Opinion
A130329
09-26-2011
MARK MIDDLETON, Petitioner and Appellant, v. DONALD FRANCIS ROOS, et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Solano County Super. Ct. No. FPR043293)
Petitioner and appellant Mark Middleton (appellant), the executor of the decedent's estate, appeals a probate court order granting in part, and denying in part his "Petition to Close Estate, Waiver of Accounting, and Petition for Allowance of Fees." He contends the court erred in concluding that his administration expenses lien against the decedent's real property was not superior to, and did not survive, a trustee's deed of trust recorded following the foreclosure sale of the property. He also contends the court erred in ordering that a lien for attorney fees and costs be placed against the estate's assets distributed to him. We reject the contentions and affirm.
The claimants/respondents are Financial Freedom Senior Funding Corporation (Financial Freedom), Cathryn Ann Luna, Scott B. Roos, Kristy D. Williams, Fannie Mae, Phillips and Cohen Associates Ltd. and Secretary of Housing and Urban Development. No respondent filed a respondent's brief on appeal.
BACKGROUND
Preliminarily, we note that factual assertions in appellant's brief not supported by a citation to the appellate record will be disregarded on appeal. (Cal. Rules of Court, rule 8.204(a)(1)(C); see Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 745.) Similarly, conclusory arguments in appellant's brief unsupported by citation to legal authority will be disregarded on appeal. (Rule 8.204(a)(1)(B); see Dabney v. Dabney (2002) 104 Cal.App.4th 379, 384.)
Barbara Ann Middleton (decedent) died testate on March 31, 2008. On October 15, 2008, appellant, decedent's son and the sole beneficiary of her will, was appointed executor with full authority to administer her estate. Decedent's sole assets were her Fairfield home (the Property) and the furnishings and other personal effects contained therein. A February 2010 appraisal valued the Property at $175,000, and the furniture and other personal effects at $1,500.
The Property was encumbered by a reverse mortgage held by respondent Financial Freedom. The mortgage went into default and between April and December 2009, appellant unsuccessfully tried to sell the Property through a short sale. A Notice to Creditors was sent to Financial Freedom on August 3, 2009. Financial Freedom did not file a creditor's claim against decedent's estate.
"In a reverse mortgage, as in a conventional mortgage, the mortgagee or lender advances money to the borrower or mortgagor. However, in a reverse mortgage the borrower is often times not obligated to repay any portion of the loan or the interest on the loan amount until the property is sold, the loan matures or the borrower dies or experiences an extended absence from the premises. [Citations.] The interest on the borrowed sums is added to the principal loan amount and the lender acquires a lien against the house in the amount of the initial principal and accumulated interest. [Citation.]") (Black v. Financial Freedom Senior Funding Corp. (2001) 92 Cal.App.4th 917, 922.)
Financial Freedom was apparently the loan servicer for respondent Fannie Mae, also known as the Federal National Mortgage Association.
The notice of default dated August 11, 2009, stated the amount owed as $260,162.40.
On December 9, 2009, appellant recorded a "Notice of Pendency of Action (Notice of Lien Pursuant to California Probate Code § 11420)" against the Property. The notice stated that on August 6, 2008, appellant, as administrator of decedent's estate, commenced a real property claim in the probate court regarding the Property, which was currently pending. The notice also stated that, pursuant to section 11420, appellant was asserting a lien for the expenses of administration which had priority over any obligation secured by any mortgage or deed of trust regarding expenses related to administration of the Property.
All further statutory references are to the Probate Code.
On January 28, 2010, at a private trustee's sale, Financial Freedom acquired the Property for a full credit bid of $262,426.34, representing the "unpaid debt together with cost." A trustee's deed transferring title to Financial Freedom was recorded on February 2, 2010. The trustee's deed states: "This conveyance is made pursuant to the powers conferred upon Trustee by that certain Deed of Trust dated 05/13/2005 and executed by [decedent] and Recorded on 05/18/2005 . . . . [¶] . . . [¶] Trustee, in compliance with said Notice of Trustee's Sale and in exercise of its powers under said Deed of Trust, sold the [Property] . . . on 01/28/2010."
The trustee's deed refers to the foreclosing beneficiary and purchaser of the Property as Fannie Mae, also known as Federal National Mortgage Association, c/o Financial Freedom Senior Fund, et al.
