Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Marin County Super. Ct. No. PR020208.
Siggins, J.
These appeals are from two orders of the probate court entered in the estate of Steven Greenberg, whose apparent suicide while fleeing from authorities investigating his possible acts of child molestation led to a bitterly fought legal battle over the assets he left behind. In appeal number A115844, Zaret v. Moran, Susan Zaret challenges a probate court order removing her as executor. Appeal No. A116946, Zaret v. B.K., concerns a subsequent order barring the special administrator from taking steps to appeal a multi-million dollar civil judgment against the estate in favor of the molestation victim. We order the two appeals consolidated for oral argument and decision. We reverse both orders.
BACKGROUND
Steven Greenberg died on January 4, 2002, when it appears he intentionally crashed a single engine plane after he learned the police were investigating allegations he had molested minor B.K. Greenberg’s will named Susan Zaret as executor, and divided his estate between Zaret, Jim Moran and B.K.
B.K. met Greenberg in 1997, when B.K. was in third grade. She and her mother moved into a Daly City apartment building owned and managed by Greenberg. Greenberg befriended B.K. and her mother, and his friendship with B.K. continued after Greenberg moved to San Rafael. B.K. occasionally spent weekends at Greenberg’s house, he sent her to various summer camps and took her on trips and to movies, clothes shopping and other outings. Zaret was a close friend of Greenberg’s. She often accompanied B.K. and Greenberg on outings and included B.K. in her own family gatherings. It was during this period that Greenberg sexually abused B.K. After the estate rejected her claim, B.K. filed a civil action against Greenberg and Zaret, in her capacity as executor, asserting claims for Greenberg’s sexual molestation of her and intentional infliction of emotional distress.
Zaret petitioned the probate court for permission to hire counsel to defend the estate in the civil action. The court authorized her to spend up to $50,000 for the estate’s defense. Over the following four years Zaret obtained court approval for another $225,000 in attorneys’ fees payable from the estate.
In November 2003, B.K. added Zaret as a defendant in her individual capacity and alleged Zaret had “enabled” the molestation. Zaret retained independent counsel for her defense.
The case was vigorously litigated. On April 10, 2006, two weeks before trial was to begin, B.K. petitioned to remove Zaret as executor on the ground that she had a conflict of interest with the estate. B.K. argued that because Zaret and the estate were named as joint tortfeasors, Zaret had a personal incentive to limit her exposure in the suit by blaming Greenberg and thereby increasing the estate’s share of liability. Conversely, she argued, the estate had an interest in a greater degree of fault being attributed to Zaret. B.K. also claimed there was a conflict of interest by virtue of Zaret’s status as a defendant and executor because Zaret, “who is responsible for [B.K.] being raped by Steven Greenberg, is the fiduciary who bears the obligation under the law to preserve and protect [B.K.’s] inheritance.” In addition, the petition asserted that Zaret wasted and mismanaged estate funds on legal fees in the civil action.
Zaret argued against the petition that she had zealously defended the estate for four years, that her interests as executor and as a beneficiary were aligned with the estate’s, that B.K.’s accusations of enabling sexual abuse were baseless and would be addressed in the civil trial, and that all defense expenditures were approved by the probate court. The court denied the petition without prejudice.
The case proceeded to a two-month jury trial. The jury found that Greenberg sexually abused B.K. but that Zaret had no knowledge of or responsibility for the molestation. B.K. was awarded $8,381,780 in damages against the estate.
Two weeks after trial, B.K. filed her second petition to have Zaret removed as executor. As before, she asserted Zaret wasted estate funds by “unreasonably defending” the civil action and refusing to settle. She also alleged Zaret improperly settled and paid numerous other claims against the estate in full; misappropriated estate funds by charging the estate for her time spent defending the “enabling” claim personally filed against her and by paying an expert who was used to defend both herself and the estate; and, due to her personal animosity toward B.K., willfully wasted and mismanaged the estate to deprive B.K. of needed funds. She also asserted that Zaret might waste additional estate funds on an appeal.
