Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BP084768, Jane L. Johnson, Judge. Affirmed.
Lee B. Ackerman for Defendant and Appellant.
Law Offices of Thomas E. Stindt, Thomas E. Stindt; Steele & Persoff, Dan Persoff; Greines, Martin, Stein & Richland, Marc J. Poster and Alana B. Hoffman for Plaintiff and Respondent Citizens Business Bank.
Gifford & Dearing and Henry H. Dearing for Plaintiffs and Respondents Eva Groves and the Groves Group of Beneficiaries.
Duane Morris, Mitchell L. Lathrop and Brian D. Murphy for Plaintiff and Respondent John Birch Society.
Pillsbury Winthrop Shaw Pittman, Thomas V. Loran III; Orrick, Herrington & Sutcliffe, Kent B. Goss and Jason M. Wucetich for Plaintiff and Respondent The Yosemite Fund.
OPINION
ASHMANN-GERST, J.
Jerry De Mille (Jerry) is the former trustee of the Revocable Living Trust of David E. De Mille and Lois De Mille dated August 25, 1988, which was subsequently restated on April 14, 2000 (trust). He appeals a judgment in which he was ordered under Probate Code section 856 to reimburse the trust for $656,000 he took from it, converted into collectibles, and distributed to himself. In particular, he challenges the double damages award of $1,312,000 pursuant to section 859. He contends: (1) he did not misappropriate any trust assets because the funds he used to purchase the collectibles came from joint accounts on which he was a signatory and co-owner; (2) the award under section 859 must be reversed because (a) relief under that statute was not properly requested, (b) the petition for recovery of trust assets was not properly served on all appropriate parties, (c) section 859 permitted double damages in the amount of $1,312,000, not an aggregate award of $1,968,000, and (d) the statement of decision did not include a finding that he acted in bad faith with respect to his use of the funds in the joint accounts; and (3) the probate court erred when it ordered the withholding of $600,000 from the trust in order to fund the successor trustee’s efforts to recover assets that were misappropriated or wasted. We find no error and affirm.
Throughout this opinion David E. De Mille is referred to as “David” and Lois De Mille as “Lois.”
All further statutory references are to the Probate Code unless otherwise indicated.
The respondents are various people and entities. The first respondent is Citizens Business Bank (Citizens), the successor trustee of the trust. The other respondents are beneficiaries of the trust. They include Eva Groves (Groves); Robert Groves (Robert); Steven M. Groves (Steven); William W. Schmidt; Delores Schmidt Grantham; Virginia Schmidt Ackerman, Ronald Binder; Kathleen Binder; Bradley F. Campbell; Douglas B. Campbell; Velma Schmidt Harris; Town of Rockville, Corporation of the Presiding Bishop of The Church of Jesus Christ of Latter-Day Saints; The Yosemite Foundation doing business as The Yosemite Fund; and The John Birch Society (collectively beneficiaries). Citizens filed a substantive respondent’s brief. The beneficiaries filed joinders. Jerry asks us to strike Citizens’s respondent’s brief because it was not a party below. Regardless of whether Citizens had standing, we will consider its brief because it was adopted by the joining parties.
FACTS
The trust
The trust provided that when David died, specific distributions were to be made to Dennis M. De Mille, Robert and Steven. When Lois died, specific distributions were to be made to Dennis Charles Glover, Anne C. O’Connor, John Alan Glover, and Charles W. Glover. If either David or Lois survived the other, the trust was to be divided into Trust A, Trust B and Trust C. Each of these trusts was to be held, administered and distributed as a separate trust.
Regarding the subtrusts, the trust provided: (1) “Trust A shall consist of the surviving trustor’s interest in the community property of the trust estate and the surviving trustor’s separate property of the trust estate.” (2) “Trust B shall consist of the balance of the trust estate after allocating assets to Trust A and Trust C in accordance with this declaration of trust. . . .” (3) “Trust C shall consist of . . . the deceased trustor’s separate property of the trust estate.”
Once David and Lois were both deceased, the trustee was to divide the entire trust estate into 66 shares and distribute specified shares to Dennis M. De Mille (or others if he was not living), Robert, Steven, Dennis Montigo, Vartan Nostri, a special needs trust for Abner De Mille, Ronald Campbell, Janet Balta, Town of Rockville, Corporation of the Presiding Bishop of The Church of Jesus Christ of Latter-Day Saints, The John Birch Society, Dennis Charles Glover (or others if he was not living), Anne C. O’Connor, John Alan Glover, Charles W. Glover, The Yosemite Fund, William R. Schmidt, Velma Schmidt Harris, Delores Schmidt Grantham, Virginia Schmidt Ackerm, Ronald Binder and Kathleen Binder.
David and Lois retained the power to amend the trust while they were both living. However, while a surviving trustor could amend or revoke Trust A, he or she could not amend Trust B or Trust C. Gifts required after the death of either David or Lois were irrevocable when that person died.
On April 14, 2000, the trust was restated. Lois died on October 17, 2000. Subsequently, on November 21, 2002, David amended the trust and named Jerry as trustee.
