The opinion
Filed 3/28/17
Prior 1/18/17 opinion vacated
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
ANTHONY PIZARRO, C077594
Plaintiff and Appellant, (Super. Ct. No. 34-2012-
00116836-PR-TR-FRC)
v.
MELISSA P. REYNOSO, as Trustee, etc.,
Defendant and Respondent;
KAREN BARTHOLOMEW,
Defendant and Appellant;
MIGUEL REYNOSO,
Real Party in Interest and Respondent.
APPEAL from a judgment of the Superior Court of Sacramento County, Matthew
J. Gary, Judge. Affirmed in part and reversed in part with directions.
William P. Roscoe, III for Plaintiff and Appellant Anthony Pizarro.
D.B. Hill and Dennis B. Hill for Defendant and Appellant Karen Bartholomew.
Law Offices of Jerilyn Paik, Jerilyn Paik, and Stephanie R. Poston for Defendant
and Respondent.
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Miguel Reynoso, in pro. per., for Real Party in Interest and Respondent.
This acrimonious family squabble erupted over the property of the deceased
patriarch and spilled over into the courts. The patriarch-settlor appointed defendant
Melissa P. Reynoso (a granddaughter of the settlor) as trustee. In this proceeding, the
trial court determined Reynoso was the most reliable and credible of the family members.
The trial court found that other family members were not credible.
Reynoso sold real property of the trust to Karen Bartholomew (a daughter of the
settlor). Plaintiff Anthony Pizarro (a grandson of the settlor) filed a petition for relief
against Reynoso concerning the sale of the real property. The court denied the petition
and ordered Pizarro and others to pay the trust’s attorney fees and costs.
On appeal, Pizarro contends the trial court erred in finding that Reynoso acted
properly as trustee. However, he fails to make a focused, organized, and coherent
argument for why we must reverse the order. We therefore conclude he forfeited the
argument.
Also on appeal, Pizarro and Bartholomew contend that the award of attorney fees
and costs against them was improper. We conclude that the attorney fees and costs were
properly and lawfully imposed under the trial court’s equitable power over the trust,
except to the extent the trial court made Pizarro and Bartholomew personally liable for
attorney fees and costs, rather than liable solely from their shares of the trust assets.
We therefore reverse the award of attorney fees and costs to the extent it imposed
personal liability. In all other respects, we affirm.
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BACKGROUND
Facts and Procedure
Willis Earl Jensen died in 2011, leaving his property, including real property, in a
trust. His children included plaintiff Keith Jensen (who is not a party to this appeal) and
defendant and appellant Karen Bartholomew. Bartholomew has two children: plaintiff
and appellant Pizarro and defendant and respondent Reynoso. Reynoso was named
trustee.
The real property at issue in this proceeding is located on El Verano Avenue in
Elverta. Reynoso sold the property to Bartholomew, as permitted by the trust.
Pizarro and Jensen filed petitions under Probate Code section 17200 against
defendants Reynoso (as trustee) and Bartholomew. Principally, the petitions alleged that
Reynoso breached her duties as trustee and that the sale of the property to Bartholomew
must be set aside. After trial, the court denied the petitions and awarded attorney fees
and costs, which award we discuss in more detail later.
Statement of Decision
Because there remains on appeal a degree of dispute concerning the facts, we
relate the statement of decision, which is the fact finder’s conclusion concerning the
facts. We quote (without quotation marks) the main body of the statement of decision:
1. The principal controverted issue presented herein is whether the sale of the
property located at 9021 El Verano Avenue, Elverta, CA, by the Trustee MELISSA
REYNOSO, to KAREN BARTHOLOMEW, was a “sham sale” as alleged by Petitioners
ANTHONY PIZARRO and KEITH JENSEN. It was not. The court finds that the sale
was a valid sale and made in good faith by the Trustee REYNOSO to the beneficiary
KAREN BARTHOLOMEW.
2. The two primary witnesses to the transactions involved in the sale were
MELISSA REYNOSO and KAREN BARTHOLOMEW. The court finds MELISSA
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REYNOSO’S testimony to be credible and convincing. The court finds KAREN
BARTHOLOMEW'S testimony to be, in large part, incredible and unconvincing.
3. On or about February 14, 2010, decedent and Settlor, Willis Earl Jensen,
executed his Will. On or about February 16, 2010, he executed his Living Trust. For
reasons that became obvious at trial, Mr. Jensen appointed his granddaughter, Trustee
MELISSA REYNOSO, as Successor Trustee to succeed him at his death, rather than
appointing any of his children or other grandchildren.
