Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, Marjorie Laird Carter, Judge. Super. Ct. No. A213648
Cannata, Ching & O’Toole, Therese Y. Cannata, Michael M. Ching; Snell & Wilmer and Richard A. Derevan for Defendant and Appellant.
Bidna & Keys, Howard M. Bidna and Richard D. Keys for Plaintiff and Respondent.
OPINION
RYLAARSDAM, J.
The trial court awarded over $347,000 to plaintiff Shan Koenig, in her capacity as trustee of two subtrusts created under the Morgridge Family Trust, against defendant Kathryn-Marie Morgridge, in both her individual capacity and as trustee of the Morgridge Intervivos Trust, and against Shan Koenig, as administrator with the will annexed of the Estate of Howard H. Morgridge. Defendant appeals contending plaintiff failed to timely name or serve an indispensable party, and the trial court erred in making the following findings: (1) Howard H. Morgridge (Howard) breached his duties as trustee of the two Family subtrusts; (2) defendant participated in and benefited from Howard’s misfeasance; (3) in its calculation of damages; and (4) in awarding damages against her as trustee of the Morgridge Intervivos Trust. Finding merit in the latter two contentions, we modify the judgment and, as modified, affirm it.
FACTUAL BACKGROUND
Howard H. Morgridge and his first wife, Alice B. Morgridge, created the Morgridge Family Trust (Family trust). During their 46-year marriage, Howard worked as an architect while Alice was a homemaker and raised the couple’s three children. Howard retired in 1992. In 1993, their income slightly exceeded $60,000, consisting primarily of interest on investments, social security payments, and rentals of their Newport Beach home.
Upon Alice’s death in 1993, the Family trust split into three subtrusts: (1) a revocable surviving spouse’s trust (Survivor’s trust); (2) an irrevocable marital qualified terminable interest property trust (Q-Tip trust); and (3) an irrevocable Family Bypass trust (Bypass trust). The Survivor’s trust consisted of Howard’s interest in the couple’s community estate. Alice’s interest in the community estate was allocated to the other two trusts with Howard named as the trustee for each of them.
Under the terms of the Family trust, Howard was entitled to receive the income produced by the Q-Tip and the Bypass trusts for his lifetime. The couple’s three children, Shan Koenig (plaintiff), Sarah Morgridge, and Susan Morgridge Forkner, were the residuary beneficiaries of all three trusts. Both the Q-tip and Bypass trusts contained the following clause: “Principal – Ascertainable Standard: If the trustee considers the income insufficient, the trustee shall pay to or for the principal beneficiary as much of the principal as is necessary for the principal beneficiary’s health, education, or support to maintain the principal beneficiary’s accustomed manner of living.”
When Alice died, the couple’s estate consisted primarily of their equity in the Newport Beach residence. Howard sold it in May 1995 and used the net sale proceeds to fund the three trusts, establishing accounts for them with Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch).
In November 1995, Howard married defendant, a widow living on social security who owned a home in Newport Beach. Before the marriage, Howard and defendant executed a premarital agreement that provided “all property owned by either of them at the time of the marriage shall remain thereafter the separate property of the party who owns the property,” and “all additional property . . . either of them acquires after marriage shall be the separate property of the acquiring party, and not community estate property.”
Howard and defendant attached financial statements to the agreement detailing each person’s assets and liabilities. Howard’s financial statement indicated the Survivor’s trust had a balance of approximately $150,200, the Q-Tip trust had a balance of approximately $67,500, and the Bypass trust had a balance of approximately $405,750. He owned approximately $156,000 in other assets. His liabilities amounted to over $124,500, including nearly $71,000 in credit card debt. Before the marriage, Howard showed the premarital agreement to his children and told them he planned to live on the interest generated by the trusts plus his social security payments.
In September 1996, Howard created the Morgridge Intervivos Trust (Intervivos trust). It consisted of the assets then contained in the Survivor’s trust and named Howard and defendant as the trustees. The trust instrument provided Howard would receive the income generated by the assets during his lifetime and, upon his death, defendant was “entitled to receive all trust income,” and granted her “the absolute power to invade all or any portion of the trust principal . . . for her own use and benefit.”
The same month, Howard withdrew over $45,000 from the Bypass trust and deposited the money into a joint bank account he had with defendant. Between late 1996 and August 2000, Howard made eight more withdrawals of principal from either the Bypass or the Q-Tip trusts, each time depositing the money into the joint bank account. The withdrawals from the Bypass trust exceeded $228,000, while the withdrawals from the Q-Tip trust totaled nearly $29,000. The trial court found that, Howard created the Intervivos trust, he and defendant “made no principal withdrawals from the account[] . . . ” during Howard’s lifetime.
