Filed 1/27/20 Kote v. Larson CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

PETER KOTE, as Trustee, etc.,

Plaintiff and Appellant,

v.

DANIEL KEITH LARSON et al.,

Defendants and Respondents.

G056820

(Super. Ct. No. 30-2012-00539610)

O P I N I O N

Appeal from an order of the Superior Court of Orange County, David L. Belz, Judge. Affirmed in part and reversed and remanded in part. Motion to augment the record denied.

Law Offices of Steven Giammichele, Steven Giammichele and Clare Wernet for Plaintiff and Appellant.

Daniel Keith Larson, in pro. per., for Defendant and Respondent. Sharon Deon Sims, in pro. per., for Defendant and Respondent.

Erin Ellen Larson, in pro. per., for Defendant and Respondent.

* * *

This is the second time this case has been before us. In this appeal, plaintiff and appellant Peter Kote appeals from an order in favor of defendants and respondents Daniel Keith Larson (Daniel), Sharon Deon Sims (Sharon) and Erin Ellen Larson (collectively defendants). The order removed plaintiff as the trustee of the Gerald Raymond Larson and Barbara Anne Larson Revocable Trust (Trust), appointed a successor trustee without provision for a bond, reduced trustee compensation and attorney fees paid and placed the Trust under court supervision. Plaintiff argues the court had no authority to rule on these issues because they had previously been decided in a prior final order. He also asserts the court relied on improper grounds in reducing the trustee and attorney fees. Additionally, he claims the person the court selected as the successor trustee is adverse to the Trust and further the court erred in not requiring the successor trustee be bonded. Finally, plaintiff maintains the court had no authority to place the Trust under court supervision.

We agree the court erred in reducing trustee fees and attorney fees and also in failing to require a bond and reverse as to those issues. We remand to the court to determine if there are legally sufficient grounds for the court to waive a bond, and if not to order the successor trustee obtain the requisite bond. We disagree with plaintiff’s other arguments and otherwise affirm the order.

MOTION TO AUGMENT THE RECORD

Almost two months after the reply brief was filed, defendants filed a motion to augment the record. They gave no explanation of why augmentation would be proper or why they had waited so long to file the request.

We deny the request. Defendants’ delay is unreasonable, without any good cause. (Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 306, fn. 3 [request denied because made after respondent’s brief filed].) In addition, some of the documents were not part of the proceedings at issue in this appeal while others are from different cases. We may not augment the record with documents not before the trial court in this action. “Augmentation does not function to supplement the record with materials not before the trial court.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.)

DEFICIENCIES IN RESPONDENTS’ BRIEF

California Rules of Court, rule 8.204(a)(1)(C) requires a party to “[s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears.” This rule applies to the entire brief, not just the statement of facts. (Conservatorship of Kevin A. (2015) 240 Cal.App.4th 1241, 1253.) It is not our responsibility to search the record for evidence supporting defendants’ factual assertions and contentions. (City of Santa Maria v. Adam (2012) 211 Cal.App.4th 266, 286.)

With the exception of a few references to the register of actions, defendants cite only to their exhibits, which are not part of the record. There is not one citation to the clerk’s or reporter’s transcript. Based on this violation, we could strike the respondents’ brief. We decline to do so but instead elect to disregard any factual claims and treat as forfeited any arguments not supported by accurate citations to the record, which is essentially all of defendants’ arguments. (Butte Fire Cases (2018) 24 Cal.App.5th 1150, 1169, fn. 10; Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1294.)

In addition, the vast majority of the respondents’ brief is devoted to issues, arguments, claims, or grievances not relevant or responsive to the issues raised on appeal. These include, but are not limited to, arguments about a loan from the Trust; the alleged “unconstitutional enjoinment” of a related case filed by Dana K. Shelton Perez (Dana) against Daniel with the probate case; the alleged unenforceable and void judgment in Shelton v. Larson, which was also allegedly based on a clerical error; the failure to join an indispensable party; a bankruptcy in which the Trust is involved; and lack of subject matter jurisdiction. They also raise arguments about the Prior Appeal, apparently as to events occurring after remittitur. We will not consider any arguments that do not deal with the issues at hand.

Defendants also make claims about events occurring after the order at issue and after the notice of appeal was filed. We do not reach issues arising after the appeal is filed. (See In re Zeth S. (2003) 31 Cal.4th 396, 407-410, 413.) In addition, we are unable to understand many of defendants’ arguments and this is a separate ground for why we cannot address them.

