Carpy v. Alfaro

Filed 6/15/10 Carpy v. Alfaro CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

These consolidated appeals involve two trusts established by Charles A. and Ann Carpy (Charles and Ann), the parents of appellant John Carpy (John),[1] for the benefit of themselves and their five children.[2] Following Charless death in August 1996, one of the trusts was divided into one revocable and three irrevocable trusts, and John (along with the other four children) became a contingent beneficiary of the irrevocable trusts. John is also both a trustor and a beneficiary of the Carpy Winery Trust as it was restated following Charless death.

John suffers from chronic mental illness and claims that he has been ostracized by his family.[3] John claims that he informally requested information about the assets and administration of the trusts after his father died, but was repeatedly rebuffed. In 2007, he filed the underlying petitions for accountings of the trusts.

In response to Johns petitions, the trustees of each trust filed accountings, to which John objected. John sought formal discovery of extensive documentation concerning the assets of all of the trusts, including documents concerning management of businesses in which the trusts held or had held interests. The trustees objected to the breadth of the requests. The trial court acknowledged Johns right to discovery related to his objections, but agreed that his requests were overbroad and directed him to file more specific objections to the accountings, and to narrowly tailor his discovery demands to those objections. The court ultimately denied his motion to compel discovery and approved the accountings. We conclude that the trial court applied an unduly narrow interpretation of the scope of information that a beneficiary is entitled to receive under the Probate Code. Further, the court failed to recognize and exercise the discretion provided to it under the Probate Code to determine what information was reasonably necessary for protection of the beneficiarys interests in the trusts. Accordingly, we reverse and remand for the court to consider those issues.

I. Background

Because of the complex nature of the estate plan implemented by the trusts in issue here, and due to the contentious family dynamic evidenced in the disputes relating to the trusts, it is necessary to review the history of this matter in some detail.

The Carpy Trust and Subtrusts

In 1989, Charles and Ann created The Carpy Trust, which was revocable during the joint lifetimes of trustors (and original trustees) Charles and Ann. The original trust corpus consisted of both community property and separate property of the trustors which was listed in a Schedule A, but which is not included in the record.

Under the terms of the trust instrument, upon the death of the first trustor the surviving trustor would become sole trustee and the trust estate would be divided into three separate trusts (referred to by the parties as subtrusts): a revocable Survivors Trust, an irrevocable Marital Qualified Terminable Interest Property Trust (Marital QTIP Trust), and an irrevocable Exemption Trust. The revocable Survivors Trust would consist of the surviving trustors separate property in the trust estate, his or her community property interest in the trust assets, the trustors residence, and all personal and household belongings. The Exemption Trust would consist of a pecuniary amount equal to the maximum sum that can be allocated to a trust that does not qualify for the federal estate tax marital deduction to any extent, without producing any federal estate tax, after taking into account: [] [a]ll available deductions[,] allowable credit, the net value of all other property in the deceased trustors estate. The Marital QTIP Trust would consist of the remainder of the trust estate. In the event that the trustors still owned the residence at 2401 Main Street, St. Helena (2401 Main Street) [an asset of the revocable Survivors Trust], the Carpy children (as a group) had a right of first refusal with respect to any sale of the residence. During the surviving trustors lifetime, all net income from the irrevocable subtrusts would be paid to the surviving trustor, with the ability to invade the principal of the subtrusts for his/her benefit as necessary. In addition, the trustee of the Exemption Trust had the discretionary power to invade principal for the health, maintenance, support and education of the issue of the Trustors.

Upon the surviving trustors death, the remainder of the Survivor Trust would become irrevocable and would be distributed to such one or more persons or entities . . . and on such terms and conditions, either outright or in trust, as the surviving spouse shall appoint by a will or, in the absence of such appointment, to the Exemption Trust. The remainder of the Marital QTIP Trust was subject to a special power of appointment and would be distributed to one or more of the group consisting of Trustors issue and on such terms and conditions, either outright or in trust, as the surviving spouse shall appoint by a will or, in the absence of such an appointment, to the Exemption Trust. The remainder of the Exemption Trust was also subject to a special power of appointment and would be distributed to one or more of the group consisting of the deceased spouses issue on such terms and conditions, either outright or in trust, as the surviving spouse shall appoint by a will or, in the absence of such an appointment, in as many equal shares as there are children of the Trustors then living and children of the Trustors then deceased leaving issue then living.

In summary, under the terms of The Carpy Trust, Ann, as the surviving spouse/trustor, receives regular distributions of all income from each of the subtrusts during her lifetime, can invade principal (in the discretion of the trustee), and has a special power of appointment over the remainder of each of the subtrusts among one or more of the children or their issue. Additionally, the trustee (Ann or her successor) has the discretionary power, during Anns lifetime, to invade the principal of the Exemption Trust for the health, maintenance, support and education of any of the children. The Carpy children will share in their parents estate, if at all, either by: a) discretionary payments from the Exemption Trust for health, maintenance, support and education during Anns lifetime; b) discretionary testamentary disposition through Anns will; or c) per stirpes distribution of whatever estate residue may exist from the Exemption Trust following Anns death if she fails to exercise her power of appointment.

Prior to Charless death the Carpy children, including John, were contingent remainder beneficiaries of the revocable Carpy Trust, and following Charless death, John and his siblings were contingent remainder beneficiaries of the designated irrevocable subtrusts. In essence, John (as the other Carpy children) can only take from The Carpy Trust estate (unless the trustee elects to make an inter vivos gift) to the extent that Ann chooses to make a testamentary disposition in his favor, or to the extent that Ann fails to make an alternative disposition.

