Wais v. Farmer

Filed 6/24/10 Wais v. Farmer 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

Marshall I. Wais (Marshall)[1] passed away in August, 2006. These consolidated appeals are the most recent chapters in ongoing litigation between his surviving spouse, appellant Lonna Wais (Lonna), and his four natural children over his estate.[2] At issue here are the trial courts denials of Lonnas attempts to remove respondent Robert Farmer (Farmer) as trustee of the Marshall I. Wais Trust (Trust), and as Marshalls personal representative in his probate estate. We will affirm the orders.

I. Factual and Procedural Background

Appellant Lonna married Marshall in 1986 and was married to him at the time of his death on August 27, 2006. Marshall had four natural children from two former marriages: respondents Michael Wais, Laura Wais, Marshall Wais, Jr. and Peter Wais (children). At the time of his marriage to Lonna, Marshall had built a personal fortune in the steel industry, with holdings that included a steel company, business real estate, homes in San Francisco, Rancho Mirage and Mexico, and a significant investment portfolio. Marshall and Lonna signed a prenuptial agreement providing for the characterization of property acquired before and after the marriage.

Marshall created the Trust in 1998, with the trust corpus composed of his separate property. The Trust provided that on his death Lonna would become the income beneficiary of the Trust, and that upon her death, his four natural children would inherit by right of representation.[3] His will, executed on February 11, 1998, left all of his community property to wife, with the residue of his estate (i.e., his separate property) pouring over into the Trust. In both instruments, he named Farmer as his fiduciary.

In addition, there were at least three written agreements signed by Marshall and Lonna during the marriage that purported to characterize certain property in Marshalls name as community property, and in one instance as Lonnas separate property. The first such agreement, dated January 27, 1987, declared that a home in Rancho Mirage then standing in Marshalls name was owned by Marshall and Lonna as community property; the second agreement, dated March 27, 2000, stated that 16 pieces of property listed in an attached exhibit (which included real property, notes receivable and financial accounts) were owned by Marshall and Lonna as community property regardless of the manner in which title was held. The third, apparently executed in October 2003,[4] was captioned Transmutation Agreement and purported, by virtue of an attached exhibit, to recharacterize a cash sum of $3,511,425.72 held by the Trust into the separate property of Lonna.[5] The net effect of the three agreements (collectively, the Property Agreements)[6] was to reduce Marshalls estate and the corpus of the Trust. The validity of the Property Agreements is the crux of the ongoing disputes between Lonna and the children.

Marshall died on August 27, 2006, and his will was admitted to probate on December 13, 2006 (San Francisco Superior Court Case No. PES-06-289350). Farmer was appointed executor as provided in the will. Farmer also became the successor trustee of the Trust on Marshalls death.

The Probate Litigation

On June 21, 2007, Farmers law firm, Farmer & Ridley LLP, filed a spousal property petition on behalf of Lonna in Marshalls probate matter to establish whether certain assets that Lonna and Marshall had held in joint or community form (and which included the assets encompassed in the 1987 and 2000 property agreements) were community property that would pass to her outside of either the Trust or the probate estate. In response, the children filed a declaratory relief petition under Probate Code section 21320,[7] seeking a declaratory ruling from the probate court that they would not violate the no contest provisions of Marshalls will[8] if they opposed Lonnas attempt to have the assets declared community property. Their proposed challenge disputed the validity of the Property Agreements, contending that the assets constituted Marshalls separate property, and therefore belonged to the Trust,[9] and that Lonna had obtained them by undue influence or breach of fiduciary duty. On September 17, 2007, Lonna dismissed her spousal property petition without prejudice.

On August 22, 2008, Farmer then filed in the probate action a Petition to Require Transfer of Property to Estate (Probate Transfer Petition) under section 850, seeking to recover the disputed assets for the probate estate to extent that the court determined them to have been improperly transferred in the first instance. He alleged that he made the Probate Transfer Petition as a protective filing and that the pleading allegations did not constitute a position taken by him as executor, the purpose being to maintain the status quo pending the courts eventual review of the matter. He asked the court to stay action on the petition. He also filed a Petition for Instructions Authorizing Disclosure of Requested Information (Petition for Probate Instructions), alleging that he had received demands from the children for information concerning the assets transferred by the Property Agreements, and that Lonna opposed the disclosure. He requested court authorization to make the disclosures, excluding otherwise privileged documents.

