Estate of Morra

Filed 9/24/08 Estate of Morra 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

John Morra filed a petition for probate of his father Louiss estate after his stepmother, Bobbye Morra, claimed control over the entirety of the couples community assets. The probate court rejected Bobbyes claim and ordered the estate to be funded with Louiss 50 percent share of the community assets, a decision we affirmed in an earlier appeal. (Estate of Louis Morra (Feb. 15, 2008, A117804) [nonpub. opn.] (Morra I).) Thereafter, the special administrator declined to include as an asset of the estate Louiss interest in one parcel of real property. While the couple had executed an agreement characterizing that property as community property, the special administrator elected to disregard the agreement because the property had originally been held in joint tenancy. The probate court approved the petition for settlement excluding this property interest and declined to reimburse any of the attorney fees incurred by John Morra in pursuing the probate petition. We reverse these two holdings.

I. BACKGROUND

This is the third appeal in this probate proceeding. Because it is relevant to the present appeal, we quote the history of the litigation from Morra I, supra, A117804:

In January 2000, Louis and Bobbye Morra instituted an estate plan that, as relevant here, included the disposition of three parcels of real property: Ocie Way, Redbud Lane and Soda Bay Road. At that time, both Redbud Lane and Ocie Way were Bobbyes separate property. Soda Bay Road had been purchased during the parties marriage and was held by them in joint tenancy. As part of their estate plan, the Morras executed a property characterization agreement, confirming all three properties as community property. They established the Trust, listing all three properties as trust assets. They executed reciprocal pourover wills that, in Paragraph Fourth, provided that upon the death of the testator, the residue of the testators estate was to be added to, administered, and distributed as a part of the trust according to the terms of the trust and any amendment made to it before [the testators] death. The Trust, in Article 6, provided that upon the death of the surviving spouse, Redbud Lane was to be distributed to Bobbyes daughter, Kim Jaye Rhuland. The balance of the remaining trust estate was then to be divided into two equal shares. One share was to be distributed to Kim Jaye Rhuland and the other share was to be distributed in equal shares to Louiss children, John Lawrence Morra, Jacqueline Morra and Jerilynn Morra. In Article 3, the Trust reserved to both spouses the power to revoke any trust created by this instrument as to any separate and quasi-community property of that [spouse] and any community property. It also provided, After the death of the deceased settler, the surviving settlor may at any time amend, revoke, or terminate, in whole or in part, any trust created by this instrument.

Louis died on August 26, 2001. After his death, Bobbye exercised her right under Article 3 to revoke the Trust, executing a new revocable living trust that provided the entire estate would go to her daughter, Kim Jaye Rhuland. John Morra petitioned to probate Louiss will. Bobbye objected, asserting that all of Louiss assets had become the property of the Trust, of which she was the sole beneficiary, and those assets therefore were subject to distribution under her new living trust. The probate court, relying on Estate of Powell (2000) 83 Cal.App.4th 1434 (Powell), found that upon Louiss death, his community property share of the trust property became his separate property so that Bobbye lacked any power or authority to revoke the trust as to that property. The court entered judgment that [Louiss] one-half of the community property share is to be distributed pursuant to his valid will or intestate, whichever the case may be. Bobbye appealed from an order denying her motion for reconsideration of the courts ruling. By unpublished opinion, we dismissed the appeal because Bobbyes motion for reconsideration had failed to raise new or different facts. (Estate of Morra (Nov. 1, 2005, A109125) [nonpub. opn.].)

John Morra then petitioned to have Louiss property distributed by intestate succession. His position was and is that by exercising her right to revoke the Trust, Bobbye effectively terminated the Trust so that under the terms of Louiss will there was no trust into which the residue of his estate might be distributed. The trial court held that under Powell, supra, 83 Cal.App.4th 1434, Bobbyes attempted revocation of the Trust effectively removed her community property from the Trust, but did not terminate the Trust as to Louiss property interests, which then, by reason of the Trust Instrument and the pourover will, would be administered and distributed by the Trust. We affirmed that order. (Morra I, supra, A117804.)