The Carpy Winery Trust

In 1995, Charles, Ann and the five children created The Carpy Winery Trust (Winery Trust). All seven individuals, including John, were both trustors and beneficiaries of the trust, and three (Charles, Ann, and one of Johns siblings) were the designated trustees. The original trust instrument is not in the record, but a restatement of the trust, executed after Charless death, in May 1998 (Restatement), recites these facts.[4]

As articulated in the Restatement, the trust purpose of the Carpy Winery Trust was to provide for continuity in the management of the trustors interests in the Freemark Abbey Winery limited partnership. All of the trustors were limited partners in Freemark Abbey Winery and the trust estate consisted of their respective partnership interests.[5] Each trustors interest in the trust was revocable at the option of that trustor. During each trustors lifetime, net income from a trustors proportionate interest in the trust was to be distributed to that trustor, supplemented by principal (a) as necessary for the trustors health, maintenance, and support in the opinion of the trustee, or (b) as requested in writing by the trustor. Upon the death of a trustor, his or her interest was to be distributed to that trustors designated beneficiary. The trusts limited partnership interests were liquidated by a sale of the winery in 2001, and a final distribution of cash trust corpus from the sale proceeds made to the beneficiaries on August 25, 2005.

The Prior Accountings and Johns Requests for Trust Information

In March 2003, the trustees filed an Account and Report of Trustee and Petition for its Settlement (First Account) for both the Carpy Trust and the Carpy Winery Trust in Napa County Superior Court, commencing two special proceedings, In re The Carpy Trust, case no. 26-20490, and In re The Carpy Winery Trust, case no. 26-20489 (the 2003 Accountings). Surviving spouse Ann Carpy was the trustee of the Carpy Trust at the time of the filing.

Attached to the First Account of the Carpy Trust were four exhibits consisting of financial reports for the period August 19, 1996, through October 31, 2002, on (a) The Estate of Charles A. Carpy, an administrative trust established to account for the assets held in the Carpy Family Trust between Charless death and distribution of assets to the revocable Survivors Trust[6] and to the irrevocable subtrusts, and (b) three irrevocable subtrusts: The Chuck Carpy Marital Deduction Trust (the Marital Deduction Trust [QTIP]), the Carpy GST Exempt Trust (GST Exempt Trust), and The Carpy Exemption Trust (Exemption Trust).[7] The First Account of the Carpy Winery Trust is not included in the record provided, but an exhibit to the Final Account of that trust that is in the record consists of financial reports on the Carpy Winery Trust for the period August 19, 1996, through October 31, 2002.

At the time of the 2003 Accountings, John apparently asked for more information about certain assets listed in The Carpy Trust accounting, including interests in entities called C. Carpy & Co., Carpy & Conolly, and The Wine Country Inn (Wine Country Inn).[8] The Marital Deduction Trust held interests in each of these entities. The Exemption Trust and the GST Exemption Trust each held only fractional interests in Carpy & Conolly. On April 25, 2003, the trustees counsel responded by letter directing John to contact these entities directly if he wanted additional information. It is not clear whether John ever did so. In November 2003, John wrote to Steven Buehl, counsel for the Freemark Abbey Winery requesting documents related to the winery partnership.[9] Two days later, the trustees counsel responded to Johns attorney as follows: Enclosed find a copy of a letter faxed to me by Steve Buehl, who is both the brother-in-law of John Carpy and a partner of [a law firm]. [] I suggest that you put a stop to this chicanery before Steve lifts his hand to dictate a response. [] We will not participate in any settlement conference or in any other form of facilitated meeting with John unless this behavior comes to a halt. Both 2003 petitions were subsequently dismissed by the trustees prior to any final action on the petitions by the court.[10]

In September 2006, the trustee of the Carpy Trust[11] filed a Petition Instructing Trustee (case no. 26-35055) asking the court to (1) determine that an account and report shall be filed for the subtrusts limited to the requirements of Probate Code 1060 et seq.,[12] and (2) determine that the Carpy Winery Trust had been terminated and determine whether an account for that trust was required. No action had been taken in that case as of June 2007.

The Instant Actions: Johns Petitions for Accountings

On June 11, 2007, John filed petitions for accountings of the Carpy Trust (In re The Carpy Trust, case no. 26-38094) and the Carpy Winery Trust (In re The Carpy Winery Trust, case no. 26-38096) which are the bases for these consolidated appeals.[13]

Second Account of The Carpy Trust

On November 13, 2007, the trustee of the Carpy Trust filed a Second Account and Report of Trustee and Petition for its Settlement (Second Account). Attached to the Second Account was a copy of the 2003 The Carpy Trust First Account and its exhibits, as well as three new exhibits consisting of financial reports on the subtrusts for the period November 1, 2002, through September 30, 2007. The 2003 reports reflected the value of Charles administrative estate (1/2 of the community) at the time of his death at $4,877,196. The bulk of the detail in the exhibits in both accountings dealt with assets and transactions in the Marital Deduction Trust. The Marital Deduction Trust established on Charless death was valued at $4,415,629.41 at its inception, at $3,872,786.79 as of October 31, 2002, and at $4,276,969.02 as of September 30, 2007. The GST Exempt Trust corpus consisted of a 10.52 percent interest in Carpy & Conolly[14] valued at $448,285.79 on December 31, 1998. As of October 31, 2002, income of $20,000 had been distributed to Ann, and there was a little over $10,000 cash accumulated. As of September 30, 2007, the assets of the GST Exempt Trust consisted of the Carpy & Conolly interest, plus about $16,000 in cash, with a total value of $464,725.76. An additional $5,202 of income had been distributed to Ann Carpy since the earlier accounting.