Farmer, in his capacity as trustee, concurrently filed a Petition to Require Transfer of Property to Trust, contending that the disputed assets were property of the Trust (the Trust Transfer Petition [San Francisco Superior Court Case No. PTR-08-291579]). He asserted that this was also a protective filing to maintain the status quo pending court resolution of the competing claims. In this proceeding he also filed a Petition for Instructions Authorizing Disclosure of Requested Information to Beneficiaries (Petition for Trust Instructions), again alleging that he was subject to conflicting demands from the Trust beneficiaries for information regarding the disputed assets, and asking the court to authorize disclosure of nonprivileged information to the children as remainder beneficiaries of the Trust.

In response, Lonna filed the petitions for Farmers removal as personal representative and for his removal as trustee which are the subject of these appeals. She alleged that Farmer had represented Marshall in preparation of their prenuptial agreement, had represented her in preparation of her own will and trust, and had represented both spouses in preparing the Property Agreements, as well as in connection with other business matters during Marshalls lifetime. She contended that Farmers prior representation created an unassailable conflict of interest, precluding him from instituting proceedings against her in either the probate or Trust matters. In both actions, she sought suspension of Farmers power to act on behalf of either the estate of the Trust pending hearing on the removal petitions, and asserted that the court should defer action on the Petition for Probate Instructions and the Petition for Trust Instructions until the court had first ruled on the removal petitions.[10]

The court declined to first hear the removal petitions, and at a hearing on February 25, 2009, granted both the Petition for Probate Instructions and the Petition for Trust Instructions. Those orders were not appealed and are now final.

Both Farmer and the children objected to the removal petitions. Farmer averred that he had represented Lonna only in connection with her estate planning in 1992, and not thereafter. He declared that he had represented Marshall in connection with the prenuptial agreement, and the 1987 and 2000 property agreements (characterizing certain property as community), but that Lonna had separate counsel as to each of these transactions. He denied that the 2000 agreement affected a transmutation of any assets, and stated that he had not represented either party in connection with the 2003 Transmutation Agreement. He asked the court to summarily dismiss the petitions on the basis that, even if all factual allegations presented by Lonna were true, no grounds for removal would be shown.

In her replies, Lonna argued that Farmers continued roles as executor and trustee would violate his duties of impartiality and loyalty, and would result in breach of attorney-client confidences. She contended that there were evidentiary conflicts created by the competing declarations submitted, and asked that the court exercise its discretion and hold an evidentiary hearing on the claims in each matter.

The removal petitions were argued on April 23, 2009. On May 15, 2009, the court entered orders denying both removal petitions. In doing so it implicitly denied Lonnas request for an evidentiary hearing. The court noted in each order that Lonna had alleged that Farmer had acted as her attorney from at least 1992 through 2007, and that Farmer had disputed that allegation. While making no finding on that issue, the court stated that, for purposes of ruling on the petitions, it takes all of the petitioners factual allegations as having been established at trial and assumes that all factual disputes have been resolved in her favor. In each order the court held that [h]aving done so, the Court nonetheless concludes that the proper exercise of its discretion is to deny the petition for removal.

Lonna filed timely notices of appeal in each matter. The orders are appealable pursuant to sections 1300, subdivision (g), and 1304, subdivision (a).[11]

II. Discussion

Assuming, as did the trial court, the truth of Lonnas allegations, the material facts presented to the court can be summarized as follows:

        Farmer had represented Marshall, and his business entities, as his attorney from the 1950s until Marshalls death in 2006.

        Farmer represented Marshall in preparation of his prenuptial agreement with Lonna.

        Farmer prepared Marshalls will and the Trust.

        Farmer prepared Lonnas will and her trust.