The specific gift designation; the power of appointment; the amendment; the handwritten
A specific gift designation was purportedly executed by David on December 14, 2002. It instructed the trustee to distribute David’s personal property to his brother, Horace De Mille (Horace).
A power of appointment was prepared but not signed. It proposed to require the trustee to administer Trust A, Trust B and Trust C for the benefit of Dennis De Mille and David’s grandchildren (Michelle Cavaness, Dennis Michael Montoya, Robert and Steven). They were to receive the net income. The power of appointment then stated: “Upon the death of the last surviving beneficiary, the Trustee shall distribute the balance of the Trust Estate to [Horace]. If [Horace] fails to survive the last surviving beneficiary by Thirty (30) days, said share shall be distributed to [Jerry], and upon such distribution the Trust shall thereupon terminate.”
A second amendment to the trust was also prepared but not signed. It stated: “All tangible personal property belonging to the Trust Estate shall be distributed to [Horace]. In the event [Horace] fails to survive the Trustor by Thirty (30) days, this gift shall be distributed to [Jerry.]”
Handwritten notes purportedly signed by David indicated that gifts of $11,000 should be made to Horace, Jerry and Michael D. De Mille. The handwritten notes referred to a new trust which would give Dennis De Mille and David’s four grandchildren a better deal, delete the other beneficiaries, and provide that the balance of the estate would go to Jerry.
Jerry’s March 22, 2004 petition for confirmation of exercise of power of appointment
As trustee, Jerry filed a petition to, inter alia, confirm David’s exercise of his power of appointment.
Groves’s June 10, 2004 petition to remove Jerry as trustee of Trust B and Trust C and to appoint a successor trustee
Groves filed a petition asking the probate court to remove Jerry as trustee of Trust B and Trust C, arguing: Pursuant to the trust, either Matthias O. Baumueller (Baumueller) or Citizens should be the successor trustee after David’s death. However, Jerry claims to be the trustee. He should be removed because he is diverting trust assets in order to enrich himself. Pursuant to section 17200, Groves requested an accounting of the trust.
Jerry’s amended first account
In his trustee’s amended first account of the trust, Jerry disclosed that he paid himself $298,300 for his services as trustee. In schedule 2 of the amended first account, he stated: “The following personal property acquired outside of the Trust was received by Trust A: [¶] (See Following Pages 17 and 18 for breakdown): $582,000.” The ensuing two pages listed four collectible automobiles valued at a total of $201,000, four collectible motorcycles valued at $131,000, motorcycle related literature valued at $46,000, various motorcycle accessories valued at $16,000, 20 collectible bicycles valued at $89,000, and bicycle accessories and literature valued together, as a package, at $98,000.
Trial on the June 10, 2004 petition
On May 2 and May 6, 2005, the probate court conducted a trial regarding Groves’s June 10, 2004 petition. After considering argument and testimony, the probate court entered an order removing Jerry as trustee of Trust B and Trust C and appointing Citizens as the successor trustee.
Groves’s June 27, 2005 petition
After trial, Groves filed a petition on June 27, 2005. The petition sought to remove Jerry as trustee of Trust A. It requested appointment of a successor trustee, recovery of property taken in bad faith, recovery of double damages under section 859, special powers and instructions for the successor trustee, and a hearing for common fund reimbursement claims.
The petition alleged: Jerry forged the specific gift designation knowing personal property would be distributed to intended beneficiaries free of any death tax. He forged David’s signature on the handwritten notes that he now claims support a finding that David wanted to exercise his power of appointment. On March 30 and 31, 2003, while David was in the hospital, Jerry gave Jeff Gilbert (Gilbert) money to purchase motorcycles, bicycles and related items (sometimes referred to as collectibles). David died on April 1, 2003. Jerry now contends that the collectibles belong to his father, Horace. Nonetheless, Jerry retains possession. On David’s estate tax return, Jerry listed the value of the property as $582,000. But Jerry spent at least $50,000 more for those purchases. Also, Jerry paid Gilbert $120,000 for unspecified services. Jerry tried to convince some of the beneficiaries that they could receive secret distributions in contravention of the trust. Further, he attempted to hide his purchase and possession of the collectibles.
The prayer requested, inter alia, a declaration that Jerry improperly took trust assets in the form of the collectibles worth $582,000, that he took cash in order to purchase the collectibles, and that he is liable for double damages under section 859 of at least $1.2 million. Also, the prayer requested, inter alia, an order appointing Citizens as successor trustee of Trust A and requiring Citizens to withhold $600,000 as a litigation fund, recover the collectibles, and seek recovery of all unnecessary fees paid to Gilbert.
The John Birch Society and the Yosemite Foundation doing business as the Yosemite Fund filed separate joinders.
Trial on the March 22, 2004, and June 27, 2005 petitions
Trial on the March 22, 2004, and June 10, 2005 petitions, commenced on September 13, 2005. Among others, the following witnesses testified.
Robert
According to Robert, Jerry called and said all the grandchildren should meet because he “was going to put the balance of the trust . . . which he said was around $3 million—into five separate accounts, one for each of the four grandchildren and one for [Dennis].”
