Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. PN29534, Robert P. Dahlquist, Judge.
NARES, J.
This action arises out of a dispute over the actions of Kendall C. Kleveland (Kendall), acting as successor trustee of the Kleveland Family Trust (the family trust). Scott C. Leach (Scott), the son of deceased beneficiary Janis Kleveland (Janis), filed a petition in the probate court alleging Kendall breached his duties as trustee, seeking title to real property that was the major asset of the trust, an accounting, and removal of Kendall as trustee. Kendall brought a petition for directions, requesting a sale of the real property and instructions as to how to properly distribute the assets of the trust. The court denied Scott's petition and awarded Kendall his attorney fees and costs, finding Scott filed and prosecuted the action in bad faith.
Because this dispute involves different members of the Kleveland family, in the interests of clarity we refer to the parties by their first names. We intend no disrespect.
Scott appeals, asserting (1) the court erred in denying his petition because Kendall made a binding and irrevocable election to distribute the real property of the trust to Janis; (2) the court abused its discretion by finding Kendall conducted his administration of the trust reasonably and in good faith; (3) the court erred by failing to adjudicate material issues that were before it; (4) Scott was entitled to attorney fees because Kendall's opposition to his contest of Kendall's accounting was without reasonable cause and in bad faith; (5) the court erred in awarding Kendall his attorney fees and costs because Scott did not act in bad faith in filing and prosecuting the petition; and (6) the amount of attorney fees and costs awarded was unreasonable and excessive. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Because Scott is challenging the court's finding, on disputed facts, that there is no substantial evidence to support the court's decision in favor of Kendall, we recite the facts in the light most favorable to the judgment. (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1632-1633.)
A. The Family Trust
The family trust was established by Chester R. and Jeanne M. Kleveland in 1995. Jeanne passed away in January 2003. Chester passed away in March 2003.
Chester and Jeanne had two children, Kendall and Janis. Chester and Jeanne's trust provided that, upon their deaths, Kendall would become the successor trustee and the trust estate was to be divided equally between Kendall and Janis. The trust instrument granted Kendall, as successor trustee, discretion to divide the trust estate in any manner he determined to be appropriate, so long as an equal division was accomplished.
At the time of Chester's death, the primary assets of the trust estate were (1) a house located at 266 Rodney Avenue in Encinitas, California (the Rodney Property); and (2) various bank accounts, life insurance policies and a $107,000 debt owed by Kendall to his parents (the Liquid Assets). The Rodney Property was worth at least $400,000. The Liquid Assets were worth approximately $280,000. In addition, the trust owned a few items of lesser value, including personal property, furnishings inside the Rodney Property, and a Ford Taurus.
Following the death of their parents, Kendall and Janis discussed the manner in which the trust estate should be divided. Janis wanted the Rodney Property. This was acceptable to Kendall, in part because he and his wife already owned their home in Ventura County, whereas Janis did not own a home. In their discussions, Kendall and Janis developed a conceptual plan for the ultimate distribution of the trust assets. That plan contemplated that Janis would receive the Rodney Property, the furnishings and personal property (except for a few items of sentimental value to Kendall), Kendall would receive the Liquid Assets, and Janis would make an equalization payment to Kendall to effectuate an equal distribution of the trust estate. Based upon a valuation prepared by an accountant and an attorney hired by Kendall to assist with the trust, the expected amount of the equalization payment from Janis to Kendall was approximately $65,000.
At the time of their discussions, Janis was ill and not working. Janis told Kendall that she was receiving government health care benefits. She also told Kendall that she was concerned that if she received the Rodney Property, then she might no longer qualify for those benefits, and that a distribution of real property to her might result in an increase in property taxes. Janis asked for some time to investigate these issues before any distributions were made.
By the time of these discussions, Janis and some of her extended family and friends had already moved into the Rodney Property. Kendall was willing to accommodate Janis's wishes and concerns and did so by allowing Janis and her extended family to remain in the Rodney Property while Janis had time to investigate the matters of concern to her and the details of the anticipated equalization payment were being established.
Kendall believed that he and Janis had a common understanding as to the expected final distribution of the trust assets. Kendall would receive the Liquid Assets and Janis would receive the Rodney Property and would make an equalization payment to Kendall. Kendall also believed that Janis would ultimately resolve her concerns about her continuing entitlement to government benefits. He further believed they would ultimately reach an agreement concerning the amount and timing of the equalization payment to be made by Janis. Kendall allowed Janis and her extended family to continue to live in the Rodney Property even though the overall trust distribution arrangement had not been finalized.
