IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE
December 7, 2010
ESTATE OF IMELDA N. FERNANDEZ, DECEASED. KENNETH J. CUMMINS, PETITIONER AND RESPONDENT,
SAN DIEGO FINANCIAL SERVICES, INC., ET AL., OBJECTORS AND APPELLANTS.
Appeal from orders of the Superior Court of Orange County, Marjorie Laird Carter, Judge. (Super. Ct. No. A223500)
The opinion of the court was delivered by: O'leary, Acting P. J.
Estate of Fernandez
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Imelda Norman Fernandez died intestate on November 28, 2003. Soon thereafter, Kenneth Cummins was appointed special administrator of the estate. For several years there was an abundance of litigation in this probate case (the trial court's register of actions is 146 pages long). Simply stated, the decedent's three adult children were each entitled to a one-third interest in the estate, but the estate had many creditors and tax problems that had to be sorted out before the estate could be distributed. To avoid the sale of assets, one of the heirs, Linda Grant, loaned the estate $500,000, and assigned a partial interest in her portion of the estate to her lender as security. In October 2008, the court entered a final order distributing the estate to the three heirs. The court specified Grant's share of the estate was "subject to" the rights of her creditors, and it reserved jurisdiction over allocation of Grant's share among those creditors.
This appeal was filed by San Diego Financial Services, Inc. (SDFS), one of Grant's creditors, who had been assigned a partial interest in Grant's share of the estate. It raises several complaints about the court's orders: (1) the court should have distributed Grant's share outright to SDFS; (2) the court erroneously deducted administrative expenses from the balance due on Grant's loan to the estate; (3) the court improperly failed to equally allocate costs between the heirs; (4) Cummins and his special counsel should not have been awarded extraordinary fees. Finding none of SDFS's contentions have merit, we affirm the court's orders.
The following facts are undisputed: In 2003, Fernandez died intestate. She was survived by three adult children, Lee Trianae Richardson (Lee), Harry Fernandez (Harry), and Grant. At the time of her death, Fernandez possessed: (1) a 31-unit apartment complex in Santa Ana, called the Garden Terrace Apartments; and
(2) real property in Palm Springs at 1552 Ridge Road (the Ridge Road property). However, there were no liquid assets and several liabilities. Specifically, there were numerous third party creditors, claiming they were owed approximately $400,000. Fernandez had not filed income tax returns for several years preceding her death.
Before she died, Fernandez had three lawsuits pending, which added to the work that needed to be done in the case. For example, the estate had a claim in Grant's bankruptcy. However, the bankruptcy trustee claimed ownership of the trust deeds encumbering the Garden Terrace Apartments and ownership of two limited liability companies (in which Fernandez owned an interest) and the Ridge Road property. The bankruptcy trustee had filed an adversary proceeding against decedent in the bankruptcy court, and a creditor's claim in the probate case (seeking between $2,525,000 and $5,525,000). The estate also had a claim against Lee and her daughter Trianae Richardson (Trianae), for recovery of the Garden Terrace Apartments. These apartments were in severe disrepair, but the heirs adamantly opposed sale of the property.
In February 2004, Cummins was appointed special administrator of decedent's estate. Thereafter, he qualified as administrator and he was issued letters of administration giving him limited authority to act under the Independent Administration of Estates Act. (Prob. Code, § 10400 et seq.) Cummins hired probate attorney John Duncan to handle matters relating to administration of the estate, such as taxes, creditor claims, and litigation. He hired another attorney, Howard Bidna, to serve as special counsel to litigate matters involving Grant's bankruptcy and the claims made by the bankruptcy trustee.
In July 2004, the parties executed a settlement agreement that resolved all litigation and claims between the estate and Grant's bankruptcy. As one of the settlement terms, the probate court received title to the Ridge Road property. Another term provided Grant "shall make monthly payments of $3,500 to the Administrator to enable the Administrator to keep current the mortgage against the Ridge Road Property (Subject to a claim by the [d]ebtors to a credit in the Fernandez Probate Estate for such sums.)" The agreement stated Grant reserved her right to make "a claim for credit for monthly payments made by the [d]ebtors to the Administrator with respect to the Ridge Road Property pursuant to section 3.02."
The following year, in June 2005, Grant loaned the estate $500,000 under the following terms: (1) no interest; (2) the money was loaned in lieu of selling the Ridge Road property; (3) the money was to be used for estate administration; and (4) the money had to be accounted for in the course of administration.
Grant borrowed the money from Talman & Talman, Inc., dba Bankers Hill Capital (Talman) and she assigned to it a partial interest in her inheritance from the estate. The assignment provided, "For valuable consideration . . . Grant does hereby assign and transfer to Talman . . . all her rights, title and beneficial interest in and to the above referenced [e]state and authorizes and directs that any distributions otherwise due her shall be distributed instead to said Talman . . . . It is provided, however, that if at the time of distribution, those certain Open Lines of Credit Agreements dated July 18, 2005 in the amount of $1,261,000 and $600,000 respectively are paid in full, then this assignment shall be of no further force and effect."
