Harper v. Amov

Filed 12/23/09 Harper v. Amov CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. James A. Cox, Judge. Affirmed.

Michael R. Daymude for Petitioners and Appellants.

Slovak, Baron & Empey, Peter M. Bochnewich, for Objector and Respondent.

Petitioners and appellants Paul Harper and Michael Daymude (appellants) appeal from the trial courts order denying their amended petition to fix and allow compensation to Paul Harper (Harper), successor in interest to Juanita Lane (Lane), former trustee of the Curtis W. Johnson 1992 Trust (Trust), and compensation and reimbursement for costs to Michael Daymude (Daymude), attorney for former trustee Lane. As discussed below, we conclude that the trial court acted within its discretion in denying all fees, costs and compensation to appellants. Although the former trustee Leon Amov improperly took an early distribution of Trust assets without making provisions to pay the expenses of Lanes life estate, his widow Sharon Amov remedied that error early on in the ensuing litigation. The record clearly supports the trial courts conclusions that the litigation appellants pursued during Lanes trusteeship was brought primarily for the personal benefit of Lane and/or to garner attorney fees for Daymude, rather than to benefit the Trust.

Statement of Facts and Procedure

In December 1992, trustor Curtis W. Johnson established the Trust. The Trust was amended in 1998, 1999 and twice in 2000, the last time three days before Johnsons death.^[1] Curtis W. Johnson was the initial trustee of the Trust. Leon Amov was the primary beneficiary of the Trust as modified, and was to receive the residue and remainder of the trust. Lane was also a beneficiary of the Trust, in that she held a life estate in a home in Los Angeles. Lane was to live in the home rent-free during her lifetime and the Trustee was to pay the property taxes, fire insurance and utilities from Trust assets. Upon Lanes death, the property was to be distributed to The Hospice Foundation. The only other bequest was a $500 monthly sum to a Mildred Bunno, not to exceed a total of $47,000. This monthly sum was guaranteed by an annuity.

Curtis W. Johnson died on February 11, 2000. Leon Amov was named successor trustee. Leon Amov, apparently improperly, took a distribution of the bulk of the Trust assets, approximately $545,000. Amov did not establish a fund from which to pay the expenses of Lanes life estate. Leon Amov died on December 1, 2003. In April 2004, Leon Amovs attorney, Norman Rasmussen, wrote to Lane to tell her that her utilities were about to be turned off for nonpayment and that no funds remained in the Trust to pay the expenses of Lanes life estate.^[2]

The trusteeship remained vacant until Leon Amovs widow, Sharon Amov (Amov), was appointed interim trustee on November 17, 2004. At some point, Amov began to pay the expenses of Lanes life estate. On June 30, 2005, Amov resigned as interim trustee and Lane was appointed her successor. On August 10, 2006, the court suspended Lanes powers as trustee for violating her fiduciary duties by pursuing frivolous litigation against the trustors former attorney to benefit herself personally and seeking to have the Trust pay her attorney fees for that litigation.^[3] Also at that hearing, the trial court: 1) approved a First and Final Account of former Interim Trustee Sharon Amov; and 2) denied Lanes Petition to Determine former Interim Trustee Sharon Amovs First and Final Account and Report violated the Trusts no-contest clause.^[4] A successor trustee, Enzo G. Provenza (Provenza) was appointed on October 16, 2006.

Upon Lanes death on July 8, 2007, the Los Angeles home was to be transferred to The Hospice Foundation. The property remaining in the Trust estate, approximately $48,000, was to be distributed to Amov, as personal representative of the Estate of Leon Amov. On November 13, 2007, Provenza filed a petition for final accounting and distribution, to fix and allow compensation to trustees and attorney, and to terminate the Trust.

On December 20, 2007, Daymude and Harper filed a petition to fix and allow compensation to former trustee and attorney. The petition sought: 1) $5,000 in trustee fees for Lane^[5]during her trusteeship from June 30, 2005 to August 10, 2006; and 2) $34,500 to Daymude for attorney fees for that same period, as well as $9,000 reimbursement for costs. Daymude and Harper filed a first amended petition on December 26, 2007.

On January 28, 2008, Amov filed her objections to the amended petition. On January 29, 2008, the court filed an Order settling first and final account; for final distribution; fixing and allowing compensation to trustee and attorney; and for termination of trust. In the order, the court approved Provenzas accounting and directed Provenza to distribute the remaining trust assets to Amov in the amount of $48,449.70.