A certified public accountant retained by plaintiff concluded that between 1996 and 2000, Howard and defendant had cash receipts of at least $71,000 each year, enough to maintain the standard of living that existed before their marriage. However, their annual expenses exceeded this income.
Howard died in July 2001. When plaintiff and her sisters received the Merrill Lynch documents for the Q-Tip and Bypass trusts, defendant commented that, “It’s too bad about the stock market losses.” Subsequently, plaintiff learned from Merrill Lynch that the accounts for these trusts had not suffered losses from poor investments.
PROCEDURAL BACKGROUND
Plaintiff commenced a creditor’s proceeding by filing a petition for the probate of Howard’s will. (Super. Ct. Orange County, No. A213125.) The court appointed her as administrator of the estate in June 2002. As successor trustee under the Q-Tip and Bypass trusts, plaintiff also filed a creditor’s claim against Howard’s estate. The court entered an order deeming the claim rejected on October 30. Plaintiff, as the successor trustee under the Q-Tip and Bypass trusts, filed a complaint on the rejected creditor’s claim, naming herself in her capacity as personal representative of Howard’s estate, as the defendant on January 27, 2003. (Super. Ct. Orange County, No. 03CC02134.) Under Probate Code section 9252, subdivision (c), plaintiff served the complaint on the court. It then issued an order to show cause for appointment of an attorney to represent the estate and appointed Sharon Grier as its attorney.
In May 2002, plaintiff, in her capacity as successor trustee of the Q-Tip and Bypass trusts, also filed a petition for a money judgment and imposition of a constructive trust against defendant, both individually and in her capacity as trustee of the Intervivos trust. (No. A213648.) The caption also names “the Personal Representative of the Estate of Howard H. Morgridge.” The petition sought “a money judgment for damages caused by the breach of trust of Howard against his estate.” (Capitalization omitted.)
Defendant successfully demurred to the petition in case number A213648. Plaintiff’s amended petition named only defendant, individually and as trustee of the Intervivos trust. In February 2003, the court sustained defendant’s demurrer to this pleading with leave to amend, in part noting plaintiff had failed to name the estate’s representative as a party. Thereafter, plaintiff filed a second amended petition against defendant, in both her individual and representative capacities, and against herself as personal representative of Howard’s estate.
A stipulation was subsequently prepared and signed by all counsel, including Grier, agreeing to consolidate case numbers A213648 and 03CC02134 “for case management purposes only” and assign the matters to the probate department. It noted, “[t]he core issues in both cases are similar – did Howard Morgridge breach fiduciary duties as trustee of the [Morgridge Family] Trust by invading [the] principal.”
Case number A213648 proceeded to trial. The trial court issued a minute order ruling for plaintiff.
At defendant’s request, the court issued a statement of decision, finding Howard breached his fiduciary duty as trustee of the Q-Tip and Bypass trusts because, although having “more than adequate income [and assets] to support his accustomed manner of living,” he maintained a “lifestyle” with defendant that “was extravagant” and “beyond their means.”
The court also found defendant participated in and benefited from Howard’s breach, because she “knew about the restrictions on the trusts and that principal was being withdrawn in violation of the[ir] terms”; she influenced Howard to alter his manner of maintaining his financial records; and while the couple “did everything together” with “Howard pa[ying] for everything,” the couple “carefully guarded the funds in the . . . Intervivos Trust” and “hoard[ed]” an inheritance defendant had received “in a segregated account.” In addition, it found defendant benefited from the Q-Tip and Bypass trust withdrawals by Howard’s use of the funds deposited into their joint bank account to make mortgage payments on her home and pay for improvements to it, as well as pay their living expenses.
The court subsequently entered judgment awarding plaintiff $347,191.42, plus prejudgment interest, against defendant in both her individual and representative capacities and against plaintiff in her capacity as personal representative of the estate.
DISCUSSION
1. The Indispensable Party Claim
Defendant contends the “judgment against the [e]state is void” because the probate court found Howard’s estate was an indispensable party in case number A213648 and, although named in the second amended petition, the estate was “never served” and “never generally appeared” in the action. Alternately, she claims the action against the estate is time barred because plaintiff failed to name it as a party in the probate proceeding within three months of the trial court’s rejection of the claim. In addition, since her liability is merely derivative in nature, defendant argues, the judgment against her must be set aside as well.
