Opinion
F050313
6-1-2007
Estate of CREIGHTON W. BROWER, Deceased. LIBBY S. POMEROY, Plaintiff and Appellant, v. JOHN C. BETTENCOURT as Trustee etc., et al., Objectors and Respondents.
Law Offices of Thomas E. Niederreuther and Thomas E. Niederreuther for Plaintiff and Appellant. Damrell, Nelson, Schrimp, Pallios, Pacher & Silva, Darrell F. Champion, James A. Oliveira and Luis O. Pérez for Objectors and Respondents John C. Bettencourt and Terrance P. Withrow. Gianelli & Associates and Nini T. Lee for Objector and Respondent Teri A. Brower.
NOT TO BE PUBLISHED
The appellant, Libby S. Pomeroy, is a remainder beneficiary of a trust created by her father and his wife, Creighton W. Brower and Teri Alice Brower, upon the death of Creighton Brower in 2000. Teri Brower is the income beneficiary of the trust during her lifetime.
This appeal concerns an estimated tax payment made by Creighton Brower shortly before his death. He made the payment from a joint checking account he maintained with his wife, but it was to be applied toward a tax liability arising from his separate property interest in a closely held corporation. When a portion of the payment was refunded after Creightons death, the trustees of the trust petitioned the probate court for instructions on how to allocate the refund as between the trust and Teri Brower. The court tentatively ruled the entire refund belonged to Teri Brower as Creightons surviving spouse. But Pomeroy, in a belated objection to the proposed ruling, contended the refund should be divided instead between Teri and the trust according to a pro rata allocation established by an agreement settling Creightons estate. The court, following a hearing, adopted this latter view.
We will sometimes refer to Creighton and Teri Brower by their first names. We do this for the sake of clarity and brevity only, and mean no disrespect.
Pomeroy then filed a motion to recover her costs and attorney fees, together with prejudgment interest, under the "common fund" doctrine, on the theory her intervention had created or preserved a common fund for the benefit of all the remainder beneficiaries. Both the trustees and Teri Brower opposed the motion. The court denied it, and Pomeroy has appealed. We will reverse the courts order insofar as it finds Pomeroys efforts did not benefit the remainder beneficiaries.
FACTS AND PROCEEDINGS
Sometime in the late 1960s, several years before he was married to Teri Brower, Creighton Brower founded C.W. Brower, Inc., a company that eventually would come to own 10 "mini-stores" and a warehouse. Creighton originally was the sole shareholder in Brower, Inc., but he would later give some of his shares to others as gifts. At the time of his death on October 29, 2000, he owned 488 of the 700 outstanding shares.
On June 23, 1995, the Browers created the Creighton W. Brower and Teri Alice Brower Revocable Trust. The trust agreement, as later amended, provided among other things that, upon the death of the first of them to die, certain specified distributions were to be made and then the remainder of the trust estate (including any additions made as a result of the deceased trustors death) were to be used to establish four separate, smaller trusts. Teri Brower would be the income beneficiary of at least some of these trusts for the rest of her life, and Libby Pomeroy would be one of several remainder beneficiaries. It appears the present dispute arose sometime after the settlement of Creightons estate but before the creation of these four new trusts.
As part of the settlement of Creightons estate, 349 of his 488 shares of Brower, Inc. (71.52 percent) were determined to belong to the trust, and the remaining 139 shares (28.48 percent) were determined to belong to Teri Brower individually.
Brower, Inc. is a subchapter S corporation, meaning that its shareholders must pay income taxes on their allocable shares of the corporations income, regardless of whether the income actually is distributed to them. (See Estate of Thomas (2004) 124 Cal.App.4th 711, 716.) It was Creighton Browers practice to cause Brower, Inc. to pay out dividends in an amount sufficient only to pay the estimated tax liability on this imputed income, and to reinvest any remaining dividends in the corporation. As he did in the present case, he would deposit the dividend payments in a joint checking account he maintained with his wife, and then write a check from that account for the estimated tax.
Following Creightons death, nearly $100,000 from his last estimated tax payment was refunded to him. A question then arose about how this money should be allocated as between the trust and Teri Brower.
The Petition for Instructions
On February 23, 2004, the trustees filed a petition seeking instructions from the court on this question. The petition stated in part:
"8. Prior settlement agreements[] failed to address the allocation of income and income taxes paid between the Estate of C.W. Brower and Teri Brower, spouse of the decedent....
