receipt of the account or report. An account or report adequately discloses existence of a claim if it provides sufficient information so that the beneficiary knows of the claim or reasonably should have inquired into the existence of the claim. [¶] (2) If an interim or final account in writing or other written report does not adequately disclose the existence of a claim against the trustee for breach of trust or if a beneficiary does not receive any written account or report, the claim is barred as to that beneficiary unless a proceeding to assert the claim is commenced within three years after the beneficiary discovered, or reasonably should have discovered, the subject of the claim.”
Probate Code section 16460 is not a straightforward statute of limitations provision that absolutely precludes claims based on trust administration filed more than three years after an accounting. Rather, it specifies that the three-year period commences only when a written accounting “adequately discloses the existence of a claim” (subdivision (a)(1)) or the beneficiary reasonably should have discovered the subject of the claim (subdivision (a)(2)). Here, Masi does not explain how his accountings for the Sebastian trust adequately disclosed the existence of the claims against him, or how and when DeRosa reasonably should have discovered the subject of her claims against him. Such an explanation is key to asserting this particular statute of limitations defense, especially given the claims in DeRosa’s petition regarding the inadequacy of the accountings. Curiously, after DeRosa pointed out this deficiency in her respondent’s brief, Masi failed to remedy it in his reply brief. We therefore decline to address this issue. (See Duarte v. Chino Community Hospital (1999) 72 Cal.App.4th 849, 856.)
3. Admission of Report from Court-Appointed Expert
Masi contends the trial court committed prejudicial error when it considered the report and opinions of the court-appointed forensic accountant, Mr. McCallum, over Masi’s objections. Specifically, Masi argues the expert: 1) was not qualified to opine on Masi’s duty as a trustee to account according to “generally accepted accounting principles” (GAAP), on causation, i.e., whether it cost the trusts more to obtain construction loans because Masi did not use GAAP; 2) the expert relied on evidence outside the record to determine a reasonable rate of interest for constructions loans; 3) the expert concluded that Masi violated his fiduciary duties because he did not use GAAP, even though Probate Code section 16063 does not require him to use GAAP; and 4) the expert concluded that Masi’s failure to use GAAP “is the underlying source of this litigation, and a large exposure to liability” despite not having heard all of the evidence at trial. “A trial court’s determination to admit expert evidence will not be disturbed on appeal absent a showing that the court abused its discretion in a manner that resulted in a miscarriage of justice.” (People v. Robinson (2005) 37 Cal.4th 592, 630.) Thus, Masi has the burden in this appeal to establish both: 1) an abuse of discretion by the trial court; and 2) resulting prejudice that caused a miscarriage of justice.
Even if we were to consider that the trial court abused its discretion when it admitted into evidence the report of the forensic accountant, Masi simply cannot establish that he suffered any prejudice at all resulting in a miscarriage of justice. This is because the trial court allowed Masi to cross-examine the forensic accountant about the report’s contents after the close of evidence and after the accountant had submitted the report to the trial court. This in itself negates Masi’s claims of prejudice from the report’s admission. In O’Neill v. Novartis Consumer Health, Inc. (2007) 147 Cal.App.4th 1388 (O’Neill) appellants claimed the trial court committed prejudicial error by admitting the testimony of two experts who criticized a scientific study which the appellants used to bolster their case. The appellate court found no undue prejudice from admitting the two experts’ testimony, in part because appellants were allowed to address the experts’ criticisms of the study through cross-examination. (Id. at p. 1398.) In Contra Costa County Flood Control & Water Cons. Dist. v. Armstrong (1961) 193 Cal.App.2d 206, 209-211 , the appellate court found that the trial court had sufficiently protected appellant’s free-trial rights when it allowed the re-opening of evidence so that appellant could cross-examine a court-appointed appraiser as to the contents of his report, even without allowing appellant to introduce new evidence. Similarly, the trial court in this matter allowed Masi to cross-examine the forensic accountant about the contents of his report on December 7, 2007, four months after the close of evidence. Masi questioned the accountant regarding a number of issues he addresses here on appeal, including the extent to which the Masi Plaza entities should have used GAAP, the forensic accountant’s qualifications to opine on construction lending rates during the period in question, and the adequacy of the financial information that Masi disclosed to DeRosa. This opportunity was enough to prevent the miscarriage of justice of which Masi complains.