This time the court granted the petition and removed Zaret as executor due to a conflict of interest arising from her status as a defendant in both her individual and representative capacities. The court explained: “the first time we had the motion to remove [Zaret] was right on the eve of trial and I wasn’t as familiar with the case. And as I recall you were in here, Mr. Carcione, trying to have her removed, and the trial was going to start next week. And I said I’m not going to change personal representatives right on the eve of trial. And we left it at that. [¶] And now this time going through this it just appears to me she had a blatant conflict of interest.” The court concluded that “if a person or entity other than Susan Zaret had been the Executrix, the civil matter might very well have settled for a sum substantially less than the verdict of $8,381,780, which was returned by the jury following trial,” and that “it is in the best interests of the Estate at this time that an independent fiduciary be appointed to administer the affairs of the Estate until these proceedings are concluded.” The court declined to authorize the estate to file a notice of appeal from the civil judgment. Zaret appealed the order removing her as executor and filed a notice of appeal on behalf of the estate in the civil action.
On October 2, 2006, the court appointed Paul Barulich as special administrator with general powers of administration. On November 21, 2006, in response to Barulich’s “Ex Parte Order for Instructions Re: Costs and Filing Fees of Appeal and for Instructions as to Motion,” the court ordered that Barulich “is not instructed to pay costs and filing fees of the appeal in the civil matter.” Barulich filed a second ex parte petition seeking authority to obtain trial transcripts and retain appellate counsel to provide him an opinion on the estate’s chances of prevailing in an appeal. The petition stated that two of the three beneficiaries had “admonished” Barulich to pursue the appeal and warned him he would be held responsible if he failed to do so.
Zaret’s appeal from the removal order stayed the operation and effect of the order. (Prob. Code, § 1310, subd. (a).) Subdivision (b) of section 1310 provides: “Notwithstanding that an appeal is taken from the judgment or order, for the purpose of preventing injury or loss to a person or property, the trial court may direct the exercise of the powers of the fiduciary, or may appoint a . . . special administrator, to exercise the powers from time to time, as if no appeal were pending. All acts of the fiduciary pursuant to the directions of the court made under this subdivision are valid, irrespective of the result of the appeal.”
At the hearing on the petition the court commented that “in view of the size of the judgment, the [estate] in all probability is insolvent if that judgment is affirmed. And I’m trying to avoid wasting what’s left in the estate on this ongoing litigation appeals, arguments over compensation and costs and so forth. . . . [¶] . . . [¶] . . . I don’t want to see the special administrator in this situation where he files a notice of appeal with his name as the attorney and then he’s got obligation to prosecute the appeal since that isn’t what he was brought into the case for. [¶] I brought him into the case specifically to try to have an independent, neutral party handle the matters and try to preserve what little is left in this estate, keeping costs and fees to the minimum until we got this resolved. That’s [the] kind of dilemma we’re in.” But the court was also concerned about the special administrator’s potential legal exposure were he to forego an appeal: “On the other hand, I don’t want him in the possible position he’s got possibly out there on a claim of professional negligence for not pursuing an appeal on behalf of the Court. It’s difficult for the trial court simply to say you can’t appeal, I don’t think the appeal is in good faith, or there isn’t any merit in it when the whole purpose of the appeal process is to review the trial court, including an order that I made which can be reviewed.”
Despite concerns about the special administrator’s legal vulnerability, the court ordered the special administrator not to pursue an appeal. Its written order directed that the special administrator “is instructed to not: (1) file a notice of appeal; (2) incur or pay, or authorize the payment of, any expense associated with said appeal, including but not limited to, court costs, transcript costs and/or attorney’s fees; or (3) participate in any manner in said appeal except upon further order of the Court.” It further ordered that “Any claim of professional malfeasance against Paul J. Barulich, Special Administrator, with respect to the aforementioned appeal is barred pursuant to the terms of this order.” Zaret filed a timely appeal from this order as well as the order removing her as executor.