Talman later assigned and transferred a portion of this interest in the estate to SDFS. This second document provided Talman assigned to SDFS its interest in the estate "up to the amount of $600,000, plus any unpaid interest, late charges and advances due . . . . pursuant to that Open Line of Credit Agreement and Deed of Trust signed by . . . Grant . . . . It is provided, however, that if at the time of any such distribution from said [e]state, said $600,000 Open Line of Credit Agreement has been paid in full, then this assignment shall be of no further force and effect." Both assignments were filed the same day with the probate court.
Grant failed to make the $3,500 monthly mortgage payments as agreed upon in the settlement of her bankruptcy. Cummins petitioned the court for instructions. In September 2006, Grant stipulated, and the probate court ordered, the balance of Grant's $500,000 loan to the estate could be reduced at the rate of $3,500 per month for costs and expenses relating to the Ridge Road Property.
During the pendency of the probate case, two creditors served notices of levy against Grant's interest in the estate. SDFS obtained a judgment against Grant and her husband in superior court in the amount of $746,117.09. SDFS served Cummins with a notice of levy issued pursuant a writ of execution on the money judgment. The notice of levy was against Grant's interest both as a "beneficiary or a creditor of the estate." Leonard and Julian Eastwood (the Eastwoods) also obtained a judgment against Grant and her husband in superior court in the amount of $640,615. The Eastwoods served a notice of levy and described the property being levied on as "any and all amounts due or to become due either as a beneficiary or a creditor of the" Fernandez estate.
After nearly five years of court proceedings, all the estate's creditor claims were resolved, the estate taxes were paid, and Fernandez's income tax issues were solved. In addition, the bankruptcy claims were satisfied. The estate had assets valued at nearly $5 million dollars. In the court's final order, the heirs received in kind preliminary distributions of the Garden Terrace Apartments, the Ridge Road property, and some cash, after the estate paid administrative bills to professionals and repaid Grant's loan. The court reserved jurisdiction to adjudicate the respective rights of the competing interests (between SDFS and the Eastwoods) with respect to Grant's share of the estate.
In this appeal, SDFS alleges the probate court erred: (1) in failing to distribute Grant's interest in the estate directly to SDFS pursuant to the assignment; (2) in deducting administrative expenses of the estate from the balance due on the loan from Grant to the estate; (3) in failing to equally allocate the carrying costs of the Ridge Road property between the three heirs; and (4) in awarding the administrator, his special counsel, and his probate counsel extraordinary fees. We will address these claims in turn.
A. Was the court required to directly distribute Grant's portion of the estate to an assignee?
SDFS asserts the court's final October 1, 2008 order is contrary to well settled law regarding assignments in probate estates. In distributing the property and assets of the estate, the final order directs Grant's undivided one third interests in the estate property and assets to be distributed directly to Grant, "subject to" any interests of SDFS and the Eastwoods. The court reserved jurisdiction to determine the respective rights of SDFS and the Eastwoods.
SDFS offers several reasons why this ruling is incorrect: (1) the undisputed evidence proves Grant's assignment to SDFS was valid and fair; (2) Cummins initially requested the court distribute Grant's interest to the assignee SDFS; (3) Cummins changed his mind and gave invalid reasons for concluding it would be inappropriate to distribute the Ridge Road Property directly to SDFS; and (4) the real reason Cummins changed his position was because SDFS objected to the extraordinary fee requests. None of these reasons warrant reversal of the court's order. Simply stated, SDFS cannot show the court did anything contrary to law, beyond its jurisdiction, or abused its discretion. To the contrary, despite SDFS's valid assignment, we found no legal or factual basis to hold the court was required, as a matter of law, to directly distribute Grant's portion of the estate to SDFS.
We begin by summarizing the facts relevant to this claim. In August 2006, two documents were filed with the probate court giving notice Talman and SDFS had been granted partial assignments "of beneficial interest in [the] estate by . . . Grant." The assignments are conditional as both purport to remain in effect only so long as two "open line of credit agreements" remain unpaid.
Two years later, in March 2008, SDFS served a notice of levy referring to a $746,117 money judgment it had obtained against Grant and her husband. The notice describes the property being levied on as "any and all amounts due or to become due either as a beneficiary or a creditor of the" Fernandez estate.
In May 2008, Cummins informed the court about the assignment and notice of levy in his "Third and Final Account and Report of Administrator . . . " (hereafter the Account) He recommended the court distribute Grant's interests in the estate first to SDFS for $746,117 (the amount in the notice of levy) and the balance, if any, to Talman up to $1,261,000. Cummins interpreted the 2006 assignments to be security for loans, and because it was possible the loans had already been repaid from other sources, Cummins requested the court retain jurisdiction to determine if Grant's share was more than the amount owed to Talman and SDFS. The hearing was scheduled for July 9, 2008.