On March 9, 2010, appellant filed the subject unopposed, verified "Petition to Close Estate, Waiver of Accounting, and Petition for Allowance of Fees" (hereafter, Petition) seeking to distribute the estate and an award for statutory attorney compensation. The Petition noted that two creditor claims were filed for approximately $5,400, but those claims were not paid because the estate had no funds and was insolvent. The Petition stated that appellant waived a statutory accounting and all rights to statutory executor commissions in exchange for his being allowed to keep decedent's furniture and personal effects at the appraised value of $1,500. Appellant requested $6,295.00 in statutory attorney compensation, $8,000 in extraordinary attorney fees and $1,032.50 in attorney costs. He also requested that 70 percent of the statutory fees and 100 percent of the extraordinary attorney fees and costs be secured by a lien against the Property.
At the hearing on the Petition, appellant argued that his section 11420 lien on the Property was in place before Financial Freedom foreclosed on the Property and Financial Freedom had, at least, constructive notice of the lien before it foreclosed on the Property. He asserted that without notice to him, Financial Freedom improperly foreclosed on the Property, thereby removing it from the estate and the Probate Court's jurisdiction. Financial Freedom argued that the decedent's estate no longer had an interest in the property and any lien on the Property was erased when the property was sold. It asserted that if appellant wanted to retain the Property he could have brought the mortgage current or sought to enjoin the foreclosure sale. Appellant rejoined that Financial Freedom had the right to sell the Property subject to his section 11420 lien, which attached prior to the foreclosure. Appellant also asserted that his law firm waived any claim to the decedent's personal property because the law firm considered it worthless.
In its written ruling, the court ordered that the administration of decedent's estate be brought to a close. It stated that appellant's reliance on section 11420 to permit the claimed statutory and extraordinary attorney fees despite foreclosure of the Property was "misplaced." Citing Title Ins. Etc. Co. v. Miller & Lux, Inc. (1920) 183 Cal. 71, 89 ["the court in probate has power, in distributing the estate of a decedent to declare a lien thereon in favor of a third person and that the distributee shall hold it subject to such lien"], the court acknowledged that a court can impose a lien on an estate asset in order to secure payment of fees. However, it stated imposition of such a lien "presupposes that the asset is within the decedent's estate and therefore subject to the Court's jurisdiction." The court noted that section 11420, prioritizes the payment of specific payment "from the estate." It found that, as of February 2, 2010, when the Property was sold at the trustees sale, it was no longer an asset of decedent's estate and, therefore, could not be distributed to a beneficiary. Citing Homestead Savings v. Darmiento (1991) 230 Cal.App.3d 424, 437 (Homestead), it stated, " 'The law is clear that the trustee's deed conveys to the purchaser the trustor's interest as of the date that the deed was recorded. [Citations.] The purchaser's title is free and clear of "all rights of the trustor or anyone claiming under or through the trustor" including liens that have attached to the property after execution of the foreclosed deed of trust.' " The court determined that because "the trustee's deed extinguished any rights that 'anyone claiming under or through the trustor' might have had, a lien against the asset for payment of fees is simply not available." It noted appellant cited no authority for the proposition that a lien established during the course of probate survives the foreclosure process. The court concluded the section 11420 lien for probate administration expenses did not survive Financial Freedom's foreclosure of the reverse mortgage deed of trust and denied appellant's request to place a lien for statutory and extraordinary attorney fees and costs on the Property.
The court's order also rejected "the executor's suggestion that he be allowed to keep all the furniture in exchange for his waiver of the statutory compensation . . . . [Appellant] may not take a distribution from the estate without obtaining a waiver from the attorney concerning his statutory right to be paid a pro rata share of the fees he is owed. . . . There is no evidence in the petition that there is such a waiver."
Appellant filed a timely appeal from the court's order.
DISCUSSION
I. Standard of Review
Appellant contends that we review the probate court's order regarding the costs of administration pursuant to the abuse of discretion standard. (Estate of Stevenson (2006) 141 Cal.App.4th 1074, 1082; Estate of Gilikson (1998) 65 Cal.App.4th 1443, 1448.)
Where the question is the legal effect of written documents or statutes, we conduct an independent review and are not bound by the trial court's interpretation. (See, e.g., Estate of Powell (2000) 83 Cal.App.4th 1434, 1439-1440.) However, "[a] judgment or order of the trial court is presumed to be correct. . . . [Citation.] It is the appellant's burden to affirmatively demonstrate error." (In re Marriage of Gray (2002) 103 Cal.App.4th 974, 977-978; Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Where the trial court makes a decision in the exercise of its discretion, we apply the abuse of discretion standard on review. "In passing upon the reasonableness and necessity of expenditures during administration, the court below is vested 'with a broad discretion,' which will not be disturbed on appeal except when abused." (Estate of Fraysher (1956) 47 Cal.2d 131, 136.)