Robert thought the idea of changing the extensive and very specific trust was “fishy.” When asked about the meeting with Jerry, Robert replied: “[Jerry] went into more detail about the matters he discussed on the phone. He said there were a certain number of other people and entities in the original trust that he said [David] didn’t want to provide for anymore. So [Jerry] was going to use his power to cut them out and they’d just divide the funds between the five of us—‘The five of us,’ meaning Dennis and the four grandchildren. [¶] And he said he was obligated . . . to take some money in return for managing, which, I believe, was something like 1 percent of the estate. And he said he didn’t want to, but he had to.”
Jerry asked the grandchildren to sign contracts (September 1, 2003 contracts). Robert wanted to consult an attorney first, and he said so. Jerry got agitated, but then calmed down.
Robert was concerned about what would happen if the people who were cut out of the trust found out. According to Robert, Jerry said: “‘Well, the great thing about doing this with a trust is a trust is a private document. Nobody ever finds out they’re in it until the trustor dies. . . . I know that you and [me and Dennis]’ [are] the only people who ha[ve] a copy of the trust. And [Jerry] advised me to burn my copy of the trust.” When asked what Jerry said to the notion of Robert rejecting the deal, Robert stated: “[H]e said . . . he had like a box of files next to him, which he gestured to. And he said he had all of the documentation to prove that . . . what he was doing was legal. [¶] But he said that it would take years and years in court, something like three to five years, and the expense would be massive and deplete the estate, and we would all not get any money at the end of the day; whereas, this way, this circumvented all that and went right to us receiving the money.”
Baumueller
Baumueller is a certified financial planner who managed investments for David. Baumueller and Robert Laney (Laney), an estate attorney, met with David on October 3, 2002, to discuss dividing the trust into Trust A, Trust B and Trust C. David dictated some changes to the distributions. But the list of people who were to receive gifts stayed “pretty much . . . the same.” He never mentioned giving a gift to Jerry.
The creation of Trust A, Trust B and Trust C was delayed because David was hesitant and did not quite understand why it was necessary. After Laney explained it, David signed all the required papers. But, a few weeks later, David did not remember what transpired at the meeting.
Baumueller went to Germany after the October 3, 2002 meeting. While there, he called David. David was confused and upset. He said, “[Y]ou took my money. It’s gone. You’ll put me on the street. You’re never coming back.” Baumueller explained that David’s money had been placed into three subtrusts. According to Baumueller, David did not remember anything about the October 3, 2002 meeting.
When Baumueller returned from Germany, he showed David mutual fund statements that detailed all the various transfers to subtrusts. At first he seemed to understand. But after a while he said that his money was gone and that Baumueller had taken it. At the time, David was frail and pale. He had a mark on his head. According to the housekeeper, David had been falling and had only just returned from the hospital.
Baumueller never saw David again.
After satisfying Jerry that nothing had been taken, Baumueller told Jerry that he wanted to tell David in person he had not taken any money. But according to Baumueller: “Jerry just kept assuring me that [David] knows that nothing was taken but that he is now representing [David], and he’s the successor trustee now and . . . it would be better if I not contact him. And he asked [that] . . . any correspondence, to solely go through him.”
During the last six months to a year that Baumueller interacted with David, he noticed a decrease in David’s ability to recognize different forms and statements and financial activities.
Jerry
Jerry testified that he discussed estate plans with David in October 2000. David indicated that he needed to make some changes to the trust and eliminate a bunch of beneficiaries. In particular, he wanted to eliminate the gifts to Lois’s relatives.
When Jerry was asked about initial gifts he claimed he received, he testified: “These were checks for me, which we put in—I called it a joint account. They were for me to spend on whatever I wanted to spend them on. And in case something happened to me, he would still have access to the remainder of that money.” Jerry explained that in early December 2002, they went to Washington Mutual and Bank of America to open the joint accounts. David funded those accounts by depositing $700,000 to $800,000.
Jerry asked Gilbert to prepare a document (the Ramblings) regarding potential purchases of antique vehicles. Jerry testified: “The [Ramblings] was presented to [David] for tax purposes because [David] had a great concern of estate death taxes. And [the Ramblings] explained to him, from an accountant, the value of while he was still alive of purchasing these type of items to make inroads as far as his goal of tax reduction.” Although Jerry was the purchaser, Jerry said David benefited. Asked how David benefited, Jerry stated: “He would only benefit by dying and, in fact, pay less taxes.” Jerry was asked to clarify how David would benefit if he was not the owner. Jerry replied: “By giving me access to money to spend down his estate with. The estate would have less taxable items to be drawn from.” Still, Jerry admitted that the gift of money to him was not reported on the estate tax return. According to Jerry, the “estate tax return was to be amended at a future date.” He admitted that he did not report the money to the Internal Revenue Service as a gift to himself from David.