As disclosed in the record of the current appeal, following the issuance of the probate courts order declaring that one-half of the couples community property would be administered by the Trust, the parties agreed to the appointment of Duane M. Leonard as special administrator of Louiss estate. On July 7, 2006, Leonard filed a partial inventory and appraisal listing Louiss 50 percent interests in the Redbud Lane and Ocie Way properties as assets of the estate, but omitting Louiss 50 percent interest in the Soda Bay Road property. Leonard thereafter filed a final inventory and appraisal that included the Soda Bay Road property interest, but he ultimately omitted the Soda Bay Road property interest from the estate in an amended final inventory, noting that the Soda Bay Road property was in Joint Tenancy and therefore is not part of the probate estate.

When Leonard petitioned for approval of a final account excluding the Soda Bay Road property interest from the estate, John Morra filed an objection, arguing that Louiss Soda Bay Road property interest should have been included and that the personal representatives statutory fees should be apportioned between him and Leonard. In addition, John Morras attorney petitioned the probate court for reimbursement of attorney fees incurred by John Morra in filing the probate petition and resisting Bobbyes opposition.

In a written order, the probate court granted the petition to settle the estate, overruled John Morras objections, and denied fees to John Morra and his attorney. In denying John Morra a share of the statutory fees, the court held that Probate Code Section 10800 only provides that compensation shall be awarded to the personal representative. Only Duane Leonard was appointed personal representative of the estate. John Morra was not. In denying reimbursement of fees to John Morras attorney, the court held that Probate Code Sections 10810 and 10811 only provide for compensation for the attorney for the personal representative. . . . Therefore statutory fees and extraordinary fees may not be awarded to [John Morras attorney] under these sections. The courts order did not expressly address the issue of the Soda Bay Road property.

II. DISCUSSION

John contends that the probate court erred in omitting the Soda Bay Road property from the estate and in refusing to grant him a share of statutory fees and reimbursement of his attorney fees.

A. The Soda Bay Road Property

A distinctive feature of property ownership by joint tenancy is the right of survivorship. When a joint tenant dies, that tenants interest passes by operation of law to the remaining joint tenant or tenants. (Estate of Mitchell (1999) 76 Cal.App.4th 1378, 1385.)

A married couple may hold real property as community property, joint tenants, or tenants in common. (Fam. Code,  750; Estate of Mitchell, supra, 76 Cal.App.4th at p. 1385.) They cannot hold property both as community property and in joint tenancy or tenancy in common, however, because spouses joint tenancy and tenancy in common interests are deemed to be separate property. (Estate of Mitchell, at p. 1385.) The Family Code creates a rebuttable presumption that property held by spouses in joint tenancy is actually community property (Fam. Code,  2581), but that presumption operates only upon the dissolution of the marriage. (Estate of Mitchell, at p. 1386; Dorn v. Solomon (1997) 57 Cal.App.4th 650, 652.) Accordingly, when one spouse dies during the marriage, ownership of any property held by the couple in joint tenancy passes to the surviving spouse by right of survivorship, assuming the joint tenancy has not otherwise been terminated. (In re Marriage of Hilke (1992) 4 Cal.4th 215, 220; Estate of Mitchell, at p. 1385.)

Upon the death of a spouse, the presumption is that the couples property is held as described in a joint tenancy deed, but that presumption may be overcome by a showing that the couple actually intended to hold the property as community property. (Estate of Blair (1988) 199 Cal.App.3d 161, 167.) A joint tenancy may be terminated either by mutual agreement between the parties or by any conduct or course of dealings sufficient to indicate that all parties have mutually treated the joint tenancy as terminated [citations]. An agreement between the tenants which while it does not expressly terminate the tenancy, is inconsistent by its terms with one or more of the four essential unities of a joint tenancy, will also be adjudged to be a severance thereof. Thus, interference with the right of survivorship by the terms of an agreement will sever the joint tenancy relationship.[1] (Estate of Asvitt (1979) 92 Cal.App.3d 348, 351.) Accordingly, it has long been recognized that the execution by joint tenants of an agreement that is inconsistent with the right of survivorship terminates a joint tenancy. (McDonald v. Morley (1940) 15 Cal.2d 409, 412; Re v. Re (1995) 39 Cal.App.4th 91, 97.)