4. The Living Trust, by reference to the Last Will and Testament of Willis Earl
Jensen executed February 14, 2010, states,
“Property located at 9021 El Verano Avenue, Elverta, Ca. 95626 (parcel #202-
0020-012-0000) to be sold to (My Daughter) Karen Bartholomew or any of her children
at 100k below appraised value. If Karen or her children are unable to purchase property
then property to be sold for fair market value. After all debts and fees have been satisfied
monies are to be equally divided to my children, except as noted; If any of my children
are deceased then their share gets equally divided among their children and Marilyn
Kimbrell’s share gets equally divided among her children.”
5. The El Verano property appraised for $365,000. Therefore, the property could
be sold to either BARTHOLOMEW, REYNOSO, or PIZARRO for $265,000. The
decision of who to sell the property to was left to Trustee REYNOSO.
6. Settlor’s intent was for either BARTHOLOMEW, or REYNOSO, or
PIZARRO, to buy the property. The decision of who to sell it to was left to Trustee
REYNOSO.
7. Pursuant to the terms of the Trust, Trustee REYNOSO could have sold the El
Verano property directly from the Trust to herself. (Estate of Carrie Hazeltine Thompson
(1958) 50 Cal.2d 613, 616.) For reasons stated in her testimony, she did not. Instead, she
sold the property to her mother, BARTHOLOMEW, for $265,000.
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8. Prior to sale, Trustee REYNOSO gave proper Notice(s)[1] as required by law.
9. Prior to the sale, BARTHOLOMEW represented orally, and by confirming
letter from her counsel, that she expected a personal injury settlement to come in that
would be in excess of the $265,000 purchase price. Trustee REYNOSO agreed to help
her mother BARTHOLOMEW purchase the property. Trustee REYNOSO and her
husband, Miguel, applied for a loan from Wells Fargo Bank, which loan was approved.
BARTHOLOMEW would repay REYNOSO when her personal injury settlement monies
came in. The sale transactions included the following:
a. On October 23, 2012, Trustee REYNOSO executed a Grant Deed(s)
transferring El Verano from the Trust to herself and her husband Miguel. Concurrently,
she executed the corresponding Note and Deed(s) of Trust to WFB [Wells Fargo Bank].
This was done because the Wells Fargo Loan was not a Trust obligation; it was an
individual loan to REYNOSO and her husband.
b. The WFB loan closed on or about October 23, 2012, and the loan funds
of approximately $262,000[2] were immediately deposited into Trust on behalf of
BARTHOLOMEW. The Trust was whole.
c. On October 25, 2012, BARTHOLOMEW executed her Promissory Note
for $265,000 to REYNOSO and her husband Miguel. This was consistent with the
agreement REYNOSO and BARTHOLOMEW had by which REYNOSO would help
BARTHOLOMEW purchase the property by obtaining a loan in REYNOSO’s name
1 The trial court added plurals in parentheses because the El Verano property
straddled the Sacramento-Placer county line and required separate paperwork for each
side.
2 There is no dispute on appeal concerning the discrepancy between the $262,000
loan and the $265,000 sale price.
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(because BARTHOLOMEW could not qualify for a loan on her own) and then
BARTHOLOMEW would pay REYNOSO back when BARTHOLOMEW’S personal
injury settlement monies came in.
d. On October 26, 2012, after the WFB loan proceeds were secured and
placed in the Trust, REYNOSO and her husband Miguel executed Trust Transfer Deed(s)
transferring the property from themselves back to Trustee REYNOSO.
e. On October 26, 2012, concurrent with the Trust Transfer Deed(s)
identified in d. above, Trustee REYNOSO executed a Trust Transfer Deed(s) transferring
the property from the Trust to BARTHOLOMEW.
10. These transactions occurring, for all practical purposes, concurrently,
constitute a valid sale of the El Verano property from the Trustee to BARTHOLOMEW,
all in accordance with the provisions of the Trust. There is nothing “sham” about this
transaction as Petitioners PIZARRO and JENSEN allege. The Trust received the net
proceeds of sale of approximately $262,000 and title to the property passed from the
Trust to BARTHOLOMEW. That is a “sale”. The proceeds of the sale remain in the
Trust today.
11. From the point of sale to BARTHOLOMEW, the El Verano property was no
long[er] Trust property. The cash from the sale now sitting in the Trust is Trust property.
What occurred between BARTHOLOMEW and REYNOSO thereafter is “outside” of the
Trust. Trustee REYNOSO did not breach any duty owed as a Trustee herein.[3]
3 Although the trial court did not so find, it appears that Bartholomew was unable to
pay on the loan from Reynoso and her husband, whether from the proceeds of
Bartholomew’s personal injury action or any other source. As a result, the property
passed to Reynoso and her husband about 15 months after the sale of the property to
Bartholomew.