At this time Kendall also assumed personal control over the Liquid Assets in the trust and used them to purchase items for his own personal use, including a new car and condominium. He did so based upon his belief that a final distribution of the trust's assets was imminent, and he would receive an amount at least equal to the Liquid Assets of the trust.
Kendall and Janis did not live in the same community and did not have a close relationship. Unbeknownst to Kendall, Janis at some point determined not to resolve the concerns about her receipt of distributions from the trust and determined not to commit to any equalization payment to Kendall. Janis was content to remain in the Rodney Property without receiving any formal distributions from the trust. Janis and her extended family consulted with an attorney about the consequences of Janis not finalizing the distribution from her parents' trust before her own expected death. After consulting with an attorney, Janis took no further action of any significance to resolve the issues pertaining to the distribution from the trust. She took no meaningful steps to resolve her stated concerns about the effect of a trust distribution on her government benefits. She also declined to agree to any equalization payment, even though Kendall, who was unaware of the details of Janis's illness, offered Janis the option of paying the equalization amount over a period of 30 years.
Janis passed away from lung cancer in October 2005. By that time, Janis and some of her extended family had been living in the Rodney Property for more than two years without paying rent, taxes or insurance. None of Janis's family members informed Kendall of Janis's passing. Kendall learned of Janis's death from a family friend, after Janis's funeral.
Scott is Janis's son He is the executor of her estate. There were no assets in Janis's estate, other than Janis's interest in the family trust.
B. The Instant Litigation
After Janis's passing, in connection with these proceedings, Scott took the position that Kendall was required to convey the Rodney Property to him, as executor of Janis's estate, without any equalization payment, even though the Rodney Property is worth more than the combined assets of the trust, including the Liquid Assets already spent by Kendall.
Scott refused to discuss the trust estate with Kendall, instead insisting that he was going to retain an attorney to "contest the will." Not long thereafter, counsel for Scott began posing questions to Kendall's attorney about the details of an accounting which had been prepared. Initially, there was some confusion because Scott had obtained a copy of a draft accounting. However, from the outset Merwyn J. Miller, Kendall's trust attorney, explained the accounting was only a draft, and the actual accounting was provided to Scott's attorney well before any litigation commenced. Despite that, Scott's attorney demanded that Kendall submit documentation concerning a series of loans which his parents had made to him over a 20-year period, including a demand that Kendall "provide an itemization of each loan Kendall received from [his parents], and each payment he made on those loans, noting whether the payment was principal or interest." Further, Scott demanded that Kendall provide "documents, such as cancelled checks, that substantiate any payments he has made." (Ibid.)!
Shortly thereafter, Scott filed a petition for breach of trust and removal of successor trustee. In the petition, Scott alleged Kendall breached his duties as trustee by failing to substantiate his accounting and that he owed more to the trust than was disclosed in the accounting. He further requested that the court find Kendall opposed the petition in bad faith and that he be awarded attorney fees and costs. Scott also requested double damages, that Kendall be removed as trustee, and that Kendall not be paid his attorney fees and costs incurred in defending the action.
At or about the time he filed Scott's petition, Scott's counsel wrote to Kendall's attorney and stated that if Kendall wished to avoid "long and expensive" litigation, then he would have to transfer the Rodney Property to Scott, without any equalization payment.
Kendall filed a petition for instructions, seeking to compel the sale of the Rodney Property so that the trust assets could be evenly divided. The petition also requested a final accounting so that the trust assets could be evenly divided and distributed. The petition sought an order requiring Scott to vacate the property and to pay back rent. Scott requested he be paid his attorney fees incurred in the proceeding from the proceeds of the sale of the property. In his response to Kendall's petition, Scott asserted that it was brought in bad faith and that he should be paid his attorney fees and costs incurred in defending the petition.
Scott filed a second petition, alleging in more detail Kendall's alleged bad acts as stated in the first petition but seeking to have the court compel Kendall to distribute the Rodney Property to Scott. In his response to this petition, Kendall requested that Janis's estate be charged with attorney fees and costs incurred in defending the litigation.
