In these two consolidated appeals-D072566 (Powell I ) and D073083 (Powell II )-Charles M. Tagami
The second order awarded $42,115.38 in attorney fees and costs pursuant to Probate Code section 17211, requiring Charles to pay these fees from his share of the Tagami Living Trust (the Trust), or personally if his share was inadequate. Charles contends the court should not have awarded fees for trustee Claudia Powell's personal attorney and the fees awarded for Powell and the Trust attorneys were excessive, duplicative and unreasonable.
On our own motion, we consolidated the appeals for disposition. We disagree with Charles's contentions in both appeals and, therefore, we affirm the orders.
BACKGROUND
A
Kenneth M. (Matazo) and Kazu Tagami were grantors of the Trust, which was established on November 10, 1997, and restated on January 3, 2012. Matazo and Kazu had three children: Kenneth K. Tagami, Barbara L. Tagami, and Charles.
A physician certified in March 2012 that Kazu was unable to make her own financial and medical decisions due to medical issues. Matazo died in August 2012. Kazu died almost three years later, in June 2015.
B
The court settled two prior accountings, the first for trust activity in the period of
In settling, allowing, and approving the first accounting, the court determined fees paid for attorney Thompson to give Powell advice regarding the proper administration and conduct of the trust were reasonable, necessary, and for the benefit of the Trust. The court also found Powell performed all duties required of her during the accounting period and had been paid reasonable compensation, calculated quarterly, on a laddered fee schedule based upon the market value of the assets on hand at 1 percent of the first $1 million. The court similarly settled, allowed, and approved the second account and report.
C
1
Approximately a year after Kazu's death, Charles's attorney requested the third accounting "with supporting documentation" and stated Charles would not approve the accounting "until supporting documentation is received and reviewed."
Attorney Thompson provided the Third Account with an explanation of the accounts where the Trust assets were held. Thompson stated neither statute nor Local Rules required delivery of bank statements or supporting documentation for an accounting. Such a request was beyond the scope of Powell's
After further communications, attorney Thompson asked for clarification of what documents Charles wanted. In his 41 years of practice representing professional fiduciaries, Thompson had never had a request for documentation after submission of a complete account formatted as required by the Probate Code, although he had responded to questions about specific receipts, distributions, or disbursements.
Charles's attorney demanded bills, statements and engagement letters with respect to expenses listed in the account including fees for Thompson's firm, fees for Powell, fees for attorney Ewin, and mediation fees. Charles's attorney stated failure to comply with the demands could be interpreted as bad faith. The attorney gave notice of Charles's objection to the Third Account and his intent to request attorney fees and surcharges against Powell.
Thompson denied Powell's actions could be interpreted as being in bad faith. He explained the Third Account was presented in conformity with the Probate Code and the two prior accounts, with the same categories, were approved without objection. Nevertheless, Thompson stated there were no engagement letters for Powell, attorney Ewin, or the mediation firm. He asserted the attorney-client privilege as to the engagement letter and billing statements for his firm. As to other billing statements requested, Thompson stated Powell would comply if the court authorized delivery of the requested statements.
2
On September 19, 2016, Powell filed her Third Account for the period of October 1, 2014, through June 20, 2015, the date of Kazu's death. The Third Account showed all assets and distributions during the accounting period. This included a schedule listing itemized administrative expenses incurred during the accounting period. The property on hand at the close of the third
3
Charles filed his objection to the Third Account on February 2, 2017. Charles objected stating it miscalculated the number of days between October 1, 2014, and June 20, 2015. He stated he had insufficient information to judge Powell's compliance with the Probate Code for inventoried investments
4
Powell submitted a supplement to the Third Account stating administrative expenses during the accounting period totaled $29,482.19 in trustee fees and $14,658.28 in attorney fees. She stated these expenses were necessary, beneficial to the Trust, and reasonable. After an initial hearing, the court continued the matter to allow discovery about the Third Account.
Thereafter, attorney Thompson submitted a declaration responding to Charles's requests for documents. Thompson lodged the engagement letter for his firm, bank statements reconciling the balances of the accounts at financial institutions as of the closing of the accounting, and redacted billing statements from his firm, attorney Ewin, and the mediator's firm. He also submitted bank letters and statements of accounts.
The parties agreed the court would take the matter under submission. The court set a briefing schedule for a supplemental objection and reply, but noted the parties could submit a stipulation if they reached an agreement.
5
Charles submitted a supplemental objection consisting of approximately 200 pages, including 38 additional exhibits. Charles accused Powell of abusive billing practices and "double dipping" into the Trust by delegating what he claimed were routine administrative tasks to attorney Thompson, who charged a higher hourly rate.