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DISCUSSION
I
Pizarro’s Contentions as to the Merits of the Order
While it is clear Pizarro does not like the order denying his petition, it is entirely
unclear what specific argument he believes will establish the order must be reversed. The
lack of clarity begins with the failure to provide a proper heading to the argument and
continues in the text, where he jumps around, criticizing the order but never providing a
solid foundation for an argument that we must reverse it. The lack of clarity and
coherence continues with his failure to give proper due to the trial court’s factual
determinations. We therefore conclude Pizarro forfeited his argument the trial court’s
order on the merits of the controversy must be reversed.
An appellant must “[s]tate each point under a separate heading or subheading
summarizing the point, and support each point by argument and, if possible, by citation
of authority.” (Cal. Rules of Court, rule 8.204(a)(1)(B); Opdyk v. California Horse
Racing Bd. (1995) 34 Cal.App.4th 1826, 1830–1831, fn. 4.) Failure to provide proper
headings forfeits issues that may be discussed in the brief but are not clearly identified by
a heading.
Pizarro’s briefing in this case presents a scenario similar to the briefing in Landa
v. Steinberg (1932) 126 Cal.App. 324 (Landa), in which case the court found the
appellant forfeited most of his arguments because he did not sufficiently apprise the court
of what argument he was trying to make. In Landa, the court wrote: “We have before us
in this case, which involves an appeal from the judgment in favor of plaintiff as well as
from an order denying a motion for new trial, an appellant’s brief of 106 pages. The
headings appearing therein are as follows: ‘Statement of Facts’, ‘Appellant’s Grounds of
Appeal’, ‘Excessive Damages’, ‘The Court Should have Allowed the Defendant to
introduce Evidence of Compensation Insurance’ and ‘Defendant Demurs to Plaintiff’s
Complaint’. Under the second heading, ‘Appellant’s Grounds of Appeal’, are listed
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specifications of error designated by letters of the alphabet, commencing with ‘a’ and
running to ‘u’. [Current rule 8.204(a)(1)(B) of the California Rules of Court] was
designed to lighten the labors of the appellate tribunals by requiring the litigants to
present their cause systematically and so arranged that those upon whom the duty
devolves of ascertaining the rule of law to apply may be advised, as they read, of the
exact question under consideration, instead of being compelled to extricate it from the
mass. An appellant’s brief which fails to comply is equally confusing to the respondent,
who labors under an unwarranted handicap in attempting to understandingly reply. There
is no reason—no great or insurmountable difficulty is presented by the rule—why there
should not be a compliance. It may possibly be that the heading ‘Excessive Damages’
and the one ‘The Court should have allowed the Defendants to introduce Evidence of
Compensation Insurance’ can be construed as a partial meeting of the requirements. For
that reason we shall take note of them instead of dismissing the appeal, but treat the
remainder of the brief for what it is, a presentation insufficient to require consideration or
comment.” (Landa, supra, at pp. 325-326.)
In 1933, the Supreme Court, referring to the rule discussed in Landa, wrote: “This
rule has been in effect for many years and its requirements have been repeatedly called to
the attention of the members of the bar.” (Cunnyngham v. Mason-McDuffie Co. (1933)
218 Cal. 196, 198.)
The strength and wisdom of this rule is that it nudges and cajoles the brief writer
into focusing and specifying the precise reason we must reverse the trial court’s action.
That did not happen here. Pizarro discusses what he perceives as problems with the
order, but he fails to organize the discussion into the type of argument that leaves the
court with an understanding of his position, instead of just a vague idea of his thoughts.
In Pizarro’s opening brief, the part enumerating his arguments on appeal bears the
following headings:
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“III. ARGUMENT AND SUMMARY OF ARGUMENT
“A. Summary of Argument
“B. Standards of Review
“C. Statement of Decision and Argument
“IV. BAD FAITH LITIGATION
“V. CONCLUSION”
These headings are entirely inadequate to raise any issue on appeal concerning the
merits of the order. For that reason, Pizarro forfeited any issue he intended to raise on
appeal but failed to raise properly according to the Rules of Court. (Cal. Rules of Court,
rule 8.204(a)(1)(B).)
As did the appellant in Landa, Pizarro also includes a list of his arguments, not as
headings but just as a list:
“1. The uncontested facts, both as stipulated and found, constitute multiple
breaches of fiduciary duties by the trustee.
“2. The uncontested facts, both as stipulated and found, do not constitute a sale
of the El Verano real property by the trustee to Karen Batholomew in accordance with
the provisions of the Willis Earl Jensen Trust.
