Opinion
A150675
06-07-2018
SHAUN CARBERRY, Plaintiff and Appellant, v. BONNIE KALTSCHMID, as Trustee, etc., et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. 16PRO00272)
Plaintiff Shaun Carberry appeals from the probate court's denial of his petition to compel the co-trustees (Trustees) of the George Dean McMillan-Gordon Living Trust (the Trust) to provide an accounting. We affirm.
BACKGROUND
George Dean McMillan-Gordon (the Settlor) created the Trust in 2013. The Trust became irrevocable upon the Settlor's death in 2014. The Settlor's widow and their six children are beneficiaries of the Trust. Two of the children are the Trustees.
The two Trustees are represented by separate counsel. Trustee Bonnie Kaltschmid filed a response brief, which Trustee Brim Aaron McMillan-Gordon joined in its entirety.
The Trust also provides for a "Trust Protector," whose purpose is "to assist in achieving [the Settlor's] objectives as expressed in the other provisions of this trust." The Trust confers certain authority to the trust protector "in a fiduciary capacity." The trust protector's three primary powers are the power to amend or modify the Trust (although the trust protector may not "expand the Trust Protector's existing powers"); the power to construe the terms of the Trust in the event of a perceived ambiguity; and the power to execute documents necessary to carry out any trust protector or trustee power. Various provisions of the Trust confer additional discrete powers to the trust protector, including the power to appoint an independent special trustee in the event a trustee is unwilling or unable to act with respect to any Trust property or provision, the power to appoint successor trustees if the office is vacant and no Trust-designated successor trustee is willing and able to serve, the power to terminate Trust-created trusts if they are no longer "economical," and the power to change the governing law or situs of administration of the Trust. The Trust clarifies that the trust protector "has no general duty to monitor or remain informed about the trust. Specifically, the Trust Protector has no duty to investigate the Trustee's actions or inactions, to audit the trust's books, to review the trust's investments, or to evaluate the trust portfolio's performance." The trust protector is compensated by the Trust.
The Trust appointed Lemoine Skinner III as the first trust protector. Skinner resigned as trust protector in October 2015 and appointed Carberry as his successor. Carberry has no relationship to the Settlor or the beneficiaries of the Trust.
In January 2016, Carberry wrote the Trustees' attorneys. The letters referred to an ex parte petition regarding a $300,000 loan to the Trust and stated: "I have not been informed of the outcome of one aspect of the relief prayed for, i.e., 'That [Trustee Kaltschmid] shall use the loan proceeds, in her sole discretion, to pay expenses of the Trust administration, subject to all fiduciaries (sic) duties owed as trustee, without the necessity of obtaining prior approval from any other party, including but not limited to, [the other Trustee].' Please inform me if that condition regarding the expending of the loan proceeds is in effect or not. [¶] I have concerns about the Co-Trustees' apparently irreconcilable differences and how that situation would affect the Trust administration. [¶] Please provide an Accounting of the Trust for the year ending December 31, 2015." Counsel for one of the Trustees responded as follows: "The Ex Parte application referred to in your letter was withdrawn . . . [because] the parties agreed to resolve their issues without the Court's involvement prior to any appearance. [¶] . . . [T]he provision you referred to regarding [Trustee Kaltschmid] having sole discretion to pay expenses is not in effect. The co-trustees and beneficiaries have come to an agreement with respect to their other differences and we . . . are currently in the process of drafting a settlement agreement with a petition for Court approval."
In February, Carberry wrote a second letter, reiterating his request for an accounting, asking for a copy of the settlement agreement, and stating that "[a]s Trust Protector, I have a fiduciary duty to keep myself informed of the condition of the administration of the Trust." Counsel for one of the Trustees responded: "Please note that we are not ignoring your request but are prudently awaiting family resolution of several issues that, depending on the outcomes, will alter our responses to you. [¶] All counsel around this matter are trust and estate specialists. We are intimately aware of the applicable standards which are attendant to the trust administration and related activities, including that of a trust protector. You can rely on this representation from all counsel that we endorse your cooperation; and, that your continued non-active involvement will not give rise to a challenge or claim that you are not fulfilling your duties as Trust Protector. We ask that you continue to place any further work on hold until counsel have concluded their work."
In September 2016, Carberry filed the instant petition. The petition, titled "Petition for Order Compelling Co-Trustees to Account and to Provide Information," attached a copy of the Trust as well as the letters exchanged between Carberry and the Trustees' counsel, and recited the content of the letters. The petition alleged Carberry had still not received a copy of the settlement agreement or an accounting; believed the Trust was "delinquent" with tax filings and had incurred penalties and interest; believed the Trust "has not been paying prior legal representation invoices, possibly subjecting the Trust to arbitration in the near future"; and expressed concern "that legal fees are being 'doubled' because each Co-Trustee has separate legal representation, and presumably the Trust is paying for all legal fees of both Co-Trustees." The petition's prayer for relief sought an order compelling an accounting, "[d]irecting that the Co-Trustees communicate directly with the Trust Protector regarding the administration of the Trust," and "[c]onfirming Trust Protector's power . . . to Appoint an Independent Special Trustee."
