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The Alberta Hale Land Trust, Inc v. Brian Bonneau et al

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Amador)


January 18, 2012

THE ALBERTA HALE LAND TRUST, INC., PLAINTIFF AND APPELLANT,
v.
BRIAN BONNEAU ET AL., DEFENDANTS AND RESPONDENTS.

(Super. Ct. No. 05-CV-3880)

The opinion of the court was delivered by: Nicholson , Acting P. J.

Albert Hale Land Trust v. Bonneau

CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

This is a dispute over whether easements or constructive trusts should be imposed on land owned by the defendants, who were trustees of the plaintiff's predecessor. The trial court found no basis for imposing easements or constructive trusts and entered judgment in favor of the defendants. The trial court also awarded attorney fees to one of the defendants.

On appeal, we conclude that the trial court did not err in denying the plaintiff's attempts to impose easements or constructive trusts. However, we find there is no support for the attorney fees award. Accordingly, we affirm the judgment but reverse the award of attorney fees.

FACTS

The following facts are taken from the trial court's statement of decision.

Alberta Hale owned several parcels of land near Volcano where she grazed cattle. She expressed to others her desire that the area around Volcano remain in its natural state. Hale also grazed cattle on land owned by Beazer Cement Company (Beazer). Four properties later purchased from Beazer became the subject of this lawsuit: Indian Hill, Sutter Creek Ranch, South Branch, and the 125-acre parcel.

Hale grazed and watered cattle on portions of the four Beazer properties during her lifetime, but the use was more accidental than open and notorious. In 1990, however, Hale posted signs on the properties announcing to prospective buyers that she was claiming water and grazing rights on those properties. Hale's use of the properties was not open, notorious, and hostile to the owner for an uninterrupted period of five or more years.

Hale died September 14, 1992, leaving ownership of her land in the Alberta Hale trust (Trust). The Trust appointed Kevin Bonneau as trustee, and he appointed Brian Bonneau and Elsie Giannini as co-trustees. By the Trust terms, the trustee was to be liable to the Trust for acts or omissions in bad faith. The Trust owned real and personal property worth about $500,000 with about $300,000 available for investment and property acquisition. The Trust provided that, to the extent possible, the real property was to be maintained as an agricultural preserve.

The Trust later transferred its assets to a charitable corporation (the Alberta Hale Land Trust, Inc.), also under the direction of the parties to this case. We need not distinguish between the Trust and the successor corporation.

Although Hale grazed cattle on the four properties during her lifetime, there was no evidence that the Trust or other successors to Hale continued to use the four properties for grazing cattle after Hale's death. In 1997, the Trust built a fence to prevent cattle from wandering onto the Indian Hill property.

In 1994, the Trust attempted to purchase the 125-acre parcel from Beazer. At the same time, Kevin and Brian offered to purchase the Indian Hill, South Branch, and Sutter Creek Ranch properties from Beazer. The purchases fell through, however, because the Trust was not willing to quitclaim to Beazer any interest the Trust might claim in other Beazer properties. Beazer desired the quitclaim as a result of Hale's earlier posting of signs claiming an interest in the Beazer properties.

Later in 1994, the Bonneaus and the Trust structured a deal to purchase the properties from Beazer and avoid the quitclaim provision. The statement of decision describes the transaction as follows:

"On May 5, 1994, Brian Bonneau ostensibly on his own behalf, but actually on behalf of the [Trust] and his wife Susan and his brother Kevin, offered to purchase the 125 acre parcel for the [Trust] for the sum of $217,350 and the three afore mentioned [sic] parcels [Indian Hill, South Branch, and Sutter Creek Ranch] for the price of $253,650, a total transaction of $471,000. The [Trust] contributed its $217,350 share from the [Trust] assets and the remaining amount of the purchase was supplied from funds gathered by Brian and Kevin from separate sources. The use of Brian as sole purchaser avoided the quitclaim condition which had doomed the previous attempt to buy the properties. The purchase was completed on September 13, 1994 and the deed for all four parcels named Brian, Susan and Kevin Bonneau as owners, in a tenancy in common. In October of 1994, the 125 acre parcel, paid for from [Trust] funds, was transferred to the [Trust], and the three parcels known as Indian Hill, Sutter Creek Ranch, and South Branch were transferred to Brian, Susan and Kevin as tenants in common. . . . During the period of negotiations for the purchase of the four parcels, Elsie Giannini was made aware of the details of the transactions and the interest of the Bonneau brothers in the purchase, as were the board of directors of the [Trust]. The 125 acre parcel purchased for the [Trust] was described as the choicest of the purchased parcels and also created a connection with two separated parcels belonging to the [Trust]. It should be noted that the [Trust] did not possess sufficient funds to purchase more than the previously described 125 acre parcel."