“3. The uncontested facts, both as stipulated and found, establish that [Pizarro]
did not commence and conduct litigation (i) that was unfounded and frivolous, or (ii) in
bad faith.
“4. The trial court error in assessing fees and costs against [Pizarro] personally
beyond any charge of an interest in the trust? [Sic].”
This list precedes a discussion of the standard of review and then a muddle of
various statements of fact and law under the heading “Statement of Decision and
Argument.” It is not our responsibility to act as counsel for Pizarro and attempt to
arrange his arguments coherently. In addition to the failure to provide proper headings,
Pizarro’s failure to provide coherent organization to his arguments forfeits consideration
9
of those arguments on appeal. (See Evans v. CenterStone Development Co. (2005) 134
Cal.App.4th 151, 165.)
Pizarro’s failure to present complete and coherent headings and legal arguments is
significant because, as the appellant, it is his burden to overcome the presumption on
appeal that the underlying order is correct. (Denham v. Superior Court (1970) 2 Cal.3d
557, 564 [judgment of lower court presumed correct; error must be affirmatively
shown].) Pizarro’s manner of briefing does not overcome that presumption.
In any event, what we can decipher of Pizarro’s arguments is without merit.
Pizarro claims that (1) Reynoso, as trustee, did not sell the El Verano property to
Bartholomew but instead to herself and her husband and (2) selling the property to herself
and to her husband violated the provisions of the trust. Neither of these claims has merit.
First, Pizarro’s argument that Reynoso (as trustee) sold the El Verano property to
herself and to her husband and not to Bartholomew fails. While the financing
arrangement was creative, it was honest. The flexibility inherent in the trust allowed for
how Reynoso accomplished the sale to Bartholomew, including the financing for the sale.
As the trial court noted, the transactions made within the short four-day period, all with
the aim to provide financing for the purchase to Bartholomew, which financing she could
not otherwise obtain, were, when viewed reasonably and practically, concurrent
transactions constituting a sale of the El Verano property by the trust to Bartholomew.
Pizarro offers no authority for the proposition the only way the trial court could view this
creative financing arrangement is transaction by transaction when it determined whether
it constituted a sale of the property to Bartholomew. It would elevate form over
substance to reject the financing arrangement as a violation of trust provisions when the
transactions achieved an end permissible under the trust. (See Knapp v. Doherty (2004)
123 Cal.App.4th 76, 95 [elevating form over substance unjustified].)
And second, even if Pizarro were correct that the trial court erred by finding
Reynoso sold the El Verano property to Bartholomew and that Reynoso instead sold the
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El Verano property to herself and her husband, Pizarro’s argument would still not prevail
because he provides no authority that including Reynoso’s husband as a buyer violated
the trust provision allowing the trustee to sell the property to Bartholomew, Reynoso (in
her personal capacity), or Pizarro. (See In re S.C. (2006) 138 Cal.App.4th 396, 408
[appellant forfeits claim of error by failing to cite authority].) We view it as rather
unremarkable that, had Reynoso decided to sell the property to herself, her husband could
be included in the transaction as a buyer. Such a sale would still be to Reynoso.
Nonetheless, Pizarro argues, with no cited authority, that Reynoso “sold the property to
herself and her husband at variance with the terms of the trust.” That legal conclusion is
not self-evident. And, without authority, the argument is unpersuasive.
One last element of Pizarro’s argument bears comment. In his opening brief,
Pizarro makes various factual allegations concerning the transactions, which allegations
are at odds with the trial court’s determinations as the finder of fact. For example,
Pizarro claims Reynoso “[p]ressured and induced [Bartholomew] to sign papers and
declarations asserting she brought [sic] the trust property by secretly advising she could
live in the property with [Reynoso] and her family.” As support for this “fact,” Pizarro
cites only to the record of Bartholomew’s testimony, even though the trial court expressly
found Bartholomew’s testimony “in large part, incredible and unconvincing.”
Such disregard for the facts as found by the trial court also results in a forfeiture of
arguments on appeal. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)
Pizarro forfeited any and all arguments on appeal as to the merits of the trial
court’s order concerning the sale of the El Verano property.