The Exemption Trust was initially funded on December 31, 1998, with a distribution from Charless estate of a 12.94 percent interest in Carpy & Conolly valued at $551,670.76. As of October 31, 2002, $27,000 income had been distributed to Ann Carpy, and the trust corpus was valued at $562,047.65. As of September 30, 2007, the assets of the Exemption trust consisted of the same Carpy & Conolly interest, plus about $18,000 in cash, with a total value of $569,592.80. A total of $6,400 had been distributed to Ann Carpy since the earlier accounting.

Account of the Carpy Winery Trust

On November 30, 2007, the trustees for the Carpy Winery Trust filed a Final Account and Report of Trustees and Petition for its Settlement (Final Account). Attached to the Final Account was an exhibit consisting of financial reports on the trust for the period August 19, 1996, through October 31, 2002, followed by financial reports on the trust for the period November 1, 2002, through September 30, 2007.

The Final Account values the trusts 25.45 percent interest in Freemark Abbey Winery at about $3.9 million at the time of Charless death. Between 1996 and 2002, the trust earned about $388,000 in income from the winery and in interest. In 2001, it realized $3.7 million in gains from the sale of the winery, increasing the trusts value to more than $8 million. Between 1997 and 2005, the trust distributed about $2.25 million in equal shares ($450,000) to each of the five children, about $30,000 to Ann, about $2.8 million to the Marital Deduction Trust, and about $2.6 million to the Survivors Trust.[15] Following the sale, the trust continued to hold the same 25.45 percent proportionate interest in an installment note from the winery sale. The note was redeemed on August 4, 2004, and the final distribution was made to the beneficiaries on August 25, 2005. After losses, expenses and distributions, the trust had no property on hand as of September 30, 2007.

Johns Objections

On January 7, 2008, John filed objections to both accountings. He presented no specific objection to the accounts submitted, but stated that he needed the opportunity to examine underlying support documentation in order to determine the accuracy of the accounting[s],[16] and he requested specified [u]nderlying support documents, including the instruments that created, amended or restated the trusts; appraisals of trust assets; documentation of sales of assets; notifications to beneficiaries; documentation of business operations for businesses held by the trust in whole or in part; and, as to the Carpy Winery Trust, bank statements and cancelled checks.[17]

The Discovery Dispute

The trustees complained that John had made no substantive objections to the accountings and argued that his attempt to use his objections as an opportunity to conduct informal discovery should be stricken. At a January 10, 2008 consolidated hearing on both matters, trustees counsel further argued John sought information as to business entities which the trusts did not manage, and was on a fishing expedition to look for potential breaches of trust. Trustees counsel contended that some of the requests were unduly burdensome or should be directed to other entities. Both sides asked for the courts assistance in informally resolving the discovery issues. The court suggested that the issues should be resolved without full-blown litigation and directed the parties to meet and confer on the issues. It set a further status conference for January 22, 2008, for a report on the parties meet-and-confer efforts.

At the January 22 hearing, trustees counsel said she had spoken with Johns counsel, that she was still looking for certain documents he had requested, and that most of the requested documents were not in the trustees possession. John again asked for the courts assistance in resolving the discovery dispute. The court scheduled a conference for February 15 to attempt to mediate the disputes and offered the parties the opportunity to file briefs. No record is included here from any proceedings on February 15, 2008.

The parties filed briefs on the discovery issue on February 8, 2008. Trustees counsel, citing Forthmann v. Boyer (2002) 97 Cal.App.4th 977 (Forthmann), argued that discovery could be ordered only if specific objections were filed.[18] John argued that Forthmann was distinguishableon the ground that the party seeking discovery there had filed no objections, and argued that detailed objections were not required in light of the courts duty to protect the estate and insist that an accounting be complete and clear. John explained that he simply seeks information to identify the initial Trust assets and seeks an accounting that provides a trail that follows the Trust assets to their current status.

At a March 28, 2008 hearing, counsel for the trustee again objected that the discovery John was seeking was unduly burdensome, impacting the resources of the income beneficiary (Ann).[19] The court again expressed concern that Johns requested discovery was far too broad. The court directed Johns counsel to carefully tailor your discovery request, requested further briefing, and continued the matter for hearing to May 7, 2008.

Amended Second Account

On April 11, 2008, the trustee for the Carpy Trust filed an Amended Second Account and Report of Trustee and Petition for Its Settlement (Amended Second Account), which consolidated the exhibits that had been attached to the Second Account to create a single accounting for each irrevocable subtrust that covered the period August 19, 1996, through September 30, 2007.[20]

May 7, 2008 Discovery Order

On May 7, 2008, the court made the following order in both matters: [I]n light of the discussion in Forthmann v. Boyer [supra] 97 Cal.App.4th 977, finding that liberal discovery policies apply in probate proceedings, and that courts should err on the side of allowing appropriate discovery when a written objection has been filed, the court will not foreclose out-of-hand the possibility of allowing certain carefully tailored discovery to John Carpy. However, the requests set forth in the objections to the Second Account and Report are too broad and far reaching. Also, trustee has now filed an Amended Second Account and Report, incorporating the period covered by the First Account and Report filed in a separate action, but never approved. To the extent that he has objections to the Amended Second Account and Report, John Carpy is directed to file specific objections. He may then serve upon Trustee narrowly tailored discovery requests under the Discovery Act. The court does not intend to allow a fishing expedition into the Trusts financial affairs, but any ruling by the court on what discovery will or will not be compelled will be reserved until brought before it on appropriate discovery motions, should those become necessary.