On March 30, 2003, David was in the hospital. On March 30 and 31, 2003, Jerry wrote checks for $375,000. He was asked: “Isn’t it true that the cash that is represented by the checks . . ., if used to purchase antique vehicles, would create a gift for . . . [Horace] . . . under the specific gift designation?” Jerry answered in the affirmative. Jerry testified that the checks were used to purchase antique vehicles, and that the use of David’s money for those purchases benefited himself as well as Horace. Jerry was asked: “And the benefit to yourself would be that your father was benefited?” Response: “It’s basically one and the same, my father or myself.”
Jerry was shown a bill of sale (bill of sale) for certain purchases. He admitted that he signed it on behalf of David.
Jerry testified: “The bank accounts that these things were purchased from are not in the trust.” When it was pointed out that those items were listed in the trust accounting, Jerry stated: “I believe that’s where they’re listed, for information.” To explain why the accounting showed a distribution from the trust to Horace, Jerry stated: “The accountant put that information in. It had to be a listed item to somebody.” When asked whether the accounting failed to reflect his true expression of what happened with the joint accounts, Jerry said: “Yes.” He was then asked why he signed the accounting, which he signed under penalty of perjury. Response: “I don’t believe I signed the document.” But when shown the first amended accounting, he agreed it bore his signature. Jerry stated that the motorcycles, bicycles and antique cars were part of the trust, but were then distributed to Horace on June 1, 2004. According to Jerry, he is in charge of Horace’s personal care.
Regarding Horace, Jerry admitted that when he was deposed, Horace did not know his birth date or the current year. Also, he was not able to recognize that they were discussing his brother, David.
Jerry was asked if the $582,000 in tangible personal property had to be part of David’s estate for it to be distributed as a gift. Jerry said no. When asked “how could you give trust property in such an amount to [Horace] unless such property were part of the trust.” Jerry replied: “It didn’t really go to [Horace].” Asked who it went to, Jerry stated: “I have control over it.” The following colloquy ensued. Question: “So you distributed the property to yourself rather than your father?” Answer: “In lieu of.” Question: “So your father is allowing you to hold the property. Is that what you are saying?” Answer: “No.” Question: “You’re saying the property went to you?” Answer: “Yes.” Question: “On what possible basis could you distribute trust property existing as of date of death in the trust estate in an amount of $582,000 to yourself?” Answer: “I don’t know.”
Gilbert
Gilbert is a certified public account for over 30 years. He provided services to Jerry and the estate and charged $87,250.
Gilbert prepared the David’s estate tax return with Jerry. David’s estate tax return stated that there was no jointly held property. It listed $581,000 worth of personal property. To derive the fair market valuation, Gilbert used the historical cost and his understanding of the market. He sold two vehicles to the trust for $198,000, but he listed the value as $150,000. In his view, the value had to be discounted for various reasons, including the cost of marketing the vehicles for subsequent sale. Gilbert received $262,000 from the trust between March 20 and March 30, 2003, for the purchase of bicycles and motorcycles in the future. In exchange, Gilbert gave Jerry four motorcycles, which Gilbert appraised at $27,000. But later Gilbert replaced those motorcycles with bicycles and other motorcycles. On the tax return, Gilbert listed the value of what Jerry received as $245,000. Last, Gilbert sold the trust 150 magazines for $40,000. It was valued at $30,000 on the tax return. According to Gilbert, the total discount was $75,000.
The accounting said the personal property was worth $582,000.
Howard C. Rile
Howard C. Rile (Rile) was retained as a handwriting expert. He opined that the signatures on the handwritten notes and specific gift designation were “carefully executed simulations” of David’s signature.
The ruling
The probate court denied Jerry’s March 22, 2004 petition, and granted the June 27, 2005 petition. The probate court issued a statement of decision on January 23, 2006.
The probate court found: (1) David placed his trust and confidence in Jerry from October 8, 2002, to the time David died. (2) During that time David was forgetful and frail. (3) From the beginning, Jerry sought to exploit his relationship with David for Jerry’s personal benefit. (4) Jerry forged David’s name on the exercise of power of appointment and the specific gift designation. (5) Jerry’s purchase of tangible personal property for the trust was a thinly disguised scheme to convert cash to a gift of tangible personal property for Horace or himself via the forged specific gift designation. (6) After David’s death, Jerry knowingly attempted to subvert the trust at the meeting with David’s grandchildren on September 1, 2003. (7) There is a presumption of undue influence because David placed his trust in Jerry, Jerry was an active participant in the creation of the purported exercise of powers of attorney, and the purported exercise of powers of appointment created an undue gift for Jerry. (8) In bad faith, Jerry took $656,000 in cash and/or property from the trust.
The probate court found that the testimony of Jerry and Gilbert was not credible. They admitted to drafting documents—the Ramblings; the bill of sale; the September 1, 2003, contracts; the accounting and David’s estate tax return—“that can only be construed as attempts to deceive [David] and the trust beneficiaries.” Jerry and Gilbert admitted to participating in transactions “that can only be construed as self-serving exploitation of their positions of influence. Their explanations for their acts were either non-existent or preposterous.”
The probate court stated that the trust could recover $656,000. Also, pursuant to section 859, the trust was entitled to $1,312,000 in double damages. The successor trustee was given the power to withhold $600,000 from distribution in order to collect funds from Jerry.