Hale had expressed a desire to keep her real property in a natural state; however, there was no term or agreement in Hale's will or in the Trust instruments or anywhere else in the record that the Indian Hill, South Branch, and Sutter Creek Ranch parcels would be subject to a conservation easement, requiring that they be kept in their natural state.

PARTITION ACTION

As of 2002, the Trust owned the 125-acre parcel, and Brian and Kevin jointly owned the Indian Hill, South Branch, and Sutter Creek Ranch parcels.*fn1 Kevin testified in this case that he and Brian had placed conservation easements on the South Branch and Sutter Creek Ranch parcels in 1995 and 1999, respectively.

In 2002, Brian and Kevin had a falling out, and Brian initiated an action to partition the jointly-owned properties. As a result of the partition action, Brian was awarded the Indian Hill parcel, the only parcel that did not have a conservation easement, and Kevin was awarded the South Branch and Sutter Creek Ranch parcels.

PROCEDURE

The Trust initiated an action against Brian and Kevin in 2005. The operative complaint is the fourth amended complaint, which alleged six causes of action, referring to the parcels owned by Kevin and Brian Bonneau: (1) quiet title to an easement by prescription, (2) quiet title to an easement by grant, (3) quiet title by grant, (4) declaratory relief concerning the existence of the easements, (5) conversion, and (6) declaratory relief concerning the existence of a conservation easement on the Indian Hill parcel.

Conclusions of Law

The case was tried without a jury, and the trial court issued a statement of decision finding in favor of Kevin and Brian on the following issues: (1) a prescriptive easement to graze and water cattle, (2) a conservation easement by agreement, and (3) a constructive trust.

1. Prescriptive Rights to Graze and Water Cattle

The court rejected the Trust's assertion that an easement to graze and water cattle had been created on the Indian Hill, South Branch, and Sutter Creek Ranch parcels by prescription. There was no open, hostile, and notorious use of those parcels for an uninterrupted five-year period. And, even if prescriptive rights were established at one time, they were lost by a period of nonuse for five years.

2. Conservation Easement

The was no agreement among the parties to impose conservation easements on the Indian Hill, South Branch, and Sutter Creek Ranch parcels. The Trust instrument placed restrictions on the use of existing real property held by the Trust, but it did not, in the court's words, "impose limitations upon the future use of real property acquired with trust assets after the death of [Hale] . . . ."

In any event, the Trust's action to impose conservation easements was barred by the statute of limitations, the statute of frauds, and laches. And the Trust could not circumvent these defenses by asserting promissory estoppel.

3. Constructive Trust

The trial court addressed the Trust's argument made during trial that a constructive trust should be imposed on the Bonneaus' property because they breached their fiduciary relationship with the Trust when they commingled Trust funds with their own in purchasing the Indian Hill, South Branch, and Sutter Creek Ranch parcels. The court concluded that, taking into consideration the totality of the circumstances, there was no breach of the fiduciary relationship. We quote the trial court's reasoning in this regard:

"The original offer to purchase the four parcels from Beazer Cement was contained in two separate documents one of which pertained to Kevin Bonneau's purchase of 125 acres for the benefit of the [Trust] and the other to the three parcels known as Indian Hill, South Branch, and Sutter Creek Ranch for the benefit of Brian Bonneau.

"The second offer to purchase and the participation in that sale of Brian and Kevin as well as their intended ownership of the three parcels and the 125 acre purchase on behalf of the [Trust] was disclosed to Elsie Giannini as well as the board of directors of the [Trust] during the negotiations for the purchase. The joint offer and the use of Brian as the sole purchaser avoided the requirement of a quitclaim deed that had been the deal breaker of the first offer to purchase the same properties.

"The [Trust instrument] provides that the trustee is only responsible for his actions when he acts in bad faith.

"The court finds on the basis of the evidence that [Brian and Kevin] did not act in bad faith in the purchase of the four parcels in 1994 and that the [Trust] in existence at the time of the purchase did not suffer any damage or loss of profit from the transaction. The [Trust] actually benefited from the purchase even though the title [to the 125-acre parcel] was not transferred to the [Trust] . . . until 1997. The provisions of the Probate Code impose upon trustees the duty not to use or deal with trust property for the trustee's own profit, and there is no evidence that the trustees benefited from the use of [Trust] property nor did the [Trust] lose profit as a result of the trustee's actions.

