The opinion of the court was delivered by: Raye , P. J.
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Once again, death, property, and inheritance strain familial bonds. Bruno and Eleanor Rausser, parents of four children, owned two parcels of land. The couple established the Rausser Family Revocable 1975 Trust (the Trust), which evolved into three separate trusts (Trust A, Trust B, and Trust C) upon the death of the first spouse. Trust A was revocable; Trusts B and C were irrevocable. After Bruno's death, Eleanor signed an amendment to the Trust, removing two of the children as beneficiaries of Trusts A and C. Eleanor later signed an amendment making appellant Greg Rausser sole beneficiary of Trusts A and B.*fn1
Following Eleanor's death, her three other children, respondents Gary Rausser, Ronica Rosa, and Romilda Rausser-Nimmo, filed a petition seeking a declaration that they were equal beneficiaries with Greg as to Trusts B and C and challenging a 2003 transaction by Eleanor that impacted the trusts. Following a trial, the court found the 2003 transaction invalid, removed Greg as trustee of Trusts B and C, and appointed Gary and Romilda successor trustees. Greg appeals, arguing the trial court erred in invalidating the 2003 transaction and in removing him as trustee. In addition, Greg challenges the trial court's surcharge based on the 2003 transaction. We shall reverse those portions of the judgment removing Greg as trustee of Trusts B and C, appointing Gary Rausser and Romilda Nimmo as successor trustees, and surcharging Gary disbursements from Trusts B and C, and remand with directions.
FACTUAL AND PROCEDURAL BACKGROUND The Trust
Bruno and Eleanor created the Trust in 1975. The couple amended the Trust four times prior to Bruno's death in 1996; Eleanor amended the Trust five times prior to her death in 2007. The first four amendments are not at issue.
As trustees of the Trust, Bruno and Eleanor owned two parcels of land. One parcel contained the family home, a dairy, farmland, and pasture. The couple rented out the second parcel as pastureland.
When Bruno died in 1996, the Trust instrument mandated the division of the trust estate into three trusts: Eleanor's share became Trust A, the survivor's trust, and Bruno's share was divided between Trust B, the bypass trust, and Trust C, the "QTIP" trust.*fn2 This division minimized payment of estate taxes. Upon Bruno's death, Trust A remained revocable, while Trusts B and C became irrevocable.
Under the terms of the Trust at that time, all four of the Raussers' children were the equal remainder beneficiaries of the irrevocable subtrusts. Subtrust A remained revocable by Eleanor.
Prior to this division of the Trust, Eleanor executed the fifth amendment to the Trust, changing the successor trustees from Greg and Gary to Greg and Ronica.
In August 2000, after a 1996 appraisal valued the home parcel at $685,000 and the pasture parcel at $345,000, Eleanor assigned a 17 percent interest in the property to Trust A, a 56.3 percent interest to Trust B, and a 26.7 percent interest to Trust C. Eleanor also executed the sixth amendment to the Trust, which directed that Greg and Ronica be equal beneficiaries of Trust A and Trust C, excluding Gary and Romilda as beneficiaries of those trusts. Eleanor's attempt to change the beneficiaries of Trust C was prohibited by the Trust instrument.
Following Bruno's death, necessary repairs were made to the dairy on the home parcel. Eleanor met with her children and asked for their thoughts on fixing up the property. Gary and Romilda stated that rebuilding the dairy would be too expensive. Greg agreed as to the expense, but stated it needed to be done because it was being leased out and the tenant provided Eleanor with income.
Eleanor decided to make substantial improvements to the dairy. The work, done in 2001 and 2002, cost over $100,000.
In November 2001 Eleanor executed the seventh amendment to the Trust, appointing Greg and Ronica as co-trustees with authority to act independently. However, Eleanor remained in control of the Trust until her death.
In 2003 Eleanor expressed fears to her attorney, James Demera, that her children would not be able to agree on management of the property. Eleanor told Demera that Greg would be better suited to manage and farm the property, that Demera could discuss trust business with Greg, and that Greg knew everything. All amendments after Bruno's death were executed privately by Eleanor with Demera's help.
Demera advised Eleanor that, as trustee of Trust A, she could acquire Trust B's 56.3 percent interest in the property as long as the purchase was for fair market value and the terms were consistent with a business and commercial transaction. In May 2003 Demera had the property reappraised by the same appraiser who had performed the earlier appraisal. The home property was now valued at $800,000 and the pasture parcel at $400,000, an increase of $170,000 over the earlier appraisal.
Eleanor, with Demera's assistance, drafted documents through which Eleanor as trustee of Trust A acquired the 56.3 percent interest in the real property assigned to Trust B for exactly 56.3 percent of the total appraisal of $1.2 million. The documents were executed on July 30 and August 1, 2003, and a grant deed and deed of trust were recorded. Respondents had no notice of the transaction. Eleanor made the down payment and the subsequent quarterly payments.
In November 2005 Eleanor executed the eighth amendment to the Trust, removing Ronica as cotrustee. Eleanor executed the ninth amendment, making Greg sole beneficiary of Trusts A and B in July 2006. This amendment was invalid, as Demera acknowledged, as to Trust B because the third amendment made Trust B irrevocable upon Bruno's death.
Eleanor died in August 2007. Greg began to act as trustee of the Trust. After Eleanor's death, Demera, representing Greg as trustee, provided Greg's siblings with formal notice of the Trust, the nine amendments, and the 2003 transaction.
Respondents Gary, Ronica, and Romilda filed an amended petition under the Probate Code in August 2008. Respondents sought a declaration that they were equal beneficiaries with Greg under Trust B and Trust C. They also argued the 2003 transaction was the product of self-dealing and should be set aside. Respondents argued Greg breached his duty as trustee in ratifying the 2003 transaction and should be removed as trustee, and requested an accounting.
A court trial followed. Prior to trial, the parties entered a stipulation, filed with the court on April 9, 2009, in which the parties agreed that respondents' claims and legal theories "concern and are limited to the actions of the original Trustee, Eleanor Rausser" and that "there are no claims currently pending against Greg Rausser in his individual capacity, either as beneficiary or trustee"; respondents agreed "that in the trial of this matter, they will not seek to surcharge" Greg; and Greg "agree[d] that in light of the foregoing, his personal ...