"9. The Trustees believe that the overpayment refund and taxes which came from the corporation before Creighton W. Browers death should be allocated in the same manner as the income tax was allocated; that is pro-rata based on stock ownership [i.e., 28.48 percent to Teri Brower and 71.52 percent to the trust].
"10. Attorney for the income beneficiary, Teri Brower, may argue that because Creighton W. Brower made the distribution to pay taxes from the corporation and deposited the distribution into a joint tenancy account with Teri Brower, the funds were co-mingled and she should be allowed to retain the refund of tax payments, even though her pro-rata share was less.
"11. Petitioner Trustees assert that it is in the best interest of the trust to trace the funds used to pay the taxes back to the original distribution; recognize that taxes were assessed pro-rata ... and allocate the pre-death payments consistent with the income allocation.
"12. If the court agrees with Petitioners, the Trust is current in its distributions to Teri Brower. If the court disagrees with Petitioners, the Trust will pay Teri Brower [$71,201.00] in order to bring the trust current in this matter."
There has been a good deal of confusion throughout these proceedings about whether the trustees, at the time they filed the petition for instructions, already had paid the disputed portion of the tax refund to Teri Brower. This statement in the petition indicates they had not, such that the question before the court was whether they should be required to pay it. But the trustees later told the court they had in fact already paid the entire refund to Teri Brower, so the question then was whether she should be allowed to "retain" the disputed portion. As we will shortly explain, the court, in both its tentative and final decisions, essentially ruled in favor of the status quo, but with very different ideas about just what the status quo was.
Nowhere in the petition did the trustees provide any argument or authority for their position, or against the position they anticipated Teri Brower would take.
It is also worth noting here that the trustees allocation proposal assumed the trusts allocable share of the tax refund was properly characterized as principal (payable to the remainder beneficiaries upon Teri Browers death) rather than as income (payable to Teri Brower during her lifetime).
A hearing on the trustees petition was set for April 1, 2004.
As predicted, Teri Brower filed a response to the petition in which she argued she was entitled to "retain" the entire refund by right of survivorship, because Creighton had made the estimated tax payment from their joint account. She relied on sections 5302 and 5303 of the Probate Code, and on the decision in Estate of Harris (1915) 169 Cal. 725, for the proposition that funds from a joint account, and any property purchased with such funds, retain their character as joint tenancy assets and pass to the one surviving account holder upon the death of the other.
Unless noted otherwise, all further statutory citations will refer to the Probate Code.
Teri alternately maintained Creighton had made a gift of his separate property to the community when he deposited his Brower, Inc. dividends in their joint account. She cited the decision in In re Marriage of Wall (1973) 30 Cal.App.3d 1042 in support of this position.
The trustees did not file any reply to these arguments.
Libby Pomeroy, as we have said, is a remainder beneficiary, if not the primary remainder beneficiary, of the trust. The other remainder beneficiaries are Spencer Avila, Sonya Brower, Melinda Brower, and the Autistic Society of San Diego.... Pomeroys husband, Thomas Niederreuther, is an attorney who served as general counsel to Brower, Inc. up until Creightons death, and since then has been its vice president. (Pomeroy is the president.) Niederreuther also drafted the Browers trust agreement and estate plan.
Niederreuther learned a few days before the scheduled April 1, 2004, hearing that the trustees did not intend to file a reply to Teri Browers response. On March 30, 2004, Niederreuther filed a declaration with the court disputing some of the factual claims made by Teri Brower in her response, challenging her legal arguments, and requesting that the hearing be continued to permit further briefing. Niederreuther also noted, as an additional basis for his request, that the trustees had not served notice of the hearing on the Autistic Society.
The court (Judge Roger Beauchesne) did not receive Niederreuthers declaration before issuing a tentative decision on the morning of the hearing. The tentative decision stated in its entirety:
"289833 — POMEROY VS. BROWER: The petition for instructions is GRANTED and petitioners [the trustees] are instructed that respondent [Teri Brower] is entitled to retain the entire amount of the overpayment refund. Probate Code section 5303. Wall v. Wall (1973) 30 [Cal.App.]3d 1042."
However, the court, in response to Pomeroys request and over Teri Browers objection, agreed to postpone its decision on the petition and continue the hearing until May 18, 2004. The trustees, through their attorney Darrell Champion, took no position on the continuance one way or the other.
"MR. CHAMPION: Your Honor, were a stakeholder. Ive prepared an order consistent with the Courts [tentative] order. As the Courts aware, we just want to know what were supposed to do. Whatever pleases the Court and counsel is fine with me."