Before the court could make a ruling, the estate was served with a second notice of levy referring to a $640,615 money judgment obtained by the Eastwoods against Grant and her husband. The July 3, 2008, notice describes the property being levied on as "any and all amounts due or to become due either as a beneficiary or a creditor of the" Fernandez estate.
The day before the hearing, SDFS filed an "answer" to the Account. The "answer" was confusing because it affirmed and denied (without explanation) each factual statement and recommendation made in the Account. For example, it denied Cumming's summary of the general legal principles concerning assignments without providing any contrary legal analysis. It denied Cumming's factual summary of the contents and dates of the assignments and levys, without offering a different version of the facts. It affirmed Cumming's conclusion SDFS's assignment and levy were valid, but failed to suggest a different disposition plan from the one Cumming's proposed.
The hearing was continued. Cummins filed a supplement to the Account, advising the court of the Eastwoods' levy. SDFS filed a supplemental objection, restating objections to the request for extraordinary fees.
At the end of July 2008, Cummins filed a "summary response" to SDFS's answer. He stated, "After four and a half years, this complex and messy estate is in a position to be closed, its creditors paid and its assets distributed." Cummins noted SDFS "is neither a creditor of the decedent or of this estate. [It's] interest arises from a loan it apparently made to Grant . . . and a money judgment it obtained against
. . . Grant. The administrator challenges the standing of [SDFS]." Cummins asserted SDFS's objections were untimely and confusing. He explained, "The proposed distribution does not impair [SDFS's] position as to Ridge Road. The Administrator seeks only to distribute Ridge Road to the three heirs, with the interest to be distributed to . . . Grant being subject to any rights and interests of [SDFS] as a judgment creditor
. . . and with [the probate] court reserving jurisdiction over the claims between . . . Grant and [SDFS] (with the Administrator out of the loop, as the assets will have been distributed). The Administrator does not feel that payment to the estate's creditors or professionals, or distribution to the other heirs, should be delayed due to complications of issues between . . . Grant and her judgment creditor."
Cummins further explained the objections were not well taken because "[SDFS] wants this [c]court to order sale of Ridge Road to a third party; yet the heirs have told the Administrator they do not want it sold and this [c]court has for many years ordered the Administrator to do everything possible to avoid a sale and keep the property in the family. Sale of the entire asset . . . is not a remedy to which [SDFS] is entitled in this proceeding." Cummings opined, "It appears the real rub with [SDFS] is that (per agreement with . . . Grant) the monthly payments not made have been offset against [her] loan to the estate, but [SDFS] is in no position to complain as the loan was made to the estate by . . . Grant (not [SDFS])." Finally, Cummins responded to SDFS's objections to the extraordinary fees.
The July 23, 2008 hearing was attended by counsel for Cummins, Grant, SDFS, and the Eastwoods. After an unreported chambers conference, the parties appeared on the record to summarize the various agreements that had been reached in chambers. Relevant to the distribution of the Ridge Road property, SDFS withdrew its objection to having the property distributed in kind to the heirs. Cumming's counsel summarized, "And, so the record is clear, the plan is that the distribution and closing of the estate, the order accomplishing that would provide for a distribution of Ridge Road by the Administrator to the three heirs, with the interest of . . . Grant . . . subject to any interest or rights of [the] judgment creditors, the idea being that at that point the Ridge Road asset is out of the estate. [¶] The judgment creditors will work with the respective heirs, and that this court would reserve jurisdiction to resolve any issues between the heirs and their respective judgment creditors, but without involvement of the Administrator at that point." The court added, "And, [counsel for SDFS] is going to work with [counsel for Cummins] on the wording for the order when we get to that point."
In September, Cummins submitted a revised version of the proposed final order settling the estate. The revised version provided the Ridge Road property would be distributed to the heirs, and Grant's interests would be "subject to" any interests of SDFS and the Eastwoods. In addition, the proposed order provided the court retained jurisdiction to resolve those completing interests. The order was served on SDFS. It did not file any objection to the proposed order with the court.
On October 1, 2008, Cummins lodged the revised proposed order with the court, and filed "comments" regarding the order. In the comments, he advised the court: "This Probate Estate is ready to close. The administrator does not believe that the distributions to the three heirs, the allowance of fees and costs or filing of the Amended Estate Tax return . . . should be delayed any further due to the issues between . . . Grant and her two judgment creditors ([SDFS] and the Eastwoods). The Proposed Revised . . . final order . . . fully protects all interests of the heirs and the judgment creditors, while allowing the estate to close subject to specified limited reservation of jurisdiction."