        Farmer represented both Marshall and Lonna in connection with the 2000 Property Agreement.

        Farmer represented Marshall in preparation of the 2003 Transmutation Agreement.

        Farmers law partner represented Lonna in filing of the June 2007 spousal property petition.

        Farmer filed the Petition for Probate Instructions and the Petition for Trust Instructions asking for court authorization to make disclosures of information concerning the assets affected by the Property Agreements. Lonna opposed the disclosure.

        Farmer filed the Probate Transfer Petition and the Trust Transfer Petition seeking to recover the disputed assets to extent that the court determined them to have been improperly transferred in the first instance.

        In both petitions, Farmer alleged on information and belief that any transfers of the disputed assets to Lonna were vitiated by lack of consent, breach of fiduciary duty, undue influence, duress, and/or lack of compliance with transfer formalities.

Lonna alleged below that these facts demonstrated that Farmer had an irreconcilable conflict of interest, and that he had breached his duty of loyalty to her as a client by seeking authorization to disclose privileged documents, and by initiating a complaint challenging the validity of actions in which he was counsel for Marshall and Lonna. In essence, she contended that Farmers actions as executor and as trustee conflicted with his preexisting duties to her individually as his client. She also argued that he would have a conflict with his duties to the estate and to the beneficiaries in pursuing litigation challenging the Property Agreements, since he would have to argue his own malpractice in the preparation and execution of those agreements.

Farmer argued that he prepared and filed the transfer petitions only to preserve the claims for the benefit of the estate and of the trust beneficiaries, and that he was obligated to do so. He noted that he had asked the court to stay these actions until the court could decide if they should proceed, and he acknowledged that the court might be required to designate an ad litem representative given his own role in the transactions.

A.                 Probate Code Section 8500

We note first that Lonnas arguments here are focused almost entirely on the failure of the court to receive testimony on the allegations in her petitions. She now contends that an evidentiary hearing was mandated, at least with respect to her petition to remove Farmer as the personal representative in the probate estate, under section 8500, subdivision (b) which provides in pertinent part that: On a petition for removal, or if the court otherwise has reason to believe from the courts own knowledge or from other credible information, whether on the settlement of an account or otherwise, that there are grounds for removal, the court shall issue a citation to the personal representative to appear and show cause why the personal representative should not be removed. ( 8500, subd. (b), italics added.) Thus, she argues, issuance of a citation to Farmer to appear and show cause why he should not be removed was mandatory,[12] and the court lacked discretion to do otherwise. She further asserts that this is an issue of law which we must review de novo.

There are two difficulties with her position. The first and most fundamental defect is that her argument is one that she failed to present in the trial court. An appellate court will not consider procedural defects or erroneous rulings where an objection could have been, but was not, raised in the court below. (Childrens Hospital & MedicalCenter v. Bont (2002) 97 Cal.App.4th 740, 776.) In fact, her position in her pleadings filed in each matter below was that [t]o the extent Farmer raises an evidentiary conflict, this court should exercise its discretion to hold an evidentiary hearing so that it may fully consider the evidence justifying Farmers removal. (Italics added.) In each reply brief she stated, As Farmer concedes, this Court has discretion to hold an evidentiary hearing. The Court should exercise such discretion so that it may fully consider all relevant evidence pertinent to its decision on the Petition. (Italics added.) Counsel for Farmer and counsel for the children both argued at the April 23, 2009, hearing that an evidentiary hearing was discretionary, and Lonnas counsel never argued to the contrary. The doctrine of invited error is an application of the estoppel principle: Where a party by his conduct induces the commission of error, he is estopped from asserting it as a ground for reversal on appeal. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 403 (Norgart); In re Marriage of Ilas (1993) 12 Cal.App.4th 1630, 1640.) At bottom, the doctrine rests on the purpose of the principle, which is to prevent a party from misleading the trial court and then profiting therefrom in the appellate court. (Norgart, at p. 403.) The argument is forfeited.