Prior to the continued hearing on May 18, 2004, Niederreuther, on behalf of Libby Pomeroy, submitted a memorandum of points and authorities in support of the trustees petition for instructions. The memorandum argued the authority cited by Teri Brower in support of her claim she was entitled to the entire tax refund by right of survivorship — Estate of Harris, supra, 169 Cal. 725, and sections 5302 and 5303 — had been abrogated or amended, and the law now supported the very opposite conclusion. Pomeroy likewise sought to distinguish In re Marriage of Wall, supra, 30 Cal.App.3d 1042, the case cited in support of Teri Browers claim Creighton should be deemed to have made a gift to the community by depositing the Brower, Inc. dividends in their joint account.
Following the May 18, 2004, hearing, the court (Judge Hurl Johnson), agreed that the tax refund, i.e. the 71.52 percent of it ($71,201.00) attributable to Creightons separate property shares in Brower, Inc., rightfully belonged to the trust. The minute order stated in part:
"... IT IS ORDERED that the petition for instructions filed by the trustees is GRANTED. The Court finds that the tax estimate overpayment refunds were correctly distributed on a pro rata basis as set forth in the petition for instructions...."
The courts "FINDINGS AND ORDER," filed on June 22, 2004, accordingly provided:
"1. The Court finds that the Trustees were correct in allocating the pre-death payment of taxes and tax estimate overpayment refunds pro-rata based on stock ownership."
Thus, Judge Beauchesnes tentative order found the trustees had been correct to allow Teri Brower to retain the entire tax refund, but Judge Johnsons final order, while it also "granted" the trustees petition, found they had been correct to allow Brower to retain only a pro-rated (28.48 percent) share of the refund. (In fact, what appears actually to have happened is that the entire refund went initially to Teri Brower, and the trust then recovered its pro-rata share as an offset against subsequent income payments due her.)
Pomeroys Petition for Costs and Fees
On November 22, 2005, some 18 months after the courts ruling on the allocation issue, Pomeroy filed a petition to recover her costs and attorney fees incurred both in the allocation proceeding and in the present proceeding for costs and fees, plus "prejudgment interest." Her claim for attorney fees was founded on the theory her legal efforts in the allocation proceeding had served to create or preserve a $71,201 "common fund" for the benefit of all the remainder beneficiaries.
In his declaration accompanying Pomeroys claim, Niederreuther stated he had spent 34.7 attorney hours in connection with the allocation proceeding, valued at the rate of $200 an hour or $6,940.00, and had incurred costs totaling $246.80. He calculated the interest on these unpaid attorney fees — from May 2, 2004, (the day after the allocation hearing) until December 15, 2005, (the anticipated date of the fee hearing) — would come to $1,115.30. As for the fee proceeding, Niederreuther asserted he already had spent 18.7 hours in preparing the petition for costs and fees, valued at $3,740.00, and he anticipated spending an additional 10 hours. The sum of these amounts (not including the anticipated hours), i.e., $6,940.00 + $1,115.30 + $246.80 + $3,740.00, came to $12,042.10.
Teri Brower and the trustees both opposed Pomeroys fee petition on several (but not necessarily the same) grounds. The predominant theme of their opposition was that the common fund doctrine ought not to apply because the actions taken by Niederreuther (who they claimed was the real party in interest) had done nothing to cause the court to reach the decision it ultimately did.
A hearing on the fee petition was held on December 30, 2005 before Judge Beauchesne (who had issued the tentative decision in the allocation proceeding). The principal argument made by Brower and the trustees in opposition to the petition was that the final decision in the allocation proceeding (by Judge Johnson) mandated no different result than had the tentative decision, in that both of them purported to approve the action taken by the trustees.
The court, at the conclusion of the hearing, denied Pomeroys request for attorney fees. It explained:
"THE COURT: All right. I have to say, its a little bit of a closer call I think than meets the eye, but under the totality of the circumstances here Im going to confirm my tentative ruling [denying the fee petition] in its totality.
"The primary basis for my ruling is that I do not find that what was, if anything, accomplished by Mr. Niederreuther was eventually for the common benefit of the trust and the trustees and/or the beneficiaries.
"The issue with regard to whether or not the fees were indeed incurred [by Libby Pomeroy] I think is an issue here, but I dont think thats dispositive, and I dont rule against the petitioner on that basis. And I dont rule against the petitioner on the basis of the 17-, 18-month delay.
"The basis for my ruling is that I do not find what was, if anything, accomplished [was] for the common benefit, as that term is defined by law."