II
Award of Attorney Fees
The trial court exercised its equitable power over trusts within its jurisdiction by
ordering attorney fees and costs against Bartholomew and Pizarro. The court’s equitable
power includes the power to charge attorney fees and costs against a beneficiary’s share
11
of the trust if that beneficiary, in bad faith, brings an unfounded proceeding against the
trust. (Rudnick v. Rudnick (2009) 179 Cal.App.4th 1328, 1335 (Rudnick).) On appeal,
Bartholomew and Pizarro contend the court exceeded its equitable powers in ordering
attorney fees and costs. We conclude the trial court’s equitable power over the trust
supports its award of attorney fees and costs from the beneficiaries’ share of the trust
assets, but the same equitable power does not support making Bartholomew and Pizarro
personally liable for attorney fees and costs to be paid for with funds that are not trust
assets.
The trial court’s award of attorney fees stated: “JENSEN, BARTHOLOMEW,
and PIZARRO are jointly and severally liable for REYNOSO[’s] attorneys’ fees and
costs incurred herein. These fees shall first be charged against the estate shares of
JENSEN and BARTHOLOMEW due to them from the Trust. To the extent that
REYNOSO’s fees and costs exceed such shares, JENSEN, PIZARRO, and
BARTHOLOMEW, jointly and severally, shall be personally liable for the unpaid
portion of the fees.”
The trial court relied on Rudnick when it ordered attorney fees and costs against
Bartholomew and Pizarro. In Rudnick, three beneficiaries of a trust filed objections to a
petition to approve a sale of real property by the trustee after a majority of the
beneficiaries voted to approve the sale. The trial court overruled the objections and
approved the sale. (Rudnick, supra, 179 Cal.App.4th at pp. 1330-1332.) After approval
of the sale, the trustee filed a motion to charge the trust’s attorney fees and costs against
the objectors’ share of the trust’s assets, based on the objector’s bad faith in objecting to
the petition. (Id. at p. 1332.) The trial court granted the motion because the objectors’
actions were not in good faith but instead were to disrupt the sale. The objectors “created
unnecessary delays and asserted disingenuous arguments causing the [trust] to incur
significant legal expenses.” (Id. at pp. 1332-1333.)
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The Rudnick objectors appealed, and the Court of Appeal affirmed. The Rudnick
court rejected the objectors’ contention that the trial court could not impose an award of
attorney fees and costs because there was no statutory authority for the award. The court
concluded that the lower court did not award attorney fees and costs under its statutory
supervisory powers over the action, but instead under the court’s “broad equitable powers
that a probate court maintains over the trusts within its jurisdiction.” (Rudnick, supra,
179 Cal.App.4th at p. 1333, original italics.)
The holding of Rudnick was summarized in that decision as follows: “[W]hen a
trust beneficiary instigates an unfounded proceeding against the trust in bad faith, a
probate court has the equitable power to charge the reasonable and necessary fees
incurred by the trustee in opposing the proceeding against that beneficiary’s share of the
trust estate.” (Rudnick, supra, 179 Cal.App.4th at p. 1335.)
The Rudnick court relied on Estate of Ivey (1994) 22 Cal.App.4th 873 (Ivey),
where the Court of Appeal similarly held that the trial court could exercise its equitable
powers over trusts by charging the trust’s attorney fees and costs against the trust share of
those who instituted an unreasonable and bad faith action against the trust.
In Ivey, several beneficiaries of a trust challenged the actions of the trustee by
filing objections to the trustee’s account. (Id. at p. 877.) The trial court held that the
challenge was frivolous and in bad faith and therefore ordered the trustee to pay the
trust’s attorney fees and costs out of the challengers’ share of future trust distributions.
(Id. at p. 878.)
The Ivey challengers appealed, and the Court of Appeal upheld the trial court’s
exercise of its equitable powers. The Ivey court reasoned that the trial court’s inherent
equitable power over trusts allowed it to protect the trust assets for the benefit of the
unoffending beneficiaries by charging the trust’s attorney fees and costs against the trust
interest of the offending beneficiaries, those who frivolously and in bad faith instituted an
action to challenge the actions of the trust. (Ivey, supra, 22 Cal.App.4th at pp. 882-886.)
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A. Bartholomew
Bartholomew’s challenge to the award of attorney fees and costs is that she did not
(1) institute a proceeding in this matter, (2) take an unfounded position, and (3) act in bad
faith. We conclude that the record supports the trial court’s exercise of its equitable
power to charge attorney fees and costs against Bartholomew’s share of the trust.
However, to the extent the trial court required Bartholomew personally to pay attorney
fees and costs over and above the funds available from her share of the trust proceeds, the
court exceeded its equitable powers. The latter conclusion is discussed in the next part in
connection with Pizarro’s contention concerning the award.