In addition, Cummins reported, "The Administrator also wishes to inform the Court that [SDFS] previously objected to the form of the order previously lodged, and in particular wanted the one-third interest in the Ridge Road property which is to be distributed to . . . Grant to instead be transferred directly from the Administrator to [SDFS]. The Administrator does not believe that it would be appropriate for the order to provide for such a direct transfer to [SDFS] for a number of reasons, including (1) attorneys for . . . Grant's other judgment creditor, the Eastwoods, have said that they object to such a direct transfer to [SDFS;] (2) the writs of execution on money judgment levied by [SDFS] and by the Eastwoods apply only to payments of money and distributions of personal property, not to distributions of real property . . . . and (3) the assignment of . . . [Grant's] interest in the estate in favor of Talman . . . and the assignment of that assignment from Talman . . . to [SDFS] . . . are not outright assignments of . . .Grant's interest in this Probate Estate (for one, on their face they are limited to specific dollar amounts) but were assignments as collateral for a loan. So while [SDFS] and the Eastwoods can argue about whose position is senior based on the assignment filed by [SDFS] or any recorded abstracts of judgment, the law is clear that in order for either of them to levy their judgment against the Ridge Road real property to be distributed to . . . Grant, they must follow the specific execution procedures set out in the Code of Civil Procedure for real property levy after the Administrator distributes the one-third interest in Ridge Road to . . . Grant. (Fns. omitted.)"
As requested by the administrator, the court did not delay closing the estate and signed the revised order. It distributed to Grant her one-third share of the estate subject to the rights of her creditors, reserving jurisdiction over that ongoing dispute.
In this appeal, SDFS suggests the court lacked authority as a matter of law to distribute estate property to an heir, when there had also been an assignment. It argues this inquiry is purely a legal question, and in essence suggests the court lacked any discretionary powers with respect to distribution of the estate. This is nonsense.
Probate courts are afforded wide discretion to when it comes to distribution of estate assets. (See e.g. Prob. Code, § 11604; Estate of Cook (1976) 64 Cal.App.3d 852, 85 ["The court has discretion in determining whether to effectuate the assignment or transfer in question"].) Not surprisingly, SDFS failed to cite to any legal authority mandating direct distribution to a lender holding an assignment to secure a line of credit. As a general rule, the court has discretion to distribute property "subject to a limitation or condition." (Prob. Code, § 11603, subd. (b)(3).) Moreover, as correctly noted by Cummins, Courts generally have the discretionary power to control their own proceedings. (Code Civ. Proc., § 128, subd. (a)(3).)
In this case, the court had good cause to delay distribution to SDFS as the assignee. Cummins explained why distribution and closing of the estate should not be further delayed (causing additional administrative expenses) because of issues existing between Grant and her creditors.*fn1 We found no authority, and SDFS cites to none, holding the court lacked authority to bifurcate the issues, reserving jurisdiction to adjudicate the competing claims to Grant's share of the estate.
SDFS reliance on a 1929 Supreme Court case is misplaced. (United States Fidelity and Guaranty Company v. N.G. Mathews (1929) 207 Cal. 556, 557 (Mathews).) It does not hold a court lacks authority to reserve jurisdiction, or that an assigned right always is superior to another creditor's claim.
In the Mathew's case, George W. Wilson's father died intestate and Wilson was appointed administrator of the estate by giving a bond with two sureties. Wilson then borrowed money and gave as security for the loan "all his interest in the estate of Thomas W. Wilson, deceased, and in and to all of the property of said estate to which he might be entitled, and all fees and commissions accrued or to accrue to him as administrator of said estate." (Ibid.) Wilson failed to repay the loan. The lender transferred its assignment and interest in the estate to a bank (the Bank), and the court granted the Bank's petition to replace Wilson with a new administrator, N. G. Mathews. Mathews then filed an action against Wilson and his sureties, seeking an accounting and a determination of how much money Wilson owed the estate. One of the sureties paid what Wilson owed the estate, and then sought repayment from Wilson's share of the estate. The sole question presented in the appeal was "whether by [Wilson's] assignment of all of his right, title and interest in the estate of his deceased father consummated prior to the existence of any liability on the part of . . . Wilson to said estate arising out of his misuse" of estate funds, the assignee had a superior right to the claim made by the surety. (Id. at p. 559.)
The Mathews court noted it is well settled an heir's right to assign his or her right to his interest in an estate "is subject only to the right of possession in the administrator" for the purpose of paying administration fees. (Mathews, supra, 207 Cal. at p. 560.) The court concluded the right to transfer an interest is superior to any other claims. Moreover, "[T]he fact that an heir may be indebted to the estate in any unliquidated and unsecured amount does not give the estate precedence over his assignment of his interest therein prior to the distribution thereof. [Citations.]" (Ibid.) The court held the Bank "by virtue of the assignment to it of the entire interest of . . . Wilson in the estate of his deceased father was entitled to a superior right over' the surety creditor's interest in Wilson's share of the estate. (Ibid, italics added.)