II. Appellant's Administrative Expenses Lien Did Not Survive the Property's Foreclosure
Appellant contends the court violated section 11420 by erroneously determining that his counsel's administrative expenses lien was not superior to, and did not survive, the trustee's deed obtained by Financial Freedom following foreclosure of the Property.
Section 11420 provides:
"(a) Debts shall be paid in the following order of priority among classes of debts, except that debts owed to the United States or to this state that have preference under the laws of the United States or of this state shall be given the preference required by such laws:
"(1) Expenses of administration. With respect to obligations secured by mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, only those expenses of administration incurred that are reasonably related to the administration of that property by which obligations are secured shall be given priority over these obligations.
"(2) Obligations secured by a mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, in the order of their priority, so far as they may be paid out of the proceeds of the property subject to the lien. If the proceeds are insufficient, the part of the obligation remaining unsatisfied shall be classed with general debts.
"(3) Funeral expenses.
"(4) Expenses of last illness.
"(5) Family allowance.
"(6) Wage claims.
"(7) General debts, including judgments not secured by a lien and all other debts not included in a prior class.
"(b) Except as otherwise provided by statute, the debts of each class are without preference or priority one over another. No debt of any class may be paid until all those of prior classes are paid in full. If property in the estate is insufficient to pay all debts of any class in full, each debt in that class shall be paid a proportionate share."
Following the hearing on a request for final compensation, the court must make an order "fixing and allowing" the personal representative's and his or her attorney's compensation for all services rendered in the estate proceedings. (§ 10831, subd. (d).) As to attorney compensation, the order must require the personal representative to "pay the attorney out of the estate" the amount allowed, less any amount paid as interim compensation. (§ 10831, subd.(d).) Court-ordered attorney compensation payments are "charges against the estate" (Ross & Moore, Cal. Practice Guide: Probate (The Rutter Group 2010) T{ 16:354, p. 16-109) and are payable from the estate as "[e]xpenses of administration." (§ 11420, subd. (a)(1).) Section 10831, subdivision (d) presupposes that there are assets in the estate from which the court-ordered compensation may be paid. But, as the trial court noted, the Property was no longer in the estate at the time the attorney compensation order was rendered.
Section 10831, subdivision (d) provides, "On the hearing, the court shall make an order fixing and allowing the compensation for all services rendered in the estate proceeding. . . . In the case of the attorney's compensation the order shall require the personal representative to pay the attorney out of the estate the amount allowed, less any amount paid to the attorney out of the estate [for interim compensation] pursuant to Section 10830."
Further, section 11420 sets out a seven-item ranking of priority in which the decedent's debts, expenses of administration and charges against the estate are paid. (Ross & Moore, Cal. Practice Guide: Probate, supra, ¶ 16:361, p. 16-110.) Expenses of administration, including an attorney's allowed compensation are given the highest priority. (§ 11420, subd. (a)(1).) Section 11420 also assumes there are assets in the estate; it deals with the debt priorities in administering the estate. With no citation of authority, appellant argues that although Financial Freedom had the "right" to remove the Property from decedent's estate through the foreclosure sale, "that right remained inferior and subject to [a]ppellant's . . . section 11420 lien." Appellant's argument lacks merit.
A trustee's deed conveys to the purchaser the trustor's interest in the property as of the date the deed was originally executed. (Homestead, supra, 230 Cal.App.3d 424, 437; see also 4 Witkin, Summary of Cal. Law (10th ed. 2005) Security Transactions in Real Property, § 169, p. 969.) "The trustee's deed therefore passes the title held by the trustor as of that earlier time plus any after-acquired title, rather than the title that the trustor held on the date of the foreclosure sale. [Citations.]" (Bernhardt, 1 Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2010) § 2.99, p. 134.) Liens that attached to the property after execution of the foreclosed deed are eliminated such that the purchaser at the trustee sale takes title to the property free of those junior liens. (Homestead, at p. 437; Bernhardt, supra, § 2.99, p. 134.) However, the trustee's deed conveys the property to the purchaser subject to all the liens attached to the property prior to execution of the foreclosed deed. (Ibid.)
The Bernhardt treatise notes that certain governmental liens, for example, for tax and real property assessments (Rev. & Tax Code, § 2192.1), are superior to the trustee's deed and are not eliminated despite having been recorded after the deed of trust. (Bernhardt, supra, § 2.99, at p. 134.) Additionally, mechanic's liens are eliminated by a trustee's deed only if the date work commenced was later than the date on which the foreclosed deed was recorded. (Ibid.) Appellant provides no authority, nor have we found any, providing that a lien for estate administration expenses recorded after the deed of trust is superior to the trustee's deed.