On February 19, 2008, Daymude and Harper filed their answer and response to Amovs objections to their amended petition. On February 20, 2008, Amov filed her reply to the answer and response. On March 20, 2008, the court held a hearing on the amended petition. After hearing argument from the parties, the court denied the amended petition.

In its written order filed on April 10, 2008, the court stated: The fees requested are not justified, given the nature of the frivolous litigation pursued by Petitioner Juanita Lane, and her counsel, Michael Daymude, at all relevant times, which in the Courts opinion after careful review, related more to the furtherance of Juanita Lanes interests and the interests of her attorney, than the interests of the Trust. For these reasons, Ms. Lane was removed as trustee in August 2006, for a blatant conflict of interest. The Court finds the conflict of interest in this matter is so strong that the request for fees out of the Trust is inherently unreasonable. This appeal followed.

Discussion

An order denying compensation to a trustee and fees and costs to a trustees attorney is subject to review under the abuse of discretion standard. (Whittlesey v. Aiello (2002) 104 Cal.App.4th 1221, 1230; Nestande v. Watson (Songstad) (2003) 111 Cal.App.4th 232, 239-240.) Further, the appellant bears the burden of demonstrating the existence of reversible error on appeal. (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 822.)

Here, appellants contend the trial court erred when it denied compensation for the periods June 30, 2005 to February 9, 2006 and from February 10, 2006 to August 10, 2006. We will address these time periods in order, as that is how appellants have structured their argument.

1.      June 30, 2005 to February 9, 2006 Objections to Amovs Account

Appellants first address the denial of compensation for Lanes actions in objecting to Sharon Amovs first and final account and report of administration (Amovs account) up to the initial hearing date of February 9, 2006. Amov filed her account on November 1, 2005. The purpose of Amovs account was to settle and account for her administration of the Trust during her term as interim trustee from November 17, 2004 to June 30, 2005. In the account, Amov also requested that the trial court order her to pay the utility, property tax and insurance bills on the Los Angeles home. Finally, Amov requested a lien against the Los Angeles home to be paid upon Lanes death and the anticipated sale of the house by the Hospice Foundation. The lien was to reimburse Amov for paying the expenses of Lanes life estate, and for trustee and attorney fees.

On December 28, 2005, Lane filed an objection to Amovs account. On January 10, 2006, Lane filed an ex-parte application seeking to have the court order Amov to turn over to Lane all trust documents and the contents of a Smith Barney account from which Amov paid the expenses of Lanes life estate. On January 25, 2006, Lane filed supplemental objections.

On February 9, 2006, the court held a hearing on Amovs account, Lanes objections and Lanes ex-parte application. As a result of Lanes three filings, the court on this date: 1) found that Amov s account was not made in the proper form; and 2) ordered Amov to file an amended account for her period as trustee, as well as for the period during which her husband, Leon Amov, acted as trustee. The hearing was then continued to May 12, 2006. However, the court at the February 9, 2006, hearing declined to enter any orders on and continued to May 12, 2006, Lanes requests to: 1) order Amov to turn over trust documents; 2) order Amov to turn over the Smith Barney account from which Amov paid the expenses of Lanes life estate; 3) place a surcharge of $100,000 for attorney fees against Amovs beneficial interest in the $545,000 that Leon Amov previously distributed to himself from the Trust; and 4) impose a constructive trust on the $545,000.

Further, the court commented on February 9, 2006 that [B]ecause Miss Lanes interest is such a limited interest in the trust, and provided her her interests are secured and theres sufficient money placed in a in an account to secure the payment of the taxes and utilities on the house that she has the life estate in, I dont see why she would even care too much about the accounting. Finally, in encouraging the parties to resolve the entire matter by simply arranging for Amov to fund an account that would pay for the expenses of Lanes life estate, the court specifically warned Daymude I urge you to consider this very strongly. Because if this litigation continues, and youre going to have to ask for fees, youre not likely going to get them. At the end of the hearing, the court also commented Settle it. I dont think you want to try it because youre just wasting a lot of money for both sides.