Simply stated, the Mathews case determined that as between the Bank and the surety, the Bank had the superior right to an heir's interest in the estate. The case cannot be so broadly interpreted to say the court was required to resolve disputes between creditors before closing the estate. It does not suggest the court would have lacked authority to reserve jurisdiction on the issue. And contrary to SDFS's suggestion, the case does not hold the court was required as a matter of law to find in favor of the assignment, or required to make a direct distribution. It would be improper for this court to state any opinion on who is entitled to Grant's share in this case, because, unlike the Mathews case, here the probate court has not yet adjudicated the respective rights of SDFS and the Eastwoods.*fn2
We wish to briefly mention, because the legal authority is noticeably absent from SDFS's briefing, that in fact the Legislature specifically grants probate courts discretion when considering assignments. Probate Code section 11604, "permits the probate court, in its discretion, to invalidate the assignment of an estate interest or to determine that consideration for the assignment is unreasonable. [Citations.]" (Estate of Wright (2001) 90 Cal.App.4th 228, 234.) "[A]lthough the original purpose of the section was protection against heir hunters, the section is not limited to that class only. It has been applied to assignees and transferees generally. [Citation.]" (In re Peterson's Estate (1968) 259 Cal.App.2d 492, 506.) This protective statutory scheme refutes SDFS's contention the court must directly distribute to any assignee as a matter of law.
Finally, Cummins asserts SDFS waived this claim because on July 23, 2008, it agreed in chambers to the proposed plan to close the estate and have the court reserve jurisdiction over the competing interests to Grant's share. We agree the record shows, SDFS did not object to the proposed order. But more importantly, SDFS does not point to anything in the record showing it affirmatively asked the probate court to adjudicate its interests in Grant's share before closing the estate. It does not suggest how delaying adjudication of its claim caused it harm. Filing the notice of assignment and notice of levy, when there was another creditor claiming rights to the same assets, simply puts the court on notice there were competing interests. Moreover, because the probate court specifically reserved jurisdiction over that dispute, SDFS's evidence and argument its claim is superior to the others must be brought to and considered by the probate court in the first instance. SDFS's efforts to have this court resolve the issue on appeal, before the trial court has made a ruling, is premature. We are not a trial court.
B. Did the court properly deduct administrative expenses of the estate from the balance due on the loan from Grant to the estate?
We grant Cumming's motion to augment the record on appeal with pleadings not included by SDFS in the clerk's transcript but that relate to the manner in which Grant loaned the estate $500,000.*fn3 The following is a brief summary of the facts relevant to SDFS's contention there was an improper deduction of administrative expenses: In 2004, Cummins reached a settlement with Grant and the trustee of her bankruptcy estate. As part of the settlement, the estate received the Ridge Road property and Grant agreed to pay the estate $3,500 per month for the mortgage payment.
Grant failed to make the payments, and in May 2005, Cummins listed the Ridge Road property for sale. Grant immediately responded by making a lump sum payment ($28,000) to purportedly bring the debt current up to May 2005. She also requested permission from the probate court to loan the estate $500,000 to pay for the administrative expenses and creditor's claims that would have come from the sale of the property. In June 2005, the court gave Grant time to obtain a $500,000 loan and to re-loan the money to the estate. However, nothing was decided about whether Grant was still obligated to pay the $3,500 per month pursuant to the terms of the bankruptcy settlement agreement.
Grant borrowed money from Talman and then loaned $500,000 to the estate. To secure the loan, in September 2005, she partially assigned her rights in the estate to Talman. On November 1, Talman assigned a portion of the proceeds to SDFS. Notices of these assignment were filed with the court on August 10, 2006.
In the meantime, Grant failed to make the $3,500 payments for the months of June through November 2005, prompting Cummings to file a petition for instructions from the probate court. Cummins advised the court Grant had failed to make the $3,500 monthly payments since May 2005, he did not anticipate future payments, and he desired clarification about whether the $500,000 loan was in addition to the $3,500 settlement obligation. Cummins opined it would be in the best interest of the estate to have Grant continue making the mortgage payments because the estate continues to be "cash poor." Alternatively, Cummins asked for permission to list the Ridge Road property for sale to eliminate the burden on the estate of the mortgage and reduce the estate's negative cash flow. At the hearing on September 29, 2006, Grant stipulated and the court ordered the past due and future $3,500 per month payments would be offset against the $500,000 loan.
SDFS argues the past amounts owed by Grant cannot be offset against the estate's obligation to repay the $500,000 loan. SDFS maintains the loan "is a general debt of the estate which needs to be paid back pursuant to the terms agreed upon." It claims the court characterized the Ridge Road property mortgage as a cost of administration. SDFS concludes administrative expenses are charged against the estate, not loans made to the estate.