"Therefore, the court rules that the Statutes regarding the breach of a fiduciary relationship do not apply, and there was no breach of a fiduciary's duty toward the [Trust]. The defense of Laches previously cited would also apply to defeat [the Trust's] request to impose a constructive trust upon [Brian and Kevin] and their properties."

Based on these conclusions, the trial court entered judgment in favor of Brian and Kevin.*fn2

Attorney Fees

Brian moved for an award of attorney fees based on the Trust bylaws. The trial court granted the motion and awarded Brian $78,250 in attorney fees, payable by the Trust.

DISCUSSION*fn3

I

Agreement to Impose Conservation Easements

The Trust contends that the trial court erred by not finding that there was an agreement to impose conservation easements on the Indian Hill, South Branch, and Sutter Creek Ranch parcels.*fn4 The court not only found that there was no agreement to impose conservation easements on those parcels and therefore the Trust's claim for specific performance was unsupported, but the court also concluded that the allegations were barred by the statute of limitations, laches, and the statute of frauds. We conclude that the trial court's conclusion that the allegations are barred by laches is supported by the record and that, therefore, we need not consider further the Trust's arguments concerning conservation easements.

"'The defense of laches requires unreasonable delay plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay.' [Citations.]" (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68.) "Generally speaking, the existence of laches is a question of fact to be determined by the trial court in light of all of the applicable circumstances, and in the absence of manifest injustice or a lack of substantial support in the evidence its determination will be sustained. [Citations.]" (Miller v. Eisenhower Medical Center (1980) 27 Cal.3d 614, 624.)

In his answer to the complaint, Brian raised the equitable defense of laches. As to the sixth cause of action for declaratory relief based on breach of fiduciary duties, the trial court stated: "The defense of Laches previously cited would also apply to defeat [the Trust's] request to impose a constructive trust upon [Brian and Kevin] and their properties." The "previously cited" discussion is as follows: "Laches as a defense to the attempt of [the Trust] to impose conservation easements on the three parcels in question would appear to be applicable to the defendants as a defense in that the delay of eleven years in filing the action has certainly resulted in detriment to [Brian and Kevin] not only in preparing a defense to the present action, but also in disturbing the status quo after fifteen years of . . . ownership."

When determining whether the equitable defense of laches applies, the court may consider the analogous statute of limitations, as did the trial court here. (Fountain Valley Regional Hospital & Medical Center v. Bonta (1999) 75 Cal.App.4th 316, 324.) The Trust does not dispute that, unless the discovery rule is applicable, the limitations period has long expired.

Code of Civil Procedure section 338, subdivision (d), provides a three-year limitations period for "[a]n action for relief on the ground of fraud or mistake," but notes that the cause of action "is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." A fraud cause of action therefore does not accrue for statute of limitations purposes until the plaintiff "at least suspects, or has reason to suspect, a factual basis for its elements." (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 389; see Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 [knowledge of one or more element of a cause of action, coupled with suspicion of the other elements, will generally trigger the limitations period]; Debro v. Los Angeles Raiders (2001) 92 Cal.App.4th 940, 950 [limitations period of Code Civ. Proc., § 338 commences upon the discovery by the aggrieved party of the fraud or facts that would lead a reasonably prudent person to suspect fraud].)

Here, the filing of the complaint occurred many years after the alleged breach of fiduciary duty. That leaves the discovery rule as the Trust's only possibility for overcoming the doctrine of laches.

The Trust's other trustee at the time of the purchase of the Indian Hill, South Branch, Sutter Creek Ranch, and 125-acre parcels, Elsie Giannini, knew, before the purchase, of the Bonneaus' intent to acquire the Trust's 125-acre parcel and the Bonneaus' other three parcels all in one transaction. And, although the Trust was not incorporated until later, the people who would be on the board of directors also knew. The trial court rejected any facts that would support application of the discovery rule to overcome the defense of laches. The court said: "[T]he Bonneau[s'] participation, details and potential ownership of the three parcels subject to the 1994 negotiations were known by Elsie Giannini and members of the [Trust's] Board of Director[s]. The information was disclosed . . . to these parties by the Bonneau brothers during the negotiations. The interests of the Bonneau brothers were known for some eleven years prior to the filing of the present lawsuit, which is a period beyond any applicable statute of limitations."