DISCUSSION
I. The Order Removing Zaret as Executor
A. Standards
We review an order removing an executor for abuse of discretion. “ ‘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 court’s action, no judge reasonably could have reached the challenged result.’ ” (Estate of Hammer (1993) 19 Cal.App.4th 1621, 1633-1634.) However, we are also mindful 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 testator’s selection of an executor should not be annulled except on the clear showing that the best interests of the estate require such action.’ ” (Ibid.; Estate of Cole (1966) 240 Cal.App.2d 324, 329.)
B. Analysis
Zaret contends the court abused its discretion because she was chosen by Greenberg to act as executor and there was no good cause for her removal. She denies that there was ever a significant conflict of interest between herself and the estate, and, even if there was once a conflict, it was eliminated by the jury’s verdict that was rendered before the probate court ordered her removed. Finally, she argues the finding that a different executor might have obtained a favorable settlement is unsupported by any evidence. Zaret’s removal turned on the court’s determination that she had a conflict of interest with the estate. We turn to that point first.
Before trial, Zaret’s dual status as executor and an individual defendant in the suit filed by B.K. against the estate raised at least a potential conflict of interest. Before the jury verdict, Zaret arguably had an incentive to reject any settlement offer that may have been more advantageous to the estate than for her personally. It also would have been in her interest as an individual defendant to deflect responsibility in the trial on the molestation claims away from herself and solely onto Greenberg, in contravention of her duties as a fiduciary of the estate. Clearly, then, before the jury rejected B.K.’s “enabling” theory of Zaret’s personal liability, the potential existed for conflict between her own interests and those of the estate.
But the court’s basis for finding Zaret had a conflict after the verdict in her favor is less evident. The jury absolved Zaret of any responsibility for the molestation and the record gives no indication that B.K. would challenge that determination by posttrial motion or on appeal. Concerns about adverse interests affecting Zaret’s settlement and/or trial strategy were therefore no longer an issue, and the court’s order on the post verdict petition finding that the claims against Zaret “placed [her] in a conflicted position” is unsupported by any evidence. B.K. relies on Estate of Hammer, supra, 19 Cal.App.4th at page 1621, in which the court found a conflict of interest because the executor was pursuing a $6 million civil action against the beneficiary in a different forum during the probate proceedings. (Id. at pp. 1641-1642.) “Under the circumstances,” the court wrote, “we question the ability of the beneficiary and the court to maintain any confidence that the executor properly will protect the interests of the estate and the beneficiary, even though the conflict exists as to a matter not directly related to the probate action.” (Ibid.) Although Hammer was arguably analogous here before the verdict was rendered in the molestation case, Hammer is inapposite in light of the jury’s rejection of B.K.’s claims against Zaret. The horse having vanished, there was no reason to lock the barn door.
And, indeed, it seems she has not.
The question, then, is whether the other reasons B.K. cites constitute good and sufficient cause to replace Zaret as executor. They do not. Without any reference to authority, she says that personal animosity between the executor and a creditor/beneficiary is grounds for removal, but if that were sufficient to defeat a testator’s intent and remove a designated executor we imagine that very few executors could survive a challenge by a disgruntled claimant of the estate. B.K.’s claim that Zaret wasted estate funds in “unreasonably defending” the civil action and refusing to settle is unsupported by the record. The probate court reviewed and approved every payment made by the estate for the defense of the B.K. action. As Zaret accurately observes, as executor it was her obligation to defend the estate. “Since it is the statutory obligation of the executor to collect, preserve and protect the assets of the estate until distribution [citations], it is likewise [her] duty to prosecute and defend such suits with respect to claims in favor of or against the estate with a view of marshaling, protecting or conserving such assets.” (Estate of Turino (1970) 8 Cal.App.3d 642, 647.) The molestation suit was a long, bitter and fiercely contested action; that the jury ultimately returned a sizeable verdict for B.K. does not establish, as B.K. suggests, that the result was inevitable, or that Zaret’s choice to defend the estate rather than settle was unreasonable and/or motivated by vindictiveness or animosity towards B.K..
