Guardinship of Hughes
Filed 4/4/13 Guardinship of Hughes CA1/3
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opinion has not been certified for publication or ordered published for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
THREE
Guardianship of ALEXANDER
REYNOLDS HUGHES, a Minor.
MITCHELL, SILBERBERG & KNUPP,
LLP, et al.,
Petitioners and Appellants,
v.
SUZAN HUGHES,
as Guardian, etc., et al.,
Objectors and Respondents;
JOHN
REYNOLDS, as Cotrustee, etc., et al.,
Objectors and Appellants.
A130802
(Los Angeles County
Super. Ct. No.
BP 062817)
ORDER MODIFYING
OPINION,
AND DENYING PETITION
FOR
REHEARING
[NO CHANGE IN JUDGMENT]
THE COURT:
It is ordered that
the opinion filed herein on March 6, 2013, be
On page 6, replace the word “Referee†in heading number II, so the heading now reads:
the Fact-Finder Apply the Proper Legal Standard?
On page 9, replace
the word “Referee†in heading number
III, so the heading now reads:
Substantial Evidence Support the Fact-Finder’s Factual Findings?
The Petition for Rehearing filed March 20, 2013
is denied. There is no change in the
judgment.
DATE: _________________________________
MCGUINESS,
P.J.
>
Filed 3/6/13
(unmodified version)
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opinion has not been certified for publication or ordered published for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
THREE
Guardianship
of ALEXANDER REYNOLDS HUGHES, a Minor.
MITCHELL, SILBERBERG & KNUPP,
LLP, et al.,
Petitioners and Appellants,
v.
SUZAN
HUGHES, as Guardian, etc., et al.,
Objectors and Respondents;
JOHN
REYNOLDS, as Cotrustee, etc., et al.,
Objectors and Appellants.
A130802
(Los Angeles County
Super. Ct. No.
BP 062817)
This
is an appeal from a trial court order denying the request of petitioners and
appellants Mitchell Silberberg & Knupp and Hillel Chodos (collectively,
petitioners) for an award of several million dollars in attorney fees for legal
services they provided on behalf of the Guardianship of Alexander Reynolds
Hughes (the guardianship), at the direction of objector and respondent Suzan
Hughes, as Guardian (guardian).
Objectors and appellants John Reynolds, Conrad Klein and Christopher
Pair (collectively, cotrustees), in turn, appeal from the portion of the trial
court order requiring them to pay 100 percent of the fee charged by the referee
appointed to consider petitioners’ fee request.
For reasons set forth below, we affirm the order.
FACTUAL AND
PROCEDURAL BACKGROUND
Mark R. Hughes (Mark),
the founder of Herbalife International, Inc. (Herbalife), died in 2000. Pursuant to his will, Mark’s only son, Alexander
Hughes, born in 1991, was named primary beneficiary of his estate. This estate includes the Mark Hughes Family
Trust (trust), which originated with assets worth approximately $320 million,
scheduled to be distributed to Alexander when he reaches age 35; and a
custodial account (custodianship), which originated with assets worth
approximately $40 million, scheduled to be distributed to Alexander when he
reaches age 25. After Mark died,
respondent John Reynolds, Alexander’s grandfather, was named custodian of the
custodianship. This position is
currently held by respondent
Fred Siegel (custodian). Mark also named
Reynolds as a cotrustee, along with cotrustees Klein and Pair.
Respondent Suzan Hughes (Suzan), Alexander’s mother, was
named Alexander’s court-appointed guardian.
As guardian, Suzan oversees a guardianship account on behalf of
Alexander. At the time of Mark’s death,
Suzan and Mark, who had been divorced several years, were bound by a Marriage
Settlement Agreement (MSA). Under the
MSA, Suzan was paid $6 million for her share
in the family residence, $33,000 per month in spousal support for 10 years,
$3.95 million to purchase a residence for Ms. Hughes and Alexander, a
$500,000 furniture allowance for the home, $10,000 per month in child support
while Alexander remained a minor, and payment of all Alexander’s medical and
educational expenses while he remained a minor.
In addition, the MSA set forth Suzan’s acknowledgment that she had no
further interest in the trust, and that the sums payable to her under the MSA
sufficed to maintain the lifestyle she and Alexander enjoyed before the
divorce.
Since shortly after Mark’s death, Suzan, the cotrustees
and the custodian have been engaged in rounds of litigation relating to various
aspects of Mark’s estate. For much of
this litigation, Suzan was represented by petitioner Chodos (Chodos), a sole
practitioner, and petitioner Mitchell Silberberg & Knupp (MSK), a large law firm. In late 2008 and early 2009,
petitioners filed separate petitions seeking extraordinary compensation for
legal work performed for their client, Suzan, in her capacity as guardian,
between years 2002 and 2008. These
petitions were handled jointly by the trial court and, thus, are referred to
herein as “the fee petition.†Pursuant
to the fee petition, Chodos, who had already been paid over $630,000 for his
legal work performed at Suzan’s direction for the guardianship, sought an
additional $1.75 million. MSK, which had
already been paid nearly $2.4 million for such work, sought an additional
$1.307 million.