FACTS AND PROCEDURAL HISTORY

Plaintiff, a private professional trustee, is the successor trustee of the Trust; both trustors are deceased. Daniel and Sharon, along with Dana, not a party to this appeal, are the children of the trustors and are each a 25 percent beneficiary of the Trust.

In August 2015, Daniel and Sharon filed a petition to remove plaintiff as trustee and to appoint themselves as successor trustees (Removal Petition). Plaintiff filed an objection to the Removal Petition.

In September 2015 Plaintiff filed his first account current (Accounting Petition) and sought instruction regarding two loans. The Accounting Petition showed payment of approximately $35,500 as attorney fees and just over $25,000 as trustee fees. Defendants filed objections (Objections) to the Accounting Petition.

Subsequently, there was a trial on the Removal Petition and on the Accounting Petition, including the Objections. The court denied the Removal Petition without prejudice. While noting defendants’ concerns, the court found they had not met their burden of proof to warrant removal and “under the code, there [was] no basis . . . to replace [plaintiff as the] trustee.”

Trial on the Accounting Petition proceeded, but on the second day of trial the court declared a mistrial because the trial had exceeded the estimated time and Daniel had asked for time to retain counsel. Nevertheless, approximately three weeks later the court entered an order, to which all the parties stipulated, instructing plaintiff how to proceed with the two loans. Subsequently, pursuant to the parties’ stipulation, the court ordered the mistrial order withdrawn.

At the continued trial on the Accounting Petition in August 2016, the parties stipulated the accounting could be approved subject to seven issues to be litigated: 1) a request for review by defendants of attorney fees charged by the Trust’s counsel; 2) defendants’ request plaintiff be surcharged for Trust losses for his alleged conduct; 3) a request for distribution of alleged excess cash in the Trust; 4) a request for award of costs to defendants for filing objections; 5) an order to expedite termination of the Trust under court supervision; 6) claimed failure of plaintiff to report gold coins in the accounting; and 7) a $2,500 truck surcharge (Stipulated Issues). Plaintiff, Daniel, and Sharon testified. During trial the court asked defendants several times to put on additional evidence regarding trustee fees and attorney fees. Defendants did not do so.

Thereafter, in September 2016 the court issued a detailed 20-page tentative decision (2016 Tentative Decision) wherein it addressed each of the Stipulated Issues. It noted the provision in the Trust stating “[n]o trustee shall be liable to any interested party for acts or omissions of the trustee, except those resulting from that trustee’s willful misconduct or gross negligence.”

Defendants had raised several grounds as to why plaintiff should be surcharged. The court found none of them persuasive and denied a surcharge, finding either no evidence of willful misconduct or gross negligence, defendants’ claims were unclear, no loss to the Trust, or insufficient evidence to support the claim.

As to defendants’ contention plaintiff overcharged the trust with his hourly fee and his one percent statutory fee, the court found insufficient evidence. The court also found plaintiff had not breached the Trust when it charged for time spent on the two loans as any time spent was reasonable as management of Trust assets.

The court approved the Accounting Petition for the period March 2010 through August 2015. It denied defendants’ request to suspend plaintiff’s powers and to substitute themselves as cotrustees as moot based on denial of the Removal Petition.

The court ruled that unless an objection was filed within 15 days, the 2016 Tentative Decision would become the proposed statement of decision. It ordered plaintiff to prepare a formal order.

On October 11 defendants filed, but did not serve, an opposition to the 2016 Tentative Decision. Two days later they filed a supplemental objection to the 2016 Tentative Decision. The court denied each of defendants’ objections and ordered plaintiff to file a final order. If no order was filed within 35 days, the 2016 Tentative Decision would be deemed the final order. On December 12, 2016 the 2016 Tentative Decision became the final order (2016 Order).

Two days later the court issued a minute order (December Minute Order) stating it had reopened the trial as to trustee fees and attorney fees based on defendants’ objections filed on October 31. It stated that at the August 2016 hearing it was agreed attorney fees and trustee fees would be decided at the hearing on the Accounting Petition. It further stated the record showed the court did not make findings approving those fees or the disbursements detailed in the Accounting Petition. The court noted defendants had argued attorney fees and trustee fees were still at issue in their October 31 objections. The court agreed and set a trial setting conference on those issues, ordering plaintiff and his counsel to provide itemized statements to defendants.