These arguments lack merit. Because this matter involved a creditor’s estate, plaintiff appeared in dual capacities: as successor trustee of the subtrusts created under the Family trust, and as the personal representative of her father’s estate. As trustee, she filed a creditor’s claim with the estate. Recognizing plaintiff’s dual status, the probate court concluded resolution of the claim was governed by Probate Code section 9252. It declares, “(a) If the personal representative . . . is a creditor of the decedent, the clerk shall present the claim to the court or judge for approval or rejection. . . . [¶] . . . [¶] (c) If the court or judge rejects the claim, the personal representative or attorney may bring an action against the estate. Summons shall be served on the judge, who shall appoint an attorney at the expense of the estate to defend the action.”
That is what occurred here. Within three months after the trial court deemed plaintiff’s creditor’s claim to be rejected, plaintiff timely filed a civil action against the estate and served the complaint on the trial court. (Prob. Code, § 9353, subd. (a)(1).) In turn, the court appointed Sharon Grier to represent the estate, and she acted as such throughout the remainder of this litigation. Contrary to defendant’s assertion, Grier’s participation, in particular her execution of the stipulation consolidating the civil action and probate proceeding and assigning the entire litigation to the probate court, amounted to a general appearance on the estate’s behalf. (General Ins. Co. v. Superior Court (1975) 15 Cal.3d 449, 453 [“A written stipulation between attorneys recognizing jurisdiction of the court over the parties constitutes a general appearance”].)
Defendant contends the filing of the civil action did not stop the running of the three-month statute of limitations. She notes plaintiff failed to name the estate as a party to the petition filed in case number A213648 until more than three months after the trial court’s October 2002 rejection of the claim and it was that petition, not the civil action, on which the parties proceeded to trial. She also cites the portion of the parties’ consolidation stipulation that declared it was “for case management purposes only.”
The filing of the complaint in the civil action satisfied Probate Code section 9353, subdivision (a)’s requirement that “the creditor commence an action on the claim.” (Italics added.) Defendant does not explain how the subsequent consolidation “for case management purposes only” precludes a conclusion plaintiff timely prosecuted a claim against Howard’s estate. Finally, the parties consolidated the two actions because they involved a common question of fact, whether Howard had violated his fiduciary duties by withdrawing principal from the Bypass and Q-Tip trusts.
Consequently, we conclude defendant’s procedural claims lack merit.
2. Howard’s Breach of Fiduciary Duty
a. Introduction
The Bypass and Q-tip trusts provided that “[i]f the trustee considers the income insufficient, the trustee shall pay to or for the principal beneficiary as much of the principal as is necessary for the principal beneficiary’s health, education, or support to maintain the principal beneficiary’s accustomed manner of living.”
Defendant attacks the conclusion Howard breached his fiduciary duty as trustee of the Q-Tip and Bypass trusts by withdrawing funds from them. First, she claims the court’s finding “Howard was permitted to invade [the] principal of the . . . Trust[s] only in the case of actual need” was erroneously “premised on a nonexistent exhaustion [of his other assets] theory.” Second, she disputes its “finding . . . Howard made excessive distributions from the Q-Tip and Bypass trusts . . . .” Finally, she cites the Family trust’s exculpatory clauses to defeat plaintiff’s case.
b. The Trustee’s Discretion to Invade the Principal
“Except as provided in Section 16081, a discretionary power conferred upon a trustee is not left to the trustee’s arbitrary discretion, but shall be exercised reasonably.” (Prob. Code, § 16080; see also Estate of Nicholas (1986) 177 Cal.App.3d 1071, 1087.) “[T]he trust must be administered in accordance with the intentions of the settlor. The rule is well stated . . . as follows: ‘The extent of the discretion conferred upon the trustees depends primarily upon the manifestation of intention of the settlor. . . . The mere fact that the trustee is given discretion does not authorize him to act beyond the bounds of a reasonable judgment.’ Even [when] it is provided that the trustees shall have absolute or unlimited or uncontrolled discretion, the court may interpose if the trustee does not act ‘in a state of mind in which it was contemplated by the settlor that he would act.’ [Citation.]” (Estate of Ferrall (1953) 41 Cal.2d 166, 176-177.)