Several
interested parties opposed petitioners’ fee petition in full or part ─ to
wit, Suzan in her capacity as guardian; Siegel in his capacity as custodian;
and Klein, Pair and Reynolds, in their capacity as cotrustees.
On
April 29, 2009, the trial court issued an order appointing the Honorable Richard
Neal, Retired, as referee pursuant to Code of Civil Procedure section 639,
subdivision (a)(1) and (a)(2), to “hear . . . all issues of fact or
law necessary or appropriate to make a recommendation as to the amount of
additional attorneys’ fees, if any, to be paid to petitioners Hillel Chodos
and/or Mitchell Silberberg & Knupp . . . .â€
the factors set forth in the California Rules of Court, statutes and cases,â€
and, in particular, to “consider, among other things, the amount of time spent,
the appropriate billing rate(s), the success, and the benefit to Alexander
Reynolds Hughes of the services performed.â€
Following a hearing held over five and a half days, at which the parties
offered extensive live testimony, documentary evidence and argument, the
referee issued a final report recommending petitioners’ request for additional
compensation be denied, that petitioners collectively pay 40 percent of his
$99,640.21 fee, and that the trust pay the remaining 60 percent of his fee.
Petitioners
objected to the referee’s report and, specifically, to the recommendation to
deny their request for additional compensation.
Neither Suzan nor Alexander, who by the time the referee’s report was
filed had reached the age of maturity, objected to this recommendation.
these objections at a hearing held September 2, 2010 before taking the matter
under submission.
On
October 8, 2010, the trial court issued an order adopting the referee’s
recommendations in whole with one exception.
The trial court agreed with the recommendation petitioners receive no
further compensation for their legal work performed on behalf of the
guardianship, but rejected the recommendation the parties share the burden of
paying the referee’s $99,640.21 fee.
Instead, the trial court ordered the trust to pay 100 percent of this
fee. Petitioners and the cotrustees have
both appealed from this order.
DISCUSSION
Petitioners
contend the trial court erred in adopting the referee’s recommendation to deny
their request for an award of additional attorney fees for legal services
provided for the guardianship on several grounds. First, petitioners contend the order was
erroneous as a matter of law, because the referee applied an improper legal
standard. Second, petitioners contend
the referee’s recommendation to deny additional compensation was not supported
by substantial evidence. Lastly,
petitioners contend the trial court violated their rights to due process by adopting
the referee’s recommendation and findings without conducting an independent
review.
On
cross-appeal, the cotrustees challenge the trial court’s order, contrary to the
referee’s recommendation, to impose upon the trust the obligation to pay the referee’s
entire $99,640.21 fee.
Governing Legal Standards.
Petitioners’
entitlement to attorney fees is governed by Probate Code, section 2642,
subdivision (b) and California Rules of Court,
rule 7.702, which rule is made applicable to guardianships pursuant to rules
7.750 and 7.751.
title="">[5] Pursuant to this legal framework, attorneys, like
petitioners, who render legal services to a guardian or estate or both, may
file a petition for extraordinary compensation.
The petition is required to include or be accompanied by a statement of
the facts that accomplishes each of the following: “(1) Show[s] the nature and difficulty of the tasks
performed; [¶] (2) . . .
the results achieved; [¶] (3) . . .
the benefit of the services to the estate; [¶] (4) Specif[ies] the amount requested for each category of
service performed; [¶] (5) State[s]
the hourly rate of each person who performed services and the hours spent by
each of them; [¶] (6) Describe[s]
the services rendered in sufficient detail to demonstrate the productivity of
the time spent; and [¶] (7) State[s]
the estimated amount of statutory compensation to be paid by the estate, if the
petition is not part of a final account or report.†(Rule 7.702.
See also rule 7.751 [“All
petitions for orders fixing and allowing compensation must comply with the
requirements of rule 7.702 . . . except that the best interest of the
ward . . . is to be considered instead of the interest of
beneficiaries of the estateâ€].) Then,
following a hearing if the matter is contested, the court must make an order
awarding in an amount charged against the estate “such compensation as the
court determines reasonable to the attorney for services rendered to the
guardian . . . .†(Prob.
Code, § 2642,
subd. (b).)