Plaintiff filed an ex parte motion to set aside the December Minute Order based on numerous grounds, including the finality of the 2016 Order and the court’s resulting lack of jurisdiction to reopen the trial, and that the issues had been fully litigated. The court “suspended” that portion of the December Minute Order requiring plaintiff to provide an itemized statement, and denied the motion, ruling it had “inherent power to correct its own record.”

The court conducted a hearing in June 2018 on the issue of attorney fees and trustee fees. Certain exhibits from the 2016 trial were admitted and the parties argued extensively. After taking the matter under submission the court issued a tentative decision (2018 Tentative Decision). Both plaintiff and Dana filed objections, which the court overruled, deeming the 2018 Tentative Decision the final order (2018 Order).

The 2018 Order set out defendants’ arguments about various alleged wrongdoings by plaintiff, noting these were repeats of arguments defendants had made previously. The 2018 Order referred to the findings in the 2016 Order where the court found insufficient evidence to support defendants’ claims, noting “[t]hese findings have become final” and declining to “revisit” them.

The 2018 Order stated that in connection with the trial on the Accounting Petition the court had “reserved” as to review and approval of the request for attorney fees and trustee fees, specifically the reasonableness of the request.

The 2018 Order also stated there was no evidence of a written attorney fees agreement or trustee agreement that set forth the fees to be charged. It noted plaintiff quoted hourly rates of $150 and $225 per hour. The court found it had discretion to determine the hourly rate and found $150 per hour for administrative work and $225 per hour for extraordinary fees for the trustee were reasonable and approved those amounts.

The court disallowed a fee of one percent of the value of the Trust assets finding there was no fee agreement as to that amount and the Trust did not provide for it. Further, there was no evidence defendants knew of that amount before they agreed to have plaintiff appointed as the trustee and it was “outside the authority of the Trust.” The court noted the statement in the 2016 Order there was insufficient evidence plaintiff had overcharged was a mistake of fact based on an assumption the Trust or a contract provided for the one percent fee. The court stated plaintiff had requested costs of $79.93 but since the court lacked information to enable it to verify how costs were calculated, it did not approve them. The court awarded $12,670 to plaintiff for trustee fees and ordered him to repay the Trust for any excessive amounts he had been paid.

As to attorney fees, the 2018 Order found the hourly rates were reasonable and customary and did not find time spent was excessive. Nor did it agree with defendants’ arguments legal work was unnecessary. It did find “some ambiguity and vagueness” in the description of work done and on that basis made “some downward adjustment.” It found $30,855.63 a reasonable amount for attorney fees and costs.

The 2018 Order removed plaintiff as trustee. It stated plaintiff’s payment of the one percent fee was not authorized by the Trust and not approved by the court. The court found it in the best interest of the Trust and its beneficiaries to suspend plaintiff and appoint Sharon as his successor. Additionally, on its own motion, the court ordered the Trust to be supervised by the court.

The 2018 Order provided it would be the statement of decision unless any party filed an objection to point out an order or a document stating controverted issues not covered.

Both plaintiff and Dana filed objections, which the court overruled.

DISCUSSION

1. Collateral Estoppel

Plaintiff argues the court had no authority to consider attorney fees and trustee fees in the 2018 Order because those issues were decided in the 2016 Order and were final. He notes the court approved the Accounting Petition and points to language in the 2018 Order where the court stated findings in the 2016 Order were final and would not be revisited. Plaintiff also challenges the court’s statement it had reserved on the issues of trustee fees and attorney fees, claiming there never was such a reservation.

We make no determination as to whether the issues were reserved. Even if they were not, the court had the authority to revisit the orders. Le Francois v. Goel (2005) 35 Cal.4th 1094 held a court could reconsider its interim orders on its own motion, so long as it gave the parties notice and the opportunity to argue the matter. (Id. at pp. 1107, 1109.)

In re Marriage of Barthold (2008) 158 Cal.App.4th 1301 concluded a court may, on its own motion, reconsider a final order where the time to appeal had not expired. (Id. at pp. 1312, 1313, fn. 9.) The ruling was based on Le Francois and on Code of Civil Procedure section 1008, which allows reconsideration of both interim and final orders. (Barthold, at pp. 1312-1313.) To reconsider a final order, the court must determine its original ruling was incorrect and the new decision must be based on evidence previously submitted. (Id. at p. 1314; accord In re Marriage of Spector (2018) 24 Cal.App.5th 201, 215.) Thus, the court was not barred from reconsidering those issues.

2. Trustee Compensation

The court found there was no agreement for plaintiff to charge a one percent fee and reduced his compensation on that basis. But the record belies the court’s finding.