Judgment was entered on February 23, 2006.
Jerry’s motion to set aside the judgment; motion for new trial
Jerry moved the probate court to set aside the judgment and grant a new trial on the grounds, inter alia, that: (1) the evidence was insufficient to justify the decision; and (2) the award of damages was excessive. In particular, Jerry argued that he could not be held liable for double damages because the beneficiaries never filed a petition under section 850. Additionally, they failed to serve Horace with their petition, which rendered the petition defective. Jerry asserted that the probate court could not scrutinize expenditures from joint accounts because they were not part of the trust estate. Also, he argued that his withdrawals had to be deemed, as a matter of law, gifts from David. The motion was denied.
This timely appeal followed.
DISCUSSION
1. The damages award pursuant to section 859.
Jerry contends that the damages award under section 859 was improper because neither Citizens nor the beneficiaries properly filed and served a section 850 petition, Jerry did not take any trust property because the funds he used to purchase collectibles came from joint checking accounts on which he was a signatory, section 859 does not permit an award of treble damages and, finally, there is no evidence that Jerry acted in bad faith. We turn to these issues.
a. Section 850.
A trustee or any interested person can file a petition for a probate court order pertaining to the conveyance or transfer of property claimed to belong to the decedent or a third party. (§ 850, subd. (a).) “The petition shall set forth facts upon which the claim is based.” (§ 850, subd. (b).)
“At least 30 days prior to the day of the hearing, the petitioner shall cause notice of the hearing and a copy of the petition to be served in the manner provided in Chapter 4 (commencing with section 413.10) of Title 5 of Part 2 of the Code of Civil Procedure on all of the following persons where applicable: [¶] . . . [¶] (2) Each person claiming an interest in, or having title to or possession of, the property.” (§ 851, subd. (a)(2).) Code of Civil Procedure section 413.10 provides that, except as otherwise provided by statute, “a summons shall be served on a person” within this state “as provided in this chapter.” The chapter permits, inter alia, personal service, substitute service, and service by mail (if the person served signs an acknowledgment and receipt). (Code Civ. Proc., §§ 415.10, 415.20, 415.30.)
According to Jerry, the June 27, 2005 petition, was defective because it did not state the facts upon which the claim was based, and there were no allegations regarding joint accounts. Further, he contends that Groves did not provide notice to Horace, which rendered the petition defective.
1. The petition satisfied section 850.
Groves’s June 27, 2005 petition, alleged that Jerry gave Gilbert trust money with instructions to purchase motorcycles and other objects. The prayer requested that the probate court declare that Jerry took trust assets worth $582,000, and also took cash. As well, the prayer asked the probate court to “[a]ssess as double damages, per [section 859], against [Jerry] for such taking, i.e.[,] damages of at least $1.2 million.”
The petition adequately stated the facts upon which Groves asserted her claim for section 859 damages. It was based on the allegation that Jerry took personal property and cash that belonged to the trust.
Next, Jerry complains that the petition does not state the facts upon which the statement of decision was based. But this contention is belied by the record. According to the statement of decision, Jerry wrongfully took $656,000 in cash and property belonging to the trust.
2. Notice.
Jerry contends that the judgment must be reversed because the June 27, 2005 petition, was not properly served on Horace and, as a result, the probate court lacked jurisdiction over the proceedings.
Horace was served by mail on June 28, 2005. The trial did not commence until September 12, 2005. Though he received more than 30 days notice, he was not provided with statutory notice, i.e., personal or substitute service. The issue, then, is whether Horace was entitled to statutory notice. In the opening brief, Jerry cites Estate of Scott (1987) 197 Cal.App.3d 913 (Scott) for the proposition that the probate court’s failure to address the notice issue in the statement of decision “is itself grounds for reversal of the entire judgment.”
In Scott, a wife appealed the denial of her probate court petition to recover one-half of her deceased husband’s inter vivos gift of community property to a third party. (Scott, supra, 197 Cal.App.3d at p. 915.) The court affirmed. The probate court lacked jurisdiction over the matter. While it had jurisdiction over the decedent’s property, the wife was trying to recover her own share of the community estate, not the decedent’s share. (Id. at pp. 918–919.) Because Scott was not predicated on whether a statement of decision addressed a notice issue, it is inapposite.
The beneficiaries defend the judgment by stating that Horace was not entitled to statutory notice. They add: “And while the forged specific gift directive purported to leave the property to Horace, Jerry testified that he, rather than Horace, had control of the property.”
The evidence is supportive. While testifying regarding gifts to Horace, Jerry was asked: “Well, how could you give trust property [in the amount of $582,000] to [Horace] unless such property were part of the trust?” Jerry replied: “It didn’t really go to my father.” Question: “Who did it go to?” Answer: “I have control over it.” Question: “So you distributed the property to yourself rather than to your father?” Answer: “In lieu of.” Question: “So your father is allowing you to hold the property. Is that what you are saying?” Answer: “No.” Question: “You’re saying that the property went to you?” Answer: “Yes.”