On appeal, a trial court’s order on a petition for
attorney fees is generally reviewed for abuse of discretion. (Terry
v. Conlan (2005) 131 Cal.App.4th 1445, 1461; Whittlesey v. Aiello (2002) 104 Cal.App.4th 1221, 1230
[“Allowance of litigation expenses rests in the sound discretion of the trial
court, whose ruling will not be disturbed on appeal absent an abuseâ€].) Of course, issues regarding the proper
legal basis for awarding attorney fees are reviewed de novo. (Sessions
Payroll Mgmt., Inc. v. Noble Construction Co. (2000) 84 Cal.App.4th 671,
677.) And “[i]f application of the rule
of law to the facts requires an inquiry that is ‘essentially factual’
. . . [the decision is] reviewable under the clearly erroneous
standard.†(Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 800-801.)
the Referee Apply the Proper Legal Standard?
Petitioners
contend the order on their fee petition (fee petition order) must be reversed
because it stems from an erroneous legal premise ─ to wit, that
petitioners had to prove their services provided an essential benefit to the
guardianship estate. According to
petitioners, this premise is erroneous, and requires reversal, because
California law required them to prove only that the amount of fees requested
was reasonable.
title="">[6] In fact, Chodos goes so far as to argue that,
“[o]n an application for attorney fees, the trial court is simply not entitled
to second-guess the Guardian’s decisions as to what was of benefit to the
Guardianship estate.†Rather, Chodos
contends, guardianship estate attorneys are entitled to payment for their
services so long as they “acted in good faith in accordance with their
fiduciary duties to the Guardian, their client.†However, petitioners, not the referee or the
trial court, are confused.
Indeed,
petitioners do not deny that they agreed in writing to the terms of the reference
order in this case. Nor can they. The Joint Status Report filed with the trial
court and signed by both petitioners on April 9, 2009, expressly states
the parties agree to appointment of a referee pursuant to section 639 to
consider petitioners’ fee petition.
Moreover, this agreement expressly defines the scope of the referee’s
authority in considering the petition ─ to wit, “to hear any and all
issues of fact or law necessary or appropriate to make a recommendation as to
the amount of additional attorneys’ fees, if any, to be paid to [petitioners]
and from what source[s] such fees, if any, are to be paid.†This report also orders the referee to
consider specific factors, including the extent to which petitioners’ services
were successful and beneficial to Alexander:
“The Referee shall consider the factors set forth in the California
Rules of Court, statutes and cases, and shall consider, among other things, the
amount of time spent, the appropriate billing rate[s], the success,
of the services performed.â€
(Emphasis added.) A formal order
appointing Justice Neal (Ret.) as referee pursuant to these agreed-upon terms
was issued by the trial court on April 29, 2009, and thus became binding on the
parties. Under these circumstances, we
reject petitioners’ argument that a different standard from that set forth in
this order of reference and based on the parties’ agreement should have
applied. (See Sy First Family Ltd. Partnership v. Cheung (1999) 70 Cal.App.4th
1334, 1341 [where parties entered into a stipulation purporting to send the
matter to a referee pursuant to § 638, the parties were bound by ordinary
contract principles]; Dallman Co. v.
Southern Heater Co. (1968) 262 Cal.App.2d 582, 591 [rejecting litigant’s
argument that the referee lacked authority to make certain findings of fact
where the parties stipulated to such authority in the reference]. Cf. DeGuere v. Universal City Studios (1997) 56 Cal.App.4th 482,
503-505 [the referee exceeded his authority under § 639(a) by ruling on
legal issues of contract interpretation and enforceability because “the trial
court was not entitled to refer any matter beyond examination of a long account
to the referee, unless the parties agreed, and they did notâ€].)
And
in any event, we note the
order of reference entered in this case was entirely consistent with California
law, which generally requires petitioners to prove their entitlement to fees
based on all relevant factors, including, but not limited to, the benefit of
their services to the guardianship.
(Rule 7.702; see also Estate
of Trynin (1989) 49 Cal.3d 868, 874
[“benefit to the estate is one of the factors to be weighed by the court in
fixing compensationâ€].)
name="_ftnref7" title="">[7] Moreover, “[w]here the trial court reasonably
concludes that the amounts previously awarded the attorney for both ordinary
and extraordinary services are adequate, given the value of the estate and the
nature of its assets, to fully compensate the attorney for all services,
including fee-related services, denial of a request for fee-related fees would
not be an abuse of discretion.†(
recent California case law makes clear:
“ ‘The underlying principle which guides the court in allowing
costs and attorneys’ fees incidental to litigation out of a trust estate is
that such litigation is a benefit and a service to the trust.’ [Citation.]
Consequently, where the trust is not benefited by litigation, or did not stand
to be benefited if the trustee had succeeded, there is no basis for the
recovery of expenses out of the trust assets.â€
(Whittlesey v. Aiello, supra, 104 Cal.App.4th at p. 1230.