1. Background
Concerning the award of fees against Bartholomew, the court wrote the following
in the statement of decision:
“Bad Faith of BARTHOLOMEW: BARTHOLOMEW wanted to buy El Verano
even before Settlor died. Prior to Settlor’s death, BARTHOLOMEW and Settlor
discussed a purchase price of $400,000. After Settlor’s death, and pursuant to the terms
of the Trust, Trustee REYNOSO agreed to sell the property to BARTHOLOMEW. At
the time, BARTHOLOMEW fully understood that she was buying the property for
$265,000, that REYNOSO was securing the loan, and that BARTHOLOMEW would pay
REYNOSO back on the Note when BARTHOLOMEW’s personal injury monies came
in. BARTHOLOMEW was fully informed and fully on board with the entire plan
through October 2013. The property was, in fact, sold to BARTHOLOMEW. When the
litigation began, BARTHOLOMEW ‘sided’ with REYNOSO. She did so because what
REYNOSO was saying was, in fact, the truth. But somewhere along the way, and this
court believes that it had to do, at least in part, with JENSEN, BARTHOLOMEW turned
on REYNOSO. BARTHOLOMEW turned so badly that she began, knowingly and
willingly, offering false testimony in Declaration, at Deposition, and at trial, all in an
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effort to manipulate the outcome of the litigation. Knowingly offering false evidence in
litigation is a ‘bad faith’ litigation tactic.
“Legal Authority for Fees: Rudnick v. Rudnick (2009) 179 Cal.App.4th 1328.”
2. Analysis
The trial court’s equitable power over trusts gives the court authority to charge
attorney fees and costs against a beneficiary’s share of the trust estate if the beneficiary,
in the words of Rudnick, “instigate[ed] an unfounded proceeding against the trust in bad
faith.” (Rudnick, supra, 179 Cal.App.4th at p. 1335.) Bartholomew argues that attorney
fees and costs cannot be charged against her share of the trust estate because (1) she did
not bring a proceeding in this matter, (2) she did not take an unfounded position, (3) she
did not act in bad faith, and (4) she is not a party to this action. We find no merit in the
arguments.
First, Bartholomew argues that she did not instigate or bring an action against the
estate and therefore cannot be charged for attorney fees and costs under Rudnick.
However, we conclude that whether Bartholomew instigated or brought an action against
the estate is not material because the court’s broad equitable powers over trust assets are
sufficient to justify an award of attorney fees and costs against any trust beneficiary who
takes an unfounded position and litigates in bad faith, causing the trust to incur fees and
costs.
In Rudnick, the offending beneficiaries were the ones who instigated the action
against the trust, objecting to the sale of trust assets. Therefore, it was appropriate in the
court’s holding to refer to that fact, stating, “when a trust beneficiary instigates an
unfounded proceeding against the trust in bad faith,” attorney fees and costs may be
charged against the offending beneficiary’s share of the trust estate. But we do not read
that language as limiting the broad equitable powers of the court to circumstances in
which the offending beneficiary instigated the action. The analysis in Rudnick supports
our position.
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The Rudnick court justified its holding by quoting Ivey, as follows: “ ‘ “Courts
having jurisdiction over trust administration have the power to allocate the burden of
certain trust expenses to the income or principal account and not infrequently do so in
connection with accountings or suits relating to the administration of the trust.
Sometimes this authority is stated in statutory form, but it exists as part of the inherent
jurisdiction of equity to enforce trusts, secure impartial treatment among the
beneficiaries, and to carry out the express or implied intent of the settlor.” [Citation.]
“Where the expense of litigation is caused by the unsuccessful attempt of one of the
beneficiaries to obtain a greater share of the trust property, the expense may properly be
chargeable to that beneficiary’s share.” [Citations.]’ ([]Ivey, supra, 22 Cal.App.4th at p.
883, italics added.)” (Rudnick, supra, 179 Cal.App.4th at p. 1334.)
Nothing in this analysis, with which we agree, requires instigation of an action
against the trust by the offending beneficiary as a prerequisite to charging attorney fees
and costs against the offending beneficiary’s share of the trust estate. Instead, the court
has broad equitable powers to protect the trust estate, and charging attorney fees and
costs against the offending beneficiary’s share of the estate regardless of whether the
offending beneficiary instigated the action against the trust is consistent with the court’s
broad equitable powers.
Second, as the trial court held, Bartholomew took an unfounded position in
supporting the contention that the sale of the El Verano property was a sham sale. As we
discussed above, the transactions involved in the sale of the El Verano property to
Bartholomew allowed her to obtain financing she otherwise would not have been able to
get. Viewed reasonably and practically, the virtually concurrent transactions constituted
a sale of the El Verano property by the trust to Bartholomew and, in any event, Reynoso
was free to sell the property to herself. Furthermore, basing one’s assertions on false
testimony, as did Bartholomew here, is, by definition, taking an unfounded position.