Before he was appointed, plaintiff presented a fee schedule to defendants showing the one percent annual fee. Defendants included a copy of the fee schedule as part of the Removal Petition and complained about the amount of trustee fees that would be incurred based on that schedule. Implicit in this argument is defendants’ understanding of an agreement to pay that fee.

In the 2016 trial, plaintiff testified at length about the services he rendered and how his fee was calculated based on the one percent rate and the hourly rate. Despite several requests by the court to do so, defendants did not present evidence as to trustee fees.

The court did not find anything improper about any of plaintiff’s services in either the 2016 Order or the 2018 Order, thereby rejecting all of defendants’ claims to the contrary. Moreover, in the 2018 hearing defendants’ only argument about the one percent fee was that the value of the estate was too high, thereby improperly inflating plaintiff’s fee. Again, underlying this argument is defendants’ understanding the fee would be charged. Further, the Trust provides for reasonable compensation to trustee. And the court did not determine the one percent fee was unreasonable.

Therefore, we reverse the ruling that disallowed the one percent fee and required plaintiff to reimburse the Trust for excess trustee fees paid.

The court ruled plaintiff was not entitled to costs of approximately $80 for administration. A trustee is entitled to be reimbursed from the trust for expenses “properly incurred in the administration of the trust.” (Prob. Code, § 15684, subd. (a); all further statutory references are to this code.) There was no finding expenses were not properly incurred. Instead, the court found it could not verify how the charges were calculated. But the court did not have before it a petition to approve the costs. Rather, it was a petition to settle an accounting. Defendants needed to file objections if they disagreed with anything contained in the Accounting Petition. We have not been directed to anything in the record showing defendants objected to those costs. That portion of the 2018 Order must be reversed.

3. Attorney Fees

The court reduced attorney fees paid by plaintiff by about $5,000 because the description of some of the work performed was ambiguous and vague. In the context of this case, this was not a legitimate basis to reduce attorney fees.

As plaintiff points out, the court was not reviewing a petition to pay attorney fees but was reviewing an accounting. Plaintiff, as the trustee, had the authority to pay the fees, and had done so. The Trust gives the trustee the power to retain attorneys “and compensate them from the trust property.” The court acknowledged it was “customary” for a trustee to hire an attorney when the trust is involved in litigation, as was the case here. “Attorneys hired by a trustee to aid in administering the trust are entitled to reasonable fees paid from trust assets.” (Kasperbauer v. Fairfield (2009) 171 Cal.App.4th 229, 235.)

The court found the time spent, the matters handled, and the hourly rates charged were reasonable. That the court found some descriptions vague does not mean the attorney fees were improper. Reduction of the attorney fees on that basis had the effect of undermining and improperly limiting the authority of the trustee to pay them and was an abuse of discretion. That portion of the 2018 Order must be reversed.

4. Removal of Trustee

a. Removal

Plaintiff challenges his removal as trustee, claiming there was no legal basis for the court to do so. We review an order removing a trustee for abuse of discretion. (Schwartz v. Labow (2008) 164 Cal.App.4th 417, 430 (Schwartz).) The court removed plaintiff as trustee on two grounds, improper payment of the one percent trustee fee and because it was in the best interest of the Trust and the beneficiaries to remove him. As discussed above, the payment of the one percent trustee fees was not improper. Thus, we are left to determine whether removal is justified based on the Trust’s and beneficiaries’ best interest.

The court has broad discretion to remove a trustee. (Estate of Gilmaker (1962) 57 Cal.2d 627, 633; § 15642, subd. (b).) A trustee may be removed when hostility between the trustee and beneficiaries interferes with the proper administration of the trust. (Estate of Gilmaker, at p. 632.) The court will rarely remove a trustee named in a trust on this ground. (Copley v. Copley (1981) 126 Cal.App.3d 248, 286-287.) But the Trust did not name plaintiff as a trustee so less deference is required.

Although the court did not specifically articulate why it relied on a best interest ground, it is plain from the record there is substantial hostility between the beneficiaries and plaintiff. Defendants have challenged virtually everything plaintiff has done and there appears to be poor communication between the parties. The court has witnessed this firsthand. It is reasonable to believe this conduct will likely continue, impairing the administration of the Trust. Thus, the court was within its discretion in removing plaintiff as trustee.

b. Successor Trustee

Plaintiff contends the court erred in appointing Sharon because she is an “adversary of the Trust.” (Capitalization & boldface omitted.) He points to his objection to the 2018 Tentative Decision where he stated Sharon was “actively suing the Trust” and had appealed a decision in favor of the Trust in the bankruptcy court. He argues that if she is appointed the proceeds from the bankruptcy matter will be lost to the Trust. He also cites Dana’s objections to the 2018 Tentative Decision, where she argues Sharon is “not independent” and points out the hostility among the beneficiaries. Plaintiff asserts the court disregarded these facts and relied on facts two years old. We are not persuaded.