A court trial was held, after which the court issued a detailed statement of decision. Kendall prevailed on all petitions and was awarded his attorney fees and costs from Scott's share of the estate based on the trial court's determination that Scott had filed and prosecuted the petition for breach of trust and removal in bad faith
The court found that it "would not be equitable to grant Scott any of the relief he is requesting against Kendall.... [A]t all relevant times, Kendall acted reasonably and in good faith in connection with all of the matters that are the subject of this proceeding. In fact, Kendall went beyond his legal obligations to Janis, and took extraordinary measures to accommodate Janis' needs and desires." "Kendall let Janis and her extended family live in the Rodney Property for an extended period, when he had no obligation to do so. He expressed a willingness to accommodate Janis' request to receive the Rodney Property in the final distribution of trust assets, even though the Rodney Property clearly constituted more than the one-half of the trust estate to which she was entitled. He delayed finalizing trust distribution plans so that she could address her concerns about the potential impacts of any distribution on her reported receipt of public benefits. He let her and her extended family use the Ford Taurus, a trust asset. He let her and her extended family use the furnishings and personal property in the Rodney Property. He included in the trust estate certain life insurance proceeds to which he personally was entitled. He personally paid certain trust expenses out of his own pocket." Further, "[w]hile Kendall was making all of these accommodations for Janis, Janis failed to follow through on the actions she had indicated to Kendall she would undertake" and "took no meaningful steps to facilitate the ultimate distribution of trust assets."
The court did fault Kendall for his decision to take and spend liquid assets in the trust prior to a final distribution of the trust assets to the beneficiaries, but found because Kendall was a layperson and not a professional fiduciary such as a lawyer, it was "an innocent mistake, and one which the Court may properly excuse under Probate Code [section] 16440[, subdivision] (b)." The court also found "it would not be equitable to allow Scott to leverage Kendall's innocent mistake into the unjust relief he is requesting in this case."
The court found that Kendall adequately disclosed the fact that he had not paid interest on a loan from his parents from between March 2003, when his father Chester passed away, and October 2003, when a condominium that secured the loan was sold. This was evidenced by a letter sent by Scott's attorney to Kendall's attorney before the litigation was commenced.
The court found that Kendall did not conceal any debt acknowledgements reflecting cash disbursements from the trust. He provided them to his attorney and accountant in a timely manner.
The court found that in order for the estate to be equally divided, the Rodney Property needed to be sold as Janis's estate had no assets from which to make an equalization payment, the trust had incurred fees and expenses that needed to be paid, and Kendall was entitled to an award of attorney fees from Janis's share of the trust estate. The court further ordered Kendall to prepare an accounting to accomplish the final distribution of the trust assets and reserved jurisdiction "concerning the final accounting of the trust estate and the proper distribution of trust assets."
The court found that Kendall's testimony at trial was credible, and Scott's was not.
The court further found that Scott's petition was filed and prosecuted in bad faith and for an improper purpose, "namely, to try to leverage Kendall into making an unequal distribution of trust assets." The court based this finding on (1) the demeanor of Scott while testifying and the substance of his testimony; (2) the fact that the verified allegations in the petition were to a significant degree unsupported by the evidence; (3) Scott's testimony that Janis did not receive certain documents from Kendall's attorney; (4) inconsistencies between Scott's testimony and documentary evidence; (5) the manner in which Scott conducted the litigation even after Kendall produced persuasive evidence the total amount of loans he received from his parents was $107,000; (6) a letter from Scott's attorney that he was willing to withdraw the petition if Kendall transferred the property without any equalization payment; and (7) Kendall's offer, prior to the litigation being filed, to cooperate in "any reasonable manner" in effectuating an accounting of the trust assets and distribution of the estate, to which Scott responded by filing the petition.
Based upon the court's finding the petition for removal of Kendall was filed in bad faith, the court ordered, under Probate Code section 15642, subdivision (d) that Scott pay Kendall's attorney fees incurred in defending the action from his portion of the distribution of trust assets. The court reserved jurisdiction to determine the reasonable amount of such fees.
The court disregarded the testimony of Scott's personal property appraiser Joe Paytas concerning the value of property at the Rodney Property as several valuable items were missing from the residence at the time of his inspection. The court also rejected the testimony of Scott's accountant expert Jeanne Goddard because she was not provided with all relevant evidence by Scott and/or his counsel, including a letter sent by Kendall to Janis before the litigation was instituted. That letter disclosed that Kendall had not paid interest on the loan from his parents from March 2003, when Chester died, and October 2003, when the loan was paid off. The court also found Goddard's opinions were based on incorrect assumptions.