The beneficiaries also point out that when Jerry’s attorney was arguing the notice issue, he stated: “Jerry did testify . . . that Horace has told him that he can have the items and nobody has disputed that.” Moreover, when Jerry was asked whether the use of David’s money to purchase antique vehicles would create a gift and benefit for Horace, Jerry replied: “And myself, yes.” Jerry was asked how he would be benefited by a gift to Horace, he stated: “It’s basically one and the same, my father or myself.”
Based on this evidence, Horace had neither title nor possession of any property at issue below because, by Jerry’s own testimony, it was distributed to him. This raises the issue of whether Horace claimed an interest in the property that Jerry distributed to himself. However, Jerry’s attorney reminded the probate court that, per Jerry, Horace said Jerry could have the items.
The reply brief states: “It is difficult to understand how [the beneficiaries] can argue that [Horace] was not a person who claimed ‘an interest in . . . the property’ given that the [petition] itself identifies Horace as the individual who was the intended recipient of the very property in question. . . . If David’s signature on the specific gift designation had been found to not be a forgery, Horace would have been entitled to receive the personal property. . . . Under such circumstances, there is no question that [Horace] had a ‘claim’ against the [trust] for the personal property, which claim may have been affected (and indeed was) by the proceeding (the very definition of an ‘interested person’ that is set forth in [section 48]). As an ‘interested person,’ Horace was required to have been personally served with . . . the [petition.] [¶] Since Horace was entitled to be personally served, the failure to so serve him deprived the [probate court] of jurisdiction to hear the matter.”
The problem with this argument is that nowhere does Jerry indicate that Horace voiced a claim to any trust property.
Based on the record and the proffered argument, we conclude that Horace was not a person described by section 851, subdivision (a). Therefore, whether he received statutory notice is moot.
b. Jerry’s use of funds from the joint checking accounts.
The parties offer a legal polemics regarding the rights of people who withdraw funds from joint checking accounts. Jerry contends that he was the owner of the funds in the joint checking accounts, and that he could use those funds for anything he wished because they were gifts. The beneficiaries argue that because all the funds were deposited by David, the funds belonged to him unless he manifested intent to make a gift to Jerry. They contend that David never manifested such intent, and Jerry obtained the funds by undue influence.
1. The law of joint checking accounts.
The California Multiple Parties Accounts Law at section 5100 et seq. provides that a joint account “means an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship.” (§ 5130.) An “account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each of the sums on deposit, unless there is clear and convincing evidence of a different intent.” (§ 5301.)
“[O]wnership of withdrawn funds which exceed the withdrawing party’s net contribution passes to that party by way of gift to the extent, but only to the extent, there is no independent legal obligation requiring the party to account for the proceeds. Whether such an obligation exists depends on the objective facts and circumstances of the transaction rather than on the transferor’s subjective intent. [Citation.]” (Lee v. Yang (2003) 111 Cal.App.4th 481, 491–492 (Lee).) While listing the scenarios under which a withdrawing party might have a duty to account, Lee stated: “So, too, a withdrawing party may have fiduciary responsibilities with respect to trust funds deposited in the joint account. [Citation.]” (Id. at p. 492.)
If, for personal expenses, a fiduciary withdraws or uses joint account funds that come from a trust, the fiduciary must account. (Evangelho v. Presoto (1998) 67 Cal.App.4th 615, 624 [former trustee who placed trust funds in a joint account and withdrew the funds had to account].)
2. Undue influence law.
Regarding undue influence, the probate court cited Estate of Sarabia (1990) 221 Cal.App.3d 599, 605 (Sarabia). Sarabia is instructive. It stated: “The presumption of undue influence arises only if all of the following elements are shown: (1) the existence of a confidential relationship between the testator and the person alleged to have exerted undue influence; (2) active participation by such person in the actual preparation or execution of the will, such conduct not being of a merely incidental nature; and (3) undue profit passing to that person by virtue of the will. If this presumption is activated, it shifts to the proponent of the will the burden of producing proof by a preponderance of evidence that the [document] was not procured by undue influence. It is for the trier of fact to determine whether the presumption will apply and whether the burden of rebutting it has been satisfied. [Citations.]”
3. Relevant Probate Code law.
“On acceptance of the trust, the trustee has a duty to administer the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to this division.” (§ 16000.) The trustee has a duty to administer the trust solely in the interest of the beneficiaries. (§ 16002.) “The trustee has a duty not to use or deal with trust property for the trustee’s own profit or for any other purpose
unconnected with the trust, nor to take part in any transaction in which the trustee has an interest adverse to the beneficiary.” (§ 16004, subd. (a).) “A transaction between the trustee and a beneficiary which occurs during the existence of the trust or while the trustee’s influence with the beneficiary remains and by which the trustee obtains an advantage from the beneficiary is presumed to be a violation of the trustee’s fiduciary duties. This presumption is a presumption affecting the burden of proof.” (§ 16004, subd. (c).) “The exercise of a power by a trustee is subject to the trustee’s fiduciary duties.” (§ 16202.) In that vein, a trustee has a fiduciary duty to protect the trust corpus. (Estate of Goulet (1995) 10 Cal.4th 1074, 1084.) “Except as provided in Section 21351, no provision, or provisions, of any instrument shall be valid to make any donative transfer to any of the following: (1) The person who drafted the instrument. . . . [¶] . . . [¶] [or] (4) Any person who has a fiduciary relationship with the transferor, including, but not limited to, a conservator or trustee, who transcribes the instrument or causes it to be transcribed.” (§ 21350, subd. (a)(1), (4).)