The question of how much money a beneficiary needs to maintain his or her accustomed manner of living generally presents a factual question. (Smith v. Smith (1942) 51 Cal.App.2d 29, 38 [issue of beneficiary’s reasonable needs “is one peculiarly proper, primarily at least, for the determination of the trial court, after hearing evidence as to the character, circumstances and condition of the party,” and appellate court will affirm trial court’s decision if its “finding is not wanting in evidentiary support, and that the . . . amount fixed is not unreasonable”].) “No set sum can be fixed to apply to all cases. The amount varies according to the station in life of the beneficiary. . . . Evidence as to cost of living, wages of servants, medical expense and reasonable entertainment, and other reasonably necessary expenses, fixes the amount.” (Canfield v. Security-First Nat. Bank (1939) 13 Cal.2d 1, 21.)
The general principles of appellate review apply in this case. The trial court’s judgment “is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. [Citations.]” (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) In reviewing its factual findings, “‘the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached . . . . When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court.’” (Estate of Bristol (1943) 23 Cal.2d 221, 223, italics omitted.) If there is “any reasonable doubt as to the sufficiency of the evidence to sustain a finding,” we “resolve that doubt in favor of the finding . . . .” (Id. at pp. 223-224.)
The evidence supports the trial court’s finding Howard had both income and assets sufficient to maintain his accustomed manner of living without invading the Bypass and Q-tip trusts, but that he and defendant lived an “extravagant lifestyle.” While “the concept of . . . needs is a fluid one” that “varies with and is to be derived from context” (Estate of Nunn (1974) 10 Cal.3d 799, 807), it does “not mean . . . the needs of the beneficiary are to be measured by his extravagance or his ability to spend.” (Canfield v. Security-First Nat. Bank, supra, 13 Cal.2d at p. 21.)
To support its findings, the trial court relied on the opinions expressed by plaintiff’s accounting expert concerning Howard’s accustomed manner of living and the adequacy of his income. Defendant’s attack on the credibility of this witness’s conclusions is unavailing. “While an expert is allowed to give his opinion, . . . when given, [it] is neither more nor less than evidence which is to be weighed and considered like any other evidence in the case, and a conflict between the opinions of two experts constitutes a conflict in the evidence.” (Southern California Edison Co. v. Gemmill (1938) 30 Cal.App.2d 23, 27.) Unless an expert’s “opinion is wholly and entirely based on incompetent material, the weight to be given such opinion is a question for the trier of fact . . . .” (People v. Rice (1960) 185 Cal.App.2d 207, 213.)
Defendant argues the trial court erred in ruling Howard needed to exhaust his own funds before invading the principal of the Q-Tip and Bypass trusts. The statement of decision does not contain such an assertion. The trial court merely found “[t]he evidence demonstrated . . . Howard had more than adequate income to support his accustomed manner of living,” citing the fact he “had over $100[],000 in cash of his own money at all times . . . .” In so finding, the court applied the general rule that “[a] trustee should consider a beneficiary’s other resources before making a distribution of principal, unless the trust instrument itself shows another intent. [Citation.]” (Thomas v. Gustafson (2006) 141 Cal.App.4th 34, 41; see also Estate of Ferrall, supra, 41 Cal.2d at p. 176 [“‘unless the language of the trust instrument affirmatively reveals an intention to make a gift of the stated benefaction regardless of the beneficiary’s other means, the trustee should consider such other means in exercising his discretion to disburse the principal’”]; Estate of Jones (1977) 68 Cal.App.3d 274, 279; Estate of Miller (1964) 230 Cal.App.2d 888, 910-913.)
Defendant also claims the trial court erred in failing to consider her needs in determining Howard’s “accustomed mode of living.” But the language of the trusts limited invasion of the principal as “necessary for the principal beneficiary’s health, education, or support to maintain the principal beneficiary’s accustomed manner of living.” (Italics added.) The trial court properly limited its focus to Howard’s needs. (Estate of Nunn, supra, 10 Cal.3d at p. 807 [such a “formulation limited the power to invade . . . and precluded . . . invasions for gifts to others”].)
Defendant has failed to establish the trial court’s findings on Howard’s needs and income is lacking in evidentiary support.
c. The Family Trust’s Exculpatory Clause
Paragraph 8.19 of the Family trust declared, “No trustee shall be liable to any person interested in this trust for any act or default unless it results from the trustee’s bad faith, willful misconduct, or gross negligence.” It also permitted a trustee to self-deal with the trust assets. (Para. 8.22.)
Defendant contends the judgment must be reversed because “there is no evidence of bad faith, willful misconduct, or gross negligence” by Howard and, since he held dual roles as the trustee and primary beneficiary of the Q-Tip and Bypass trusts, he “did not ‘profit’ as trustee in the sense used in the statute.” These arguments lack merit.