The court denied Kendall's request for back rent, finding it would not be equitable because Kendall had use of the liquid assets of the trust while Janis had use of the Rodney Property. The court also ruled that because the court had ordered the property sold, Scott and his extended family should vacate the property and, if they failed to do so, Janis's share of the trust assets would be charged with the fair market rental value of the property. The court denied Kendall's request for an order directing Scott's extended family to vacate the property as they were not parties to the litigation.
DISCUSSION
I. DUTY TO DISTRIBUTE RODNEY PROPERTY TO JANIS
Scott asserts that under the terms of the trust, law and equity, Kendall had a duty to distribute the Rodney Property to Janis. This contention is unavailing.
A. Standard of Review
Because the court resolved the factual dispute over how the trust assets should be distributed, the substantial evidence standard of review governs. (Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 632 (Winograd).) We "view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference." (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053.) We consider the whole record when we make this evaluation. We have no power to substitute our own judgment for that of the trial court if substantial evidence supports the trial court's finding. (DiMartino v. City of Orinda (2000) 80 Cal.App.4th 329, 336.)
Credibility is an issue of fact for the trial court to resolve. (Johnson v. Pratt & Whitney Canada, Inc. (1994) 28 Cal.App.4th 613, 622.) The testimony of a single witness, even that of a party, may be sufficient to provide substantial evidence to support a trial court's finding of fact. (In re Marriage of Mix (1975) 14 Cal.3d 604, 614.) If there is substantial evidence to support the trial court's finding, even if that evidence is contradicted, then we must affirm that finding. (Winograd, supra, 68 Cal.App.4th at p. 632 ; see Bickel v. City of Piedmont, supra, 16 Cal.4th at p. 1053.)
B. Analysis
1. Terms of the trust
Attempting to cast the issue as one of law, Scott asserts that under the terms of the trust, Kendall was bound to distribute the Rodney Property in kind to Janis. In support of this argument, Scott focuses on three sections of the family trust. First, section 5.02.C provides that Kendall, as trustee, has the power to "distribute the trust estate in undivided interests in kind, or partly in money and partly in kind, at valuations determined by the Trustee." Scott also quotes section 6.03, which gave Kendall the discretion to elect to distribute the trust "partly in cash and partly in kind." Scott then quotes section 6.03, which provides:
"The decision of the Trustee, either prior to or on any division or distribution of such assets, as to what constitutes a proper division of such assets of the Trust Estate or any trust provided for in this Declaration, shall be binding on all persons in any manner interested in any trust provided for in this Declaration." (Italics added.)
Focusing on the italicized portion of section 6.03, Scott asserts that Kendall made a binding election to transfer the Rodney Property to Janis. However, as detailed ante, the court found, based upon disputed facts, that Kendall and Janis never reached a binding agreement on how to distribute the trust estate. Rather, the court found there was only a "conceptual plan" that was never finalized. This was because Janis requested that Kendall not distribute the trust assets until she resolved her concerns about the impact any distribution would have on her government benefits and property taxes. There was also no agreement as to the amount and terms of the equalization payment. Substantial evidence supports the court's finding on this issue.
2. "Conclusive presumption" argument
Scott next asserts that a "conclusive presumption" arose that Kendall would distribute the Rodney Property to Janis. In support of this argument Scott relies on Evidence Code section 622, which provides: "The facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, or their successors in interest...." Scott also cites Evidence Code section 623, which provides: "Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it."
However, Scott never raised this issue at trial. Therefore, Scott has forfeited this issue on appeal. (Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316.)
Moreover, no conclusive presumption arose because while Kendall offered to distribute the Rodney Property to Janis, the offer was conditioned on her making an equalizing payment to Kendall in return. However, she never agreed to an equalizing payment. Indeed, in this litigation it was Scott's position that he should not have to pay an equalizing amount.
In arguing that a conclusive presumption arose, Scott asserts that Janis "never told KENDALL not to distribute the Rodney Avenue Property to her." (Boldface omitted.) However, the cited testimony of Kendall in support of this assertion only reveals she did not make such a request at a particular time─one month after Chester passed away. It was Kendall's testimony at trial, which the court found credible, that Janis did tell Kendall not to transfer the Rodney Property to her because she was concerned about losing her government benefits.
Scott also asserts a conclusive presumption should arise because he paid the property taxes and insurance on the Rodney Property. However, Scott never paid the taxes and insurance on the property until after this litigation commenced.