Charles complained it was inappropriate for attorney Thompson to bill for reviewing communications on which he was copied if the subject matter was not a legal issue. Charles pointed to communications between Powell, Charles, a caregiver, and a potential case manager regarding arranging for an assessment of Kazu at her home. Charles submitted a list of charges where he thought Thompson's fees should be reduced by $35 to $140 (one to three tenths of an hour at a rate of $350 per hour), or disallowed as either unnecessary or not legal services. Charles claimed, "at the very least" $6,125
Charles challenged the fees charged by attorney Ewin for attending two family mediations during the accounting period
Charles claimed Powell encouraged abusive billing practices and withheld information. He characterized her administration of the Trust a "failure." He raised issues regarding Powell's administration of the Trust related to the first and second accounting periods. Charles accused Powell of sluggish distributions and of holding an unreasonably high reserve to maximize Powell's fee. He accused Powell of wasting trust funds by not producing "substantiating records before he approved the account" and by seeking judicial intervention.
Charles claimed Powell refused to honor Kazu's wishes to pay his dental bills. He also accused Powell of sabotaging the Trust by not following the terms of the Trust with respect to distribution of the family home and in appointing trustees for Kenneth's special needs trust. He accused Powell of being disloyal to the settlors of the Trust and abandoning and breaching her duties as trustee, citing actions predating the current accounting.
6
Powell responded to Charles's objections both personally and in her capacity as trustee. Powell's individual response stated she "administered the Trust for the benefit of the surviving grantor, [Kazu], prudently managed trust assets, and made appropriate and reasonable distributions on [Kazu's] behalf and for her benefit" during the Third Account period. Powell "also attempted to facilitate the resolution of long-standing family disagreements." The response explained, "[g]iven the family dynamics involved, and often competing interests of those family members, significant communication was required to ensure all interested parties were kept informed."
Powell's compensation was based on the fee structure used since she became the trustee in September 2011 and approved without objection in the
Powell did not believe a declaration was needed under the Local Rules because court approval is not required by statute for a trustee to receive compensation. Nevertheless, Thompson provided a declaration with billing records for his firm, attorney Ewin, and other documentation sought by Charles. Powell stated this was "a futile attempt to satisfy [Charles's] expansive demands for further substantiation of various expenses," which Charles's counsel admitted to the court was a "fishing expedition."
Powell used attorney Thompson to advise her of her duties and responsibilities. This included advice about communications with Kazu's children and their attorneys. Powell reviewed the invoices provided by Thompson and determined they were reasonable and justified for the services provided.
Powell stated the purpose of the mediation was to resolve issues related to the care of Kazu and Kenneth and compensation
The injury to Charles's mouth occurred before Powell became the trustee. Charles brought up the dental bills as an issue he wanted addressed in the family mediation. Kazu lacked the capacity to make her own financial or medical decisions. The other beneficiaries would not agree to the payment.
Powell disputed Charles's allegation that attorney Ewin "made" Powell trustee. The settlors interviewed and retained Powell after receiving a recommendation from Ewin.
Attorney Ewin attended the first mediation at her office with prior knowledge of all parties. As the attorney who drafted the Trust restatement, she attended to provide insight regarding Kazu's historical wishes since Kazu was no longer able to speak for herself.
Powell requested recovery of attorney fees and costs pursuant to Probate Code section 17211, subdivision (a), because of the need to respond to the surcharge allegations she deem unmeritorious. As trustee, she also noted many of the issues Charles complained of had been determined in the earlier
7
Kenneth's personal attorney also submitted a declaration in response to Charles's objections and took issue with the personal allegations Charles made about Kenneth and his attorney. Kenneth did not object to the Third Account and found Charles's accusations so baseless and reckless, they amounted to willful and wanton harmful conduct.
D
The court overruled each of Charles's objections. With respect to attorney Thompson's fees, the court rejected Charles's contention some of the work could have been performed by Powell at a lower hourly rate. The court stated, "In a disputed case such as this, it is wise for a trustee to rely more extensively on counsel than might otherwise be necessary." The court also concluded the "higher fees were a result of Charles'[s] contentious approach
E
After considering the declaration of fees and costs submitted by Powell and Charles's objection thereto, the court concluded the requested fees were reasonable considering the issues presented and the work performed. The court ordered Charles to pay $30,080.38 to attorney Thompson's firm as the trust's attorneys, $5,997.50 to Powell's personal attorney, and $6,037.50 to Powell.