An order to this effect was entered on February 1, 2006. It stated in part:
"[Pomeroys] efforts in support of the Petition for Instructions did not preserve or create a fund for the benefit of the remainder beneficiaries of the trust. [Her] request for attorney fees, costs and prejudgment interest are denied."
Pomeroy filed a timely notice of appeal on May 1, 2006.
According to Pomeroy, notice of entry of the judgment, which triggers the 60-day period within which to file a notice of appeal (see Cal. Rules of Court, rule 8.104(a)), was mailed on February 28, 2006. The sixtieth day thereafter fell on April 29, 2006, a Saturday. The notice of appeal was filed the following Monday, May 1, 2006. It therefore was timely. (See Code Civ. Proc., § 12.)
DISCUSSION
The Common Fund Doctrine
The primary issue on appeal, as it was at the fee hearing, is whether Pomeroys intervention in the allocation proceeding had had a significant effect on the outcome, i.e., whether her efforts created or preserved a common fund for the benefit of the remainder beneficiaries.
"... The common fund or `fund-in-court doctrine ... is a venerable exception to the general American rule disfavoring attorney fees in the absence of statutory or contractual authorization. (Code Civ. Proc., § 1021.) The exception `is grounded in "the historic power of equity to permit the trustee of a fund or property, or a party preserving or recovering a fund for the benefit of others in addition to himself, to recover his costs, including his attorneys fees, from the fund of property itself or directly from the other parties enjoying the benefit." [Citations.]
"Because the common fund doctrine `rest[s] squarely on the principle of avoiding unjust enrichment [citations], attorney fees awarded under this doctrine are not assessed directly against the losing party (fee shifting), but come out of the fund established by the litigation, so that the beneficiaries of the litigation, not the defendant, bear this cost (fee spreading)." (Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 27, italics added by the Lealao court.)
"The cases out of which the common fund doctrine originated each involved three common elements: (1) without the litigation there would have been no recovery; (2) the recovery was an available fund out of which the beneficiaries of the litigation would be paid; and (3) the applicant seeking contribution in respect to costs and attorney fees was the sole `active litigant and as such obtained the recovery that provided the fund. [Citations.]
"Attorney fees were allowed the `active litigant in such matters so as `to compel those for whose benefit the action or proceeding was taken to bear their share of the expenses of the litigation ... [citations], thus preventing an unfair advantage by the others who were entitled to share in the fund. Such allowance of attorney fees also afforded an encouragement for the attorney for the successful litigant so that he would therefore be more willing to undertake and diligently prosecute the litigation to a successful termination. [Citation.]" (Lindsey v. County of Los Angeles (1980) 109 Cal.App.3d 933, 936-937; see also Estate of Stauffer (1959) 53 Cal.2d 124, 132 [setting out equitable bases for doctrine]; Estate of Reade (1948) 31 Cal.2d 669, 671-672 [same]; 7 Witkin, Cal. Procedure (4th ed. 1997) Judgment, § 215 et seq., p. 747.)
The trustees in their respondents brief (Teri Brower has not filed a brief) argue the common fund doctrine does not apply here because: (1) Pomeroy was not the "sole active litigant" in the allocation proceeding; (2) it was not she but the trustees who "obtained the recovery that provided the fund"; (3) she did not "diligently prosecute the litigation to a successful termination"; and (4) her efforts only delayed the allocation proceeding and depleted rather than preserved the trusts assets.
All these arguments are but slight variations on the trustees general assertion Pomeroy contributed nothing to the outcome of the proceeding because, in the end, the courts final ruling approved the position originally taken by the trustees in the petition for instructions. The real issue, however, is whether the courts tentative ruling, which represented the state of the case at the point Pomeroy intervened, would, if adopted by the court, have produced the same result.
The trustees do not squarely address this issue in their brief on appeal. But they maintained at the fee hearing that the courts tentative ruling was entirely consistent with their proposed allocation.
"MR. CHAMPION: Well, Your Honor, what Mr. Niederreuther doesnt seem to focus on is the fact that the original petition [for instructions] was granted in its entirety as requested and the original tentative ruling would not have impacted negatively his client in any way. Okay? All the Court said there [in the tentative ruling] was the petition for instructions is granted.