Masi does not suggest what more the trial court could have done to protect Masi’s rights, in addition to allowing him to cross-examine the forensic accountant about the contents of his report. In his reply brief, Masi argues that the trial court gave him much less opportunity to rebut the forensic accountant’s report than was given to the appellant in O’Neill. Specifically, Masi points out that the appellant in that case had had access to the experts’ opinions earlier in the trial, had been able to depose the two experts, and was allowed additional time at trial to address those opinions. This ignores a key factual difference between the two trials: here the forensic accountant submitted his report after trial, as the parties and trial court had contemplated all along, and thus there would have been no opportunity for depositions, even had appellant so requested. Masi has not pointed to any real restrictions that the trial court placed on his ability to delve into and rebut the contents of the report. For all of these reasons, we conclude that, even if Masi were to establish any error on the trial court’s part in admitting the forensic accountant’s report, he simply did not suffer any prejudice because the trial court gave him ample opportunity to rebut the contents of the report by cross-examining the accountant.
4. Surcharge for Interest on Loans Used to Pay Trustee Fees
The trial court ordered “for all fees paid to [Masi] out of loan proceeds, that he reimburse the trusts for the cost of the interest. This would include all payments until the property was sold and the loans were paid off.” Masi argues the trial court abused its discretion when it made this order because it was not authorized by “law or equity.” 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 (Gump); Estate of Cassity (1980) 106 Cal.App.3d 569, 572 (Cassity).) “In determining compensation for [the] trustee and attorney fees the court has the right to consider [the] actions of the trustee....” (Cassity, supra, 106 Cal.App.3d at p. 572, citing Estate of McLellan (1936) 8 Cal. 2d 49, 55.)
First, Masi contends there is no statutory basis for this surcharge, absent a finding that his trustee fees were excessive. However, Masi points to no legal authority stating that a trial court may surcharge a trustee only if the Legislature has specifically authorized the surcharge via statute. Further, Masi himself provides no legal authority for his assertion that the trial court abused its discretion when it surcharged him for the interest paid on loans used to pay his trustee fees. Masi bears the burden in this appeal to establish that the trial court abused its discretion, and he has not carried that burden.
Second, Masi argues he was entitled to reasonable fees for his services even at the time the trusts had no income because Probate Code section 15681 requires that “if the trust instrument does not specify the trustee’s compensation, the trustee is entitled to reasonable compensation under the circumstances.” Again, Masi ignores the standard of review here-whether the trial court abused its discretion in determining just what compensation is “reasonable.” Jack argues that it is not reasonable that he be asked to forego or even postpone all trustee fees until the Masi Plaza project became profitable. Indeed, the trial court did not make such a determination. Rather, the trial court concluded that the yearly amount paid to Masi from 1999 to 2006, plus or minus “$77,543 per year plus the cost of the interest on the loans that paid for these amounts” was “unreasonable, ” given that all of the real assets of the Sebastian Masi trust were tied up in the partnerships, which were heavily in debt.” Masi does not establish in this appeal that this determination of unreasonableness (of the trustee fees paid to Masi plus the interest on the money borrowed to pay the fees) was beyond the broad discretion granted to the trial court.
5. Surcharge for Attorney Fees
The trial court ordered that Masi “pay his own attorney fees and reimburse the trusts for attorney fees paid in the defense of this action as [Masi]’s actions are the cause of this lawsuit and the trusts should not be responsible.” Masi argues that, although the trial court ultimately granted DeRosa’s petition to removed him as trustee and determined that he failed in his duty to provide DeRosa with sufficient information and accountings as to how he managed the trusts’ assets, he should be surcharged for only a portion of the attorney fees incurred to defend this action because much of the 16-day trial was taken up with evidence regarding other issues that were resolved in his favor. Masi contends the trial court abused its discretion when it made the above order, citing almost exclusively to Cassity, supra, 106 Cal.App.3rd 569.