A trustee has a duty of loyalty to all of the beneficiaries of a trust. (Prob. Code, §§ 16002 & 16003.) When “[a] trustee . . . is also a beneficiary, and . . . given the discretion to invade the trust principal, [he or she] has a fiduciary obligation to the remaindermen to confine his demands within reasonable limits. [Citation.]” (Ammco Ornamental Iron, Inc. v. Wing (1994) 26 Cal.App.4th 409, 419.) “‘It is against public policy to permit the settlor to relieve the trustee of all accountability to the courts.’ [Citation.]” (Estate of Ferrall, supra, 41 Cal.2d at p. 174.) Thus, while “the trustee can be relieved of liability for breach of trust by provisions in the trust instrument” (Prob. Code, § 16461, subd. (a)), such “[a] provision . . . is not effective to relieve the trustee of liability (1) for breach of trust committed intentionally, with gross negligence, in bad faith, or with reckless indifference to the interest of the beneficiary, or (2) for any profit that the trustee derives from a breach of trust.” (Prob. Code, § 16461, subd. (b).) Thus, exculpatory clauses in trust instruments are strictly construed. (Estate of Collins (1977) 72 Cal.App.3d 663, 673.)
Contrary to defendant’s assertion, the evidence supports a conclusion Howard’s conduct precludes reliance on the exculpatory clauses to shield him from liability for his invasions of the Q-Tip and Bypass trusts. Howard and Alice created the Family trust. The assets used to fund the Q-Tip and Bypass trusts consisted of Alice’s interest in the couple’s community estate. Both the terms and the structure of the Family trust limited the surviving spouse’s discretion to make withdrawals of trust principal from these subtrusts. Alice clearly intended that, if she died before Howard, the income produced by the Q-Tip and Bypass trusts would be available for Howard’s use during his lifetime, with the added ability to invade the principal for limited purposes, if necessary. But she also intended to leave the balance of the trusts’ assets to the couple’s three daughters.
In addition, Howard and Alice established the Family trust in light of the federal estate tax laws. Paragraphs 5.4 and 6.4 were inserted in the Q-Tip and Bypass subtrusts to preclude a finding Howard held a power of appointment over them, a finding that would render their assets part of his estate for tax purposes. (See Sowell’s Estate v. C.I.R. (10th Cir. 1983) 708 F.2d 1564, 1565-1566; Prob. Code, § 16081, subd. (c) [“Unless a settlor or a testator clearly indicates that a broader power is intended . . ., a person who is a beneficiary of a trust that permits the person, as trustee . . ., to make discretionary distributions of income or principal to or for the benefit of himself or herself may exercise that power in his or her favor only for his or her health, education, support, or maintenance within the meaning of Sections 2041 and 2514 of the Internal Revenue Code”].)
Before marrying defendant, Howard told plaintiff that he intended to live on his social security payments and the income produced by the trusts. Plaintiff’s evidence supports a conclusion these income sources would have been sufficient to maintain his accustomed manner of living. But the number and extent of his subsequent withdrawals of principal from the Q-Tip and Bypass trusts were extensive, and there was no showing these funds were employed for any specific purpose other than to maintain Howard and defendant’s “extravagant” lifestyle. Under defendant’s construction of the exculpatory clauses, Howard’s obligations to the residuary beneficiaries could be entirely eliminated, thereby defeating both Alice’s testamentary intent and reducing the ascertainable standard to mere surplusage.
The evidence also supports a finding Howard profited from the breach of his fiduciary duty. He used the unauthorized withdrawals to maintain an “extravagant” living standard without making withdrawals from the Intervivos trust which consisted of his share of the community estate and over which he had sole distributive authority. Defendant’s reliance on Copley v. Copley (1981) 126 Cal.App.3d 248 to support a contrary conclusion is unavailing. There the court found a marital trust trustee-beneficiary’s acquisition of an advantage over the beneficiaries of a nonmarital trust through her use of the nonmarital trust’s assets to pay taxes, administrative costs, and debts did not violate her duties as trustee because “the trust directed payment of the[se] . . . expenses . . . from the nonmarital trust . . . . [¶] . . . [¶] The conclusion necessarily follows . . . in carrying out this direction of the trust the trustees committed no breach of the duty of loyalty to the beneficiaries and no violation of the prohibition against self-dealing in the sense of profiting or obtaining an advantage.” (Id. at p. 279.) In withdrawing principal from the Q-tip and Bypass trusts, Howard was exercising a discretionary power, not carrying out a direction of the trusts.
d. The Sufficiency of the Trial Court’s Statement of Decision
Defendant claims she requested findings on the effect of the Family trust’s exculpatory provisions, and since the trial court’s statement of decision failed to include findings on this issue, judgment must be reversed. We conclude defendant waived this contention by failing to timely object to the trial court’s final statement of decision and that, in any event, the failure to make a finding amounted to harmless error.
