Probate: Case Goes To The 4/3 DCA A Second Time For Trustee’s Attorney Fees With 4/3 DCA Overturning Lower Court’s Ruling To Reduce

4/3 DCA Declares The Reduction Undermined And Improperly Limited The Authority Of The Trustee To Pay Attorney Fees And Was An Abuse Of Discretion.

            Well, folks, in the famous words of Yogi Berra, “It’s déjà vu all over again.” 

            In a July 15, 2016 post, we reported on Shelton v. Larson, and now report on that case, again – this time as Kote v. Larson, Case No. G056820, (4^th Dist., Div. 3 January 27, 2020) (unpublished).

            Three siblings – Dana, Sharon, and Daniel – are beneficiaries under their deceased parents’ revocable trust. 

            In the original case, Sharon and Daniel successfully had Dana removed as trustee and her request for trustee fees/costs and attorney fees/costs denied – along with a requirement that she disgorge certain attorney fees, trustee fees, and costs already paid.  Dana successfully appealed the lower court’s order as to the fees/costs – with the 4/3 DCA reversing and remanding because trustees generally are awarded attorneys’ fees in contests involving accountings or beneficiary objections, unless some bad conduct is involved.  As bad conduct was not involved, some fees were justified.

            In the current case, heard by a different lower court judge, Sharon and Daniel successfully had the Successor Trustee – a professional trustee appointed by the lower court in the first case – removed and a reduction to the already paid trustee fees and attorney fees/costs.  Additionally, the lower court appointed Sharon as new successor trustee without requirement that she obtain a bond, and – on its own motion – ordered the Trust be court supervised.  Successor Trustee successfully appealed the lower court’s order as to the fees/costs and bond requirement – with the 4/3 DCA reversing and remanding.

            As to the bond issue - Probate Code 15602(a) requires a bond for a trustee not named in the trust excepting compelling circumstances.  The record did not reflect any compelling circumstances – so a remand for determination as to whether any exist, and an order for Sharon to obtain the bond if none exist. 

            As to the trustee’s fees - the lower court had reduced by about $12,466.18 based on its erroneous finding that there was no agreement for the Successor Trustee to charge a one percent (of the Trust assets value) fee.  The record clearly demonstrated that Successor Trustee presented a fee schedule that included the one percent fee to Sharon and Daniel before he was appointed.  Sharon and Daniel included that fee schedule as part of their Removal Petition and complained about the amount of trustee fees based on the fee schedule.

            As to the reduction in trustee’s attorney fees/costs – although the lower court found the billings to demonstrate reasonableness in time spent, matters handled, and hourly rates charged, it reduced by roughly $5,000 based on some ambiguities and vagueness in some of the descriptions of work performed.  In a 3-0 opinion authored by Justice Thompson, the 4/3 DCA found that “[r]eduction of the attorney fees on that basis had the effect of undermining and improperly limiting the authority of the trustee to pay them and was an abuse of discretion” in the context of this case.  The lower court was not reviewing a petition to pay attorney fees but was reviewing an accounting.  Successor Trustee had the power to retain and pay attorneys from the trust property, and had done so.  The attorneys hired by Successor Trustee to aid in administering the trust were entitled to reasonable fees paid from the trust assets (Kasperbauer v. Fairfield (2009) 171 Cal.App.4^th 229, 235) [reviewed in our January 27, 2009 post]. 

            Finally, as to the removal of Successor Trustee and placing the Trust under court supervision, the 4/3 DCA found no abuse of discretion nor error.  It was in the best interest of the Trust to remove Successor Trustee based on the substantial hostility between him and the beneficiaries, and the court holds authority to make necessary orders to supervise administration of a Trust.

            Interestingly, it seems the Successor Trustee may have missed a key argument.  As the 4/3 DCA pointed out, “The court did not reserve the issue of removal of the trustee or give notice it would make a ruling on it in the December Minute Order setting the 2018 hearing, thus raising the due process issue of lack of notice.”  However, because Successor Trustee did not argue that on appeal, nor raise it in his objections to the lower court’s 2018 Tentative Decision, he waived any potential due process claim.  This, too, applied to the appointment of a new successor trustee and court supervision of the Trust.

            So that’s it, folks.  Maybe there will now be a final resolution of this case without need for additional appeal.  But you know what Yogi Berra would say . . .  “It ain’t over ‘til it’s over.”