The testimony cited for B.K.’s assertion that Zaret purposely looted the estate through needless litigation merely to spite her does not support it. Asked at deposition whether she stood to gain financially if B.K. were lying about the molestation, Zaret responded: “As I understand your question, if [B.K.] admitted right now that she has been lying I would gain monetarily, as would Jim and [B.K.]. If, however, we have to go to trial and a jury decides that [B.K.] was lying, I believe that at that point the estate would be depleted and no one would get anything.” B.K. says this testimony “made [Zaret’s] intention clear that if [B.K.] pursued her claim through trial, there would be no money left in the Estate for [B.K.] to recover.” Not so. Viewed under the proper standard to support the probate court’s interpretation if possible, this testimony cannot reasonably be understood as anything other than an unremarkable prediction that the costs of trial would likely consume the estate’s remaining assets; it cannot under any standard of review reasonably be interpreted as a promise, threat or statement of intent to bankrupt the estate to keep B.K. from recovering.
B.K.’s remaining allegations of misconduct by Zaret are also unsupported by the record. She claims Zaret wrongfully paid in full a creditor’s claim by the Jewish Federation. The record, however, shows only that Zaret agreed to compromise the claim for whatever amount was shown due on a series of forensic accounts, and that she applied to the probate court for authorization of the settlement. B.K. fails to cite to any indication in the record that this claim was in fact paid, or, if so, that it was paid in full rather than pro rata, as she claims it should have been; nor does she demonstrate that any such payment, assuming it was made, was improper. Her related assertion that Zaret improperly settled claims “with dozens and dozens of other creditors to the Estate” is supported by citation to a schedule showing some $402,000 in numerous disbursements, filed in the probate court with Zaret’s “First Account of Personal Representative.” But she makes absolutely no showing that these payments were in the same class as her own and, therefore, that they should have been paid pro rata rather than in full. There is no sufficient basis for us to conclude there was waste or mismanagement of estate assets.
Zaret maintains these payments were for expenses of administration, not creditor claims, and therefore had priority over B.K.’s claim.
B.K. claims Zaret improperly used estate funds to pay an expert witness in her own defense as well as the estate’s. It is true that the 22-page report prepared by the expert psychologist retained to assist in the estate’s defense, Dr. Richard Perillo, addressed the “enabling” theory as part of a comprehensive analysis of the case; it is also unsurprising, given the interrelated nature of the claims against the estate and Zaret. But there is no evidence that Perillo was retained as part of or did any work on behalf of Zaret individually, rather than the estate. B.K.’s claim that Zaret improperly paid herselfwith estate funds for her personal defense is premised on two entries for time spent meeting with her individual defense attorney in a “Journal of Work, Hours, and Mileage for Greenberg Estate,” submitted with Zaret’s “First Accounting.” The two items represent just four hours. They are two entries out of 12 pages of entries for countless hours of time expended over the course of almost a year. Zaret concedes it was in error. “A probate court should not defeat the will of a testator by removing his chosen executor for light or trivial causes and particularly for matters which are subject to ready adjustment in the settlement of accounts.” (Estate of Cole, supra, 240 Cal.App.2d at p. 332.) No reasonable judge could find such a relatively minor error to be just and sufficient cause to disregard a testator’s intent and remove the testator’s chosen executor.
The conflict of interest cited by the court when it granted the second removal petition could have warranted removing Zaret before trial. But, by the time the second petition was heard, the defense verdict in Zaret’s favor eliminated the basis for that conflict of interest. Zaret no longer has any interest that conflicts with her duties as executor to protect and preserve assets of the estate. As B.K.’s remaining grounds for removing the testator’s chosen executor lack adequate support in the record, the removal order is reversed.