Here, following the foreclosure and trustee's sale, the trustee's deed conveyed the title to the Property held by decedent as of May 13, 2005, when she executed the deed of trust under which the foreclosure sale was subsequently conducted. The purported section 11420 lien recorded by appellant in December 2009 was extinguished by the trustee's sale and Financial Freedom, the purchaser at the sale, purchased the Property free and clear of the lien. The trial court correctly concluded the lien did not survive the foreclosure of the Property.
Appellant's reliance on Estate of Stein (1968) 267 Cal.App.2d 631 is misplaced. Stein concerned the calculation of statutory executrix and attorney fees where the property was foreclosed on during the probate period. The appellate court noted that the statutory scheme required that the statutory fees be computed on the appraised value of estate property whether or not there was a sale or foreclosure during the probate period. And, if there is a sale, the gain or loss over the appraised value is considered in computing the statutory fees. (Id. at p. 641.) The court concluded that a foreclosure must be considered a sale for purposes of the statutory fee calculation. (Ibid.) Stein did not concern whether a lien established during probate survives the foreclosure process.
III. The Court Properly Imposed the Lien On the Estate's Furniture
Appellant also contends the court's order improperly imposed a lien for $12,327.50 (the sum of the attorney fees and costs awarded) against the estate's furniture and personnel effects distributed to him.
The court's order stated in part: "The estate in the possession of the executor remaining for distribution is ordered sold and the proceeds shall be applied to the attorney's statutory compensation. Alternatively and with his counsel's specific consent, [appellant] may distribute the furniture to himself as the sole beneficiary of [decedent's] will, but that the assets so distributed shall be subject to a lien by his counsel. Any other property of the estate not now known or discovered that may belong to the estate or in which the decedent or the estate may have any interest shall likewise be distributed to [appellant]. However, any and all assets distributed to [appellant] shall be subject to a lien for any and all unpaid statutory and extraordinary compensation and costs payable to his attorney, up to the amount of fees and costs ordered."
In reliance on Hatch v. Bush (1963) 215 Cal.App.2d 692, 703-705, appellant argues that attorney fees and costs incurred on behalf of the administrator in a probate matter are properly categorized as expenses of administration that are payable like other estate expenses, and must be borne by the estate, not by the administrator personally. Appellant argues that as a result of the court's order, his options were to dissipate the "modest items" he received from the estate, force him to make a direct payment to his counsel for the attorney fees and costs ordered or force his counsel to "essentially assist [him] with no expectation of receiving" the compensation ordered. He also argues that the practical effect of the court's order is that it provides no means for his counsel to be paid out of the estate or alternatively, charges him personally for the fees and costs awarded. He asserts that the order must be reversed and instead, the probate court should order that all fees and costs incurred by him for work performed by his counsel for estate administration be charged against the estate. Appellant's contention lacks merit.
Pursuant to section 11640, the payment of estate debts takes priority over distribution of the estate to the estate's beneficiaries. As we noted ante, the expenses of administration, including an attorney's allowed compensation, are given the highest priority. (§ 11420, subd. (a)(1).) Contrary to appellant's assertion, the court's order does not require that the attorney compensation award be borne by appellant personally. Instead, it requires that, to satisfy the estate's attorney's statutory compensation debt, the remaining estate assets be sold and the proceeds applied to the attorney's statutory compensation. Alternatively, the order provided that with the specific consent of appellant's counsel, appellant could distribute the estate's furniture to himself subject to a lien by counsel. Neither alternative requires that the attorney compensation award be borne by appellant personally. As recognized by the court, in distributing the estate of a decedent, the probate court has the power "to declare a lien thereon in favor of a third person and that the distributee shall hold it subject to such lien." (Title Ins. Etc. Co. v. Miller & Lux, Inc., supra, 183 Cal. 71, 89.) We conclude appellant has failed to establish any error in the court's imposition of the lien to satisfy the attorney compensation award.
Section 11640, subdivision (a) provides: "When all debts have been paid or adequately provided for, or if the estate is insolvent, and the estate is in a condition to be closed, the personal representative shall file a petition for, and the court shall make, an order for final distribution of the estate."
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DISPOSITION
The order is affirmed.
Simons, Acting P. J.
We concur:
Needham, J.
Bruiniers, J.