Scott contends the court did not want to consider that the property could be refinanced rather than sold. However, there was no evidence presented at trial that Janis's estate or any of her beneficiaries had the ability to refinance the property. In fact, the court found that a sale of the property was necessary because Janis's estate had no assets.
3. Equitable estoppel argument
Scott asserts that Kendall was equitably estopped from refusing to transfer the Rodney Property to Janis based upon his representations that he would do so. Scott asserts that in reliance on this representation, Janis moved into the Rodney property and Scott paid taxes and insurance. However, the evidence at trial showed Janis and members of her family moved into the Rodney Property before Chester died (thus before any alleged representation was made), and property taxes and insurance were not paid until after this litigation commenced. As there was no detrimental reliance by Janis or Scott on any alleged representation by Kendall, no estoppel can arise. (In re Lisa R. (1975) 13 Cal.3d 636, 645.)
II. COURT'S FINDING KENDALL ACTED IN GOOD FAITH
Scott asserts the court abused its discretion in finding that Kendall acted in good faith because (1) his accountings were inaccurate, misleading and incomplete; (2) he failed and refused to substantiate his accounting; and (3) he engaged in "egregious" self-dealing and concealment. These contentions are unavailing.
A. Standard of Review
As Scott acknowledges, the question of whether Kendall acted in good faith is subject to the abuse of discretion standard of review. Under this standard, we may reverse only if the court's decision " 'exceeds the bounds of reason, all of the circumstances before it being considered.' " (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.)
B. Analysis
1. Accuracy of accountings
In support of his contention Kendall gave inaccurate accountings of the trust, Scott cites the testimony of his accounting expert, Jeanne Goddard, that the draft accounting and revised accounting were "materially different." However, the draft accounting was not the final accounting, and Scott was informed of this fact.
Scott also claims the accountings were misleading because neither showed Kendall owed interest on the loans from his family. However, the fact that for a short period of time between when Chester died and the condo that secured the loan was sold no interest was paid was disclosed in the cover letter for the draft accounting that was provided to Janis.
Further, as the court found, Scott and his counsel withheld that letter from their accounting expert Goddard, causing the court to reject her testimony.
At trial, Scott denied ever receiving the final accounting and claimed that his mother did not receive it either. However, when Janis claimed to have lost the accounting, Scott picked it up from Kendall's attorney. The court found Scott's testimony on this issue not credible.
2. Substantiation of accounting
Scott next argues that Kendall never adequately substantiated his accounting. In support of this contention, he again relies on the testimony of his accounting expert, Goddard. But the court rejected Goddard's opinions because Scott and his attorney withheld relevant evidence from her and because her testimony was based on incorrect assumptions.
Scott also attacks the alleged failure to substantiate a $10,000 value Kendall's accounting placed on personal property in the Rodney Property. However, much of the valuable personal property was removed from the house by Scott and/or his attorney before Scott's personal property appraiser inspected the house. This caused the court to reject his appraiser's opinion. Moreover, Scott does not provide any evidence to dispute the reasonableness of the $10,000 value given for the personal property in the Rodney Property.
Scott asserts Kendall concealed documents related to cash disbursements he received from the trust. However, the court specifically found that there was no concealment as he timely provided documentation supporting these items to his attorney and accountant.
Scott again takes issue with the fact that Kendall did not provide information concerning interest on the loans to him. However, as discussed, ante, the fact that Kendall had not paid interest on the loans was disclosed in a cover letter to the accounting provided by Kendall's attorney to Janis.
Scott also points out there were no cancelled promissory notes for the loans. However, there was no dispute as to the amount loaned or that the loans were paid back, and they were personal loans between his parents and him. Therefore, no formal cancellation of promissory notes was necessary.
3. Court's award of discovery sanctions
Scott asserts the court abused its discretion in awarding Kendall $6,450 in discovery sanctions based on his attempt to seek documents and a deposition from Kendall's trust attorney, Miller, because he only sought nonprivileged documents. However, this contention is belied by the record. In the records and deposition subpoenas Scott sought "[y]our entire file concerning the administration of the Kleveland Family Trust dated October 19, 1995." Kendall attempted, unsuccessfully, to limit the scope of the subpoenas. This forced Kendall to bring motions to quash and for protective orders.
The court granted the motion to quash the subpoena for Miller's records, finding it was "overbroad, unduly burdensome and includes documents that are likely to be privileged." (Italics added.) In the order granting the motion to quash the deposition subpoena, the court found: "The selected method of discovery is unduly burdensome and expensive, taking into account the needs of the case, the amount in controversy, the importance of the issues at stake in this litigation, the policy considerations associated with deposing an opposing party's former attorney and the privilege issues likely to arise in connection with an unlimited deposition of an opposing party's former attorney." (Italics added.)