A pertinent example is found in Powell, supra, 83 Cal.App.4th 1434, in which a couple executed an inter vivos trust providing that, upon the death of either, the survivor would become the sole beneficiary and, upon the death of that survivor, the estate would be distributed to the wifes son. (Id. at pp. 14371438.) The trust assets included a parcel of real property held in joint tenancy. (Id. at pp. 1438, 1441.) Upon the death of the wife, the husband claimed to have succeeded to ownership of the property by right of survivorship, notwithstanding the terms of the trust. (Id. at p. 1441.) In rejecting the argument, the court affirmed the trial courts holding that any property held in joint tenancy lost this character upon being included in the trust, in light of the clear intent therein to eliminate the right of survivorship. (Ibid.)

Powell and the other decisions cited above are plainly controlling here. Louis and Bobbye not only placed the Soda Bay Road property in a trust that directed disposition of the property, an act inconsistent with an intent to dispose of the property by the right of survivorship, but they also executed a PROPERTY CHARACTERIZATION AGREEMENT that confirmed the Soda Bay Road property to the parties as community property. By both these actions, the couples intent to sever the joint tenancy and hold the property as community property was made plain and indisputable. The probate courts implicit ruling to the contrary by approving the settlement petition was an error of law and must be reversed.

In defense of the courts decision, Bobbye acknowledges that a joint tenancy can be severed by the execution of a written instrument that evidences an intent to sever the joint tenancy. Without citation to authority, however, she argues that [i]t is abundantly clear that the Soda Bay Road property joint tenancy was not severed by execution of the Property Characterization Agreement because [i]t is axiomatic that joint tenancy property can include property owned as community property by husband and wife in California. In fact, as held in Estate of Mitchell, supra, 76 Cal.App.4th at page 1385, the opposite is true. Joint tenancy property cannot be held as community property by a husband and wife in California because a joint tenancy interest is by definition separate property. In arguing to the contrary, Bobbye may have in mind the presumption of Family Code section 2581, but as noted above, that presumption operates only upon marital dissolution. The couples execution of an agreement characterizing the Soda Bay Road property as community property was therefore wholly inconsistent with an intent to hold as joint tenants and severed the joint tenancy.

B. Statutory Fees

We agree with the probate court that John Morra was not entitled to a share of the statutory fees. The personal representative of an estate and the attorney for the personal representative are eligible for two types of compensation for services rendered to the estate. The first type, based on the value of the estate, is referred to as ordinary or statutory fees and constitutes compensation for the services that are typical of most probate cases. (Prob. Code,  10800, 10810; Estate of Hilton (1996) 44 Cal.App.4th 890, 894895.) The second type, which may be awarded in the discretion of the probate court, is referred to as extraordinary fees and compensates unusual services. (Prob. Code,  10801, 10811; Estate of Hilton, at p. 895.)

By the express terms of the applicable statutes, statutory fees are available only to a personal representative and his or her attorney. (Prob. Code,  10800, 10810.) Although statutory fees are to be apportioned when more than one personal representative has served (Prob. Code,  10805; Estate of Windiate (1961) 197 Cal.App.2d 560, 565), John Morra did not serve as personal representative. He may have performed some services normally performed by a personal representative, but any such activities were voluntary. He was never appointed by the court to perform this role. He cites no authority for his position that he should receive a share of the statutory fees because he was effectively the personal representative, as he describes his role, and the statute does not provide for such compensation. Accordingly, we find no error in the probate courts conclusion that Leonard was entitled to all of the statutory fees.