Defendant’s request for a statement of decision included the following controverted issues: “Whether the ‘Exculpatory Clause,’ as set forth in section 8.19 of [the] Trust, operate[d] . . . to bar [plaintiff’s] claim for breach of trust against . . . Howard”; and “[w]hether Howard . . . was grossly negligent or otherwise acted in bad faith in making any withdrawals from the By[]Pass and Q-Tip trust[s] . . . .” In November 2004, each party submitted a proposed statement of decision, with defendant’s proposed statement noting the trial court’s tentative ruling had failed to address the controverted issues quoted above.
Plaintiff’s proposed statement addressed the exculpatory clause, stating it did “not provide a defense to Howard . . . because [he] . . . profited from the breaches of trust,” and his “actions constitute bad faith and willful misconduct.” Defendant’s objections to plaintiff’s proposed statement conceded it “addresse[d] . . . the effect of the exculpatory clause,” but complained that it “omit[ted any reference” to “[w]hether Howard . . . was grossly negligent or otherwise acted in bad faith in making withdrawals from the By[]Pass and Q-Tip trust[s] . . . .”
In April 2005, the trial court signed and filed its own statement of decision omitting any express reference to either of the foregoing controverted issues. Several months later, the court entered judgment.
Code of Civil Procedure section 632 declares “upon the trial of a question of fact . . . [t]he court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial. . . . The request . . . shall specify those controverted issues as to which the party is requesting a statement of decision.” Under Code of Civil Procedure section 634, “When a statement of decision does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court . . . prior to entry of judgment . . ., it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue.”
Defendant’s request for a statement of decision sought findings on the effect of the Family trust’s exculpatory clause and whether Howard acted in a manner that would subject him to liability for the Q-Tip and Bypass trust withdrawals. Plaintiff’s proposed statement addressed the first issue but not the second. The statement of decision fails to expressly address these questions. While defendant objected to plaintiff’s failure to address Howard’s gross negligence or bad faith in the proposed statement, the record does not reflect that when the trial court failed to address either issue in the final statement of decision, defendant asserted an objection to it.
“[Code of Civil Procedure] Sections 632 and 634 . . . set forth the means by which to avoid application of the[] inferences in favor of the judgment. . . . [U]nder section 634, the party must state any objection to the statement in order to avoid an implied finding on appeal in favor of the prevailing party. . . . The clear implication of this provision . . . is that if a party does not bring such deficiencies to the trial court’s attention, that party waives the right to claim on appeal that the statement was deficient in these regards, and hence the appellate court will imply findings to support the judgment.” (In re Marriage of Arceneaux, supra, 51 Cal.3d at pp. 1133-1134, fns. omitted.) Thus, if a “party challenging the statement of decision fails to bring omissions or ambiguities in it to the trial court’s attention, then, under . . . section 634, the appellate court will infer the trial court made implied factual findings favorable to the prevailing party on all issues necessary to support the judgment, including the omitted or ambiguously resolved issues” and “reviews the implied factual findings under the substantial evidence standard. [Citations.]” (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 59-60.) Because of defendant’s failure to timely object to the trial court’s statement of decision, no basis exists to apply section 634’s limitation on the general principles of appellate review.
But even if defendant’s proposed statement of decision and her objections to plaintiff’s proposed statement preserved this issue for review, we conclude any error resulting from the trial court’s failure to make findings constituted harmless error. “Failure to make a finding . . . is normally reversible error unless this court concludes that there is no substantial evidence to support the position of the appealing party. [Citations.]” (Parker v. Contractors State License Bd. (1986) 187 Cal.App.3d 205, 211; see also Newby v. Alto Riviera Apartments (1976) 60 Cal.App.3d 288, 304 [“An appellant suffers no prejudice from the failure to make a finding on a material issue if the evidence would have compelled a finding adverse to him”] disapproved on another ground in Marina Point Ltd. v. Wolfson (1982) 30 Cal.3d 721, 740, fn. 9.)
Howard participated in creating the Family trust. He knew of its limitations on the surviving spouse’s ability to withdraw principal from the Q-Tip and Bypass subtrusts. He told plaintiff and her sisters that he intended to live on the trust income and social security benefits. Thus, given the number and amounts of withdrawals Howard made without any indication he used the funds for a purpose other than to maintain an extravagant lifestyle and without making similar withdrawals from the Intervivos trust, we conclude no substantial evidence exists to support a conclusion Howard acted other than intentionally and for his own benefit without consideration for the interests of the Family trust’s residuary beneficiaries.