In Cassity, the appellate court determined that the trial court abused its discretion when it denied the former trustee any trustee or attorney fees. The appellate court remanded the matter to the trial court to properly apportion the requested fees. Masi requests this Court act similarly. However, the facts in the present matter are significantly different from those in Cassity. First, the trial court in Cassity found that the trustee, who had previously resigned, “at all times acted conscientiously and in good faith.” (Id. at p. 573.) Here, the trial court itself removed Masi as trustee “due to his complete failure to manage the trusts in an open and recorded manner and because he has demonstrated a deliberate pattern of behavior of hiding his financial transactions from the beneficiary.” “‘If the trustee commits a breach of trust, the court may in its discretion deny him all compensation....’” (Gump, supra, 1 Cal.App.4th at pp. 582, 597, fn.16, citing Rest.2d Trusts, § 243.) Second, in Cassity the amount of the surcharges imposed by the trial court was “but a small percentage” of those sought by the beneficiary. (Id. at p. 574.) Here, DeRosa prevailed in the two major goals of the litigation-to remove Masi as trustee and to compel an accounting and record keeping so that the beneficiary and contingent beneficiaries could be kept informed of the financial transactions in which the trusts were engaged.
Further, Masi provides no legal authority supporting his theory that a trustee’s legal fees should be surcharged only in proportion to the time spent in trial presenting evidence on issues regarding which the trial court finds in the petitioner’s favor.
In surcharging Masi for attorney fees paid by the trusts to defend Masi in this litigation, the trial court noted that Masi’s own “actions are the cause of this lawsuit and the trusts should not be responsible, ” and cited to Estate of Miller (1968) 259 Cal.App.2d 536, 547 (Miller). The appellate court in Miller reversed the trial court’s award of trustee, executor and attorney fees to the executor-trustee, stating “‘where litigation results from the fault of the trustee he is not entitled to charge the expenses of the litigation against the trust estate.’” (Id. at pp. 547-548, quoting 2 Scott on Trusts (Second Edition) section 188.6, at page 1405.) We also note the factual similarity between this matter and Miller, in that the trial court in Miller concluded that “defendant presents a general picture of unwillingness to act except upon order of court.... Defendant’s conduct evidences a paramount concern for his own protection as against actively determining and serving the proper needs of the prime beneficiary.” (Miller at p. 547.) Here, the trial court concluded that it must remove Masi as trustee “due to his complete failure to manage the trusts in an open and recorded manner and because he has demonstrated a deliberate pattern of behavior of hiding his financial transactions from the beneficiary.”
As shown below, the litigation resulted from the fault of Masi-that is, his intentional and long-term refusal to perform his clear fiduciary duty to provide DeRosa with meaningful financial information about the trusts and their main asset, the Masi Plaza project.
DeRosa filed two petitions in September 2001 (one to remove Masi as executor of Jennie’s estate and the other to remove Masi as trustee of the Sebastian trust), plus a supplemental petition filed in November 2006 seeking to remove Masi as trustee of both trusts and to surcharge him for damages caused by his breach of the fiduciary duty. These three petitions form the basis of this current litigation.
In Masi’s favor, the trial court found that Masi had the right under the Sebastian trust to develop the Masi Plaza project and that Jennie herself had consented to the development because that is what Sebastian had wanted. Masi also “had the right to engage Mr. Scandiffio as developer.” However, we find no other issues that the trial court specifically and positively resolved in Masi’s favor.
However, the trial court concluded that Jennie was not aware of and did not understand either the partnership entities that Masi formed nor the “financial dealings that [Masi] engaged in as Trustee or as Conservator.”
At the end of the statement of decision, the trial court denied DeRosa’s request for reimbursement for unaccounted funds, damages and tax penalties because “there is no specific evidence at this time” regarding these issues. However, the court authorized DeRosa to seek further orders should the ordered accountings show any misallocations. We disagree with Masi that these issues were conclusively determined in his favor. Rather, it appears clear to us that, as a direct result of Masi’s failure to provide DeRosa, and ultimately the trial court, with meaningful financial information about the trusts and Masi Plaza, there was not enough evidence to either prove or disprove DeRosa’s allegations on these issues. Significantly, the trial court did not determine these issues in either party’s favor, but authorized DeRosa to re-open these issues should the full disclosure the court ordered uncover any further wrongdoing by Masi.
In DeRosa’s favor, the trial court first found that the burden of proof had shifted to Masi under Probate Code section 16004, subdivision (c), because he had given himself an advantage by: 1) developing the property he owned together with the property owned by Jennie and by the Sebastian trust, thus increasing the value of his property; and 2) structuring the various partnerships to increase his personal share in the development, along with giving his own heirs control of the development in case of his death, despite their minority ownership share in the partnerships. This shift in the burden of proof applies to whether Masi’s “conduct as the trustee, other than the use of the property for the development of the Masi Plaza, was appropriate.”