Even if we were to consider the merits of her claim, she is wrong on the facts and on the law. To the extent that she contends the court erred in failing to issue a citation, the statute merely sets forth a procedure by which a fiduciary may be brought before the court in order to respond to allegations of misconduct. (See McAuliffe v. Coughlin (1894) 105 Cal. 268, 270 [an order to show cause was simply a notice of the motion, and a citation of the defendant to appear at a stated time and place and show cause why plaintiffs motion should not be granted].) In a probate proceeding the court has jurisdiction of the rem. The office of the citation is to give notice of a proceeding and to procure the presence of the persons involved. It is not jurisdictional in the same sense that a summons may be. (11A Cal.Jur. 91, p. 157.) (Estate of Palm (1945) 68 Cal.App.2d 204, 213214.) Voluntary participation in the proceedings waives any necessity for compliance with the formalities of a citation. (Ibid.) Farmer did appear, submitted opposition to the petitions for removal, and argued the issue before the court. The courts jurisdiction to hear and determine Lonnas removal petitions was never contested. Her own proposed orders submitted to the court after the April 23, 2009 hearing asked the court to find that Farmer and other interested parties had notice of the time and place of hearing on her removal petitions, and the orders signed by the court found that [a]ll notices were given as required by law. She points to nothing in section 8500 itself mandating the form of the hearing to be conducted by the court on such a petition. There was a hearing at which the court fully considered the pleadings and arguments of all parties. The argument patently lacks merit.

B.                 Section 1022

Lonna also now contends that section 1022,[13] which limits consideration of affidavits as evidence to uncontested proceedings, compelled the court to receive live witness testimony. She made no such argument in the trial court, and it is similarly forfeited. Moreover, the case which she cites for the proposition that failure to take testimony in a contested probate hearing constitutes reversible error(Estate of Bennett (2008) 163 Cal.App.4th 1303) is ultimately unhelpful to her position. She is correct that in Estate of Bennett the court held that section 1022 limited use of affidavits to uncontested proceedings and that the probate court committed reversible error in denying a request for an evidentiary hearing on a motion to set aside and rescind a settlement agreement. (Id. at pp. 13091310.) The court also acknowledged the rule, however, that the restriction on the use of declarations in contested probate hearings is inapplicable when  the parties d[o] not object to the use of affidavits in evidence and both parties adopt[] that means of supporting their positions. [Citations.] (Id. at p. 1309; see also Evangelho v. Presoto (1998) 67 Cal.App.4th 615, 620.) Unlike the objecting party in Estate of Bennett, Lonna did not assert that the competing declarations before the court mandated a testimonial hearing, thus preserving the issue for appeal. (Ibid.) Instead, Lonna relied upon her own verified petitions and her declarations to argue that she had shown a basis for the relief she requested, and that removal of Farmer as the personal representative/trustee was required.[14]

In attacking Farmers declarations on the scope of his prior legal representation, Lonna did not object to consideration of the declarations, but stated Should the Court be inclined to give any credence to Farmers factual assertions, the Court would be aided by testimony in an evidentiary hearing about Farmers role in each transaction and his legal representation of Petitioner throughout her marriage to Decedent. (Italics added.)

She suggests that she preserved her objections to the declarations in the proposed orders she submitted to the court after the April 23, 2009 hearing. But there again she did not object to the courts consideration of the declarations, but instead asked the court to find that there was conflicting testimony (i.e., the declarations) on Farmers prior representation of Lonna, and that it is necessary to resolve factual issues raised by the conflicting testimony to determine if Farmer was disqualified from acting as executor. However, there ultimately were no factual conflicts requiring resolution since the court, as previously noted, stated that it takes all of the petitioners factual allegations as having been established at trial and assumes that all factual disputes have been resolved in her favor.

No objection was made at any time to consideration by the court of the verified pleadings, or of the competing sworn declarations.  The trustees petition and [the objectors] written objections were both verified in the form of declarations under the penalty of perjury. [Citation.] Absent an objection, these documents were properly considered as evidence. [Citations.]  (Evangelho v. Presoto, supra, 67 Cal.App.4th at p. 620.)