"Now, where we are today, ultimately the Court signed the exact petition ... [O]ur trustees in this matter are both CPAs. They recognized that there may have been a tax refund that was not accounted for. They never intended for her [Teri Brower] to repay that. Okay? And the Court, in its tentative ruling, ordered exactly what these two CPAs felt was the correct way to handle it. She was entitled to — not — well, its says entitled to retain the entire amount of the overpayment refund. But what they [the trustees] did, they offset that [the trusts allocable share of the refund] against future income [payable by the trust to Teri Brower], okay? They didnt require her to write a check back. And that was always the argument. Okay? That yes, she has been overpaid that amount, she doesnt have to pay it back, but shes going to get shorted that amount, if she thinks shes been wronged, shes going to be shorted that amount in the future. And thats exactly what happened....[¶] ...
"The Court in its tentative ruling supported exactly what they [the trustees] had done and what they intended to do in the future. I saw no reason for a hearing on that [the tentative ruling], and in fact thats what happened on this case.
"So from that standpoint, I dont see where theres anything that Mr. Niederreuthers done that has added to any — anybody. All its done is taken up a lot of court time to get right where these two CPAs said we should be, and right where the tentative ruling indicated we would be."
We understand Mr. Champions point to be that the courts tentative ruling that Teri Brower was "entitled to retain the entire amount of the overpayment refund," when read in conjunction with the trustees petition for instructions, really meant only that Brower could keep the entire refund check, i.e., she would not be required to reimburse the trusts allocable share of the refund from the proceeds of that check (although she still would have to reimburse the trust).
The tentative ruling does not say that, of course, nor was it at all clear from the petition that the trustees had already recovered the trusts share of the refund as an offset against income payments it otherwise owed Teri Brower. More to the point, the authority cited by the court in support of its tentative ruling was the very same authority cited by Teri Brower for the exactly opposite conclusion. And, indeed, this authority did support Browers position, or it would have supported her position had it still been the law. But it was not still the law. Moreover, it was Pomeroy, not the trustees, who called the courts attention to the fact the law had been changed, and the present law supported the trustees proposed allocation.
As we have said, Brower relied on Estate of Harris, supra, 169 Cal. 725, and sections 5302 and 5303, for the proposition that "[p]roperty derived from proceeds of a joint tenancy account retains its character as a joint tenancy asset ... unless the parties changed its character by some agreement." As the court has since explained in Estate of Probst (1990) 50 Cal.3d 448, this is a misinterpretation of the Harris opinion subsequently adopted and restated by several other courts (including the Supreme Court itself). (Probst, supra, 50 Cal.3d at p. 457.) The correct rule, as stated in Probst is that a joint tenant of personal property, like a joint tenant of real property, "is free to sever his or her interest from the joint tenancy in the absence of an agreement to the contrary." (Id. at p. 460, italics in original.)
Consistent with the correct rule, section 5303 was amended in 1989 to add subdivision (c), which states in part: "Withdrawal of funds from the [joint tenancy] account by a party with a present right of withdrawal during the lifetime of a party also eliminates rights of survivorship upon the death of that party with respect to the funds withdrawn." (Stats. 1989, ch. 397, § 30; Estate of Probst, supra, 50 Cal.3d at p. 461.)
It seems abundantly clear to us that the courts tentative ruling in the allocation proceeding, had it become the courts final ruling, would not have authorized a pro rata allocation of the tax refund between Teri Brower and the trust. It seems equally clear that, but for Pomeroys intervention in the proceeding, the court would not finally have adopted a ruling that did approve the allocation. The allocation, in turn, benefited the trust, and the remainder beneficiaries in particular, by the amount of $70,201. There is, in short, no factual basis for the courts finding that "[Pomeroys] efforts in support of the Petition for Instructions did not preserve or create a fund for the benefit of the remainder beneficiaries of the trust." It follows the court abused its discretion in denying Pomeroys fee request on this basis. (In re Trinity Tractor Co. (1970) 3 Cal.App.3d 428, 445 [trial courts decision whether or not to award attorney fees under the common fund doctrine is reviewed for an abuse of discretion].)
Did Pomeroy "Incur" Attorney Fees?
The trustees contend Pomeroy did not actually incur attorney fees in the sense she paid or became obligated to pay her husband for his legal services. The fees, they seem to be saying, were incurred instead by Niederreuther himself, who lacks standing to seek reimbursement for his services.
Pomeroy submitted a declaration in response to the trustees opposition to her fee request in which she stated in part:
"4. My husband, Thomas E. Niederreuther, served as my attorney in regard to the Petition of Instructions proceedings which were initiated by the Trustees of the Trust. I am indebted to Mr. Niederreuther for the value of his legal services and the expenses his office incurred in connection with those proceedings."