“A transaction between the trustee and a beneficiary... by which the trustee obtains an advantage from the beneficiary is presumed to be a violation of the trustee’s fiduciary duties.”
Also in DeRosa’s favor, the trial court found that Masi violated his duty under Probate Code section 16061, to maintain readable financial records, in that “[i]n effect, [Masi] engaged in the Masi Plaza development with no thought to keeping or providing records of his conduct as Trustee....” In addition, the trial court found it to be “of great significance” that Masi not only repeatedly violated this statutory duty to provide DeRosa with useful financial information about the trusts, but violated several specific agreements between the parties regarding such disclosure that became orders of the court.
“... 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, including the terms of the trust....” (Prob. Code, § 16061)
The trial court summed up its finding that Masi failed to do his duty to provide financial records as follows: “[Masi’s] duty to keep readable records was clear, his failure to keep such records was also clear. [Masi] embarked on a major business construction with no experience and no plan for maintaining records of his conduct. He relied upon his accountant to prepare taxes only and relied upon the tax returns to meet his fiduciary obligation to keep readable records. Tax returns, as Mr. McCallum testified, are only of benefit to showing how much money is owed the government. Tax returns do not tell you what is happening within the business financially.”
Further, as discussed above, the trial court found that the yearly amount Masi took for trustee fees from 1999 to 2006 was “unreasonable” given that the trust assets were tied up in the partnerships, which themselves were heavily in debt.
The trial court found that Masi’s testimony regarding disbursements to Jennie during her lifetime was “inconsistent” and that the records supporting these disbursements “are even more inconsistent, ” thus supporting a finding that Masi violated his fiduciary duty to keep clear financial records with regard to Jennie’s conservatorship. In addition, while the trial court did not specifically find that Masi caused Jennie to pay an unnecessary tax penalty because of the pattern and amounts of disbursements Masi made, it commented that “a look at Jennie’s tax records suggest” that such was the case.
Finally, the trial court concluded that Masi “demonstrated his animosity and hostility towards [DeRosa] by entering into agreements to cooperate and provide her with the financial information and then refusing to do so in a manner that she could know what he was doing, ” thus providing an additional ground for removal “‘when the hostility threatens to impair the proper administration of the trust. (IFS Industries, Inc. v. Stephens (1984) 159 Cal.App.3d 740, 754.)’”
To conclude, we find that the trial court did not abuse its discretion in surcharging Masi for all attorney fees incurred by the trusts in defending against this litigation. This is because: 1) the trial court determined the key issues in DeRosa’s favor; and 2) the trial court conclusively determined only two issues in Masi’s favor, and it appears to us that DeRosa would not have needed to litigate even these issues had Masi performed his fiduciary duty of financial disclosure to DeRosa and not engendered such hostility between the parties by promising to disclose the information and subsequently and consistently failing to do so.
6. Surcharge for Trustee Fees and Management Fees
The trial court ordered Masi to “reimburse the trusts for a percentage of the fees paid during the management of the Masi Plaza from 1997 until the sale in 2006. The percentage is to reflect the appropriate relationship between the ownership interest of [Masi] and the trusts, that is, for every $10,000 he is to reimburse the trust $2523.32.” Masi argues the trial court abused its discretion when it ordered this surcharge because substantial evidence does not support the court’s conclusion that the trusts were paying Masi fees for managing his own share of the Masi Plaza project.
We disagree. As DeRosa points out, Masi testified that the work he performed to earn his fees from the trusts consisted of “I was administering the trust and I was running the [Masi Plaza] center.” Masi saw these two functions as “pretty close, identical, pretty close.” In other words, Masi’s work administering the trust assets consisted of his work running the Masi Plaza project. Masi testified that he received no separate management fees from the various partnerships that owned Masi Plaza; these fees were paid exclusively by the trusts. Masi also agreed that he personally owned nearly 26 percent of the Masi Plaza project. Clearly, then, because Masi benefitted from his efforts in managing the Masi Plaza project, but did not pay this proportion to himself from partnership funds nor make any attempt to reduce his fees paid by the trusts by 26 percent to reflect this benefit, substantial evidence supports the trial court’s order surcharging him this percentage for the fees paid to him for this work from trust assets.
Disposition
The trial court’s judgment is affirmed in all respects. DeRosa shall recover from Masi her costs in this appeal.
We concur: RICHLI J., MILLER J.