Appellants argue that the trial court erred when it denied Lane compensation for the period June 30, 2005 to February 9, 2006. This is because Lanes December 28, 2005, objection to Amovs account caused the trial court to order Amov to revise her accounting to place it in the proper form and to include an accounting of Leon Amovs time as trustee. However, appellants do not carry their burden to establish that the trial court abused its discretion in denying compensation for this period. This is because, as the trial court commented at the hearing on February 21, 2008, the interests of each of the beneficiaries were adequately secured without need for the litigation initiated by Lane, and the trial court informed Daymude of this fact every time you were in court. Further, as of February 9, 2006, the court had taken no action on Lanes application filed January 10, 2006, seeking to have Amov turn over all trust documents and the contents of a Smith Barney account from which Amov paid the expenses of Lanes life estate. These requests were later rendered moot when the court suspended Lanes powers as trustee on August 10, 2006. We conclude that the trial court did not abuse its discretion in denying compensation for this period because appellants have not established that the litigation pursued by Lane and Daymude materially benefitted the Trust or any of the beneficiaries.

1.      February 10 to August 10, 2006

Appellants contend the trial court erred when it found that Lane pursued frivolous litigation subsequent to February 9, 2006. Specifically, Lane refers to two petitions.

A. Petition to Approve Settlement of Los Angeles Litigation

The first petition Lane filed on May 12, 2006, was entitled Petition for approval of compromise of claim against Norman Rasmussen. In this petition, Lane sought the courts approval of a settlement agreement between Lane, individually, and Norman Rasmussen, former attorney for trustor Curtis W. Johnson. Rasmussen had drafted the Trust documents and later served as attorney for Leon Amov and Amov when they served as successor trustees. The causes of action in this Los Angeles County litigation were professional negligence and breach of fiduciary duty. The complaint alleged that Rasmussen: 1) drafted the Trust amendment that deleted Lanes income interest in a specific bank account for payment of the expenses of her life estate, and instead allowed the trustee to pay the expenses from the Trust fund generally; 2) failed to advise Leon Amov regarding his duties as trustee, so that Leon improperly distributed all of the trust assets to himself without leaving a fund from which to pay the expenses of Lanes life estate; 3) wrote to Lane after Leon Amov died, telling her that no more expenses of the life estate would be paid and you are on your own on this one; 4) had a conflict of interest in that he represented both Johnson and Leon Amov at the time he drafted Trust documents benefitting Leon Amov; and 5) assisted Leon Amov in converting Trust assets for his personal use and later assisted Amov in covering up Leon Amovs improper actions regarding the Trust assets.

The settlement agreement proposed that Rasmussens insurance company issue a check for $50,000 jointly to Lane and Daymude, who was also Lanes attorney in the Los Angeles litigation. In return, Lane agreed that this amount was in full settlement of her claims against Rasmussen as an individual, and that she would dismiss with prejudice all claims against Rasmussen in her capacity as trustee. After several continued hearings, on August 10, 2006, the trial court in Riverside County approved payment of the $50,000 settlement to the trustee who would be named once Lane was formally removed.

Appellants argue that the trial court abused its discretion in denying attorney fees for the petition to approve the Los Angeles litigation because the $50,000 recovery ultimately went to the Trust rather than to Lane. However, appellants fail to acknowledge the following: 1) Lane initiated the litigation solely on her own behalf as an individual, and only later added her role as trustee; 2) Lane never joined the Trust in the litigation; 3) the settlement for which Lane sought approval purported to waive all claims against Rasmussen on behalf of the trust but accepted the $50,000 payment to Lane as an individual; 4) the trial court told Daymude that if the court were to approve the $50,000 payment to Lane individually, then the court would relieve the Trust of all obligation to pay the expenses of Lanes life estate; 5) Daymude then indicated that he had planned to take his attorney fees out of the $50,000 if it were to be paid to Lane individually^[6]; and 6) the trial court then ordered that the $50,000 not be paid to Lane individually but rather to the successor trustee. Further, the record indicates that the parties anticipated using the $50,000 plus a $13,000 contribution from Amov to establish a fund from which the expenses of Lanes life estate would be paid. Because Lane brought the litigation to benefit herself individually rather than to benefit the Trust, the trial court did not abuse its discretion when it chose not to award attorney fees for the petition to approve settlement of that litigation.