II. The Order Regarding Appellate Costs and Fees
Zaret contends the probate court abused its discretion when it instructed the special administrator not to participate in the appeal of the civil verdict and not to pay or incur costs to proceed with the appeal. Here too, we agree.
The personal representative of an estate is authorized by statute to “[d]efend actions and proceedings against the decedent, the personal representative, or the estate” (§ 9820, subd. (b)) and, although he or she may seek court authorization before doing so, authorization is not required. (§ 9610; see also § 9820, Cal. Law Revision Com. com., [1990 Enactment].) It is the duty of the administrator to take necessary steps to defend the estate assets. (Estate of Turino, supra, 8 Cal.App.3d at p. 647; Chase v. Leiter (1950) 96 Cal.App.2d 439, 447.) Estate of Sidebotham (1956) 138 Cal.App.2d 412 is instructive. The personal representative there petitioned for authority to use estate funds to defend the estate against litigation. The probate court instructed the personal representative not to disburse any of the estate funds in defense of the action. The Court of Appeal reversed. Unless there is no good faith basis for a defense, “it is error by an unlimited and absolute prohibition to deprive the administrator of all use of the funds in his hands for the defense of the action instituted against him.” (Id. at p. 417; see Estate of Denton (1971) 17 Cal.App.3d 1070, 1076.) Moreover, “a representative is not required to advance his own funds for the protection of the assets of the estate, although he is entitled to reimbursement if he does so for a necessary purpose. [Citation.] He must therefore normally use the assets of the estate for such purpose.” (Estate of Sidebotham, supra, at p. 417.)
Here, there was no basis for the probate court to conclude the proposed appeal was improper or in bad faith. Indeed, the very costs requested by the petition, for transcripts and an appellate specialist to evaluate the merits of an appeal, were to permit such an evaluation to be conducted. The probate court itself acknowledged as much when it observed that: “[i]t’s difficult for the trial court simply to say you can’t appeal, I don’t think the appeal is in good faith, or there isn’t any merit in it when the whole purpose of the appeal process is to review the trial court, including an order that I made which can be reviewed. [¶] And so I shouldn’t discuss any opinion on the appeal or lack of merit on the appeal.” (Italics added.) The probate court was reasonably concerned that the cost of the appeal would consume the estate. But, without a basis upon which to assess the prospects for success on appeal or to determine that an appeal would be in bad faith, the order instructing the administrator not to pay any appeal-related costs was an abuse of the court’s discretion.
The order barring future claims against the special administrator for failing to appeal the civil judgment was predicated on the order barring him from processing an appeal, and, accordingly, must also be reversed. As Zaret observes, the special administrator was appointed with general powers to administer the estate, subject to limitations not relevant here, and unless he is relieved of those powers his obligation is to use “ordinary care and diligence” in his management and control of the estate. (§ 9600.) A determination as to whether the administrator’s obligation encompasses pursuing an appeal in the civil action is premature and must await another day.
III. Mootness
B.K. contends the issues raised by this appeal are moot because on January 12, 2007, this court dismissed the appeal in the civil action for failure to timely procure the record. (Cal. Rules of Court, rule 8.140.) However, a dismissal based on such a default may be vacated upon a showing of good cause (Cal. Rules of Court, rules 8.140(b); 8.60(d)), and good cause may be found where the default was occasioned by a representative’s failure to act. (Roberts v. Bank of America (1952) 112 Cal.App.2d 823, 824.) Zaret represents that she intends to pursue such relief from default in this court. While we express no opinion on the merits or outcome of such a motion at this juncture, the possibility of relief alone belies B.K.’s assertion that this appeal is moot because “it is impossible for this Court to render any effectual relief.”
DISPOSITION
The orders are reversed and the matter is remanded to the probate court. Appellant is awarded costs in both appeals.
We concur: McGuiness, P.J., Horner, J.
Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Unless otherwise indicated, all statutory citations are to the Probate Code.