Accord Thomas v. Gustafson
(2006) 141 Cal.App.4th 34, 44; Donahue v. Donahue (2010) 182 Cal.App.4th 259, 269-270.)
The record before us
reflects the referee and the trial court thereafter applied the appropriate
legal standard. For example, the trial court adopted the referee’s conclusion
that no further fees were payable by the estate because adequate compensation
had already been paid for the services provided for the benefit of the
estate. Contrary to petitioners’ claims,
this conclusion did not stem from a finding that their services failed to
result in economic success or “a traditional judicial win.†Rather, it stemmed from several of the
referee’s findings later adopted by the trial court, the most significant of
which was that the services for which compensation was sought provided little
or no benefit of any sort, tangible or non-tangible, to the guardianship
estate.
provided were motivated by Suzan’s personal agenda or animus toward the
cotrustees (or her former husband) rather than by the interests of the
guardianship. Finally, with respect to
Chodos, the referee found relevant to its decision the absence of detailed and
reliable contemporaneous time records, which were particularly important given
the extraordinarily high rate ($1,000 per hour) charged by the attorney for his
services. Whether, however, the trial
court had a proper evidentiary basis
for these findings is a separate, factual issue left to the court’s
discretion. (E.g., In re
Estate of McDonald (1940) 37
Cal.App.2d 521, 527 [the fee award is “is a matter generally left to the
sound discretion of the probate court, based upon the necessity for and the
nature of the litigation, its difficulty, the amount involved, the skill
required and employed, the attention given, the success or failure of the
attorneys’ efforts, including the amount of recovery, and other similar
considerationsâ€]; Thomas v. Gustafson, supra, 141 Cal.App.4th 34, 44.) It
is to this issue we now turn.
Substantial Evidence Support the Referee’s Factual Findings?
Petitioners
challenge on evidentiary grounds several of the factual findings underlying the
decision to deny their request for additional compensation. Turning first to petitioners’ petition to
compel the cotrustees to distribute various sums of money and properties to the
guardianship (“Distribution and Reimbursement Petitionâ€), for which they sought
an amount of approximately $1.4 million, the referee concluded the cotrustees
had paid all sums due under the MSA and that no evidence was offered that these
“generous sums†were insufficient to support Alexander at the level he was
accustomed to at the time of Mark’s death.
This accords with the tentative ruling of the trial court hearing the
underlying petition that Suzan was not entitled to personally receive trust and
custodianship monies. After this tentative
ruling, Suzan dismissed the petition.
Likewise, in this appeal, petitioners have identified no evidence
demonstrating any need for or benefit from the Distribution and Reimbursement
Petition. As such, they have
demonstrated no abuse of discretion arising out of the referees’ finding as to
this petition. (Whittlesey v. Aiello, supra, 104 Cal.App.4th at p. 1230.)
The
referee also found “implausible†Suzan’s claim that Alexander, rather than she,
desired most of the properties and monies sought under the petition, including
valuable home furnishings and a $100,000 summer rental property. Similarly, the trial judge hearing (and
tentatively denying) the underlying petition called Suzan’s claim that
Alexander desired the requested items “ridiculous†because they were “not
appropriate for the youngster.†The
referee and trial court were entitled to accept these conclusions. (See Donahue
v. Donahue, supra, 182 Cal.App.4th at p. 270 [“If litigation is necessary for the preservation of
the trust, the trustee is entitled to reimbursement for his or her expenditures
from the trust; however, if the litigation is specifically for the benefit of
the trustee, the trustee must bear his or her own costs incurred, and is not
entitled to reimbursement from the trustâ€].)
We
next address the guardianship’s petitions to remove the cotrustees and
custodian for alleged breaches of fiduciary duties, including mismanagement of
assets, for which petitioners sought an amount of approximately $850,000. The referee noted the first petition to
remove the cotrustees, filed in 2001, resulted in summary judgment in favor of
the cotrustees, a decision upheld on appeal.
Other such petitions have yet to be heard. When the 2001 petition was filed, Alexander’s
guardian ad litem told Suzan’s counsel there was no evidence to support it and
that many of the factual allegations in the petition were inaccurate. Regarding the other removal petitions, the
referee found “little showing and no preponderant evidence†of misconduct or
other circumstance demonstrating removal was necessary or beneficial to the
guardianship. In particular, the referee
rejected petitioners’ request for legal fees related to their contention that
trustee mismanagement had caused a steep decline in the estate’s value, finding
they presented “no expert testimony, no economic analysis, and no mention of
the economic events of the last several years which might have caused
significant decline even in well managed portfolios.†The record supports the referee’s conclusion
the petitions lacked an evidentiary foundation.
As such, there is no basis for reversal on appeal.