The Trust contends that there was no substantial evidence that Elsie Giannini knew sufficient details of the transaction to support a duty of inquiry concerning the Bonneaus' intentions. To the contrary, Brian testified that he informed her of the details of the transaction during negotiations, and the trial court so found. The Trust weakly responds that Brian's testimony was self-serving. Under a substantial evidence review, merely labeling a defendant's testimony as self-serving does not establish that the evidence is insufficient to support the judgment if the defendant's testimony is credited by the fact finder. "The trier of fact is the exclusive judge of the credibility of the witnesses." (Maslow v. Maslow (1953) 117 Cal.App.2d 237, 243, original italics.)

The Trust also argues that "even if Elsie Giannini knew some details of the self-serving transaction, there is no evidence that she was advised that either Kevin or Brian Bonneau intended to use their individually obtained parcels for anything other than a use consistent with the . . . [Trust] purposes." To the contrary, the fact that Kevin and Brian intended to personally own the Indian Hill, South Branch, and Sutter Creek Ranch parcels with no agreement for limitations on the use of those parcels was sufficient to put the Trust on inquiry notice that Kevin and Brian might use the parcels however they pleased.

Finally, the Trust asserts that Kevin and Brian "had represented to the world their intentions to preserve all land . . . ." That is not what the trial court concluded. It found no evidence to support an agreement that the parcels would be subject to conservation easements.

On the issue of prejudice, the Trust contends that the passage of time, by itself, does not constitute laches "as a matter of law." (Sullivan v. Balestrieri (1956) 142 Cal.App.2d 332, 343.) The court here, however, did not rest its finding of laches on the belief that the passage of time constitutes laches "as a matter of law." Instead, the court found that the long lapse between the transaction and the filing of the complaint "resulted in detriment to [the Bonneaus] not only in preparing a defense to the present action, but also in disturbing the status quo after fifteen years of the [Bonneaus'] ownership." The Trust makes no attempt to rebut the court's finding that the lapse of time prejudiced the Bonneaus' preparation of a defense; therefore, the Trust has failed to successfully contest the court's finding of prejudice as an element of laches.

Having found that the request for specific performance of the alleged agreement to impose conservation easements on the Indian Hill, South Branch, and Sutter Creek Ranch parcels is barred by laches, we need not consider the Trust's assertions on the merits of the alleged agreement. Neither do we need to consider the Trust's arguments that the trial court was wrong about the statute of limitations and the statute of frauds.

II

Breach of Fiduciary Duties -- Constructive Trust

It appears that the Trust wants the court to impose a constructive trust on the Indian Hill, Sutter Branch, and Sutter Creek Ranch parcels as a remedy for the alleged breach of fiduciary duties. The evidence revealed that the Trust could not afford to purchase the Indian Hill, South Branch, and Sutter Creek Ranch parcels and, in fact, did not intend to purchase those parcels. Nonetheless, the Trust seeks the remedy of a constructive trust over those parcels.

In attempting to establish its right to a constructive trust, the Trust contends that the trial court erred by finding that the Bonneaus did not breach their fiduciary duties to the Trust when they comingled funds to purchase the parcels. The Trust further contends that the trial court should have imposed a constructive trust on the Indian Hill parcel to prevent Brian from developing that property.

The parties' arguments on this issue are confused and unresponsive to each other, as two ships passing in the night. The Trust argues that self-dealing is a breach of fiduciary duties regardless of whether the self-dealing is done in good faith and to benefit the Trust. But the Trust's argument does not recognize that the trial court found that (1) the Trust provided for liability only for bad faith breaches by the trustees and (2) Brian's actions were taken in good faith. For his part, Brian argues that there was no self-dealing and, even if there was, he is not liable to the Trust because it was done in good faith and benefited the Trust. But Brian offers no authority for the proposition that good faith self dealing is permissible if it does not harm the Trust.

We need not sort out the parties' arguments in this regard because the Trust, as appellant, has failed to account for the fact that the trial court found that the defense of laches prevented relief on the allegation that the Bonneaus had breached their fiduciary duties. An appellant has the burden to establish prejudicial error on appeal. (Votaw Precision Tool Co. v. Air Canada (1976) 60 Cal.App.3d 52, 55.) If the court has ruled on two alternative grounds, the appellant cannot establish prejudice by challenging just one of the grounds, even if the appellant establishes error as to that alternative ground. Here, the trial court rejected the breach of fiduciary duties allegations based on two alternative grounds: (1) the merits of the question of breach and (2) the defense of laches. We do not consider the merits of the question of breach because the record supports the court's application of the defense of laches.