3. Defendant’s Liability for the Breach of Trust
Defendant also contends the trial court erred in finding her liable for Howard’s breach of the trusts. Claiming “[t]ort liability arising from a conspiracy presumes that the conspirator is legally capable of committing the tort, that he owes a duty to the plaintiff recognized by law[,] and [that he] is potentially subject to liability for the breach of the duty,” she concludes that since she “owed no duty to [plaintiff] concerning the trust, she cannot be liable for any . . . breach as a matter of law.”
“If a trustee commits a breach of trust, . . . a beneficiary . . . may commence a proceeding for any of the following purposes that is appropriate: [¶] . . . [¶] . . . to trace trust property that has been wrongfully disposed of and recover the property or its proceeds.” (Prob. Code, § 16420, subd. (a)(9).) In addition, “[t]he provision of remedies for breach of trust in subdivision (a) does not prevent resort to any other appropriate remedy provided by statute or the common law.” (Prob. Code, § 16420, subd. (b).) Case law recognizes that “when the claim being asserted rests in whole or in part on alleged breaches of trust by the trustee, a beneficiary has standing to pursue such a claim against either (1) the trustee directly, (2) the trustee and third parties participating in or benefiting from his, her or its breach of trust, or (3) such third parties alone.” (Harnedy v. Whitty (2003) 110 Cal.App.4th 1333, 1341-1342; see also Wolf v. Mitchell, Silberberg & Knupp (1999) 76 Cal.App.4th 1030, 1037-1038; Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 427-428; Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1103.)
Defendant claims she cannot be held liable on a conspiracy theory because she owed no duty to plaintiff and her sisters. (See Everest Investors 8 v. Whitehall Real Estate Limited Partnership XI (2002) 100 Cal.App.4th 1102, 1106.) But plaintiff did not allege defendant was liable under a conspiracy theory. The amended petition alleged defendant was liable for Howard’s breach of trust because “she actively participated with [Howard] in that breach of trust for her own financial advantage and/or she received and retained trust property from [Howard] in knowing breach of trust.”
Defendant also contends she did not knowingly participate in Howard’s breach of trust. (See Prob. Code, § 18100, subd. (b) [a third person acting “in good faith . . . for a valuable consideration and without actual knowledge that the trustee is exceeding . . . or improperly exercising” his powers “is fully protected in dealing with or assisting the trustee”]; Vournas v. Fidelity Nat. Tit. Ins. Co. (1999) 73 Cal.App.4th 668, 673-674.) But this issue presented a question of fact, which the trial court resolved against her. Merely citing the evidence favorable to her cause does not support a reversal of the judgment on this ground. The trial court did not err in finding defendant liable for breaching the terms of the Q-Tip and Bypass trusts.
4. The Judgment
a. Introduction
The judgment declared plaintiff “shall have and recover . . . against [both defendant], individually and in her capacity as Successor Trustee of the Morgridge Intervivos Trust . . ., and Shan Koenig, as Administrator with Will Annexed of the Estate of Howard H. Morgridge, jointly and severally” “[t]he principal sum of $347,191.42” plus costs and attorney fees. It also awarded prejudgment interest on 10 separate amounts of money. The first nine categories consist of the sums Howard withdrew from the Q-Tip and Bypass trusts between September 1996 and August 2000. The tenth category, totaling $90,248.42, constitutes the balance of the Intervivos trust on the date of Howard’s death, less his final expenses. The judgment also “ordered defendant “individually and in her capacity as Successor Trustee of the . . . Intervivos Trust . . . to return to [plaintiff] the sums awarded . . . above[] forthwith.”
Defendant asserts several arguments concerning the judgment entered by the trial court. We conclude some of these claims have merit.
b. Failure to Consider Offsets
First, defendant argues the trial court erred in failing to award her offsets against the judgment for Howard’s “preexisting debt . . . incurred during his [m]arriage to Alice” (italics omitted) and “$123,845 in personal effects” plaintiff had “received . . . from the Intervivos trust . . . .” Defendant had the burden of proof on these claims. (Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061, 1077.)