The
referee also considered and rejected petitioners’ request for a combined
$488,000 for legal services related to various trust accountings, and nearly
$112,000 combined for their review of seven fee petitions filed by Alexander’s
guardian ad litem. Awarding no
compensation for these services, the referee found that “no challenge was ever
raised to these bills, nor did the applicants make a showing of facts or
circumstances raising concerns about the bills justifying close and expensive
scrutiny of them.†It was within the
lower court’s discretion to find charging over a half million dollars for legal
services related to uncontested fee petitions was excessive and warranted no
further payment. Petitioners offer
nothing from the record to suggest otherwise.
The
sum of $300,000 was requested for petitioners’ services opposing the so-called
estate many tens of millions of dollars in estate taxes; the guardianship
opposed it on the ground that any tax savings would be largely offset by income
tax increases and additional encumbrances on estate assets that could postpone
payment of distributions to Alexander on his 35th birthday. Before filing the opposition, MSK’s tax
attorneys advised Suzan the plan would save the estate tens of millions of
dollars in taxes, and Alexander’s guardian ad litem warned that opposing it was
“irresponsible,†“appalling†and “potentially very harmful.†Nonetheless, MSK
pursued the opposition to its unsuccessful conclusion at the appellate level,
and the Graegin plan was ultimately
consummated. This evidence, including
MSK’s own acknowledgement before filing the opposition that the plan would
generate significant tax savings, supports the referee’s finding that “the
transaction benefited the estate, resulting in a net savings of several tens of
millions of dollars,†and that petitioners’ opposition to it was harmful, and
would have been even if successful.
Petitioners
also sought $60,000 in fees relating to their work opposing the cotrustees’
request for access to Alexander. Below,
the trial court hearing their opposition rejected their position, finding the
cotrustees needed access to Alexander to effectively discharge their duties and
the guardianship had failed to put forth any valid reason for restricting
it. The referee agreed, concluding Suzan
was motivated by her own personal animus toward the cotrustees or perhaps
toward her former husband rather than by a legitimate need to restrict
access. We defer to this reasonable
conclusion, which was based in part on the referee’s observations of the
cotrustees and Suzan in open court, observations not available to this court.
[“[i]t is the duty of the trier of fact to determine the credibility of
witnesses and the value of evidence and to resolve any evidentiary
conflicts].)
Petitioners
sought $120,000 ($60,000 each) for services relating to Suzan’s unsuccessful
efforts to purchase Herbalife, which was later sold for nearly twice Suzan’s
offer to another buyer. With respect to
Chodos, the referee denied fees because he was not retained until after
Herbalife was sold, a finding Chodos does not dispute. With respect to MSK, the referee found that,
had the law firm succeeded in its efforts on Suzan’s behalf to buy the company,
the estate would actually have been harmed by the sale of trust assets at a
“deeply discounted value.â€
name="_ftnref12" title="">[12] Petitioners dispute the referee’s finding and
contend that buying a valuable asset like Herbalife for the guardianship at a
discounted price would have benefitted the guardianship. This argument, we note, contradicts Chodos’s
description that the sale of Herbalife was designed to address the cotrustees’
refusal to diversify estate assets. In
any event, we conclude the lower court did not abuse its discretion when
finding the sale of Herbalife to Suzan at a very low price would not have
benefitted the guardianship given other parties’ willingness to pay
substantially more.
In
addition, petitioners sought the combined sum of approximately $275,000 for
their work on a petition challenging
various aspects of the trust’s management of trust-owned LLCs
(hereinafter, the LLC petition). Summary
judgment was granted in favor of the cotrustees after the trial court sustained
154 of the cotrustees’ 159 evidentiary objections and concluded the guardianship’s
opposition was “entirely devoid of facts.â€
The guardianship appealed the ruling; however, the appeal was ultimately
dismissed at the advice of the guardianship’s successor counsel, Bingham
McCutchen (Bingham), which replaced petitioners as counsel. Chodos nonetheless claims the LLC petition
was beneficial because it forced the cotrustees to disclose detailed
information about the LLCs’ finances and to fund the custodianship with
millions of dollars of much needed cash.
However, Chodos offers no evidence to prove these claims and, thus, no
basis for reversing the lower court.