May 22, 2008 Objections to Amended Second Account

On May 22, 2008, John filed objections to the Amended Second Account in the Carpy Trust matter. He objected generally on the grounds (1) that he is informed and believes that certain assets of the Carpy Trust are not accounted for in the Amended Second Account; (2) that he is informed and believes that certain procedures established in The Carpy Trust have not been adhered to and certain assets of said trust are not accounted for in the Amended Second Account; and (3) he needs to have the opportunity to examine underlying support documentation relating to various assets of the Carpy Trust in order to determine the true value of the assets and the accuracy of the accounting. He also made the following more specific objections to the accounting.

He averred that Ann, who was sole trustee from Charless death until October 2005, failed to provide JOHN with a copy of the Carpy Trust, at the time of its funding in 1996; and that he did not receive a copy until four years later, in 2000; and that from the time he received a copy of the trust, the trustee ceased all communication with him.

He further averred that, despite the purchase option in The Carpy Trust, the family residence at 2401 Main Street was sold without JOHN having been advised of, nor given an opportunity to exercise, said first right of refusal.

He produced two deeds showing trust ownership of real property that was not expressly included in the accounting. A September 1997 deed showed that Ann, as trustee of The Carpy Trust, granted her 50 percent interest[21] in real property commonly known as 8891 Conn Creek Road, St. Helena (which John called the Rutherford property) to Carpy-Conolly I LLC, a California limited liability company. In the same deed, the holders of the remaining 50 percent interest in the property also transferred their interests in the property to Carpy-Conolly I LLC. An August 1998 deed showed that Ann, as trustee of The Carpy Trust, granted her undivided one-half interest in real property located in San Mateo County (apparently, 515 Stage Road, Pescadero) to herself, as trustee of the Marital Deduction Trust.

John continued: JOHN has found no mention of Carpy-Conolly I LLC in the Amended Second Account or the transaction transferring the Rutherford property out of the Carpy Trust. This transaction raises significant questions about the Carpy Trust and the asset, Carpy-Connolly and why Carpy-Conolly I LLC is not identified as an asset of the Carpy trust. It also is not known and cannot be determined from the account whether the business of the vineyard that is on the Rutherford property . . . is included in the Carpy Trust, Carpy-Conolly, or how it is accounted for. Regarding the Pescadero property, John wrote, If the parcel remains in the Trust, it does not readily appear in the account and if it was sold, the proceeds of the sale do not readily appear. Finally, he noted that the Amended Second Account includes an unexplained change in treatment of a $57,775 payment to Carpy-Conolly. This fact emphasizes the need for discovery to proper[l]y analyze the Amended Second Account.

John further stated on information and belief that C. Carpy & Co. is a general partnership, owned by the Carpy Trust and members of Johns immediate family; its value is based upon the assets it holds, among which is the Wine Country Inn. JOHN cannot determine the actual value of C. CARPY & CO., nor its holdings without discovery.

On May 28, 2008, the court filed an order in The Carpy Trust matter that stated, The court has received objections to the Amended Second Account and Report of Trustee. Objector indicates his intention to seek discovery from trustee. This court has previously ruled that he may do so using ordinary civil discovery methods.

June 2008 Discovery Requests

In June 2008, John served the trustees of both trusts with the requests from production of documents which are the focus of this appeal.

Regarding The Carpy Trust subtrusts, John requested the following documents for Carpy & Conolly, C. Carpy & Co. and the Wine Country Inn during the period of the accounting: documents related to the organization of the entity (including entities with similar names), profit and loss statements, balance sheets, documents showing assets and liabilities, federal and state income tax returns, and documents identifying the entities employees. He also requested documents related to the purchase, sale, or transfer of real property, including 2401 Main Street, St. Helena, California; 8891 Conn Creek Road, St. Helena, California; and 515 Stage Road, Pescadero, California, as well as appraisals and the escrow closing statement for 2401 Main Street. Finally, he requested the trust document and any amendments thereto, documents related to the creation of the subtrusts, documents related to loans made by the trust to any remainder beneficiary during the accounting period, the trusts federal and state income tax returns, and any appraisals or valuations of any of the trusts or subtrusts former or current assets.

Regarding the Carpy Winery Trust, John requested the partnership agreement and every accounting provided to the partners of Freemark Abbey Winery, as well as the following documents related to the trust: the original trust document and amendments or restatements thereto, state and federal income tax returns, cancelled checks made payable to John, profit and loss statements, balance sheets, documents showing assets, liabilities, and the trusts employees, and documents related to the sale of the trust.

The trustees responded to the requests with objections and did not produce any of the requested documents. The trustee for The Carpy Trust objected to each of Johns requests on the ground that they were overly broad and not reasonably calculated to lead to the discovery of admissible evidence, and that they were in the process of preparing a supplement to the Second Amended Account, which addresses the concerns raised by John Carpy in his objections to that account. Once the supplement is submitted, the currently pending objections will become moot. Consequently, this request cannot, by definition, be narrowly tailored to support any of his objections. The Carpy Winery Trust trustees objected to Johns requests on the ground that they were overly broad and not reasonably calculated to lead to the discovery of admissible evidence or narrowly tailored to support specific objections. With respect to the request for trust documents, amendments and restatements, they further objected on the ground that the documents were attached to the Final Account. With respect to the requests for the trusts tax returns, the trustees further objected on the ground that the documents were protected by privacy rights and the attorney/client communication privilege.[22]

Supplement to Amended Second Account

On July 28, 2008, the trustee for the Carpy Trust filed a Supplement to Amended Second Account and Report of Trustee and Petition for Its Settlement (Supplement) that responded to Johns objections regarding Carpy & Conolly, the Rutherford property, and the Pescadero property. It explained that Carpy & Conolly was a joint venture between Charles, Ann, and Joseph F. and Mathilde Conolly that owned three pieces of property at the time of Charless death: (i) 8891 Conn Creek Road, St. Helena, CA (the Rutherford property); (ii) 515 Stage Road, Pescadero, CA (the Pescadero property); and (iii) Carizza Plains, King City, CA (the San Luis property).