C. Reimbursement of John Morras Attorney Fees

As noted above, extraordinary fees may be awarded in the discretion of the probate court to the personal representative and his or her attorney to compensate unusual services. (Prob. Code,  10801, 10811; Estate of Hilton, supra, 44 Cal.App.4th at p. 895.) Bobbye argues that the trial court was correct in ruling that John Morra was not entitled to reimbursement of his attorney fees under these statutes, which apply only to the personal representative and his or her attorney.

While this argument may well be correct, it does not resolve the issue before us because the fees awardable by statute do not exhaust the probate courts power to compensate legal services. It has long been held, in connection with probate proceedings, that a plaintiff who has succeeded in protecting, preserving or increasing a fund for the benefit of himself and others may be awarded compensation from the fund for the services of his attorney. This is to compel those for whose benefit the action or proceeding was taken to bear their share of the expenses of the litigation; and this rule is equitable and just. (Estate of Reade (1948) 31 Cal.2d 669, 671672 (Reade).) Such an award is made in the exercise of the courts equitable jurisdiction, rather than by statute. (Id. at p. 672.) Since Reade, the principle has been repeatedly reaffirmed. (E.g., Estate of Stauffer (1959) 53 Cal.2d 124, 131132; Hutchinson v. Gertsch (1979) 97 Cal.App.3d 605, 614615; Estate of Gopcevic (1964) 228 Cal.App.2d 280, 281.)

The principle articulated in Reade is now viewed as an application of the more general common fund doctrine: The common fund doctrine recognizes the common law historic power of equity to permit the trustee of a fund or property, or a party preserving or recovering a fund for the benefit of others in addition to himself, to recover his costs, including his attorneys fees, from the fund or property itself or directly from the other parties enjoying the benefit. That rule has been consistently followed. [Citations.] [Citation.] [] . . . [] The doctrine has been recognized and applied consistently in California when an action brought by one party creates a fund in which other persons are entitled to share. Although once described as a principle of representation or agency [citation], it is now recognized as an equitable principle. The bases of the equitable rule which permits surcharging a common fund with the expenses of its protection or recovery, including counsel fees, appear to be these: fairness to the successful litigant, who might otherwise receive no benefit because his recovery might be consumed by the expenses; correlative prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery; encouragement of the attorney for the successful litigant, who will be more willing to undertake and diligently prosecute proper litigation for the protection or recovery of the fund if he is assured that he will be properly and directly compensated should his efforts be successful. [Citations.]  (City and County of San Francisco v. Sweet (1995) 12 Cal.4th 105, 110111, fn. omitted.)

Based on the evidence before us, it appears that Louiss estate, which several beneficiaries will share, was funded solely as a result of the efforts of John Morra. It was John Morra who filed the petition for probate of Louiss estate and prevailed over Bobbyes argument that all of Louiss assets were subject to distribution under her new living trust. Had John Morra taken no action, Bobbyes position would have left Louiss estate bare. On its face, this appears to be an appropriate situation for application of the common fund doctrine.

While application of the common fund doctrine lies in the discretion of the court (Estate of Gopcevic, supra, 228 Cal.App.2d at p. 281), the probate court failed even to consider the doctrine, mentioning only the applicable statutes. Given the nature of John Morras contributions, it was an abuse of discretion not to at least consider applying the common fund doctrine. The probate courts denial of the petition of John Morras attorney for fees must therefore be reversed, and the matter remanded to the probate court for consideration of common fund doctrine reimbursement.

III. DISPOSITION

The probate courts order approving the petition for final settlement and denying reimbursement of John Morras attorney fees is reversed for the reasons stated. The

matter is remanded to the probate court for further proceedings consistent with this decision. John Morra shall recover costs on appeal.

_________________________

Margulies, J.

We concur:

_________________________

Marchiano, P.J.

_________________________

Swager, J.

Publication courtesy of California free legal advice.

Analysis and review provided by Carlsbad Property line attorney.

San Diego Case Information provided by www.fearnotlaw.com

[1] The four unities of a joint tenancy, an archaic concept that is rarely discussed in modern decisions, are interest, title, time, and possession. (Estate of Gebert (1979) 95 Cal.App.3d 370, 375.)