B. Petition to Determine Will Contest

The second pleading for which the appellants seek attorney fees is Lanes petition, also filed May 12, 2006 to determine if Interim Trustee Sharon Amovs First and Final Account, etc., Violate the No Contest Clause. The petition asked the trial court to determine whether the following requests in Amovs account dated November 1, 2005, violated the no contest clause in the Trust. First, Amov asked the trial court to order Amov to continue to pay all reasonable property taxes, fire insurance and utilities upon the presentment of bills therefore to [Amov] in a timely fashion. Lane argued this violated the Trusts no contest clause because it both contained the qualifier reasonable, which was not in the language contained in the Trust, and implicitly challenged the Trust provisions requiring a resigning trustee to transfer all trust assets and an accounting to the successor trustee. Second, Amov asked the trial court to impose liens on the Los Angeles home for $23,810 Amov had already paid for the utility, tax and insurance expenses for the home, $1,000 for trustee fees, and $3,000 for attorney fees.^[7].

At the hearing on August 10, 2006, the trial court denied the petition. In doing so, the trial court commented that Lane and Daymude were wasting the courts time with the motion because, even if the court granted the motion, Amov was not a beneficiary of the Trust and so there was nothing to take away from her under the Trust, and thus no remedy. The trial court also stated that Lane had violated her fiduciary duties to the Trust by bringing completely frivolous and unnecessary litigations and that it would not order the Trust to pay either trustee fees or attorney fees for the litigation.

Appellants argue that, under Dingwell v. Seymour (1928) 91 Cal.App.483, 513, the trial court should have ordered costs and attorney fees because the no contest clause litigation was a benefit and a service to the Trust. However, appellants fail to convincingly articulate what that service and benefit are. Appellants argue it was Lanes duty as Trustee to seek a determination whether Amovs requested orders ran afoul of the trusts no-contest clause . . . . However, as the trial court pointed out, there was no benefit to the Trust in the form of a remedy because Amov was not a beneficiary of the Trust and thus could not be forced to give up any benefit that could be returned to the Trust. Appellants also argue that, if a violation were to be found, Amov would be required to provide a full and complete accounting that established the amount of the Amov remainder interest, which had never been determined. Appellants assert that this accounting would be a benefit to the Trust because: 1) it would be essential to any trust recovery; and 2) it would provide proof for Lanes claims on behalf of the trust estate against Rasmussen, should they go to trial. These arguments are not well taken because: 1) there could be no trust recovery from Amov because she was not a trust beneficiary; and 2) Lane had already waived any claims against Rasmussen on behalf of the Trust. Further, the trial court had already ordered Amov to provide a full accounting of the period during which Leon Amov was trustee. For these reasons, we conclude that the trial court did not abuse its discretion when it denied appellants their fees for the no contest petition proceedings.

Disposition

The trial courts orders denying trustee and attorney fees are affirmed. Daymude alone is to pay Amovs costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RAMIREZ

P.J.

We concur:

McKINSTER

J.

KING

J.

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^[1] As granted January 8, 2009, we take judicial notice of the record in Case No. E042512. 2CT refers to the clerks transcript prepared for Lane and Daymudes appeal from the courts orders approving Amovs account and denying Lanes petition to determine whether Amovs account violated the Trusts no-contest clause in Case No. E042512.

^[2] The letter was worded as follows: Enclosed is a billing from the Los Angeles Department of Water and Power for utility services to your property. This billing is dated March 22. The total due is $492.92. The billing indicates it is a FINAL NOTICE. Mr. Amov is now deceased and there are no funds left in the Curtis Johnson Trust to pay the utilities. You are on your own on this one.

^[3] The subjects of this appeal are attorney fees and trustee compensation for the litigation that Lane pursued during her trusteeship, from June 30, 2005 to August 10, 2006. That litigation is described in detail in the Discussion section of this opinion.

^[4] Lane and Daymude appealed these orders in February 2007. Lane passed away during that appeal and Harper was substituted in as Lanes Trustee and successor-in-interest. On November 20, 2007, this Court dismissed the appeal for mootness and lack of standing.

^[5] Harper sought the trustee fees as successor-in-interest to former trustee Juanita Lane.

^[6] Let me mention something to the court. Has the court considered she has an expense incurred in that litigation? She has administrative expenses. Thats not $50,000 free and clear. Shes got bills. Shes had to pay to get that money, and I dont think its --I dont think its fair to the -- of the court to treat that money that it is being found or . . . .

^[7] Amov withdrew the request for liens prior to the August 10, 2006 hearing.