Opinion
NOT TO BE PUBLISHED
Superior Court County No. PR060301 of San Luis Obispo, Martin J. Tangeman, Judge
Cyril Lawrence, Inc., and Cyril L. Lawrence for Appellant.
No appearance for Respondents.
PERREN, J.
Appellant Vallory Conkle is both the trustee of an inter vivos trust and the executor of the trust settlors' wills. The corpus of the trust estate and probate estate is, in large part, the same. As trustee of the Worden Family Trust, she appeals from an order of the probate court denying her requests for trustee compensation and attorney fees. We affirm.
Facts and Procedural History
Vernon and Maxine Worden established a family trust in October 1997. Conkle was named as successor trustee of the trust. The Wordens had no children together, but each had children from prior marriages. Conkle, Royce Worden and Loretta Hicks are Mr. Worden's children. Darlene Waters and Donald Bear are Mrs. Worden's children. They are equal beneficiaries of the trust. Hicks, Waters and Bear are the respondents in this action.
At the time the trust was executed, the Wordens owned several properties in six states which they leased to the United States Postal Service (USPS). The express purpose of the trust was to avoid probate. Section 16.01 of the trust states:
"Settlors acknowledge that this Trust Agreement has been prepared by CYRIL LAWRENCE... as attorney for the Settlors. The parties acknowledge that they have been advised that this Agreement conforms to California law as of the date of its execution. This Agreement is intended to implement an estate plan that avoids probate. No income or estate tax benefits are expected from this agreement."
In order for the trust to avoid probate, it was necessary to transfer all of Settlors' property to the trust. The first paragraph of the trust states: "Settlors hereby assigns, transfers, conveys and delivers [sic] to Trustees [sic] to hold, in Trust, the property (hereinafter 'Trust Estate') described in Exhibit 'A' attached hereto and by this reference made a part hereof. Settlor [sic] agrees to execute and deliver to Trustee such other instruments and to do such other and further acts as may be necessary for more fully vesting and confirming in Trustee... the complete title to said property set forth in Exhibit 'A'."
By the time of Mr. and Mrs. Wordens' deaths in 2004, only one of the properties had been transferred to the trust. Mr. Worden purportedly refused to transfer the remaining properties because of previous problems with USPS over lease payments following a title change. As a result of this omission, it was necessary for Conkle, as trustee and named executor under the Wordens' wills, to bring probate proceedings to transfer the various properties to the trust. Conkle filed a petition for probate of Mr. Worden's will in Fresno County in April 2005. She filed a petition for probate of Mrs. Worden's will in Madera County in March 2006. For her services in both of these matters she was awarded fees and costs as permitted by law.
In 2006, respondents demanded financial information regarding the trust. Conkle provided copies of the Wordens' final income tax returns and tax returns of the estates. Conkle told respondents that until title to the properties passed to the trust, the rental income from the properties belonged to the estates. Respondents were not satisfied with the response. They filed a petition to compel a trust accounting on September 15, 2006.
After many lengthy and acrimonious discovery disputes, Conkle filed a first account and petition to settle account on or about January 25, 2010. In the petition, Conkle requested approval of trustee compensation of $34,768.62, $5,218.50 of which represented fees for "extraordinary time and effort, " and attorney fees of $28,431.50 for Mr. Lawrence. Conkle previously had been paid $76,464.96 and Lawrence had been paid $66,552.12 in connection with the probate estates. Respondents filed opposition to the requests for fees and requested distribution of the estate.
In reply, Conkle filed a declaration stating the trustee compensation requested was reasonable as she had acted as property manager for the trust from the period January 5, 2007, to November 30, 2009. Her fee amounted to 8 percent of the rental income she collected from the properties for that period. Attached to the declaration were several documents relating to her activities on behalf of the trust for the period 1998-2003, a letter from a real estate asset consultant supporting the amount of her fee request, and time sheets showing time spent from September 18, 2006, to January 18, 2010.