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Third, Bartholomew acted in bad faith. She testified falsely in her attempt to get
the trial court to invalidate the sale of the property.
Fourth and finally, Bartholomew is a party to this action. She claims she cannot
be charged attorney fees and costs in this proceeding because she is merely a percipient
witness, not a party. That claim is frivolous. She was named as a defendant in Pizarro’s
petition, appeared at trial representing herself, and argued her position to the court.
The trial court’s broad equitable power to protect trust assets supported the court’s
charge of the trust’s attorney fees and costs against Bartholomew’s share of the trust.
B. Pizarro and Bartholomew–Personal Liability
On the other hand, the award against Pizarro was not justified by the trial court’s
equitable powers over the trust because the award is against him personally, not against a
share of the trust. He does not have a share of the trust. Likewise, imposing personal
liability for attorney fees and costs on Bartholomew, in addition to charging her share of
the trust assets, was not justified by the court’s equitable powers over the trust.
1. Background
Concerning the award of fees against Pizarro, the court wrote the following in the
statement of decision:
“PIZARRO[’S] complaint is, and has been, that the property should have been
sold to him instead of BARTHOLOMEW. At trial, PIZARRO testified that ‘[he] wanted
to buy the property’, that, ‘in his mind’, and ‘according to the will and trust’, he had ‘the
right’ to buy the property, that ‘[he] knew that his mo[ther] [BARTHOLOMEW] had no
money’, and that ‘[he] didn’t have no chance to buy it’, because ‘they never responded to
nothing I wrote them or nothing.’ [Citation to reporter’s transcript.] He further
complained that ‘[REYNOSO] didn’t sell [the property] to [BARTHOLOMEW] – [his]
mother, [REYNOSO] sold it to herself pretty much. That’s the way [he] takes[s] it.’
‘[His] position is [REYNOSO] used [his] mom as a front to buy it.’ [Citation to
reporter’s transcript.]
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“The latter complaint, that ‘REYNOSO sold the property to herself using his mom
as a front to buy it’, is based on the transaction identified in paragraphs 9.a. through e. [of
the statement of decision]. Throughout the litigation, PIZARRO has referred to this as a
‘sham sale’. As stated above, this was not a ‘sham sale’ and no reasonable person could
conclude the same. Neither is this a ‘conspiracy’ between REYNOSO and
BARTHOLOMEW, or ‘self-dealing’ by REYNOSO, as alleged by PIZARRO in his
Amended Petition filed April 18, 2013. There is no evidence that ‘Trustee [REYNOSO]
really intended to sell the property to herself and her husband’ as alleged by PIZARRO.
There is no evidence that BARTHOLOMEW was a ‘straw buyer’ as alleged by
PIZARRO. Again, if REYNOSO’s true intent was to buy the property herself, she could
have easily, and legally, done so straight away. This was obvious to any reasonable
person who chose to view the circumstances with reason. What REYNOSO was doing is
exactly what she said she was doing; selling the property to her mother
BARTHOLOMEW just as the Settlor had expressed in the Trust.
“Pizarro simply did not like the fact that the property was sold to someone other
than himself. PIZARRO did not have ‘a right’ to buy the property as he maintained
throughout the litigation. Who to sell the property to, as between BARTHOLOMEW,
REYNOSO, and PIZARRO, was left to REYNOSO. PIZARRO complains that the [sale]
to BARTHOLOMEW is wrong because ‘[he] knew that his mo[ther]
[BARTHOLOMEW] had no money’. True. BARTHOLOMEW had to borrow the
money from REYNOSO. But then, PIZARRO ‘had no money’ too. He had to borrow
from his step-mother Violet. PIZARRO complains that ‘[REYNOSO] didn’t sell [the
property] to [BARTHOLOMEW] – [his] mother, [REYNOSO] sold it to herself pretty
much; that [REYNOSO] used [his] mom as a front to buy it.’ Factually, legally, and
logically, PIZARRO’s position is wrong.
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“From the start, PIZARRO had no basis in fact, law, or reason to litigate. Yet, he
chose to commence and maintain, through trial, a ‘sham sale’ theory. Like JENSEN, this
theory is nothing more than legal ‘gotcha’. This is ‘bad faith’ litigation.