Following the death of Chuck Carpy, on or about June 23, 1997, Ann Carpy and her brother-in-law, Joseph Conolly, formed Carpy-Conolly I LLC and subsequently transferred their respective interests in the Rutherford property (held in their respective revocable trusts) to it. The parties intended to transfer the other two properties into a second limited liability company, Carpy-Conolly II LLC, but never completed the transfers. A cancellation of the name Carpy-Conolly II LLC is currently pending with the Secretary of State. As part of the post-death administration of The Carpy Trust, Ann Carpy allocated an undivided 50% interest in both the Pescadero property and the San Luis property to the [Marital Deduction Trust].

Attached to the Supplement were revised pages for the exhibits to the Amended Second Account that separately listed Carpy & Conolly (i.e., Carpy-Conolly I LLC, which held an interest in the Rutherford property) and the Pescadero and San Luis properties as assets of the trust and subtrusts, rather than collectively identifying these real property interests as Carpy & Conolly, as was done in the original exhibits.[23] Regarding the unexplained $57,775 payment to Carpy-Conolly in the Amended Second Account, the Supplement explained that it was an expense for repairs to the Pescadero property and that the revised exhibit pages listed it as an administrative expense in the Disbursements of Principal schedule for the Marital Deduction Trust.

Objections to Supplement to Amended Second Account

On August 25, 2008, John filed objections to the Supplement. Inasmuch as the Supplement does not answer the basic objections raised heretofore by the Objector, he asserts the same objections as made herein to the First, Second, and Amended Second Report of the Trustee. He also objected to the trusts creation of the generation skipping trust (the GST Exempt Trust), contending that there was no provision for the creation of such a subtrust in the original trust instrument. He argued further, [T]he Trustee, through counsel, adamantly fails and refuses to give any information as to three key assets, the partnerships referred to as C. Carpy & Co., Carpy & Conolly, and Carpy Winery Trust. By inference, these assets consisted of very large holdings of prime vineyard interests. There are also real estate holdings in Pescadero and San Luis Obispo count[ies] (100 acres). . . . [] While it is certainly possible that . . . these assets will be found to have been managed frugally and without waste[,] there is simply no way to know this now, other than blind faith.

At an August 27, 2008 court hearing, the court commented, To me, its dragged on a long time and [the] only thing that I have seen, really, that had some meat on it was this GST. Nothing else seemed to be of concrete value.[24] The court set an October 22 hearing to rule on an anticipated motion to compel, and directed the parties to once again meet and confer on the discovery dispute.

Motions to Compel

In September 2008, John moved to compel further discovery responses in both matters. He filed a separate statement in support of each motion. He argued generally that because each trust held assets that were operated by family members who were also beneficiaries or trustors (or both) of the trusts, he was entitled to review financial information about the value and management of those assets to determine whether the accounting was accurate and whether all beneficiaries were being treated fairly. In opposition, the trustees argued that Johns objections were still overbroad, that no new objections had been filed to the Carpy Winery Trusts Final Account, and that Johns limited interest as a remainder beneficiary did not entitle him to the detailed financial information he was seeking.

October 15, 2008 Hearing and Denial of Motions to Compel

At an October 15, 2008 hearing on the motions, Johns counsel argued, [T]he majority of the assets of the trust are concentrated in two real property holdings which are two limited partnerships. And we simply dont have any information about them. [] It may be that theyre being administered in the most exemplary fashion and theres nothing to worry about at all. It may be, however, that family members are able to participate other than John in the management of those companies, receiving part of the income stream and so forth. . . . [] . . . [W]ere confronted with dozens of acres of prime vineyard land that are [listed as] one little line carried at the value that they represent the value 15, 20 years ago, we dont know. And nothing about this operation at all. . . . [] . . . [] . . . [S]ome discovery is appropriate. The trustees countered by emphasizing Johns limited interest in the Carpy Trust as a remainder beneficiary, and arguing that the proceedings for trust accountings were not the proper forum for gathering information about the partnerships.

The court ruled, In looking at the separate statement and the objections and the requested documents, Ive come to this conclusion. Ive already held this wont be a fishing expedition; it appears to [m]e the objectors separate statement doesnt do anything to correlate any objections that have been asserted or any claims that you may have to the requested documents. [] So Im going to deny both motions. The court filed a summary written order on October 29, 2008.

Court Approval of Accounts

On November 5, 2008, the court approved the Amended Second Account in the Carpy Trust matter, as supplemented, and the Final Account in the Carpy Winery Trust matter. On December 29, John filed a notice of appeal in each case from 10/31/08 Notice of Entry of Order Denying Motion to Compel Discovery Responses. 

II. Discussion

John argues the trial court erred when it approved the trustees accountings without permitting him adequate discovery. We agree. We are not unsympathetic to the trial courts apparent frustration with Johns inability to focus his requests. But while we agree that John sought more information than he was entitled to receive, it also appears that he received less than he was due under the Probate Code, and that the trial court too narrowly construed the discretion available to it in considering his requests.