4. Jerry’s right to property obtained with joint account funds.
Jerry was the trustee of Trust A, Trust B and Trust C, David placed his trust and confidence in Jerry, and David was forgetful and frail. As a result, Jerry owed David a fiduciary duty. Though Jerry argues that the joint accounts were a gift from David, any such gift was invalid under section 21350 because Jerry, as trustee of the trust, owed David a fiduciary duty. Further, under Lee, there was no gift because Jerry owed a fiduciary duty and had a duty to account. The same facts establish that Jerry obtained the joint account funds by undue influence. Also, he violated sections 16000, 16002, and 16004, and he breached his fiduciary duty to protect the corpus. These are additional reasons he had to account.
But this analysis is unnecessary.
Separate from whether the joint account funds belonged to Jerry, there was substantial evidence that the tangible personal property was placed in the trust after it was purchased. The tangible personal property purchased with the joint account funds was listed as trust property in the estate tax return. Also, those assets were listed as trust property in Jerry’s accounting. And at points in his testimony, Jerry agreed that the property belonged to the trust. He even admitted that he signed the bill of sale on David’s behalf. Because the tangible personal property was in the trust, the joint account issue is moot.
In opposition to the foregoing analysis, or anything similar, Jerry simply posits that a gift occurred when he withdrew the funds. Impliedly, he asserts that he did not owe David or the other beneficiaries a fiduciary duty. He avers that at the time he “withdrew the funds he was under no legal obligation to account for the funds or to account for how those funds were expended.” But he does not explain how he gets around sections 21350, 16000, 16002 and 16004, as well as his duty to account under Lee. This is fatal to his position on this point. But, as we have stated, the joint account issue is not dispositive.
Jerry complains that “requiring [him] to prove his defense before [the beneficiaries] established even a prima facie case against him, violates the fundamental principle underlying the burden of proof. Jerry should not have had to first [prove] that David intended to make a gift to him of the funds; rather [the beneficiaries] should have been required to prove that [there was] no such intent.” We disagree. There was a presumption that Jerry violated his duties as a trustee, which shifted the burden of proof to him to establish otherwise. (§ 16004, subd. (c).) Moreover, the facts proffered by the beneficiaries support a nullification of any gift under section 21350, as well as a finding of a duty to account under Lee. David’s intent does not factor into the analysis once probate law is applied. And again, even though Jerry focuses on the joint accounts, they are not turning points.
According to Jerry, it was improper for the probate court to make a finding of undue influence in connection with the joint accounts when ruling on his motion to set aside or grant a new trial. He says he was denied an opportunity to present counter evidence regarding undue influence. We do not take due process claims lightly, but this one is directed at a red herring. He had a duty to account based on multiple reasons not rebutted at trial.
c. Permissible damages under sections 856 and 859.
The parties dispute whether section 859 and the statutory scheme of which it is a part permitted an award of $656,000 under section 856 and then an award of $1,312,000 under section 859.
It does.
The statutory scheme is Division 2, Part 19 of the Probate Code, which is entitled “Conveyance or Transfer of Property Claimed To Belong to Decedent or Other Person.” Section 850 permits a party to petition for an order under Part 19. (Added by Stats. 2001, ch. 49 (S.B. 669), § 1.) If an improper transfer of the decedent’s property is made, “the court shall make an order authorizing and directing the personal representative or other fiduciary, or the person having title to or possession of the property, to execute a conveyance or transfer to the person entitled thereto, or granting other appropriate relief.” (§ 856.)
Section 859 provides: “If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to the estate of a decedent, conservatee, minor, or trust, the person shall be liable for twice the value of the property recovered by an action under this part. The remedy provided in this section shall be in addition to any other remedies available in law to a trustee, guardian or conservator, or personal representative or other successor in interest of a decedent.” (§ 859.) We are called upon to construe this language.
As we stated in Carson Redevelopment Agency v. Padilla (2006) 140 Cal.App.4th 1323, 1332: “‘When interpreting a statute, we must “ascertain the intent of the Legislature so as to effectuate the purpose of the law.” [Citation.] We must “look first to the words of the statute themselves, giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose. A construction making some words surplusage is to be avoided. The words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible. [Citations.] Where uncertainty exists consideration should be given to the consequences that will flow from a particular interpretation. [Citation.] Both the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent. [Citations.]” [Citation.]’”
In our view, the plain language of section 856 permitted the probate court to order Jerry to return the trust’s collectibles to the trust’s possession. But the probate court had discretion to fashion other appropriate relief. Because Gilbert testified that the collectibles were not worth what they were purchased for, this created doubt as to whether the trust could be made whole by a simple transfer of the assets. Also, the property started out as $656,000 in trust cash. Therefore, in lieu of ordering a transfer of the collectibles, the probate court reasonably ordered Jerry to sell the collectibles, transfer the proceeds to the trust, and then make up any shortfall. This ensured that the trust would be made whole.