“Further, the court finds that, like BARTHOLOMEW, PIZARRO offered false
testimony at trial. The court does not believe PIZARRO when he testified that he
intended to buy El Verano and live there. In fact, PIZARRO was intending to buy the
property and ‘flip it’ for the $100,000 (or more) gain. PIZARRO borrowed $265,000
from his step-mother Violet. The $265,000 was deposited into a joint account held by
PIZARRO and Violet at Ump[q]ua Bank. There was no note, no deed of trust, no fixed or
firm agreement concerning this ‘financing’ or payment. PIZARRO had been living in the
Colfax area with his immediate family for the past 13 or 14 years. REYNOSO testified
that JENSEN told her that PIZARRO intended to buy the property and sell it. When
asked on cross-examination, ‘Did you tell your Uncle Keith [JENSEN] at some point you
were going to buy El Verano and you would flip it?’, PIZARRO answered, ‘I don't – I
don’t believe telling him that, I don’t recall telling him, you know.’ [Citation to
reporter’s transcript.] This testimony was less than compelling. PIZARRO and
REYNOSO both testified that PIZARRO asked REYNOSO to buy his interest out for
$7,500.00 because ‘[he] didn’t want dealing with them’ (JENSEN and others). In fact,
PIZARRO was intending to ‘flip’ the property for the $100,000 gain. But because the
Settlor clearly wanted the property to stay in the family, and this would occur if the
property was sold to BARTHOLOMEW or REYNOSO, but would not occur if sold to
PIZARRO, PIZARRO changed his position to suit his litigation tactics and then
offered false testimony at trial. That, too, is ‘bad faith’.
“Legal Authority for Fees: Rudnick v. Rudnick (2009) 179 Cal.App.4th 1328.”
Here, it is undisputed that, without a right to purchase the El Verano property and
no other distribution from the trust, Pizarro is not a trust beneficiary.
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2. Analysis
Neither Rudnick nor any other case supports the reach of the trial court’s award of
attorney fees and costs beyond a beneficiary’s share of the trust. The effect of Rudnick
and Ivey is to allow the trial court, in its equitable jurisdiction over trusts, to direct that
the share of the trust assets that would be distributed to an offending beneficiary would
instead be used to pay attorney fees and costs to the benefit of the trust, specifically to the
benefit of those trust beneficiaries who did not improperly cause the trust to expend funds
for attorney fees and costs. Ordering Pizarro and Bartholomew to potentially pay
attorney fees and costs out of their own pockets is beyond the equitable power of the
court over trusts because the court has no equitable jurisdiction over that money. We
therefore strike the part of the award assessing personal liability for attorney fees and
costs against Pizarro and Bartholomew.
C. On Remand
Reynoso contends, even if we cannot uphold the award of attorney fees and costs
under the court’s equitable powers over trusts, we should affirm based on the court’s
statutory power to impose an award of attorney fees and costs under Probate Code
sections 15642, subdivision (d) and 17211, subdivision (a). We decline because the trial
court did not consider the issues specific to ordering attorney fees and costs under those
provisions.
Probate Code section 15642, subdivision (d) requires not only a finding of bad
faith but also consideration of the settlor’s intent as to a petition for removal of the
trustee.4 Probate Code section 17211, subdivision (a) allows an award of attorney fees
4 Probate Code section 15642, subdivision (d) 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.”
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and costs against a beneficiary if the beneficiary brought a contest against the trustee’s
account without reasonable cause and in bad faith.5
The trial court relied exclusively on its equitable power over trusts and did not
invoke the statutory power and procedures and make the determinations under any
statutory means of imposing an award of attorney fees and costs. We therefore reverse
and remand as to personal liability for attorney fees and costs. On remand, the trial court
may consider whether to impose an award of attorney fees and costs under statutory
authority.6
DISPOSITION
The part of the order making Bartholomew and Pizarro personally liable for
attorney fees and costs to the extent that Reynoso’s attorney fees and costs exceed the
trust shares of Jensen and Bartholomew is reversed. In all other respects, the order is
affirmed, and the matter is remanded for further proceedings consistent with this opinion.
5 Probate Code section 17211, subdivision (a) provides: “If a beneficiary contests
the trustee’s account and the court determines that the contest was without reasonable
cause and in bad faith, the court may award against the contestant the compensation and
costs of the trustee and other expenses and costs of litigation, including attorney’s fees,
incurred to defend the account. The amount awarded shall be a charge against any
interest of the beneficiary in the trust. The contestant shall be personally liable for any
amount that remains unsatisfied.”
6 This appeal and our disposition do not affect the award of attorney fees and costs
against Keith Jensen, who did not perfect his appeal by paying the statutory filing fee.
(Cal. Rules of Court, rule 8.140(b).)
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Reynoso is awarded her costs on appeal against Bartholomew only. Bartholomew and
Pizarro will bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(4).)
NICHOLSON , Acting P. J.
We concur:
MAURO , J.
MURRAY , J.
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