DISCUSSION
I
Powell I
Charles challenges the order settling the Third Account on several grounds. First, he claims the court erred in approving the Third Account without a declaration he contends was required by Local Rules, rule 4.16.2(C)(4). Second, he contends there was not substantial evidence to support the court's conclusion the fees paid to attorney Thompson, attorney Ewin, and the mediator were reasonable and appropriate. Finally, he contends the court erred in concluding his objection was without reasonable cause and in bad faith justifying an award of costs and fees under Probate Code section 17211, subdivision (a). We find no merit in these contentions.
A
Rule 4.16.2 of the Local Rules governs requests for fees and commissions in trusts, conservatorships, and guardianships. The court determined rule 4.16.2(C)(4) did not apply in this case because a declaration is not required by statute and fee approval was not specifically sought in the Third Account. (Local Rules, rule 4.16.2(D).) We agree.
The Third Account did not seek an order approving a new fee disbursement. Rather the Third Account itemized disbursements already made, which included disbursements for fees paid to attorney Thompson, attorney Ewin,
Even if Local Rules, rule 4.16.2 applied, the Probate Code governs "all accounts to be filed with the court" and "[e]xcept as specifically provided elsewhere in this code, or unless good cause is shown therefore, no information in addition to that required in this chapter need be in an account." ( Prob. Code, § 1060.) Local rules may not narrow or conflict with statutory requirements. (
Under the statutory scheme, "An account shall include both a financial statement and a report of administration." ( Prob. Code, § 10900, subd. (a).) The financial statement consists of a statutorily required summary (id. , § 1061) along with statutorily required supporting schedules. (Id. , § 1062.) The disbursement schedule must show "the nature or purpose of each item, the name of the payee, and the date thereof." (Id. , § 1062, subd. (b).)
The Third Account complied with these statutory requirements. In addition, attorney Thompson submitted a declaration attaching billing statements for attorney fees sought for Thompson's firm, attorney Ewin, and the mediation firm. Therefore, the court had adequate information to exercise its discretion to ensure the fees paid were reasonable and for the benefit of the Trust. ( Donahue v. Donahue (2010)
B
Charles alleged broadly in his opening brief that there was not substantial evidence to support the court's findings Powell satisfied her fiduciary duties. He reiterated his complaints about Powell's conduct before and after the Third Account period. However, as clarified by his reply brief, he specifically challenges only the court's conclusion that fees paid to attorney Ewin, attorney Thompson, and the mediator were reasonable and appropriate.
Section 15.09 of the Trust permitted Powell to employ and reasonably compensate professionals, including attorneys, to advise or assist in the performance of her duties as trustee. This is consistent with the statutory powers conferred on trustees to hire persons, including attorneys, "to advise or assist the trustee in the performance of administrative duties" (
On settlement of an account, " '[a]llowance of compensation rests in the sound discretion of the trial court, whose ruling will not be disturbed on appeal in absence of a manifest showing of abuse.' " ( Estate of Gump (1991)
Under the deferential substantial evidence standard of review, findings of fact are liberally construed to support the judgment or order and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings. ( Thompson v. Asimos (2016)
1
Charles contends there was no substantial evidence to support the court's finding that attorney Ewin's fees in the amount of $2,412 were reasonable and appropriate for attending the mediations. The court, who had heard and settled the first two accounts, found the settlors hired attorney Ewin when they were competent to assist with their estate planning issues and the court had previously approved payment of attorney Ewin's fees in prior accounts for her "ongoing work for on their behalf."
Powell stated the purpose of both mediations was to resolve issues related to the care of Kenneth and Kazu as well as compensation of Barbara and Charles. The mediations did result in some agreements Powell was able to implement. Attorney Ewin, as the person who prepared the Trust restatement, could offer insight regarding Kazu's historical wishes since Kazu was now unable to speak for herself. All parties agreed to the attendance of attorney
The court also found Charles presented no evidence of impropriety between attorney Ewin and Powell. Charles asserted Powell hired Ewin to "pretend" to represent Kazu or some other impropriety because another attorney, Richard Stewart, represented Kazu at some point historically. However, Ewin attended the mediation with agreement of the parties. Additionally, when Charles wanted Stewart to represent him at the second mediation, Powell exercised her authority as Kazu's agent under the financial power of attorney to terminate any attorney-client relationship that may have existed between Kazu and Stewart. Powell informed Stewart he could not represent Charles at the mediation due to a conflict of interest. The fact Stewart may have represented Kazu at some point does not diminish the value of Ewin's perspective at the mediation. There was substantial evidence to support the court's factual findings regarding Ewin and it did not abuse its discretion in determining Powell's payment of Ewin's fees was reasonable and appropriate.