The Trust's argument that the court erred by failing to find a breach of fiduciary duties is without merit because (1) although the trial court found that laches barred this allegation, the Trust fails to contend on appeal that the laches finding, as to this allegation, was error, and (2) as discussed in part I of the Discussion, the Trust fails to establish error on the merits of the laches argument.

III

Prescriptive Easements

The Trust contends the trial court erred in concluding that no prescriptive easements for grazing and watering cattle had been created by open, notorious, and hostile use on the Indian Hill, South Branch, and Sutter Creek Ranch parcels. The Trust asserts: "The only conclusion possible from the evidence presented was that Alberta Hale had established those prescriptive rights, and the evidence does not support a finding of subsequent nonuse that could extinguish those rights." We limit our analysis to the second point, that any prescriptive rights were extinguished by five years of nonuse.

"The elements necessary to establish a prescriptive easement are well settled. The party claiming such an easement must show use of the property which has been open, notorious, continuous and adverse for an uninterrupted period of five years. [Citations.] Whether the elements of prescription are established is a question of fact for the trial court [citation], and the findings of the court will not be disturbed where there is substantial evidence to support them." (Warsaw v. Chicago Metallic Ceilings, Inc. (1984) 35 Cal.3d 564, 570.)

To obtain a prescriptive right to property, the open and notorious use of the property must be continuous, meaning it must "be so used at all times when it can be used for the purposes to which it is adapted [citations]." (Kellogg v. Huffman (1934) 137 Cal.App. 278, 284.) "It is well settled in this state that pasturing during the entire grazing season of each year during which feed is available, if done to the exclusion of others, is a sufficient use and occupation of land, which is reasonably fit only for pasturage purposes, to constitute the occupation and possession necessary to establish a title by adverse possession [citations]." (Ibid.)

Prescriptive rights once gained may then be lost by nonuse for five years. (Civ. Code, §§ 321, 811; People v. Ocean Shore Railroad (1948) 32 Cal.2d 406, 419.) It is not necessary to show an intent to abandon in order to prove loss of an easement acquired by prescription. (People v. Ocean Shore Railroad, supra, at p. 419.)

The Trust asserts that the court erred by concluding that there was no evidence of use after 1992. Viewing the evidence in the light most favorable to the judgment, the evidence supports the trial court's judgment.

Our review on this matter is for whether substantial evidence supports the judgment. (Warsaw v. Chicago Metallic Ceilings, Inc., supra, 35 Cal.3d at p. 570.) Substantial evidence may be slight in comparison to the contradictory evidence so long as it is of ponderable legal significance. (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 630-631.)

The trial court found that, although some cattle grazed on the parcels in question during Hale's lifetime, such use was more accidental than open and notorious. After her death in 1992, the Trust did not use the parcels in question. Considering this trial court factual finding and the supporting evidence, we agree with the trial court that, even if some kind of prescriptive right had been established before Hale's death, it was extinguished by five years of nonuse by the time this action commenced in 2005.

The Trust attempts to dispute this conclusion by citing instances in the record in which witnesses stated that cattle were on the parcels in question. Kevin testified that cattle grazed on the parcels after Hale's death. However, the trial court, consistent with its role as the trier of fact, found Kevin's testimony lacking in credibility. (Webber v. Clarke (1887) 74 Cal. 11, 18.) Other than Kevin's testimony, the Trust proffered the testimony of a Trust employee who answered affirmatively to a leading question about whether he "still see[s] cattle grazing on the South Branch property quite a bit." There was no further testimony about what was meant by "quite a bit." He also said that cattle graze on the Indian Hill and Sutter Creek Ranch parcels "only if they have walked away." Finally, Brian testified that cattle occasionally get onto a portion of the parcels in question where there are rocks and nothing for the cattle to eat.

This evidence does not establish that the trial court's finding of nonuse was in error. The occasional use of the parcels did not maintain any prescriptive right Hale may have established in her lifetime.

V

Attorney Fees

The trial court awarded attorney fees to Brian based on his argument that the bylaws of the corporation that succeeded the trust in ownership of the property allowed for indemnity to an agent or director sued in his official corporate capacity. The Trust asserts the award must be reversed because Brian was not sued in his official corporate capacity. We agree.

A full understanding of this issue requires review of the relationship between the Alberta J. Hale Revocable Trust (trust) and the Alberta Hale Land Trust, Inc. (the corporation).*fn5 The trust was created by Alberta Hale while she was alive and became irrevocable upon her death in 1992. Before her death, Hale transferred her property to the trust. The corporation was formed in 1994 as a charitable corporation to eventually receive the property from the trust and carry out Hale's wishes with respect to the property.