The court acted well within its discretion to award sanctions for Scott's refusal to limit his document and deposition subpoenas to nonprivileged matters.
III. KENDALL'S ALLEGED "SELF-DEALING AND CONCEALMENT"
Scott asserts that Kendall engaged in "egregious self-dealing and concealment" by (1) using the family trust's liquid assets before a final distribution was agreed to and carried out; (2) failing to disclose that he had not paid interest on the loans from his parents; and (3) conditioning distribution of the Rodney Property to Janis on a release of his personal liability. These contentions are unavailing.
A. Use of Trust Assets
"(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. [¶] (b) If the trustee has acted reasonably and in good faith under the circumstances as known to the trustee, the court, in its discretion, may excuse the trustee in whole or in part from liability under subdivision (a) if it would be equitable to do so". (Italics added.)
After considering all of the evidence at trial, and weighing the credibility of the witnesses, the court found Kendall's testimony credible and Scott's not. The court excused Kendall's distribution of trust assets because (1) he was not a professional and made an innocent mistake; (2) it was done at a time he believed the Rodney Property would be distributed to Janis; and (3) the amount he distributed was less than the value of the Rodney Property. The court found that it would not be equitable to allow Scott to attempt to leverage Kendall's innocent mistake into the unjust relief (an unequal distribution of trust assets) in this matter.
The court did not abuse its discretion in ruling Kendall was not liable for his innocent mistake.
B. Disclosure of Failure To Pay Interest on Loans
As discussed, ante, the interest not paid on the loans from Kendall's parents was disclosed to Janis with the first accounting sent to Janis. This fact was not disclosed to Scott's accounting expert, leading the court to reject her testimony. As the court properly found, there was no concealment by Kendall on this issue.
C. Release of Liability
Probate Code section 16004.5 provides in part: "(a) A trustee may not require a beneficiary to relieve the trustee of liability as a condition for making a distribution or payment to, or for the benefit of, the beneficiary, if the distribution or payment is required by the trust instrument. [¶] (b) This section may not be construed as affecting the trustee's right to: [¶]... [¶] (4) Withhold any portion of an otherwise required distribution that is reasonably in dispute." (Italics added.)
As the court found in its statement of decision, subdivision (a) of Probate Code section 16004.5 was not applicable as the Rodney Property was not required under the family trust to be distributed to Janis. The trust only called for an equal distribution of assets. Moreover, because the terms of the distribution, including the amount of any equalization payment, were in dispute, subdivision (b) of that section applied. Further, Kendall only proposed an equal division of assets and did not require a release of liability as a condition Janis's agreement.
IV. COURT'S ALLEGED FAILURE TO ADJUDICATE MATERIAL ISSUES
Scott asserts the court failed to adjudicate all material issues before it because it (1) failed to determine the amount of the equalizing payment and (2) failed to determine the amount of interest Kendall owed to the trust. We reject these contentions.
A. Equalization Payment
The court did not, as Scott alleges, refuse to rule on the correct amount of the equalizing payment. Rather, the court reserved its jurisdiction to determine this amount after the matters it ordered, in particular the sale of the Rodney Property, were carried out. This ruling was proper and reasonable because the amount of the equalization payment could not be determined until the Rodney Property was sold.
B. Amount of Interest Kendall Owed to Trust
Similarly, the court reserved jurisdiction to determine a final accounting, which it charged Kendall with preparing. This included any charges and credits, which would include any interest Kendall allegedly owed on loans from his parents. Thus the court did not fail to rule on this issue
V. SCOTT'S RIGHT TO ATTORNEY FEES
Scott asserts that he was entitled to an award of attorney fees because Kendall without reasonable cause and in bad faith opposed Scott's contest of his accounting. This contention is unavailing.
Probate Code section 17211, subdivision (b) provides in part: "If a beneficiary contests the trustee's account and the court determines that the trustee's opposition to the contest was without reasonable cause and in bad faith, the court may award the contestant the costs of the contestant and other expenses and costs of litigation, including attorney's fees, incurred to contest the account."
We have already concluded that substantial evidence supports the court's determination that Kendall acted reasonably and in good faith with regard to his administration of the trust. Thus, Scott is not entitled to attorney fees under this Probate Code section.