To prevail on this contention, SDFS is essentially asserting the probate court, and this court, should ignore Grant's 2006 stipulation (and the 2006 court order) that past and future mortgage payments would be offset against the loan. SDFS offers no legal authority to support its claim the 2006 stipulation or court order was not binding or should be set aside.
For example, we are not persuaded by SDFS's unsupported speculation its assignment "may have included repayment of the . . . Grant loan" and therefore SDFS "would have to consent to any stipulation which effected the repayment of Grant's loan." Essentially SDFS would have us hold only it had the right to modify the terms of Grant's loan to the estate because of the mere possibility it would eventually be entitled to some of the repaid loan proceeds as an assignee. This argument lacks a sound legal basis, and for that matter, an ounce of common sense.
The most obvious problem is Grant, not SDFS and not Talman, loaned money to the estate. Grant and the estate are the only parties to the loan agreement, and under basic principles of contract law, only those parties had authority to modify the terms of the loan. Grant secured a private loan (exceeding $500,000) from Talman using her expected inheritance, which would include assets in addition to the loan. It was not a complete assignment of her entire interest in the estate. Moreover, the assignment could have been satisfied using assets unrelated to repayment of Grant's loan to the estate. Indeed, Grant could have repaid the line of credit from sources outside of her inheritance. We found no authority to hold Talman's status as one of Grant's creditors would confer to it any authority to modify the terms of a loan Grant made to the estate. Similarly, SDFS who is further removed from the matter having received its partial assignment of the secured loan from Talman, should have no right to control any particular asset in the estate, and certainly not have authority to modify Grant's loan to the estate.
In its reply brief, SDFS suggests another reason the 2006 stipulation and order were invalid was because SDFS was not served with Cummins's November 2005 petition for instructions. It boldly states Cummings and his counsel knew Grant borrowed money from Talman and, therefore, Cummings had a duty to inform Talman and SDFS anytime anything related to the loan was discussed in the probate proceedings. This argument fails because SDFS and Talman filed notice of their respective assignments with the court in August 2006, several months after Cummins filed his petition for instructions in November 2005. SDFS does not suggest how Cummings would have known SDFS was an assignee nine months before it filed notice of the assignment. Moreover, as noted above, only Grant had authority to modify the terms of the loan she made to the estate. Having only partial assignments, SDFS and Talman had no standing to prevent her from doing so. There is no legal basis to set aside her stipulation and the court's order.
The probate court relied on its prior 2006 order when calculating the amount to be offset from the loan. It determined repayment of Grant's $500,000 should be reduced by $143,500 to reflect the numerous $3,500 mortgage payments she failed to make on the Ridge Road Property. SDFS offers a confusing argument as to why the figure is incorrect, and rather than offer direct evidence as to what the sum should be, it submits the matter should be remanded for a "proper accounting."
Cummins asserts, "The math used to derive the $143,500 figure (. . . is not in the record because Cummins understood that SDFS agreed to the figures). It appears SDFS waived this issue by acknowledging on the record the figures were correct, but in any event, we found there is sufficient evidence in the record to support the court's calculations.
Both parties agree there was a total of 49 possible months of Grant's obligation to pay $3,500 per month (from the date of the bankruptcy settlement in July 2004 to the final accounting in August 2008). The total possible amount Grant owed the estate for 49 months was $171,500 (49 x $3,500). However, the record reflects Grant made a $28,000 lump sum payment in May 2005 and then stipulated the rest would be offset from the $500,000 loan. Thus, the total amount owed of $171,500 should be reduced by Grant's lump sum payment of $28,000, for a total offset of $143,500.
SDFS acknowledged this sum was correct in the probate court. On September 4, 2008, SDFS's counsel stated to the court "that of the 49 months in payments less those that . . . Grant made directly, there was a charge against that loan . . . of $143,500." This was the calculations used by the trial court. SDFS does not claim it later challenged or objected to this figure being used for the offset. Any error with respect to these calculations was waived by SDFS's failure to object.
Moreover, to the extent SDFS suggests the calculation is incorrect because likely Grant made a bigger lump sum payment in 2005, we note SDFS fails to supply any direct factual support for this argument. The figure of $28,000 (used by Cummins and the court) is supported by the record. Cummins reported $28,000 in his May 2008 accounting to the Probate court. This sum reflects $3,500 owed for a period of eight months. We recognize Cummins's November 2005 petition for instructions to the court also reported Grant made the loan "current to May 2005," which SDFS suggests means Grant may have paid more than eight months of the debt. However, SDFS does not suggest how much Grant paid in May 2005 to make the loan current, nor can it directly refute the $28,000 figure. There is no factual or legal basis for us to hold the probate court should have ignored the reported $28,000 figure and instead used May 2005 as the starting point for calculating the offset.*fn4
C. Can this court address issues raised against parties who were not served with appellant's opening brief?
SDFS asserts the court should have apportioned costs for the Ridge Road property among the three heirs (Grant, Fernandez, and Richardson). Cummins points out SDFS did not serve the heirs with its opening brief and consequently, the real parties in interest were not given the opportunity to respond to SDFS's contention. SDFS does not refute this claim in its reply brief. Cummins expressly took no position on the apportionment issue below or on appeal. Given the complexity and density of this probate case, and the lack of notice to the heirs, it would be inherently unfair to for this court to review this issue. We deem the apportionment issue waived.