C.                 Exclusion of Evidence

Lonna further claims that she was deprived of full consideration of the merits of her petitions by failure of the court to consider other evidence. We generally review decisions of the trial court to admit or exclude evidence for abuse of discretion. (City of Ripon v. Sweetin (2002) 100 Cal.App.4th 887, 900.) Lonna asserts that the courts refusal to order an evidentiary hearing foreclosed assessment of matters having crucial bearing on Farmers duty of impartiality to all Estate and Trust beneficiaries and thus, his fitness to continue to serve in these fiduciary capacities.

At the April 23 hearing the court directly asked Lonnas counsel Is there anything, in addition to the petitions, supporting documentation, any declarations, that you want to offer to the Court on the issue of the removal petition? Counsel responded Not at this time, Your Honor. Weve briefed ours. The court then asked for an offer of proof as to what additional evidence Lonna would produce at an evidentiary hearing. Counsel referenced letters, Lonnas testimony and the testimony of Bruce Carrier.[15] He did not further explain what the content of the letters might be, or identify Mr. Carrier or the nature of his proposed testimony. The court inquired Other than whats already been set forth in her declaration, what is your client going to add? Counsel reiterated that Farmer had assisted in or prepared the 1987 and 2000 Property Agreements, and that during the period 1991 to approximately 2003, it was Mr. Farmer who represented Mr. and Mrs. Wais. Farmers counsel then argued that, assuming Lonnas allegations to be true, the facts presented did not justify removal.

In other words, Lonnas counsel did not explain the substance or significance of the additional evidence he sought to adduce, and the court could have reasonably concluded that any testimony Lonna could provide would be cumulative to that set forth in her declarations and verified pleadings. The court did not abuse its discretion in declining to receive the additional evidence, particularly when Farmers counsel offered to accept the truth of Lonnas allegations for purposes of adjudicating the petitions, and the court did so.

D.                Lonna Concedes that the Court Did Not Abuse Its Discretion in Denying the Petitions

Our standard of review in this matter is not de novo.[16] We review orders removing, or refusing to remove, an fiduciary for abuse of discretion. (Estate of Wemyss (1975) 49 Cal.App.3d 53, 61.)  The test is not whether we would have made a different decision had the matter been submitted to us in the first instance. Rather, the discretion is that of the trial court, and we will only interfere with its ruling if we find that under all the evidence, viewed most favorably in support of the trial courts action, no judge reasonably could have reached the challenged result.  (Estate of Hammer (1993) 19 Cal.App.4th 1621, 1634.)

In considering the courts exercise of its discretion, we also keep in mind that  [w]hile it is the duty of the courts carefully to protect the interests of estates, the rights of those who are appointed to take charge and manage them should not be overlooked. An administrator should not be removed except for good and sufficient cause [citation]. The courts are even more reluctant to defeat the will of a testator by removing his chosen executor [citation]. A testators selection of an executor should not be annulled except on the clear showing that the best interests of the estate require such action.  (Estate of Hammer, supra, 19 Cal.App.4th at p. 1634; Estate of Cole (1966) 240 Cal.App.2d 324, 329.)

Lonna has not alleged that Farmer has taken any action detrimental to the probate estate, nor that he has taken any action inconsistent with his obligation as a trustee to deal impartially with all beneficiaries. ( 16003.) The court found that filing of the protective transfer petitions was prudent and not a breach of trust, and that preserving the status quo was a fair and reasonable way for the executor/trustee to proceed. The court further found that there were methods less extreme than removal available to address the issues raised by the petitions, and that granting the petition would have the effect of thwarting the settlors choice of executor and trustee.

Were it necessary for us to decide the issue, it is difficult to see any abuse of the courts considerable discretion in these areas. It is not necessary, however, because Lonna has conceded the issue. Having chosen to place all of her appellate eggs in the single proverbial basket discussed above, she not only fails to address any argument to these points at all in her opening brief, but in her reply brief she states Wais agrees that the lower court was within its discretion to dismiss her petition brought pursuant to . . . section 17202 to remove Farmer as trustee of the Marshall I. Wais Trust (Trust). Wais even agrees that the lower court had discretion to dismiss her concurrent petition brought under Section 8500 to remove Farmer as personal representative of her late husbands estate (Estate). (Footnote omitted.) Any claim that the trial court abused its discretion in denial of either removal petition has been both implicitly abandoned by failure to pursue it in the briefing (Lyons v. Chinese Hospital Assn. (2006) 136 Cal.App.4th 1331, 1336), and expressly abandoned in the reply brief.