Quite separately, section 859 authorized the probate court to issue an award equal to twice the value of the property recovered, which has a value of $656,000. Two times $656,000 is $1,312,000.
Aggregating the two awards, Jerry says, results in an improper treble damages under section 859. But that is a mischaracterization. It is two awards: one under section 856, one under section 859. By asserting that there should have been an award under section 859 for $1,312,000 and nothing else, he seeks to nullify section 856. Also, he seeks to avoid the language of section 859. It permits an award for “twice the value of the property recovered by an action under this part.” (§ 859.) Thus, it presumes that double damages comes only after property is recovered. In other words, section 859 is secondary to an order under section 856 directing a transfer of property or, as in this case, other appropriate relief.
Next, Jerry complains that the beneficiaries did not request the relief that the probate court granted. We cannot concur.
The prayer in the June 27, 2005 petition, requests a declaration that Jerry wrongfully took motorcycles, bicycles and related items worth $582,000, as well as the amount of cash he paid. It also asks for double damages under section 859. It then asked the probate court to order Citizens to “[s]eek recovery [of] all of the motorcycles, bicycles and related items for the trust” and “[s]eek rescission of all of the purchase and exchange contracts related thereto” They also requested orders or surcharges necessary to correct Jerry’s breach of fiduciary duty.
Though section 856 was not referenced, the beneficiaries requested relief under it when they sought either recovery of the collectibles or an unwinding of the purchase contracts, and also sought any other surcharges and orders necessary to correct losses suffered by Jerry’s actions. The prayer covered the range of relief contemplated by sections 856 and 859.
d. Bad faith.
According to Jerry, the award under section 859 must be reversed because the statement of decision is devoid of any finding that he withdrew funds from the joint accounts in bad faith.
We disagree.
Upon request by a party, a trial court is obligated to issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial. (Code Civ. Proc., § 634.) “When a statement of decision does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court either prior to entry of judgment or in conjunction with a motion under Section 657 or 663, it shall not be inferred on appeal or upon a motion under Section 657 or 663 that the trial court decided in favor of the prevailing party as to those facts or on that issue.” (Code Civ. Proc., § 634.)
Jerry does not suggest that he requested a statement of decision regarding whether he used joint account funds in bad faith. Neither does he contend that he brought any omission regarding that issue to the probate court’s attention. Therefore, we are free to presume that the probate court found that he acted in bad faith with respect to his use of joint account funds. In any event, there was evidence that the collectibles were in the trust and Jerry forged documents so he could obtain those collectibles under the guise of a gift to Horace. This established bad faith with respect to trust assets and supported the award of double damages under section 859. On this particular point, the statement of decision averred: “[Jerry] has in bad faith wrongfully taken, concealed, or disposed of property belonging to the Trust.” Further, the statement of decision does cover Jerry’s use of the joint account funds. It states: “The [probate court] finds that the amount of cash wrongfully taken, concealed or disposed [of] by [Jerry] in bad faith is $656,000.00.” Though this finding of fact does not reference the joint accounts, the evidence adduced at trial established the $656,000 used to purchase collectibles came from those accounts.
2. The $600,000 withholding.
Jerry challenges the $600,000 withholding. However, as the beneficiaries point out, Jerry lacks standing to object. We concur.
An aggrieved person may appeal an adverse judgment. “One is considered ‘aggrieved’ whose rights or interests are injuriously affected by the judgment. [Citations.] Appellant’s interest ‘“must be immediate, pecuniary, and substantial and not nominal or a remote consequence of the judgment.”’ [Citations.]” (County of Alameda v. Carleson (1971) 5 Cal.3d 730, 737.)
Jerry is not aggrieved. He has not challenged the probate court’s finding that the written power of appointment and specific-gift designation were forged and the $656,000 must be returned to the trust. Therefore, Jerry is not a beneficiary of the trust, and he has no pecuniary interest in it. Also, he was removed as trustee. Therefore, he has no possible trust interest which is being threatened.
In his reply brief, Jerry contends that his rights are injuriously affected by the order withholding $600,000, and the interest affected is immediate, pecuniary and substantial. He contends: “Jerry clearly satisfies all the requirements to establish his standing. Both the granting the successor trustee special powers and authorizing it to retain otherwise distributable trust monies to fund the litigation ‘war chest’ were predicated on the [probate court’s] rulings and the imposition of the treble damages award. Jerry’s liability for that award is a subject of this appeal and a ruling favorable to him necessarily will affect the successor trustee’s pursuit of Jerry, thereby affecting Jerry’s interests.”
The interests that Jerry refers to are personal. He fears that if Citizens is well funded, he will suffer personal loss. But those interests are not at issue. We are only concerned with the trust.
DISPOSITION
The judgment is affirmed.
Citizens and the beneficiaries shall recover their costs on appeal.
We concur: BOREN, P. J., DOI TODD, J.