Thus,
based on the foregoing discussion, we conclude substantial evidence did in fact
support the lower court’s ultimate finding that petitioners’ litigation
initiatives were, for the most part, of no essential benefit to the
guardianship. In doing so, we hasten to
add that this finding was not the sole basis for recommending petitioners
receive no additional compensation. The
referee also relied on the “substantial evidence demonstrating that Ms. Hughes
was motivated, not by intent to benefit the guardianship, but by animus against
the cotrustees, and perhaps her former husband†in deciding against awarding
additional fees. Pointing to Suzan’s
testimony that the cotrustees were a “gang out to deprive Alex of his rights,â€
the referee observed “Ms. Hughes’ animosity to the cotrustees was strongly
on display during the hearings.†We
defer to the lower court’s superior credibility findings, based in large part
on the referee’s observations of Suzan and other witnesses during live
testimony. (Adoption of Matthew B., supra, 232 Cal.App.3d at
p. 1254.) While petitioners may be correct that
any improper motivation exhibited by Suzan is not imputable to them, the
referee was nonetheless entitled to consider a party’s motivation when
assessing the broader issue of whether fees were reasonably incurred. (See Whittlesey
v. Aiello, supra, 104 Cal.App.4th at pp. 1230-1231.)
Finally,
as to Chodos, the referee relied on his failure to produce contemporaneous
billing records, even though his billing rate was “at the very top end of the
range†charged by his peers and “would have been off the charts a few years
ago.†And while MSK may have charged
reasonable rates and produced detailed contemporaneous records, the referee
found these circumstances were not enough to overcome the fact that MSK had
already been adequately compensated for its services given the relatively few
essential benefits arising from them.
Again, the referee’s findings in this regard were appropriately
supported. (See ComputerXpress, Inc. v. Jackson, supra, 93 Cal.App.4th at
p. 1020 [the court may properly reduce attorney compensation for failure
to maintain adequate time records].)
IV. Do
Other Factual Grounds Exist for Reversing the Order?
Petitioners,
in addition to pointing to the alleged benefits of their various litigation
initiatives, set forth several other fact-based arguments for reversing the
lower court order. First, petitioners
rely on their own good faith in pursuing those initiatives, a fact that does
not appear to be in dispute. As
petitioners note, the referee stated that, had petitioners sought to recover
fees from Suzan personally rather than the estate, he would not hesitate to
recommend awarding them. Second,
petitioners rely on the fact many of the initiatives continue to be pursued by
the guardian’s successor counsel or by Alexander, who has reached age 18 and is
capable of pursuing his own litigation.
Finally, petitioners rely on the fact the trial court had previously
approved significant payments of fees to petitioners or to successor counsel
pursuing the same legal initiatives from the guardianship or custodianship.
With
respect to petitioners’ good faith, they correctly note Suzan’s admission that
she directed and approved all litigation initiatives because she believed them
to be in the guardianship’s best interests.
However, even assuming petitioners were acting in good faith and in
accordance with Suzan’s instructions, under the law set forth above, a court
considering a fee petition is entitled to consider other relevant factors,
including whether the underlying services were reasonably and prudently incurred for the
guardianship’s benefit and whether the amount requested is reasonable.
v. Aiello, supra, 104 Cal.App.4th at pp. 1230-1231; rule 7.702.) And, as noted above, the lower court was
entitled to consider a party’s motivation when assessing the reasonableness of
the fee request. (See
Cal.App.4th at pp. 1230-1231.) That
is particularly true here because the record reflects MSK itself relied upon
Suzan’s questionable tactics when withdrawing as counsel. Specifically, MSK advised Suzan by letter
that her “opposition to [the firm’s] recommendations as to what may be in the
best interests of Alex and the Guardianship†was a motivating factor in their
decision to withdraw. (See
Cal.App.4th 259, 268 [“To
recover fees and costs, cotrustees must subjectively believe the expense was
necessary or appropriate to carry out the trust’s purposes, and they must show
their beliefs were objectively reasonableâ€].)
Moreover, while petitioners rely on Suzan’s testimony that she directed
and approved their activities, they disregard her other testimony denying the
guardianship benefitted from their activities.
The trial court was entitled to credit this portion of her testimony.
With
respect to the legal activities of other lawyers, including those of successor
counsel and Alexander’s counsel, we simply note those activities are not before
us and, in any event, are of little relevance.
The mere fact other people pursued the same litigation initiatives says
nothing of the wisdom, necessity or effectiveness of those initiatives. Moreover, evidence of what other lawyers did
or are doing does not change the outcome of this case, given that the lower
court’s findings, as discussed above, were adequately supported by the record.