2
Charles objected to $6,125 out of approximately $14,000 in fees paid to attorney Thompson during the Third Account period. Charles claimed the charges were either unnecessary or not legal tasks, which should have been performed by Powell. Charles pointed to charges related to Thompson's review of communications between Powell and a nurse who evaluated Kazu's future care needs. The court rejected Charles's objections to Thompson's fees stating, "In a disputed case such as this, it is wise for a trustee to rely more extensively on counsel than might otherwise be necessary. The higher fees were a result of Charles' contentious approach to the trust administration."
Ongoing family disputes made the Trust administration difficult. Charles admitted the family dynamic was fractured. He sought payment of dental fees from the Trust, to which the other beneficiaries objected. Charles also sought compensation for his participation in Kazu's care whereas
The bills to which Charles objected were communications that attorney Thompson reviewed related to Powell's arrangement for a nurse to evaluate and assess Kazu's future care needs. Since Barbara and Charles jointly held the power of attorney for Kazu's health care, disputes between Charles and
3
Charles also contends there was not substantial evidence supporting the court's conclusion that the mediation expense ($3,960 for two mediation sessions) was "a reasonable expense to deal with the family issues that impacted the Trust." He specifically contends Powell should have used her own skills to resolve what he now claims were routine decisions regarding Kazu's care, her needs, and her desire to pay for things.
The record shows Powell outlined the first mediation agenda and explained the need for a mediator, "The presence of a mediator is to assist us in having an open discussion of sensitive issues, some of which will involve the Trust and some of which will not. Her role is to objectively facilitate, aid, and promote discussion, with a primary goal being to reduce the time needed and so achieve a net savings to the Trust." In her individual response, Powell explained it would have been inappropriate for her to conduct the mediation to resolve issues regarding Kazu's care needs as well as disputes among the family members regarding compensation to family members when her role was to act as the trustee and agent under Kazu's financial power of attorney responsible for disbursing trust funds for her care. Powell's goal was to "create an opportunity for those issues to be resolved by the interested parties" so Powell could implement any agreement as the trustee. This position was reasonable to avoid any possible conflict of interest. Substantial evidence supported the court's finding the cost of the mediation was a reasonable expense. The court noted Charles participated in the mediation without objection and benefitted from presenting his views and, yet, did not offer to pay some of the mediation fees himself.
C
Probate Code section 17211, subdivision (a), provides: "If a beneficiary contests the trustee's account and the court determines that the contest was
The probate court here advised the parties of Probate Code, section 17211, at each hearing. Ultimately, the court found Charles's contest was without reasonable cause and in bad faith. As to lack of reasonable cause, the court stated, "The court found all of the objections to be without merit. Some dealt with matters that have been settled by the court and not subject to re-litigation. Some dealt with matters that were inconsequential. Some were based on factually inaccurate assertions." The court also found the contest was taken in bad faith stating, "the court concludes that the only reasonable explanation for the unreasonable objections to the Third Account is that Charles intended to perpetuate family disputes; or to gain a personal advantage in distributions from the Trust; or both. Under any explanation, the court finds that such intention rises to the level of bad faith." We conclude the court did not err in making these findings.
Before filing the petition for the Third Account with the court, attorney Thompson provided Charles with a complete accounting, formatted as required by the Probate Code. Thompson also provided information regarding accounts for the Trust assets. He said production of bank statements or supporting documentation was not required by statute or Local Rules and was
Instead of asking attorney Thompson for specific information about specific disbursements, Charles and his attorney repeatedly made broad demands for documents such as engagement agreements and monthly billing statements for all fees paid for attorneys, mediators, and Powell.
In his original objection to the Third Account, Charles quibbled about a misstatement in the report regarding the number of days in the Third Account period and the identification of the beneficiary. He objected to all of Powell's trustee fees, Thompson's fees, Ewin's fees, and the mediation fees. He contended they were unsubstantiated, excessive, or inappropriate
Even after receiving documents, Charles filed a supplemental objection, which with additional exhibits totaled more than 200 pages, and stated he still wanted more documentation.
He complained about Thompson, as the trust's attorney, spending one or two tenths of an hour reviewing and assisting with communications between Powell and the beneficiaries regarding development of a care plan for Kazu. Charles accused Powell of liquidating trust assets to pay for Thompson's fees when the court previously authorized liquidation and diversification of stock assets.