We first consider the trustees argument that the appeal should be dismissed because they were taken from nonappealable orders and because John forfeited his right to appeal the discovery orders. We reject these arguments. We then review the legal standards governing discovery motions and consider the scope of relevant discovery in a proceeding on a trust beneficiarys petition to obtain a report and account from the trustee on the affairs of a trust.

A.                 Appealability

Johns notice of appeal in each case identifies the order appealed from as 10/31/08 Notice of Entry of Order Denying Motion to Compel Discovery Responses.  The trustees do not complain that the notice identifies a notice of entry of the discovery order rather than the discovery order itself. Rather, they argue the appeal must be dismissed because the discovery order is not appealable under Code of Civil Procedure section 904.1.

Although the discovery order was not directly appealable, it was reviewable on appeal from the final judgment. (Carlson v. Superior Court (1961) 56 Cal.2d 431, 435436; Wooldridge v. Mounts (1962) 199 Cal.App.2d 620, 628 (Wooldridge).) Applying the well-established policy that notices of appeal should be construed liberally in favor of their sufficiency (Walker v. Los Angeles County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 20 (Walker)), we conclude the notice of appeal should be construed as an appeal from the judgment in each case.

Under the rule of liberal construction, a notice of appeal from a nonappealable order  can be interpreted to apply to an existing appealable order or judgment, if no prejudice would accrue to the respondent.  (Walker, supra, 35 Cal.4th at p. 20.) In Walker, the trial court entered judgment on November 13, 2001, and denied the plaintiffs motion for a new trial on January 3, 2002. (Id. at p. 18.) On February 4, 2002, the plaintiff filed a notice of appeal from the order denying her motion for a new trial, which was not an appealable order. (Id. at pp. 1819.) The Supreme Court held the court of appeal erred by dismissing the appeal rather than construing it as an appeal from the final judgment. (Id. at p. 21.) Walker has presented a colorable argument that she intended to appeal from the underlying judgment and that the [respondent], which filed a respondents brief on the merits in the Court of Appeal as well as a counter-designation of the record on appeal, would not be prejudiced by allowing the appeal to go forward. (Ibid.) Moreover, the court had appellate jurisdiction over the appeal despite the defect in the notice of appeal, because the notice was filed within the time period for appealing from an existing appealable order or judgment. (Ibid.) The Court distinguished cases in which an appeal from a nonappealable order was dismissed where no appealable judgment or order had been entered. (Ibid.; see, e.g., Modica v. Merin (1991) 234 Cal.App.3d 1072, 10731075; Shpiller v. Harry Cs Redlands (1993) 13 Cal.App.4th 1177, 11781180.)

Here, the trial court denied Johns motions to compel in October 2008, and entered final orders approving the accountings in November. Johns notices of appeal, filed on December 29, were timely with respect to the final orders. There appears to be no doubt that John intended to appeal from the trial courts final orders on the ground that the accountings should not have been approved without first compelling responses to Johns discovery demands so he could fully analyze the accountings and raise appropriate objections. The statement of appealability in Johns opening briefs stated, Denial of a motion to compel discovery is appealable after the final judgment is entered. [Citation.] Without the clarification of the issues from discovery and just days after the court had denied discovery, the final judgment in this matter was entered . . . . Moreover, it appears the trustees will not be prejudiced by our construing the notice of appeal to be an appeal from the final orders, as they filed appellate briefs on the merits and counter-designations of the record on appeal. Therefore, we apply the prevailing judicial policy of construing notices of appeal as referring to the proper order where, despite minor technical deficiencies, they in fact gave timely and adequate notice of the matter referred for appellate review. (Conservatorship of Starr (1989) 215 Cal.App.3d 1390, 13931394, fn. omitted [construing notice of appeal from a minute order as an appeal from the formal appealable order]; see also Holden v. California Emp. etc. Com. (1950) 101 Cal.App.2d 427, 429431 [construing notice of appeal from order granting motion to dismiss as an appeal from judgment of dismissal]; McClellan v. Northridge Park Townhome Owners Assn., Inc. (2001) 89 Cal.App.4th 746, 751 [construing notice of appeal from order granting motion to amend judgment as appeal from amended judgment]; Gu v. BMW of North America, LLC (2005) 132 Cal.App.4th 195, 202 [construing notice of appeal from order sustaining demurrer as appeal from judgment of dismissal].)

The trustees argue that John waived his right to appeal from the discovery order by failing to seek writ review of the order before judgment was entered. They cite Wooldridge, supra, 199 Cal.App.2d 620, which stated that, although discovery orders are reviewable on appeal of a final judgment, appellate courts are much more reluctant to overturn the judgment of a trial court after the full trial of the action because of a procedural error unless such error is so prejudicial it constitutes a miscarriage of justice. (Id. at pp. 628629.) With respect to a particular argument that the opposing partys objections to the discovery requests were filed late, the court wrote the argument should have been raised . . . by writ of mandamus . . . . [Citation.] Since defendants elected to sit on their rights, the hearing of objections filed after the statutory period, if error, was not prejudicial. [Citation.] (Id. at p. 629.)

However, a prerogative writ is not the favored method of reviewing discovery orders. Ordinarily the aggrieved party must raise the issue on direct appeal from a final judgment. [Citations.] The premise upon which this general policy rests is that in the great majority of cases the delay due to interim review of discovery orders is likely to result in greater harm to the judicial process by reason of protracted delay than is the enforcement of a possibly improper discovery order. (Sav-On Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1, 5 (Sav-On Drugs).)