One of the Trustees filed a verified opposition arguing Carberry lacked standing to demand an accounting. The opposition stated that "a number of contested Trust administration issues have arisen [since the Trust's creation], including the necessity of obtaining loans against Trust property, payment of compensation, and estate and income tax issues." The opposition noted Skinner, during his tenure as trust protector, generated "substantial" fees "which are the subject of ongoing settlement negotiations," and the Trustee believed these fees were the "legal fees" referred to in the petition. The parties had recently engaged in informal and formal mediation, and "remain in negotiations to settle all disputes relating to the Trust, including the Skinner fees." Prior to the petition's filing, the Trustee had provided an accounting to all beneficiaries.
At the hearing on the petition, counsel for one of the Trustees represented that the parties had reached a tentative settlement. Counsel explained that Carberry had not been involved in settlement discussions because "the parties are trying to keep expenses down. . . . [but] we have no problem sharing the settlement agreement with Mr. Carberry . . . ." When Carberry argued that he was entitled to "some information about what is going on," the court responded, "Maybe you are, maybe you are not, and for me to speculate on it would be inappropriate, but the issue of standing with regard to an accounting is completely different, and that I can opine on." The court noted, "just shutting you out does not seem to be the right way to go" and if there is "a specific issue . . . I can deal with that, but in general terms objecting to an accounting that you don't have the right to is not going to carry the day . . . ." The court denied the petition for lack of standing.
DISCUSSION
The probate court did not err in concluding Carberry lacks standing to compel an accounting. Probate Code section 16062, subdivision (a), provides trustees shall provide accountings "to each beneficiary to whom income or principal is required or authorized in the trustee's discretion to be currently distributed." Section 17200 provides "a trustee or beneficiary of a trust may petition the court" for an order "[c]ompelling the trustee" to "[a]ccount to the beneficiary." (§ 17200, subds. (a) & (b)(7)(C).) The Probate Code defines the beneficiary of a trust as "a person who has any present or future interest, vested or contingent." (§ 24, subd. (c).) Carberry is not a beneficiary and he cites no authority that non-beneficiary trust protectors are entitled to compel accountings under the Probate Code.
The parties dispute whether the appropriate standard of review is de novo or abuse of discretion. We need not decide the issue, as our conclusion would be the same under either standard. We also need not decide the Trustees' contention that we can affirm the probate court's order on alternative grounds. We note that during oral argument, appellant conceded he was not entitled to an accounting.
All undesignated section references are to the Probate Code.
Carberry fails to demonstrate that his cited secondary authority is relevant to the Trust. For example, he quotes a national law review article for the proposition that, " 'if the protector has the power to replace the trustee (with or without cause), the protector has a duty to stay informed as to the actions of the trustee by seeking out appropriate and sufficient information and acting accordingly.' " But he cites no provision of the Trust granting him the power to replace a trustee.
The Trust itself also does not entitle Carberry to compel an accounting. The Trust obligates the Trustees to "provide an annual accounting to the Income Beneficiaries of any trust created under this trust unless waived by the Income Beneficiaries," but does not impose any such obligation with respect to the trust protector. None of the powers granted to the trust protector by the Trust include the power to compel an accounting.
We disagree with Carberry that the authority granted him by the Trust renders him the functional equivalent of a trustee.
Carberry argues that he sought more than an accounting. However, while the petition's caption identifies the petition as seeking to compel the Trustees "to Account and to Provide Information," the only other "information" referenced in the petition is a settlement agreement. At the hearing, the Trustees agreed to provide Carberry with a copy of the relevant settlement agreement, so the petition is moot to the extent it sought this information. The petition's prayer for relief did not identify any specific information sought by Carberry, but instead sought generally to compel the Trustees to communicate with Carberry "regarding the administration of the Trust." At the hearing, Carberry argued he was entitled to "some information about what is going on" but again did not identify any specific information sought. The probate court properly declined to grant such an amorphous request, and—also properly—indicated its willingness to consider a subsequent request which identified the specific information sought.
The prayer also sought an order confirming the trust protector's authority to appoint an independent special trustee, but there is no indication in the petition (or the record) that the Trustees contested this authority.
Trustee Kaltschmid filed a motion for sanctions in this court, arguing Carberry's appeal is frivolous. We deny the motion, as we do not find the appeal so without merit as to be frivolous. (See In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650-651 ["An appeal that is simply without merit is not by definition frivolous and should not incur sanctions. . . . [Sanctions for frivolous appeals] should be used most sparingly to deter only the most egregious conduct."].)
DISPOSITION
The order is affirmed. Respondents are awarded their costs on appeal.
/s/_________
SIMONS, J. We concur. /s/_________
JONES, P.J. /s/_________
NEEDHAM, J.