As for Howard’s preexisting debts, defendant cites no authority for the proposition she should receive a credit for this sum against the wrongful withdrawals from the Q-Tip and Bypass trusts. The premarital agreement declared the property owned by Howard and defendant before marriage “remain[ed] . . . the separate property of the party who own[ed]” it, and any “additional property . . . acquire[d] after marriage [was deemed] the separate property of the acquiring party . . . .” Thus, defendant’s assets were not liable for Howard’s preexisting debts. (Fam. Code, §§ 911, subd. (a), 913, subd. (b)(1).) The terms of the Intervivos trust did not alter this result. That instrument gave defendant “the absolute discretion” to “refuse to make payment of . . . any portion of [Howard’s] debts that were in existence at the time of his marriage to” her, and also “direct[ed]” Howard’s “creditors . . . to look elsewhere to sources outside of this trust for . . . payment of the remaining unpaid . . . indebtedness.”
Defendant’s personal effects offset claim is based upon a misstatement of the record. The personal effects in question consisted of a time share, artwork, and household furnishings that Howard owned when he married defendant. As noted, the premarital agreement declared these assets remained Howard’s separate property. Howard funded the Intervivos trust with the monies held in the Survivor’s trust. Thus, contrary to defendant’s assertion, the personal effects were not part of the Intervivos trust. Defendant’s subsequent assignment of Howard’s personal effects to plaintiff did not entitle her to an offset for the value of these assets.
c. The Scope of the Judgment
Defendant also claims “an award of the . . . sum[s] withdrawn from the Bypass and Q-Tip [trusts] is error . . . absent a judgment against Howard.” This argument lacks merit because the judgment is against both defendant and Howard’s estate.
d. The Constructive Trust and Recovery Against the Intervivos Trust
Finally, defendant contends the judgment is invalid to the extent it effectively imposes a constructive trust and awards plaintiff recovery of the assets in the Intervivos trust. We agree with these claims.
Under Probate Code section 16440, subdivision (a), “If the trustee commits a breach of trust, the trustee is chargeable with any of the following that is appropriate under the circumstances: [¶] (1) Any loss or depreciation in value of the trust estate resulting from the breach of trust, with interest. [¶] (2) Any profit made by the trustee through the breach of trust, with interest. [¶] (3) Any profit that would have accrued to the trust estate if the loss of profit is the result of the breach of trust.” The evidence established Howard, with defendant’s knowing participation, withdrew over $256,000 in funds from the Q-Tip and Bypass trusts in violation of the terms of those subtrusts. Plaintiff was entitled to recover the amount of these withdrawals plus interest on each withdrawal from the date it occurred.
Plaintiff contends the judgment does not expressly impose a constructive trust. While true, by awarding plaintiff recovery of the value of the Intervivos trust’s assets on the date of Howard’s death, imposing judgment on defendant as trustee of that trust, and ordering her “to return to [plaintiff] the sums awarded,” the effect of the judgment was to impose a constructive trust.
As defendant argues, imposition of a constructive trust in this case was error because plaintiff failed to trace the monies Howard withdrew from the trusts to the Intervivos trust. “[A] trust will not be created by judicial decree when there is no property upon which the trust can be impressed, that, when ‘the subject matter of the trust was money, the plaintiff’s right to an adjudication of ownership depends upon his ability to identify the money as a particular fund or to trace it into specific property.’ [Citations.]” (Corely v. Hennessy (1943) 58 Cal.App.2d 883, 885; see also Estate of Arms (1921) 186 Cal. 554, 561-562.) In its statement of decision, the trial court expressly found Howard’s withdrawals from the Q-Tip and Bypass trusts “were deposited into a joint checking account” he maintained with defendant, not the Intervivos trust. But plaintiff did not attempt to trace the wrongful withdrawals to the joint checking account.
The assets in the Intervivos trust were derived from the Survivor’s trust, which consisted of Howard’s portion of community estate under the Family trust. These funds belonged to Howard and he was entitled to change the distribution of them, which he did by using them to fund the Intervivos trust and grant defendant the income from it during her lifetime. Since none of the wrongful withdrawals from the Q-Tip and Bypass trusts were traced to the Intervivos trust, plaintiff was not entitled to recover the assets in it. As a result defendant is correct in asserting plaintiff “is not entitled to the . . . proceeds of the [Intervivos] trust . . . .”
DISPOSITION
The judgment is modified to eliminate recovery against appellant in her capacity as successor trustee of the Morgridge Intervivos Trust Agreement dated 9-13-96, and to reduce the damage award to $256,944.08 plus prejudgment interest on the sums listed in paragraph 1.b. i. through ix. of the judgment. As so modified, the judgment is affirmed. The parties shall bear their own costs on appeal.
WE CONCUR:
SILLS, P. J., BEDSWORTH, J.