The
same is true for evidence relating to prior court orders approving fee advances
from the estate to petitioners. Pursuant
to those prior orders, fees were advanced to petitioners subject to the
requirement that the guardianship provide future accountings to the court to
validate the fees. Whether the requisite
accounting was ever prepared or was sufficient to substantiate the
appropriateness of the fees are, again, issues not before this court. We thus decline petitioners’ request that we
rely on them as evidence of the reasonableness or beneficial nature of their
services.
title="">[15]
Thus, having considered the
record as a whole, we agree with the trial court there is no basis for recovery
of additional fees in this case. While
we accept petitioners’ point that the referee found some of their services
reasonable and beneficial to the estate, the referee also found that many of
their services were not and, in all events, that the money they had already
been paid sufficed as compensation for those services that were of
benefit. As our colleagues in the Fourth
District, Division Three, have explained, in the probate context, “a spare-no-expense strategy
calls for close scrutiny on questions of reasonableness, proportionality and
trust benefit. ‘Consequently, where the trust is not benefited by litigation,
or did not stand to be benefited if the trustee had succeeded, there is no
basis for the recovery of expenses out of the trust assets.’ †(See Donahue v. Donahue, supra, 182 Cal.App.4th at p. 273.)
the Trial Court Conduct an Independent Judicial Review?
We
are left with petitioners’ claim that the trial court impermissibly delegated
its authority to the referee by adopting his findings and recommendation
without conducting a sufficient independent judicial review. As petitioners note, a litigant’s
constitutional rights are violated where the trial court improperly delegates
its judicial authority. (E.g.,
Life Ins. Co. v. Superior Court (1986) 182 Cal.App.3d 431, 435; Jovine v. FHP, Inc. (1998) 64 Cal.App.4th 1506, 1533 (“Jovineâ€).) For reasons set forth below, we find no
violation of petitioners’ constitutional rights in this matter.
Where,
as here, a reference is pursuant to section 639, a referee’s findings are advisory only
and do not become binding unless adopted by the court after an independent
review. (Jovine, supra, 64 Cal.App.4th at p. 1522; § 644.) In conducting this independent review, the
court should “consider the referee’s findings and any objections submitted by
the parties before accepting or rejecting the referee’s recommendations.†(Rockwell
Internat. Corp. v. Superior Court (1994) 26 Cal.App.4th 1255, 1269;
(1993) 19 Cal.App.4th 1256, 1261.) “[I]n
an exercise of its discretion, the trial court may consider these matters as
the circumstances dictate, with or without a formal hearing--as long as the
record demonstrates a considered and careful review not only of the referee’s
report, but also of the transcript of the proceedings held before the referee
and the objections, responses and replies filed by the parties after submission
of the referee’s report.†(
supra, 26 Cal.App.4th at pp. 1269-1270.)
In
this case, after the referee submitted his final report, petitioners
objected to the recommendation that no additional compensation be awarded. In doing so, petitioners filed a brief citing
the relevant law and evidence, including many exhibits from the hearing, but
did not file copies of the exhibits themselves.
Thereafter, the cotrustees filed a responsive brief accompanied by an
appendix that included, among other things, the entire reporter’s transcript of
the reference proceedings and many key exhibits. The cotrustees later filed more exhibits with
the court. In addition, Alexander filed
opposition papers that included a two-volume request for judicial notice
containing, among other things, a complete set of the reporter’s transcripts.
In
issuing the order adopting the referee’s findings and recommendation to deny
further compensation, the trial court stated as follows: “The court has independently considered the
matter and has reviewed the documents included in Alexander Hughes’ two-volume
request for judicial notice. The request
for judicial notice included the lengthy transcripts of the oral proceedings
conducted before the Referee; the court reviewed and considered those
transcripts.†This statement is
confirmed by the record, including the transcript from the hearing on
petitioners’ objections, during which the trial court frequently addressed the
parties’ arguments and evidence, seeking clarification or a further showing
where necessary, and thereby demonstrating a reasonable familiarity with the
relevant record. For example, the trial
court asked MSK to explain how the $2.3 million it already received in compensation
was paid, and questioned Chodos regarding his written consent to the reference
in the Joint Status Report. In addition,
the trial court put on calendar an evidentiary hearing on the fee petition to
prepare for the possibility that it would not accept the referee’s report and
recommendations. Under these
circumstances, we decline
petitioners’ request to presume the court failed to perform all judicial
acts required of it. (Marathon National
Bank v. Superior Court, supra, 19 Cal.App.4th at pp. 1260-1261 [given
the well-established presumption that a trial court does what it is supposed to
do, the judgment is reversed on appeal only if challenging party makes an
affirmative showing that the court misconstrued its authority].)