VI. KENDALL'S ENTITLEMENT TO ATTORNEY FEES
Scott asserts the court erred in awarding attorney fees to Kendall because (1) Scott was denied procedural due process because Kendall did not request fees in his opposition to Scott's petition for his removal as trustee; (2) Scott did not file his petition in bad faith; (3) the court erred when it admitted into evidence Scott's settlement offer letter; and (4) Kendall provided no evidence his removal as trustee was contrary to the trustor's intent. We reject these contentions.
A. Due Process Argument
Probate Code section 15642, subdivision (d), under which the court awarded Kendall his attorney fees and costs, provides: "If the court finds that the petition for removal of the trustee was filed in bad faith and that removal would be contrary to the settlor's intent, the court may order that the person or persons seeking the removal of the trustee bear all or any part of the costs of the proceeding, including reasonable attorney's fees."
Scott asserts the award of attorney fees to Kendall under this section must be reversed because he did not have notice Kendall would seek such fees because Kendall did not request them in his opposition to Scott's petition for Kendall's removal as trustee. However, Scott's petition for removal was itself brought under Probate Code section 15642. This gave Scott adequate notice that if he brought the petition for removal in bad faith, he could be subjected to an award of fees.
Further, Scott never raised a due process argument in response to Kendall's motion for attorney fees, which sought recovery of fees under Probate Code section 15642, subdivision (d). Therefore, Scott has forfeited this issue. (Planned Protective Services, Inc. v. Gorton (1988) 200 Cal.App.3d 1, 12-13, disapproved of on other grounds by Martin v. Szeto (2004) 32 Cal.4th 445.)
Additionally, Wiley v. Rhodes (1990) 223 Cal.App.3d 1470 , the case Scott relies on for the proposition a party seeking attorney fees must plead entitlement in his or her complaint and make a demand in the prayer, is inapposite. In Wiley, an award of attorney fees was reversed on appeal for lack of a specific prayer for fees in the complaint. But Wiley involved a default judgment, which involves due process considerations not applicable here. (Id. at p. 1472; see also Feminist Women's Health Center v. Blythe (1995) 32 Cal.App.4th 1641, 1675-1676; Cummings Medical Corp. v. Occupational Medical Corp. (1992) 10 Cal.App.4th 1291, 1296.) It is settled that outside a default setting, attorney fees do not need to be demanded in a complaint. (Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 194.) "Due process is satisfied by a noticed motion for attorney fees, duly served on the opposing party." (Ibid.)
Moreover, Kendall, in his trial brief, asserted that Scott should pay Kendall's attorney fees, based upon his bad faith actions in pursuing this matter. Thus, Scott had adequate notice that attorney fees were being sought by Kendall in this matter.
B. Court's Finding of Bad Faith by Scott
Scott asserts the court's findings in its statement of decision are inconsistent with his having filed his petition in bad faith. In this regard, Scott points to the (1) court's finding Kendall made a mistake in disbursing liquid assets of the trust to himself; (2) the denial of Kendall's request to charge rent on the Rodney Property; and (3) the denial without prejudice of Kendall's request for an order directing Scott and his family to vacate the Rodney Property. He argues that because some of his claims and defenses had merit, he could not have acted in bad faith.
However, the issues of payment of rent and an order requiring Scott and his family to vacate the Rodney Property were not issues raised in Scott's petition. Rather, they were raised in Kendall's petition requesting instructions regarding the sale of the Rodney Property. Further, the court found that anything inappropriate about Kendall's disbursement of cash from the trust was an innocent mistake.
As described, ante, the court made detailed findings concerning every fact supporting its conclusion Scott filed his petition in a bad faith attempt to leverage Kendall into transferring the Rodney Property to him, without any equalizing payment. The court did not err in finding that Scott brought the petition for removal in bad faith.
C. Court's Reliance on Letter from Scott's Counsel
Scott asserts the court erred in admitting a settlement offer letter his counsel sent shortly after he filed his petition seeking removal of Kendall as trustee. The part of the letter relevant to the court's bad faith finding states, "Before our clients embark down the long and expensive road of litigation, my client asked that I extend an offer to settle this matter. My client is willing to withdraw his petition in exchange for your client transferring the Encinitas real property to the Estate of Janis Kleveland free and clear of any indebtedness to your client." (Italics added.)