We thus reject the trustees arguments that these appeals should be dismissed.

B.                Motions to Compel

John does not challenge here the courts approval of the accountings on any substantive defect in the proof presented to the court. Rather he contends that the denial of his motions to compel further responses to his requests for production of documents precluded him from being able to contest the showing made by the trustees.

The trial courts denial of Johns motions to compel can only be overturned if the court abused its discretion. (Save OpenSpaceSanta MonicaMountains v. Superior Court (2000) 84 Cal.App.4th 235, 245246.)  Where there is a basis for the trial courts ruling and the evidence supports it, a reviewing court will not substitute its opinion for that of the trial court. [Citation.] [Citation.] The trial courts determination will be set aside only when it has been established that there was no legal justification for the order granting or denying the discovery in question. (Ibid., quoting Johnson v. Superior Court (2000) 80 Cal.App.4th 1050, 1061.) The burden rests on the complaining party to demonstrate from the record that such an abuse has occurred. (Forthmann, supra, 97 Cal.App.4th at p. 985.)

However, Appellate courts must keep liberal policies of discovery statutes in mind when reviewing decisions denying or granting discovery. (Pacific Tel. & Tel. Co. v. Superior Court (1970) 2 Cal.3d 161, 171.) Absent a showing that substantial interests will be impaired by allowing discovery, liberal policies of discovery rules will generally counsel against overturning a trial courts decision granting discovery (ibid.) and militate in favor of overturning a decision to deny discovery. (Ibid., quoting Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, 378379 [in passing on orders denying discovery appellate courts should not use the trial courts discretion argument to defeat the liberal policies of the statute ].) (Forthmann, supra, 97 Cal.App.4th at p. 987; see also Volkswagen of America, Inc. v. Superior Court (2006) 139 Cal.App.4th 1481, 1497; but see Calcor Space Facility, Inc. v. Superior Court (1997) 53 Cal.App.4th 216, 223 [danger of overreaching discovery is particularly great with respect to orders requiring production of documents].)

  [T]he scope of discretion always resides in the particular law being applied, i.e., in the  legal principles governing the subject of [the] action . . . . Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an  abuse  of discretion.  [Citations.] (Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 833.) In other words, judicial discretion must be measured against the general rules of law and, in the case of a statutory grant of discretion, against the specific law that grants the discretion. (Horsford v. Board of Trustees of CaliforniaStateUniversity (2005) 132 Cal.App.4th 359, 393.)

1. Beneficiaries Rights to Information from Trustees

a. Mandated Information

John filed his petitions for accounting pursuant to sections 16060 et seq. and 17200, subdivision (b)(7).[25] The trustee of a revocable trust generally has no duty to report or account to the trust beneficiaries and the beneficiaries have no right to receive such accountings. (Johnson v Kotyck (1999) 76 Cal.App.4th 83, 87;  16064, subd. (b) [trustee not required to report information or account to a beneficiary of a revocable trust, as provided in Section 15800, for the period when the trust may be revoked].) Section 16060 et seq. imposes a broad duty to report, on request, information and account to beneficiaries of irrevocable trusts: [O]n reasonable request by a beneficiary, the trustee shall provide the beneficiary with a report of information about the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particulars relating to the administration of the trust relevant to the beneficiarys interest, including the terms of the trust.[26] ( 16061; see also  16060 [trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration].) A trust beneficiary is a person to whom a donative transfer of property has been made and who has any present or future interest, vested or contingent. ( 24, subd. (c).)

Sections 16060 and 16061 codify trustees common law duty to report to beneficiaries. (See Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 207208, & fn. 1 (Wells Fargo), [citing Union Trust Co. v. Superior Court (1938) 11 Cal.2d 449, 460462, and Strauss v. Superior Court (1950) 36 Cal.2d 396, 401402].) The duty of the trustee under sections 16060 and 16061 is to keep beneficiaries reasonably informed ( 16060) and to provide a report of information ( 16061). (Wells Fargo, at p. 207.) The trustees duty to furnish information to beneficiaries is articulated in the Restatement Third of Trusts, as follows: (1) Except as provided in  74 (revocable trusts) or as permissibly modified by the terms of the trust, a trustee has a duty: [] (a) promptly to inform fairly representative beneficiaries of the existence of the trust, of their status as beneficiaries and their right to obtain further information, and of basic information concerning the trusteeship; [] (b) to inform beneficiaries of significant changes in their beneficiary status; and [] (c) to keep fairly representative beneficiaries reasonably informed of changes involving the trusteeship and about other significant developments concerning the trust and its administration, particularly material information needed by beneficiaries for the protection of their interests. [] (2) Except as provided in  74 or as permissibly modified by the terms of the trust, a trustee also ordinarily has a duty promptly to respond to the request of any beneficiary for information concerning the trust and its administration, and to permit beneficiaries on a reasonable basis to inspect trust documents, records, and property holdings. (Rest.3d Trusts,  82, pp.180-181 (Restatement).) Under the general rule of Subsection (2), a trustee ordinarily has a duty, with reasonable promptness, to provide information that is requested regarding the trust property or its administration by any beneficiary, a right not limited to fairly representative beneficiaries. The trustee is also to grant access to books and records of the trust, and to permit inspection of the trusts property holdings, on a reasonable basis, at reasonable hours and intervals, to any beneficiary, including with the participation of the beneficiarys accountant, attorney, or other advisor. On petition by the trustee or a beneficiary, however, a court may limit the frequency or extent of such inquiries by one or more of the beneficiaries, weighing the remoteness or substantiality of their interests in the trust against the burdens, intrusiveness, and privacy considerations that may be involved. (Ibid., com. e, pp.186-187.) [T]he beneficiary is always entitled to such information as is reasonably necessary to enable [the beneficiary] to enforce [the beneficiarys] rights under the trust or to prevent or redress a breach of trust. (Ibid., reporters notes, com. a(2), p.192, italics added.)

