Filed 8/6/20 Andersen v. Andersen CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

SCOTT K. ANDERSEN,

Plaintiff and Appellant,

v.

TODD H. ANDERSEN, as Trustee, etc.

Defendant and Respondent.

A157900

(Napa County

Super. Ct. No. 19PR000051)

Appellant Scott Andersen sought a pendente lite order to restrain trustee Todd Andersen from using trust assets to defend against a contest to invalidate the second and third amendments to Jane J. Campbell’s Surviving Grantor’s Trust. Appellant contends the trial court’s order denying relief is appealable pursuant to Probate Code section 1300, subdivision (f). We conclude that the order, which denied appellant’s request “without prejudice” to refiling, was not an appealable final order.

BACKGROUND

This dispute arises from a surviving grantor’s trust executed by Jane J. Campbell. Jane passed away on September 20, 2018, and is survived by her nephews, Scott and Todd, both beneficiaries of the trust. In 2014, Jane executed a complete restatement of the trust, naming Todd as successor trustee. The restatement contains two provisions that authorize the trustee to use trust assets to defend against contests and other litigation for the benefit of the trust.

Section 4.3.j (Deal With Claims) provides: “In order to protect the trust assets and to protect the Trustee in the performance of the Trustee’s duties, the Trustee may litigate, mediate, arbitrate, compromise, settle, release or appeal any claims held by or asserted against the trust (or which affect trust assets) and all expenses incurred in connection with such proceedings shall be charged against the trust or trusts that are involved, except to the extent a court of competent jurisdiction determines such expenses are incurred as a result of the Trustee’s liability for (1) breach of trust committed intentionally, with gross negligence, in bad faith, or with reckless indifference to the interest of the beneficiary; or (2) any profit that the Trustee derives from a breach of trust.”

Section 7.4 (No Contest Clause) states, in relevant part: “The Trustee is authorized to defend any contest of this document or any of its provisions at the expense of the trusts created under this document.”

The restatement was followed by three amendments executed on May 1, 2017 (First Amendment), February 28, 2018 (Second Amendment), and May 10, 2018 (Third Amendment). In the Third Amendment, Jane left to Todd her interest in a limited partnership which holds title to real property in Sonoma County. Each amendment contained identical language providing that “[e]xcept for the changes hereinabove set forth, the provisions of said Restated Trust Agreement dated April 17, 2014, shall be, and the same are hereby ratified and confirmed.”

On February 26, 2019, appellant filed a petition pursuant to section 17200 seeking to invalidate the Second and Third Amendments on the basis of undue influence, lack of capacity, fraud, and mistake. Appellant sought reformation of the trust and to restrain respondent from using trust assets to defend against the contest.

After briefing, the trial court issued an order denying appellant’s interim request to restrain respondent from using trust assets to defend against the petition. The court found that the restatement expressly authorized the trustee to use trust funds to protect the trust from a contest, citing sections 4.3.j. and 7.4, and that amendments to the trust did not alter these provisions. The court noted in particular: “Even though the request is denied without prejudice, if petitioner ultimately is successful in invalidating the second and third trust amendments based on undue influence, lack of capacity, fraud, and mistake by showing the trustee acted with ‘reckless indifference to the interest of the beneficiary,’ the Court would entertain a renewed request as to whether the continued use of trust assets to defend is appropriate and whether a surcharge is necessary.” This appeal followed.

DISCUSSION

This appeal largely turns on the “finality” of the trial court’s ruling denying appellant’s request for interim relief. Appellate jurisdiction over civil appeals is statutory and governed by Code of Civil Procedure section 904.1. (Art Movers, Inc. v. Ni West, Inc. (1992) 3 Cal.App.4th 640, 645 (Art Movers).) That statute codifies the “one final judgment rule,” which limits appellate courts’ jurisdiction to matters that have been fully adjudicated. (Ibid.) For a judgment to be final, the “judgment must dispose of all the causes of action pending between the parties.” (Ibid.) If any further judicial action is essential to a final determination of the rights of the parties, the order is not final. (Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1, 5 (Dana Point).) It is the effect of the order, not its label, that determines appealability. (Art Movers, at p. 645.)

Code of Civil Procedure section 904.1, subdivision (a)(10) provides that an appeal may be taken from “an order made appealable by the Probate Code.” Section 1300 of the Probate Code sets forth a list of generally appealable orders, while appeals relating to trusts are governed by section 1304. Section 1304 provides in relevant part: “With respect to a trust, the grant or denial of the following orders is appealable: [¶] (a) [a]ny final order under Chapter 3 (commencing with Section 17200) of Part 5 of Division 9, except the following: [¶] (1) [c]ompelling the trustee to submit an account or report acts as trustee. [¶] (2) [a]ccepting the resignation of the trustee.” (§ 1304, subd. (a), italics added.)