The Trust provides that if a majority of the beneficiaries cannot agree on a successor trustee, the court may appoint one. Section 15660, subdivision (d) gives the court discretion to appoint a successor trustee. Plaintiff has not shown appointment of Sharon was an abuse of such discretion.

Plaintiff cited no authority to support his argument. Further, he admits he is relying on “updated evidence” as the basis for his opposition. As far as we can determine, the court never ruled on the request for judicial notice containing such evidence. Moreover, we question whether it would have been proper for the court to consider it at that stage of the proceedings. In reconsidering a final order a court may rely only on previously admitted evidence. (In re Marriage of Barthold, supra, 158 Cal.App.4th at p. 1314.)

The court did not explain why it selected Sharon as the successor trustee. In the absence of plaintiff affirmatively showing error, we must presume the court made all factual findings necessary to support the ruling. (LSREF2 Clover Property 4, LLC v. Festival Retail Fund 1, LP (2016) 3 Cal.App.5th 1067, 1076.)

c. Bond for Successor Trustee

Pursuant to section 15602, subdivision (a), where a court appoints a trustee who is not named in the trust, a bond is required. The court may not waive this requirement “except under compelling circumstances.” (§ 15602, subd. (b).)

The 2018 Order appointed Sharon to succeed plaintiff as the trustee but did not order her to obtain the required bond. Sharon was not named as a successor trustee in the Trust. The 2018 Order did not set out any “compelling circumstances” that would justify excusing a bond. Thus, we remand for the court to determine whether there are any compelling circumstances that would excuse a bond, and if not, order Sharon to obtain the requisite bond.

5. Court Supervision of Trust

Plaintiff challenges that portion of the 2018 Order placing the Trust under court supervision and requiring court authorization before any payments from the Trust are made. He argues there is no statutory authority for such supervision, pointing to section 17209, which provides “[t]he administration of trusts is intended to proceed expeditiously and free of judicial intervention, subject to the jurisdiction of the court.” Plaintiff asserts “[s]uch judicial involvement . . . is absurd on its face” and both time consuming and expensive. We are not persuaded there was any error.

As noted above, the court has inherent authority to make necessary orders to supervise administration of the Trust. (Schwartz, supra, 164 Cal.App.4th at p. 427.) It hardly needs stating administration of the Trust has been troublesome. There have been three trustees. There were conflicts among the beneficiaries and between the beneficiaries and the trustees. There were disputes about multiple issues. The court had witnessed all of this plus apparent additional problems outside the scope of this appeal.

While in the normal scheme of things trust administration proceeds move expeditiously without court intervention, it is not unreasonable to assume in this case court supervision will expedite administration and winding up of the Trust. We see no abuse of discretion by the court in ordering court supervision.

 

DISPOSITION

The motion to augment the record is denied. We reverse those portions of the 2018 Order reducing trustee fees and attorney fees. In addition, we remand for the court to determine whether there were compelling circumstances excusing a bond for the successor trustee, and if not, to order a bond. In all other respects the 2018 Order is affirmed. The parties shall bear their own costs on appeal.

THOMPSON, J.

WE CONCUR:

O’LEARY, P. J.

ARONSON, J.

Parties and Attorneys
Kote v. Larson et al.
Case Number G056820
Party Attorney

Peter Kote : Plaintiff and Appellant
Steven Andrew Giammichele
Law Offices of Steven Giammichele
24361 El Toro Rd Ste 260
Laguna Woods, CA 92637

Daniel Keith Larson : Objector and Respondent
6670 El Pomar Drive
Templeton, CA 93465 Pro Per

Sharon Deon Sims : Objector and Respondent
6670 El Pomar Drive
Templeton, CA 93465 Pro Per

Erin Ellen Larson : Objector and Respondent
6670 El Pomar Drive
Templeton, CA 93465 Pro Per

Dana Kim Perez Shelton : Objector and Respondent
8018 E Santa Ana Canyon Rd, Ste 100-302
Anaheim, CA 92808 Pro Per