D. Was the award of extraordinary fees to the administrator, his special counsel, and his probate counsel an abuse of discretion?
Over Grant's and SDFS's objection the court awarded extraordinary fees to Cummins ($101,100), and his two attorneys, Bidna ($312,666.75) and Duncan ($257,945). We review the trial court's order for an abuse of discretion. (See Estate of Gilkison (1998) 65 Cal.App.4th 1443, 1448; Estate of Heller (1992) 7 Cal.App.4th 862, 864.) We find no such abuse.
"In proceedings for the probate of a decedent's estate in California, the compensation of the personal representative and the compensation of the personal representative's attorney are each fixed through the use of two quite different approaches. To begin with, in every case the personal representative and his or her attorney are entitled to compensation based upon a sliding scale of percentages of the value of the estate accounted for. ([Prob. Code, §§ 10800, 10810.]) Because this compensation is intended as payment for the services which are involved in substantially every probate case, it is commonly known as "statutory" or "ordinary" compensation or as compensation for "statutory" or "ordinary" services. The second approach provides for compensation for services which are not involved in the typical probate case, and that approach authorizes the court to allow additional compensation for those unusual services--so-called "extraordinary" services. Probate Code [s]sections 10801 (as to personal representatives) and 10811 (as to their attorneys) provide that the probate court "may allow additional compensation for extraordinary services . . . in an amount the court determines is just and reasonable." Compensation determined by this second approach is commonly known as "extraordinary" compensation or as compensation for "extraordinary" services." (Estate of Hilton (1996) 44 Cal.App.4th 890, 894-895, fns. omitted.)
"There are no set rates for extraordinary compensation. The amount of extraordinary compensation is determined by the court, in the exercise of its discretion and on the basis of supporting declarations and exhibits. [Citations.]" (Ross, Cal. Practice Guide: Probate (The Rutter Group 2009) ¶ 16:327.4, p. 16-99.) "For example, the court generally takes into account the value of the estate, the nature and difficulty of the tasks performed and the time spent, the results achieved and whether those results benefited the estate as a whole (rather than simply furthering the interests of a particular distributee). The court will also evaluate these factors against the amount of statutory (ordinary) compensation payable, and whether that amount would itself provide reasonable compensation. [Citations.]" (Id. at ¶ 16:330, pp. 100-101; see also Estate of Stevenson (2006) 141 Cal.App.4th 1074, 1091 [lower court considers various factors to determine whether to allow a claim for extraordinary fees pursuant to probate code section 10811 and has discretion to disallow claims for extraordinary compensation].)
As stated above, this court will overturn an award of extraordinary compensation only where the lower court has abused its discretion. "'The appropriate [appellate] test for abuse of discretion is whether the trial court exceeded the bounds of reason.'" (Estate of Gilkison (1998) 65 Cal.App.4th 1443, 1449 (Gilkison), quoting Shamblin v. Brattain (1988) 44 Cal.3d 474, 478.)
As the Gilkison court has aptly noted, "An attorney who prosecutes an appeal from an order addressed to the trial court's sound discretion is confronted with more than a daunting task. This is an uphill battle which, absent unusual circumstances, may be equated with confederate General John Bell Hood's attempt to capture 'Little Round Top' at the battle of Gettysburg in the Civil War. General Hood did not succeed." (Gilkison, supra, 65 Cal.App.4th at p. 1448.)
In this case, we conclude SDFS "does not succeed because of the factual record on appeal and time-honored precedents. '"The term [judicial discretion] implies the absence of arbitrary determination, capricious disposition or whimsical thinking. It imports the exercise of discriminating judgment within the bounds of reason. . . . To exercise the power of judicial discretion all the material facts in evidence must be known and considered, together also with the legal principles essential to an informed, intelligent and just decision." [Fn. omitted.]' [Citations.] 'The appropriate [appellate] test for abuse of discretion is whether the trial court exceeded the bounds of reason.' [Citations.]" (Gilkison, supra, 65 Cal.App.4th at pp. 1448-1449.)