Appellant contends that a pendente lite order is appealable under section 1300, subdivision (f), which provides as follows: “In all proceedings governed by this code, an appeal may be taken from the making of, or the refusal to make, any of the following orders: [¶] . . . [¶] . . . [f]ixing, directing, authorizing, or allowing payment of the compensation or expenses of a fiduciary.” He argues that the denial of an interim request to restrain the trustee from using trust funds to defend the contest amounts to an order concerning the “expenses of a fiduciary.” He adds that unlike section 1304, section 1300 does not expressly state that an order must be “final” to be appealable, and that under Art Movers, the Court of Appeal concluded that the denial of interim injunctive relief was appealable. We are not persuaded by these arguments.

Section 1304 makes appealable any final orders issued with respect to a petition filed under section 17200. Appellant’s section 17200 petition seeks to restrain the internal affairs of the trust by suspending respondent’s authority under sections 4.3.j. and 7.4 to use trust assets to defend against the contest. Appellant’s request to suspend the trustee power falls under section 17200, subdivision (b)(10), which concerns the appointment or removal of a trustee. (See Schwartz v. Labow (2008) 164 Cal.App.4th 417, 426–427 [encompassed within the court’s authority to remove a trustee is the power to suspend a trustee].) Accordingly, an order issued pursuant to a section 17200 petition must be “final” to obtain appellate review. (§ 1304, subd. (a); see Aviles v. Swearingen (2017) 16 Cal.App.5th 485, 492 [order removing a trustee pendente lite and “without prejudice” was not appealable].)

Appellant’s reliance on Art Movers, supra, 3 Cal.App.4th 640, is misplaced. The appellants in that case relied on Code of Civil Procedure section 904.1, subdivision (f) as grounds for their appeal of the denial of a permanent injunction. The question before the court was “whether Code of Civil Procedure section 904.1 and its predecessor should be applied to an interlocutory order dismissing a cause of action for permanent injunctive relief.” (Art Movers, at pp. 645–646.) While the court recognized an exception under the Code of Civil Procedure to the “one final judgment rule” in the issuance or denial of pendente lite injunctions, that exception is inapplicable here. (Ibid.) As respondent points out, appellant insisted in the trial court proceedings below that he was not seeking preliminary injunctive relief. His belated assertion that the denial of the section 17200 petition was a denial of injunctive relief is not well taken. In any event, unlike the situation in Art Movers, there is no risk of substantial and irreparable harm that warrants immediate review of this nonfinal order. (Art Movers, at p. 647.) In denying appellant’s request for a pendente lite order, the trial court signaled that it would entertain a renewed request should he prevail on his trust contest and would consider whether a surcharge is necessary to recoup funds expended by the trustee. Appellant has not demonstrated how he would be irreparably harmed by the interim order.

The salient question here is whether the court’s ruling denying appellant’s request for interim relief is appealable as a final order. We conclude that it is not. The trial court’s denial was “without prejudice” and gave appellant another opportunity to file a new request asking the court to reassess whether trust funds should be used in defending against the petition. The court’s order specifically noted that “if petitioner ultimately is successful in invalidating the second and third trust amendments . . . the Court would entertain a renewed request as to whether the continued use of trust assets to defend is appropriate and whether a surcharge is necessary.” Because the order does not conclusively resolve the question whether the trustee can use trust assets to defend against the contest, and further judicial action is essential to a final determination of the rights of the parties, the order is not final or appealable. (Dana Point, supra, 51 Cal.4th at p. 5.) Appellant objects that under the order, he cannot renew his request until after the conclusion of the contest, and only if he prevails. That only underscores why the order is not a final determination. If he loses the underlying contest, he will have failed to persuade the trial court that respondent’s defense was unauthorized or improper, and he may raise the issue on appeal from the final judgment. But if he prevails, appellant will have an opportunity to seek a surcharge, making appellate review at this point unnecessary.

Section 16440, subdivision (a) provides that “[i]f the trustee commits a breach of trust, the trustee is chargeable with any of the following that is appropriate under the circumstances: [¶] (1) [a]ny loss or depreciation in value of the trust estate resulting from the breach of trust, with interest.” Established case law provides that “a court may not surcharge a fiduciary without substantial evidence that the particular loss was caused by the fiduciary’s fault. [Citation.] ‘Liability [to surcharge] is predicated upon a finding that the [fiduciary] failed to faithfully perform the duties of managing the business affairs of the estate “with that degree of prudence and diligence which a man of ordinary judgment would be expected to bestow upon his own affairs of a like nature.” ’ ” (Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523, 531.) Thus, the trial court’s willingness to consider a surcharge in the future should appellant prevail on his section 17200 petition illustrates that it has not finally resolved the issue of whether the trustee may use trust funds to litigate against the contest. We conclude the interim order denying relief is not appealable.

DISPOSITION

The appeal is dismissed. Respondent to recover his costs on appeal.

 

_________________________

Sanchez, J.

WE CONCUR:

_________________________

Humes, P. J.

_________________________

Banke, J.

A157900 Andersen v. Andersen