Lawrence also filed a reply and a declaration. The declaration states in part: "I have surveyed the prevailing rates for Merced, Madera and Fresno Counties and found that the rates set forth in the schedule attached to the Trustee's First Account are consistent with prevailing charges for attorneys and paralegal staff. The amount requested, $28,431.50 is a reasonable sum for legal services provided the Trustee handling a Trust with over $2,300,000.00 in assets and over $365,000 in income over two and a half years. [¶]... Those fees include the time and effort by the Trustee's attorney in responding to the petitioners' discovery demands made between September 2006, through September 2007." Lawrence requested an additional sum of $2,275 for additional time spent since the initial fee request.
After taking the matter under submission, the trial court issued a ruling on April 5, 2010. The court approved trustee compensation of $3,694, an amount representing 1 percent of the rental income of the properties, and costs of $851.02 for attending a conference. The court reasoned that the assets of the trust and the probate estates were identical, Conkle had not shown that the time she spent on trust matters was different from or in addition to that spent on estate matters, and the evidence showed that she had bookkeeping, tax and legal work done for her, at a cost to the trust of $23,662.32.
The court denied Lawrence's request for fees on the grounds that he failed to complete the intended purpose of the trust, he had been paid $66,662.12 in the probate proceedings, and he had not demonstrated how his services benefitted the trust.
On appeal, Conkle asserts that fees she and Lawrence are requesting are reasonable and were incurred on behalf of the trust. No respondent's brief was filed.
DISCUSSION
Trustee Compensation
A trustee has a nonwaivable fiduciary duty to provide reasonable information regarding the administration of a trust. (Salter v. Lerner (2009) 176 Cal.App.4th 1184, 1186.) Where such a duty has been breached, a beneficiary may seek to "reduce or deny compensation of the trustee." (Prob. Code, § 16420, subd. (a)(7).) Pursuant to Estate of Gump (1982) 128 Cal.App.3d 111, 117, a trustee's negligence in administering a trust allows the court to exercise its discretion to "deny compensation for services rendered in conjunction with the mismanaged trust asset." We thus review for abuse of discretion. "The test is not whether we would have made a different decision had the matter been submitted to us in the first instance. Rather, the discretion is that of the trial court, and we will only interfere with its ruling if we find that under all the evidence, viewed most favorably in support of the trial court's action, no judge reasonably could have reached the challenged result." (Estate of Billings (1991) 228 Cal.App.3d 426, 430.)
All statutory references are to the Probate Code.
The issue of reasonable trustee fees is determined from the facts of the specific case. Guidelines for awarding trustee fees are set forth in California Rules of Court, rule 7.776, as follows: "In determining or approving compensation of a trustee, the court may consider, among other factors, the following: [¶] (1) The gross income of the trust estate; [¶] (2) The success or failure of the trustee's administration; [¶] (3) Any unusual skill, expertise, or experience brought to the trustee's work; [¶] (4) The fidelity or disloyalty shown by the trustee; [¶] (5) The amount of risk and responsibility assumed by the trustee; [¶] (6) The time spent in the performance of the trustee's duties; [¶] (7) The custom in the community where the court is located regarding compensation authorized by settlors, compensation allowed by the court, or charges of corporate trustees for trusts of similar size and complexity; and [¶] (8) Whether the work performed was routine, or required more than ordinary skill or judgment." (See also Estate of Nazro (1971) 15 Cal.App.3d 218, 221.)
All further references to rules are to the California Rules of Court.
In its ruling, the trial court pointed out that Conkle had failed to address the factors set forth in rule 7.776. In addition, Conkle's work with respect to the trust was not complicated, and much of the work was done by outside professionals, who were separately compensated. The court summarized the evidence: "During the 35 month account period, the Trustee received approximately seven rent checks per month and a total of approximately twenty reimbursement checks; and may have paid a number of bills, mostly for taxes, insurance, repairs, phone bills and professional services. During the account period, the Trust paid:... a bookkeeper, $3,272.50;... CPAs, $10,084.93; and attorneys in various states (not including Mr. Lawrence) $10,304.89.
"Thus, the Trustee had her bookkeeping and tax and legal work done for her, at a cost of $23,662.32. The Trustee has not provided any information regarding: how much time she spent; how much risk or responsibility she assumed; or whether her work was routine or complex. All the Court can tell from reviewing the Summary of Account prepared by the CPAs is that various rent payments came into the Trust; and someone wrote checks to pay numerous bills, purchased various supplies, and engaged workmen to perform repairs in various locations.