Scott asserts that this settlement offer was inadmissible under Evidence Code sections 1152 and 1154. Evidence Code section 1152, subdivision (a) provides: "Evidence that a person has, in compromise or from humanitarian motives, furnished or offered or promised to furnish money or any other thing, act, or service to another who has sustained or will sustain or claims that he or she has sustained or will sustain loss or damage, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove his or her liability for the loss or damage or any part of it."
Evidence Code section 1154 provides: "Evidence that a person has accepted or offered or promised to accept a sum of money or any other thing, act, or service in satisfaction of a claim, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove the invalidity of the claim or any part of it."
However, the letter was not admitted as proof of Scott's liability or the invalidity of his claims. Rather, it was admitted for the limited purpose of showing his petition was filed and litigated for an improper purpose: to gain an unfair advantage and attempt to achieve an unjust result. Settlement negotiations are admissible "to show that a case was litigated for an improper purpose." (HMS Capital, Inc v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 219; see also Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 915 [unreasonably low settlement offer admissible for the limited purpose of showing bad faith].)
Moreover, the letter was only one item of evidence the court considered in concluding Scott filed and pursued the action in bad faith. The evidence also included the lack of merit of the claims in his petition, the conduct of the litigation, and Scott's testimony at trial. Thus there is ample evidence to support the court's finding of bad faith, even if the settlement letter were not considered.
D. Trustor's Intent that Kendall Be Successor Trustee
Without citation to the record, Scott asserts there was no evidence presented at trial that removing Kendall as trustee would contrary to the intent of the trustors to remove Kendall as trustee. Because that is one of the required findings to award fees under Probate Code section 15642, subdivision (d), Scott asserts the court erred in awarding Kendall fees under that section.
However, one need look no further than the terms of the family trust itself. The trustors Chester and Jeanne had two children, Kendall and Janis. They selected Kendall to become the successor trustee upon their deaths. There was no provision in the trust for any alternate trustor other than Kendall. By the time Scott brought his petition, Janis had passed away. Thus, the terms of the trust itself provide substantial evidence removing Kendall as trustee would be contrary to the intent of the trustors.
E. Amount of Fees Awarded to Kendall
We review a court's decision as to the amount of attorney fees to be awarded to a party under the abuse of discretion standard. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.) As stated, ante, under this standard we will only reverse if the trial court's ruling "exceeds the bounds of reason, all of the circumstances before it being considered." (Denham v. Superior Court, supra, 2 Cal.3d at p. 566.)
Scott asserts the court erred because it failed to apportion the attorney fees among the various petitions and should have reduced the amount of attorney fees to those incurred only related to his petition for removal of Kendall as trustee. However, Scott cites no evidence that the attorney fees could be segregated in such a manner. He also does not even suggest what amount would be an appropriate and reasonable amount of fees.
"[I]t is entirely inappropriate for an appellate brief to incorporate by reference documents and arguments from the proceedings below." (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2009) ¶ 9:30.1, p. 9-10 (rev. #1, 2009); accord, Banning v. Newdow (2004) 119 Cal.App.4th 438, 455-456.) "An appellant cannot rely on incorporation of trial court papers, but must tender arguments in the appellate briefs." (Paterno v. State of California (1999) 74 Cal.App.4th 68, 109 .) Instead of proffering evidence and authority to support his contention the attorney fee award should be reduced, Scott attempts to "incorporate by reference" the legal arguments, authorities and evidence submitted in support of his opposition to Kendall's motion for attorney fees, and his motion to tax costs, filed with the trial court. This is inappropriate, and we therefore decline to address any such arguments, authority or evidence not presented in Scott's appellate briefs.
Moreover, both petitions filed by Scott essentially contained the same allegations of alleged wrongdoing by Kendall. In its statement of decision the court found that the "main component" of the litigation was the petition for breach of trust and removal. Further, in determining the reasonable amount of fees to be awarded to Kendall, the court found that it would not be practicable to attempt to allocate fees amongst the various petitions in this case. "[F]ees need not be apportioned when incurred for representation of an issue common to both a cause of action for which fees are permitted and one for which they are not. All expenses incurred on the common issues qualify for an award. [Citation.] When the liability issues are so interrelated that it would have been impossible to separate them into claims for which attorney fees are properly awarded and claims for which they are not, then allocation is not required." (Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1133.)
The court did not abuse its discretion in determining the reasonable amount of fees to award to Kendall.
DISPOSITION
The judgment is affirmed. Kendall Kleveland shall recover his costs on appeal.
WE CONCUR: BENKE, Acting P. J., IRION, J.