Charles complained about fees charged by the mediator and attorney Ewin to participate in two mediations to help the beneficiaries resolve issues related to the care of Kazu, and other disputes involving trust distributions. Charles claimed the mediations were unnecessary even though he agreed to attend and obtained some benefit from them. The amount of the fees to which Charles objected were de minimus compared to the size of the estate and required significant time and expense for Powell to respond.
A substantial portion of the supplemental objections and supporting exhibits complained about Powell's actions and fees paid to attorney Thompson in the two prior accounts. Settlement of an account is conclusive to all interested parties and releases the trustee from future claims arising from
The objections also made unfounded inflammatory personal attacks on Powell and attorney Ewin. Charles also attacked his siblings and their attorneys. The vitriolic and contentious nature of Charles's pleadings and correspondence, his unmeritorious objections, and his personal attacks of Powell, the attorneys, and his siblings support the court's inferred finding of bad faith.
Under these circumstances, we conclude Charles's objections were made and maintained without reasonable cause and there was substantial evidence to support the court's finding the objections were brought in bad faith. Therefore, the court properly determined Charles should pay the costs of the trustee and other expenses and costs of litigation, including attorney fees, pursuant to Probate Code section 17211, subdivision (a).
II
Powell II
In the second appeal Charles challenges the court's subsequent order awarding fees. Charles contends the court should not have awarded fees for Powell's personal attorney and the fees awarded for Thompson
"We independently review any legal issue regarding the appropriate criteria for a fee award. But once those criteria are identified, we defer to the trial court's discretion in determining how they are to be exercised. [Citation.] In fashioning an equitable remedy, the trial court is in the best position to determine whether the criteria for a fee award have been met. We will not disturb its judgment on this issue unless we are convinced the court abused its discretion. [Citation.] A trial court abuses its discretion only where its
Charles contends the court should not have awarded fees and costs for Powell's personal attorney because Probate Code section 17211, subdivision (a), requires the costs and fees to be "incurred to defend the account." Charles contends Powell's retention of a personal attorney to respond to the individual attacks made against her were for her benefit rather than for the benefit of the Trust. Charles is wrong. "While defense against those allegations may have benefited [Powell] personally by eliminating the possibility of individual liability, they also benefited the trust by eliminating charges raising serious questions about whether she had and could continue to administer the trust properly." ( Hollaway v. Edwards (1998)
Charles next contends the time spent and fees charged for Thompson's firm and for Powell were excessive, duplicative, and unreasonable. We disagree. The "spare-no-expense" strategy was employed by Charles in objecting to the Third Account, not Powell or the Trust attorneys. ( Donahue, supra,
The court concluded the fees requested were reasonable in light of the issues presented and the work performed. " 'The "experienced trial judge is the best judge of the value of professional services rendered in [her] court, and while [her] judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly
DISPOSITION
The orders are affirmed. We deny Powell's request for attorney fees pursuant to Probate Code section 17211, subdivision (a). However, Powell shall recover her costs on appeal.
WE CONCUR:
BENKE, J.
DATO, J.
Notes
Because the Tagami family members share a common surname, we use first or middle names after initial introduction to avoid confusion. No disrespect is intended.
An order settling an account is appealable. (Code Civ. Proc., § 904.1, subd. (a)(10) ; Prob. Code, § 1300, subd. (b) [settling an account of a fiduciary].) An order "[f]ixing, authorizing, allowing, or directing payment of compensation or expenses of an attorney" is separately appealable. (Prob. Code, § 1300, subd. (e) ; Leader v. Cords (2010)
Among the family disputes that postdate the Third Account is whether the language of the fiduciary deed recorded for the family home in June 2016 (recorded after the Third Account period) complied with the Trust language stating the family home was to be distributed to Charles "on the condition that he allow [Kenneth ] to reside in the property for the remainder of his lifetime without any payment for his residency while there ." After another attorney negotiated the language of the deed on behalf of Charles, his current attorney raised a dispute about whether the settlors intended Kenneth to have an ownership interest in the property for his life or a conditional right to occupy. Charles denied Kenneth a key to the home, required notice 24 hours before Kenneth could visit the home, and required Kenneth to seek Charles's approval before bringing someone with him to the home. Kenneth believed Charles breached a condition precedent to holding title to the home, but stated the issue would be addressed in a future petition.
After the mediation, Powell attempted to assist Charles by making a gift of $14,000, the maximum annual gift allowed by the Trust, to each child. Additionally, Powell paid $5,000 to the attorneys who represented Charles and Barbara at the mediation.