"A '. . . showing on appeal is wholly insufficient if it presents a state of facts, a consideration of which, for the purpose of judicial action, merely affords an opportunity for a difference of opinion. An appellate tribunal is neither authorized nor warranted in substituting its judgment for the judgment of the trial judge. To be entitled to relief on appeal from the result of an alleged abuse of discretion it must clearly appear that the injury resulting from such a wrong is sufficiently grave to amount to a manifest miscarriage of justice . . . .' [Citation,] '"A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown. This is not only a general principle of appellate practice but an ingredient of the constitutional doctrine of reversible error." [Citations.]' [Citation.]" (Gilkison, supra, 65 Cal.App.4th at p. 1449.)
"There may be instances where an appellant could demonstrate that the probate court abused its discretion as a matter of law. For example, had the trial court indicated that the request for extraordinary fees was denied because it 'never' grants such fees, or because it believes that the proponent bears the burden of proof beyond a reasonable doubt and has failed that burden, or because the estate must be over an arbitrary amount, e.g., $1 million, for there to be extraordinary fees, then an abuse of discretion would be demonstrated." (Gilkison, supra, 65 Cal.App.4th at p. 1449.) However, there can be no abuse of discretion if the trial court articulated a sound factual basis for its ruling and understood the law with respect to extraordinary fees. Such is the case here.
The issue of extraordinary fees was litigated extensively below. We have carefully reviewed the record and conclude the requests for fees submitted by Cummins and his counsel were supported by detailed declarations, which delineated what had been done, why the action was taken, and how the estate benefitted. They submitted for the probate court's consideration copes of their bills along with summaries showing the time and expense required for particular tasks. SDFS filed several objections, challenging specific portions of the bills and questioning the overall necessity for additional counsel. For example, in July 2008, SDFS filed 26 pages of objections claiming the requested fees were unnecessary, duplicative, or fabricated. The following month, it filed more detailed objections, spanning 64 pages.
The probate court judge held several continued hearings on the issue of fees and considered SDFS's many objections. Nevertheless, the probate judge granted the full amount requested, stating in her minute order, "There has been extensive litigation in this estate which include the involvement of beneficiary . . . Grant. Every effort was made to effectuate the wishes of . . . Grant. Before the court are requests for attorney fees and objections, primarily from an assignee of beneficiary . . . Grant. [¶] In examining the amount of fees requested, the court must consider the benefit to the estate. Although it has taken four and a half years, the results have been extraordinary. The court finds the attorneys have worked diligently to reach this point and have billed at reasonable hourly rates. [¶] The objections of . . . Grant and [SDFS] have been considered and are overruled. [¶] The court approves all attorney fees and costs requested as more fully elaborated in the proposed revised 9/22/08 final order signed and filed this date."
We find the probate court articulated a sound factual basis for granting of extraordinary fees, i.e., the benefit to the estate from the four years of extensive litigation was extraordinary. The court properly relied on the declarations and evidence submitted, which described in detail the nature and scope of work performed on this multifaceted case, as well as the detailed descriptions of how the work benefitted the estate. Moreover, the record unquestionably showed the probate court understood the law with respect to extraordinary fees, as it specifically mentioned several key factors relevant to this determination, i.e., results achieved and benefit to the estate.
As correctly noted by Cummins, SDFS's arguments "are a rehash of a few 'pot shots' SDFS took at the fee requests in the probate court." We also agree with Cummins's observation SDFS, who was a creditor and took no active role in the probate proceedings until near the end, and it was not focused on whether Cummins and his counsel brought value to the estate. Rather, SDFS's argument appears motivated by its own "bottom line" to be repaid its debt from Grant's share of the estate. The probate judge, who had presided over much of the nearly five year case, could reasonably take SDFS's limited role in the case into account when considering and rejecting its objections.
As noted in Gilkison, supra, 65 Cal.App.4th at page 1449, most appeals from discretionary orders are "'dead on arrival' at the appellate courthouse." This one is no exception. There is simply no indication the court failed to consider the value of the estate, the nature and difficulty of the tasks Cummins and his counsel performed and the time they spent, the results they achieved and whether those results benefited the estate as a whole. Nor does the record demonstrate the court declined to evaluate these factors against the amount of ordinary "compensation payable, and whether that amount would itself provide reasonable compensation." (Ross, Cal. Practice Guide: Probate, supra, ¶ 16:330, p. 101.) The court considered the declarations, evidence, and oral argument, and fixed an amount of extraordinary compensation that was "just and reasonable" under the circumstances. (Prob. Code, § 10811, subd. (a).) SDFS has presented no factual or legal argument demonstrating the court's order exceeded the bounds of reason. At most, it demonstrated the probate court disagreed with its position. This is simply not enough to prove the award was a miscarriage of justice.
The orders are affirmed. The motion to augment the record on appeal is granted. Respondent shall recover his costs on appeal from SDFS.
WE CONCUR: ARONSON, J. FYBEL, J.