Brian was a trustee of the trust and, after the formation of the corporation, served on the corporation's board of directors.

Meanwhile, in 1994, the Bonneaus purchased the four parcels from Beazer (Indian Hill, South Branch, Sutter Creek Ranch, and the 125-acre parcel), using, in part, funds from the trust.

Although the corporation was formed in 1994, the trust did not transfer the property to the corporation until 1997. Therefore, when the four parcels were purchased by the Bonneaus, the money came from the trust, not the corporation, because the corporation, as yet, had not received the property from the trust.

Article 3 of the corporation's bylaws contains provisions relevant to the corporate directors. Section 19 of article 3 states, in relevant part:

"To the extent that a person who is, or was, a director, officer, employee or other agent of this corporation has been successful on the merits in defense of any civil, criminal, administrative or investigative proceeding brought to procure a judgment against such person by reason of the fact that he or she is, or was, an agent of the corporation, or has been successful in defense of any claim, issue or matter, therein, such person shall be indemnified against expenses actually and reasonably incurred by the person in connection with such proceeding."

The Trust (which is the corporation) filed this action against Brian. In the action, the Trust alleged causes of action against Brian in his capacity as a property owner (quiet title and prescriptive easement) and a fiduciary of the trust (breach of fiduciary duty and constructive trust). Nothing in the complaint alleged that Brian had violated his duties to the corporation or that anything he did in his capacity as a director of the corporation was even relevant to the proceedings.

Brian filed a motion for attorney fees. Although Judge Richard A. Haugner presided over the trial and issued the statement of decision and judgment, Judge Susan C. Harlan presided over the motion for attorney fees. Brian based his request for attorney fees on article 3, section 19 of the corporate bylaws and on Probate Code section 16247.

The court awarded $78,250 in attorney fees. It based the award on article 3, section 19 of the corporate bylaws.

The Trust asserts that the trial court erred by awarding attorney fees pursuant to article 3, section 19 of the corporate bylaws because (1) Brian was not sued for actions taken in his corporate capacity, (2) article 3, section 19 of the corporate bylaws was intended to indemnify directors for suits brought by third parties, not by the corporation, and (3) Susan, Brian's wife, was not a corporate director. We agree with the first assertion and therefore need not consider the remaining two.

As noted above, the causes of action against Brian related to his ownership of property and his duties to the trust, neither of which had anything to do with his status as a director of the corporation. By its terms, article 3, section 19 of the corporate bylaws only provided for indemnification to the director if he was sued "by reason of the fact that he or she is, or was, an agent of the corporation . . . ." While it is true that Brian became a director of the corporation, that development is irrelevant to the Trust's claims. Accordingly, basing the award of attorney fees on article 3, section 19 of the corporate bylaws was error.

Brian asserts that we must affirm the attorney fees award because it was authorized by Corporations Code section 5238 and Probate Code section 16247. Neither code section supports the award.

Corporations Code section 5238 allows a corporation, under limited circumstances, to provide for indemnity to agents and directors sued in their official capacity. Subdivision (b) of the statute states: "A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor . . . ) by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding . . . ." Brian is not entitled to attorney fees pursuant to this statute for the same reason he is not entitled to attorney fees pursuant to article 3, section 19 of the corporate bylaws: Brian was not sued for actions taken in his official capacity as a director or agent of the corporation.

Probate Code section 16247 relates to trusts and states: "The trustee has the power to hire persons, including accountants, attorneys, auditors, investment advisers, appraisers (including probate referees appointed pursuant to Section 400), or other agents, even if they are associated or affiliated with the trustee, to advise or assist the trustee in the performance of administrative duties." Nothing in this statute, which allows a trustee to hire professionals to assist in the performance of the trust's administrative duties, supports Brian's assertion that he is entitled to attorney fees.

Without referring to the actual text of Probate Code section 16247, Brian nonetheless argues that this section requires an award of attorney fees. For this proposition, he cites Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201. That case is inapposite. It held that the trustee, who hired counsel to assist in the administration of the trust, was entitled to assert attorney-client privilege to avoid turning over privileged documents to trust beneficiaries. This holding is unhelpful to Brian.

The trial court therefore erred by awarding attorney fees to Brian.

DISPOSITION

The judgment is affirmed. The award of attorney fees is reversed. Each party must bear its own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

We concur: HULL , J. MURRAY , J.


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