Petitioners’
authority, Jovine, supra, 64
Cal.App.4th 1506, does not require a contrary conclusion. In Jovine, the trial court issued a
written order “Appointing [a] Special Referee to Supervise, Hear and
Determine Discovery Matters [639(e) C.C.P.]†However, without the parties’ consent, the
referee then heard and decided three summary adjudication motions effectively
disposing of the case, and the trial court then adopted the referee’s report
without further review as if it were a binding judicial decision. Because “considering and deciding dispositive
motions is not one of the special references authorized by section 639 which
the court may make without consent,†the appellate court reversed. (Jovine,
supra, 64 Cal.App.4th at
p. 1523.)
to consider and decide determinative motions without the parties’ consent and
in violation of section 639, the purported basis of the reference. Rather, the court entered a valid order
pursuant to section 639, subdivision (a), in accordance with the parties’
written stipulation, appointing the referee to consider the limited issue of
compensation. Second, after the referee
submitted his final report recommending no additional compensation for
petitioners, the trial court did not, as in Jovine,
simply adopt the report as its own; rather, as set forth above, the court
conducted the requisite independent judicial review and thereafter concluded
the referee’s recommendations were correct. Thus, where, as in this case, “the
trial court’s order[] demonstrate[s] a considered and careful review not only
of the referee’s report but also of the transcript of the proceedings held
before the referee, and of the stacks of objections, responses, replies and
other papers filed after the referee’s report was submitted, we are able to say
with confidence that the trial court did not abdicate its judicial
responsibilities. [Citation.]â€
name="_ftnref17" title="">[17] (Marathon Nat. Bank v. Superior Court, supra, 19 Cal.App.4th at p. 1261.)
Cross-Appeal.
Finally,
the cotrustees challenge the fee petition order on one ground – that the trial
court erred by ordering the trust to pay 100 percent of the referee’s
$99,640.21 fee for his work on this matter.
In so ordering, the trial court declined, without explanation, to adopt
the referee’s recommendation that petitioners collectively pay 40 percent of
the fee and the trust, as the prevailing party, pay the remaining 60 percent.
The relevant law is not in dispute.
“Under section 645.1, the
trial court may, at the time the referee is appointed, order the parties to pay
the referee’s fees ‘in any manner determined by the court to be fair and
reasonable, including an apportionment of the fees among the parties.’ †(Marathon
National Bank v. Superior Court, supra, 19 Cal.App.4th at p. 1261.) “It is . . . the responsibility of
the court, not the referee, to determine what manner of payment is ‘fair and
reasonable’ to the parties. (§ 645.1; [citation].) In performing its
judicial function, the court must avoid even the appearance of unfairness: ‘[t]he justice system not only must be fair
to all litigants; it must also appear to be so.’ [Citation.]†(
v. Superior Court (1998) 62
Cal.App.4th 94, 105.) On appeal,
a trial court’s allocation of fees is reviewed for abuse of discretion. (Winston
Square Homeowners’ Assn v. Centex West Inc. (1989) 213 Cal.App.3d 282,
293.)
Here,
the cotrustees do not contend the referee’s fee was unreasonable in amount or unnecessary to the
litigation. They contend the fee should
have been shared equitably by the parties and not imposed entirely on the
trust.
The
order of reference provided that the referee would in the first instance
recommend how to allocate his fee among the parties. Consistent with this order, following the
reference proceedings, the referee recommended the trust, as the prevailing
party, pay 60 percent of his fee, and petitioners pay the remaining 40 percent. In making this recommendation, the referee
stated his belief that the fee petition, like most fee petitions, could have
been resolved much more efficiently and without the need for holding over five
days of hearings. With respect to what
he deemed this unnecessary expenditure of resources, the referee noted that,
while petitioners “presented their side of the case in relatively short order,â€
the opponents, including the cotrustees, “persistently pressed for the extended
proceedings.â€
Subsequently,
after independently reviewing the referee’s report, the trial court altered the
referee’s recommendation that the trust pay 60 percent of the fee by increasing
its payment obligation to 100 percent.
As stated above, the trial court provided no explanation. While we agree it would have been preferable
for the trial court to expressly state its reason for changing the fee
allocation, we cannot conclude on this record an abuse of discretion
occurred. Simply put, the trial court
could, in reaching a fair and reasonable apportionment of the fee, rely on the
referee’s finding that the prevailing parties, by their own conduct,
significantly and unnecessarily increased the time and resources required to
hear petitioners’ petition. (See
v. Superior Court, supra, 62
Cal.App.4th at p. 105.)
Unlike this court, the referee and trial court were present to hear the
parties’ arguments and observe their conduct during the course of these
proceedings. (Baker-Hoey v. Lockheed Martin
Corp. (2003) 111 Cal.App.4th
592, 605.) Under these
circumstances, we decline to overrule the lower court decision. The order that the trust bear 100 percent of
the referee’s fee stands.
DISPOSITION
The
order is affirmed. The parties will bear
their own costs on
appeal.
_________________________
Jenkins,
J.
We concur:
_________________________
McGuiness, P. J.
_________________________
Pollak, J.
name="_ftn1" title="">[1] Members of the Hughes’ family are
referred to by their first name for ease of identification and clarity, and we
mean no disrespect thereby.
name="_ftn2" title="">[2] Unless otherwise stated, all statutory
citations herein are to the Code of Civil Procedure.