"... It is clear that the real party seeking reimbursement for fees herein is [Pomeroys] husband, Mr. Niederreuther. Mr. Niederreuther is not a remainder beneficiary of the Trust and therefore has no standing as a real party in interest. [Pomeroy] would be the only party to this action capable of receiving a reimbursement for attorneys fees under the common fund theory because [she] is the only remainder beneficiary who participated in this litigation. Because [Pomeroy] actually incurred no attorneys fees in this action, [she] is not entitled to reimbursement for such fees."
As best we can tell, the trustees are attempting to analogize the present situation to one in which an attorney represents him- or herself in propria persona in an action to enforce a contract containing an attorney fee provision. (See Civ. Code, § 1717, subd. (a) [prevailing party in such an action is entitled to recover attorney fees and costs "incurred" to enforce the contract].) The attorney in that situation does not "incur" his or her own attorney fees. (Trope v. Katz (1995) 11 Cal.4th 274, 280 [term "attorney fees" implies the existence of an attorney-client relationship, i.e., one in which a party receives professional services from a lawyer]; see also PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1093 [corporation represented by in-house counsel may recover attorney fees under Civil Code section 1717 at prevailing market rate].)
In any event, in the absence of any further explanation of the trustees position, or any citation to authority supporting that position, we decline to consider their claim. (Trinkle v. California State Lottery (2003) 105 Cal.App.4th 1401, 1413 [unless brief contains legal argument supported by citation of authority, court may treat issue as waived and refuse to consider it]; MST Farms v. C.G.1464 (1988) 204 Cal.App.3d 304, 306 [appellate court need not discuss or consider points not argued or supported by citations to authority or record].)
May Pomeroy Recover "Prejudgment Interest"?
The parties also ask us to address two other issues raised in the fee proceeding but not addressed by the trial court in light of its conclusion the common fund doctrine did not apply. Is Pomeroy entitled to recover prejudgment interest? Should her fees be paid from trust principal or interest, or both? Since both these issues raise questions of law in the present circumstances, we will address them briefly for the benefit of the trial court on remand.
The trustees do not reassert their contention raised in the trial court that the common fund doctrine, even if it entitles Pomeroy to recover attorney fees and costs expended in the allocation proceeding, ought not to be extended to her fees and costs in the fee proceeding.
Pomeroys claim for prejudgment interest is founded on section 3287, subdivision (a) of the Civil Code, which provides in part:
"Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day ...."
The term "damages" refers to monetary compensation recoverable by a person who has suffered detriment from the unlawful act or omission of another. (Civ. Code, § 3281.) What Pomeroy is seeking here are attorney fees, not damages. Civil Code section 3287 manifestly does not apply.
Are Pomeroys Fees Recoverable from Income or Principal?
Section 16371 provides: "(a) A trustee shall make the following disbursements from principal: [¶] ... [¶] (4) Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property."
Section 16370 provides: "A trustee shall make the following disbursements from income ...: [¶] ... [¶] (b) Except as otherwise ordered by the court, one-half of all expenses for accountings, judicial proceedings, or other matters that involve both the income and remainder interests."
Pomeroy maintains the allocation proceeding concerned both the trusts income and remainder interests such that section 16370 ought to apply. The trustees contend, on the other hand, that the proceeding was concerned primarily with trust principal. In fact, the proceeding was concerned entirely with trust principal.
As we have said, the allocation proceeding was founded on the premise the trusts allocable share of the tax refund was properly characterized as principal (payable to the remainder beneficiaries upon Teri Browers death), rather than as income (payable to Teri Brower during her lifetime). Browers interest in that proceeding did not arise from her status as the income beneficiary of the trust, but from her individual status as Creighton Browers surviving spouse.
Likewise, the whole premise of Pomeroys request for attorney fees is that she had created or preserved a common fund for the benefit of the remainder beneficiaries (whose interest is in the trust principal), and she therefore is entitled to recover her attorney fees from that fund. Teri Brower, the trusts income beneficiary, plainly received no benefit from Pomeroys efforts.
Any reimbursement to Pomeroy for her costs and attorney fees therefore should be paid entirely from the trust principal.
We express no opinion about whether the costs and fees claimed by Pomeroy are reasonable.
DISPOSITION
The portion of the trial courts February 1, 2006, order denying Pomeroys request for attorney fees and costs is reversed. The portion of the order denying her request for prejudgment interest is affirmed. The matter is remanded to the trial court for further proceedings consistent with the views expressed in this opinion.
The parties are to bear their own costs on appeal.
We Concur:
VARTABEDIAN, Acting P.J.
WISEMAN, J.