As to the irrevocable Marital Deduction Trust [QTIP]), the GST Exempt Trust and the Exemption Trust, John qualifies as a beneficiary entitled to information from the trustee on request under sections 16060 and 16061.[27] He was both a trustor and a beneficiary of the Carpy Winery Trust, with a power to revoke as to his interest, and therefore entitled to receive reports from the trustee under section 15800.

b. Probate Court Discretion

The probate court is granted broad equitable powers in responding to a beneficiarys request for an accounting. A beneficiary may petition the court pursuant to section 17200 to compel the trustee to report information about the trust or account to the beneficiary, if (A) the trustee has failed to submit a requested report or account within 60 days after written request of the beneficiary and (B) no report or account has been made within the six months preceding the request. ( 17200, subd. (b)(7).)

 The matter of determining the appropriate equitable relief to be granted to a beneficiary is generally left to the good judgment of the trial court. [Citation.] (Evangelho v. Presoto (1998) 67 Cal.App.4th 615, 623624; see also Kasperbauer v. Fairfield (2009) 171 Cal.App.4th 229, 237 [the probate court has the power to settle all disputes relating to the trust matters that come before it]; Schwartz v. Labow (2008) 164 Cal.App.4th 417, 427 [probate court has  inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust ].)

A report or account is not limited to an accounting required by section 16062, but may include any report or account the court in its discretion deems appropriate. (Esslinger, supra, 144 Cal.App.4th at pp. 526, 528 [although a remainder beneficiary was not entitled to a  16062 accounting, he was entitled to an account in the courts discretion under  16061, 17200, subd. (b)(7)].) However, [t]he administration of trusts is intended to proceed expeditiously and free of judicial intervention, subject to the jurisdiction of the court ( 17209), and [t]he court may dismiss a petition if it appears that the proceeding is not reasonably necessary for the protection of the interests of the trustee or beneficiary ( 17202). The court also has the power to limit the frequency or extent of a beneficiarys inquiries weighing the remoteness or substantiality of their interests in the trust against the burdens, intrusiveness, and privacy considerations that may be involved. (Restatement, supra,  82, com. e, p. 187.)

c. Discovery in Accounting Proceedings

[T]here is no question but that the discovery procedures found in the Code of Civil Procedure are available for use in probate proceedings. (Forthmann, supra, 97 Cal.App.4th at p. 987; see  1000 [[e]xcept to the extent that this code provides applicable rules, the rules of practice applicable to civil actions, including discovery proceedings . . . apply to, and constitute the rules of practice in, proceedings under this code].) Discovery is expressly provided in special proceeding of a civil nature. (Code Civ. Proc.,  2016.020, subd. (a).) Probate matters, including petitions for accountings, are special proceedings of a civil nature. (Coberly v. Superior Court (1965) 231 Cal.App.2d 685, 690 (Coberly).) When a beneficiary raises an objection to an accounting, the beneficiary is entitled to discovery relevant to the objection. (Mota v. Superior Court (2007) 156 Cal.App.4th 351, 355356; Forthmann, supra, 97 Cal.App.4th at p. 985; Coberly, supra, at p. 690; see also Wells Fargo, supra, 22 Cal.4th at pp. 205206 [ruling on discovery dispute in action arising from petition for accounting where beneficiaries filed objections]; Moeller v. Superior Court (1997) 16 Cal.4th 1124, 11271128 (Moeller) [ruling on discovery dispute in action arising from petition for accounting where successor trustee filed objections].) But the party providing the accounting is also entitled to the concomitant safeguards of those rules against abuse of discovery and absence of good cause. (Forthmann, supra, at p. 985; Coberly, supra, at p. 691.)

The trustees rely on Forthmann, supra, 97 Cal.App.4th 977, to argue that a beneficiary is entitled only to discovery which is narrowly tailored to specific objections to an accounting. We do not believe that Forthmann can be read so narrowly. In Forthmann, the proceeding was initiated by a trustee seeking approval of an accounting; beneficiaries became parties to the proceeding only if they filed a response or objection to the accounting. (Id. at pp. 981982, & fn. 5, 988;  10431044.) The trial court had previously held that the beneficiary, Boyer was authorized to conduct discovery as to all financial matters relating to the accounting (and into a prior years account). (Forthmann, at p. 982.) In allowing Boyer to conduct limited discovery, the trial court did so on the assumption that Boyer would first file his proposed response and objections to the accounting. (Ibid.) Boyer never filed any objections to the accounting (because he was concerned an objection would trigger a no-contest clause in the trust and disqualify him as a beneficiary). (Id. at pp. 982983, 985.) The trial court refused to grant Boyer an additional seven month continuance of an already twice-continued hearing on the trustees petition for approval so that he could conduct discovery to evaluate whether or not to file objections. (Id. at pp. 980, 983.) The appellate court upheld the probate courts denial of the continuance in the absence of any filed objections. (Id. at p. 985.) Until [the beneficiary] actually filed objections, there was no contested proceeding that would require an assignment for trial and the conduct of discovery. [Citation.] (Ibid.) The court held that the trial court cannot be faulted for slamming the door on this transparent fi