III. Disposition

The orders denying the petitions to remove Farmer as executor and as trustee are affirmed.

_________________________

Bruiniers, J.

We concur:

_________________________

Simons, Acting P. J.

_________________________

Needham, J.

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[1] Because many of the individuals share the same last name, we use first names for clarity only, and in doing so intend no disrespect.

[2] In a prior appeal, we held that Marshalls children would not violate a no contest provision in his will by questioning the validity of written transmutation agreements, designating certain assets as community property. (Estate of Marshall I. Wais (Sept. 22, 2009 A124364) [nonpub. opn.].)

[3] Except for a specific bequest, he excluded an adopted child from his second marriage.

[4] No executed copy was provided to the court. The copy attached to Lonnas pleadings shows only an attachment dated October 9, 2003, signed by Lonnas attorney, indicating that he had advised her regarding the legal effect of the document and that he believed that she understood the consequences.

[5] Lonna alleged that the 2003 transfer was to permit her to purchase a residence at 2511 Baker Street in San Francisco as her separate property. This residence is one of the disputed assets.

[6] Lonna also refers to the 1987 and 2000 agreements as Transmutation Agreements.

[7] Unless otherwise noted, all further statutory references are to the Probate Code. Under section 21320, a beneficiary may, without violating a no contest clause, apply to the court for a determination whether a particular act would be a contest. . . . This procedure provides a safe harbor for beneficiaries who seek an advance judicial determination of whether a proposed challenge would result in forfeiture of their rights under the will. (Betts v. City National Bank (2007) 156 Cal.App.4th 222, 232.)

[8] There is a similar provision in the Trust.

[9] The undisputed assets of the Trust are apparently in excess of $60 million, and the disputed assets are worth about $40 million.

[10] On March 12, 2009, Lonna also filed a separate civil action against Farmer and his law firm in the San Francisco Superior Court, alleging fraud, negligent misrepresentation, professional negligence, breach of fiduciary duty, breach of contract, and elder abuse (San Francisco Superior Court Case No. 09-486102).

[11] In all proceedings governed by this code, an appeal may be taken from the making of, or the refusal to make, any of the following orders: [] . . . [] (g) Surcharging, removing, or discharging a fiduciary. ( 1300 [applicable to personal representatives].) With respect to a trust, the grant or denial of the following orders is appealable: [] (a) Any final order under Chapter 3 (commencing with Section 17200) of Part 5 of Division 9, except the following: [] (1) Compelling the trustee to submit an account or report acts as trustee. [] (2) Accepting the resignation of the trustee. ( 1304.)

[12] Shall is mandatory and may is permissive. ( 12.)

[13] An affidavit or verified petition shall be received as evidence when offered in an uncontested proceeding under this code. ( 1022.)

[14] Farmer relies here, as in the trial court, on Conservatorship of McElroy (2002) 104 Cal.App.4th 536 (McElroy) for the proposition that an evidentiary hearing is not required where the issue for decision is one entirely within the courts discretion. McElroy dealt with the trial courts ability to exercise substituted judgment for a conservatee. We are not convinced that McElroy would have application to a petition for removal of a personal representative under section 8500, but we need not reach that question.

[15] Counsel at oral argument contended that Lonna also wished to cross-examine Farmer at the hearing. She made no such request.

[16] Lonna argues that Estate of Bennett, supra, 163 Cal.App.4th 1303 stands for the proposition that de novo review by this court is required. We agree with the view of our colleagues that Estate of Bennett held it was an abuse of discretion to deny a request for an evidentiary hearing under the circumstances of that case. (Estate of Lensch (2009) 177 Cal.App.4th 667, 676.)