"[There was a] lack of evidence showing how much time the Trustee expended managing the Trust, separate from her duties as personal representative...."
Where, as here, the record shows that the time spent on trust matters was duplicative of the time spent on related probate matters, it is appropriate to deny duplicative fees. (See In re Vokal's Estate (1953) 121 Cal.App.2d 252, 257 [court refused to pay trustee fee for services already compensated by a probate proceeding].) Further, the court did not abuse its discretion by limiting Conkle's trustee fees to one percent of the trust income. (See Estate of Gump, supra, 128 Cal.App.3d at p. 116 ["While the court may properly consider comparable or customary charges within the private sector based upon a percentage of the value of the administered trust assets, it is not obliged to do so and is free to consider other relevant factors including, inter alia, the success or failure of the trustee's administration of the trust"].)
The trial court's denial of Conkle's request for extraordinary fees for time spent in defense of the lawsuit also was not an abuse of discretion. The litigation was a result of Conkle's failure to perform her duty to account to the beneficiaries and her efforts were expended defending herself, not the trust. (See Terry v. Conlan (2005) 131 Cal.App.4th 1445, 1461 [if litigation is specifically for the benefit of the trustee, the trustee must bear her own costs incurred and is not entitled to reimbursement from the trust]; see also In re Vokal's Estate, supra, 121 Cal.App.2d at p. 258 [where trustee breached his duty to the trust and has thereby brought on litigation against it, his expense must be borne out of his own property].) Moreover, a trustee is not entitled to reimbursement where, as here, there is no showing that the litigation benefitted the trust. (§ 15684; see Estate of Gump (1991) 1 Cal.App.4th 582, 605 [trustee is not entitled to expenses of litigation if trustee breached trust unless trustee's actions resulted in benefit to trust].)
Attorney Fees
We review a probate court's ruling on an application to use trust assets to pay attorney fees for abuse of discretion. (Kasperbauer v. Fairfield (2009) 171 Cal.App.4th 229, 234.)
As part of its supervision over trusts, a probate court has a special responsibility to ensure that fee awards are reasonable. (Donahue v. Donahue (2010) 182 Cal.App.4th 259, 269.) "Presented with a section 17200 petition to settle an account, 'the probate court has a duty imposed by law to inquire into the prudence of the trustee's administration.'" (Schwartz v. Labow (2008) 164 Cal.App.4th 417, 427.) "[A]ttorney fees deriving from probate court litigation are subject to concerns sufficiently unique, we believe, to distinguish them from fees generated in ordinary civil litigation." (Hollaway v. Edwards (1998) 68 Cal.App.4th 94, 98.)
The reasons for denying Conkle's request for extraordinary fees for time spent in this litigation apply as well to Lawrence's request for attorney fees. Where, as here, the trust was not benefitted by the litigation, there is no basis for recovery of expenses out of trust assets. (Whittlesey v. Aiello (2002) 104 Cal.App.4th 1221, 1230; see also Thomas v. Gustafson (2006) 141 Cal.App.4th 34, 44 ["'"[t]he underlying principle which guides the court in allowing costs and attorneys' fees incidental to litigation out of a trust estate is that such litigation is a benefit and a service to the trust" ...'"].) The time Lawrence spent on this litigation was necessitated solely by Conkle's failure to account to the beneficiaries and benefitted only Conkle herself, not the trust. (Estate of Gump, supra, 1 Cal.App.4th at p. 605.)
Conclusion
Conkle seeks compensation for services she previously performed and for which she was previously compensated in the probate matters. As the trial court pointed out, Conkle received fair compensation for her duties as personal representative. Her claim for extraordinary fees was denied because her services did not benefit the trust. The fees sought by her attorney not only were not beneficial to the trust, his efforts were found by the trial judge to be contrary to the settlors' wishes. We conclude that the record supports the findings of the trial court and that it did not abuse its discretion. Accordingly, the judgment is affirmed.
No costs are awarded on appeal.
We concur: YEGAN, Acting P.J., COFFEE, J.