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Kendall Kleveland v. Siegel & Wolensky

April 17, 2013


(Super. Ct. No. 37-2010-00061990- CU-MC-NC APPEAL from an order of the Superior Court of San Diego County, Timothy M. Casserly, Judge.

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



This is the third appeal arising out of a probate matter involving Scott Leach's (Scott)*fn1 challenge of the trustee's (Kendall Kleveland (Kendall)) handling of a trust. In the first appeal, we affirmed the trial court's final judgment resolving, among other issues, Scott's petition for breach of trust and removal of Kendall as trustee.*fn2 (See Leach v. Kleveland (Mar. 24, 2010, D054532) [nonpub. opn.] (Leach v. Kleveland).) In that opinion, we affirmed the judgment in its entirety, including the trial court's determination that Scott filed and pursued the petition in "bad faith" and for "improper purpose."

In the second appeal, Scott challenged an order approving a petition for approval of accounting and proposed plan of distribution of trust assets. As part of that appeal, Boris Siegel filed a brief appealing the court's award of sanctions against him. We affirmed both the order and the award of sanctions. (See Leach v. Kleveland (Nov. 20, 2012, D061371) [nonpub. opn.].)

This third appeal involves a malicious prosecution suit brought by Kendall against Scott and his attorneys Siegel & Wolensky, LLP; Boris Siegel; Lewis M. Wolensky; and Joshua J. Herndon (collectively Attorney Defendants) arising out of Scott's petition for breach of trust and removal. Attorney Defendants moved to strike the malicious prosecution suit under Code of Civil Procedure section 425.16,*fn3 the anti-SLAPP (strategic lawsuit against public participation) statute. The court denied the motion and awarded Kendall $20,055 in attorney fees and costs.

Attorney Defendants appeal, contending the court erred in finding Kendall demonstrated a probability of success on the merits. They assert that at the time the malicious prosecution suit was initiated, there was no final determination of the merits of the underlying trust dispute. In addition, Attorney Defendants argue probable cause existed in bringing the petition for breach of trust and removal and that petition was not initiated with malice. Also, Attorney Defendants maintain that the court abused its discretion by awarding attorney fees and costs because the court failed to include "factual support with specific circumstances" to justify the award in the order.

We reject all of Attorney Defendants' contentions and affirm the order. In doing so, we are troubled by Attorney Defendants utter failure to provide a "summary of significant facts limited to matters in the record." (Cal. Rules of Court, rule 8.204(2)(C)).*fn4 For example, Attorney Defendants' opening brief omits the most critical fact of the entire appeal: the trial court found the petition for breach of trust and removal was filed and pursued in bad faith and for an improper purpose.

We further are perturbed by Attorney Defendants use of "facts" and "evidence" beyond the petition for breach of trust and removal in an attempt to manufacture a reasonable justification for filing and pursuing the petition. In taking this tact, Attorney Defendants have misrepresented the record and ignored established case law without explanation or justification.

This appeal shares the fate of the two previous appeals involving the underlying probate matter. We affirm the order of the superior court. In addition, there must be consequences for Attorney Defendants' tactics in this appeal, which are patently frivolous. We find no support in law or fact for the arguments advanced by Attorney Defendants here. In other words, this appeal indisputably has no merit. Because we determine "any reasonable attorney would agree that the appeal is totally and completely without merit," we deem sanctions are appropriate. (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650 (Flaherty).)*fn5


Kendall brought a malicious prosecution suit against Attorney Defendants and Scott.*fn6 The malicious prosecution suit was based on a petition for breach of trust and removal of Kendall as trustee of the trust. Scott, who was represented by Attorney Defendants, filed the petition. After a bench trial involving Scott's petition as well as other petitions, the court found against Scott and did not award him any of his requested relief. The court determined Scott had "filed and pursued the Petition for Breach of Trust and Removal in bad faith and for an improper purpose." The court also awarded Kendall attorney fees and costs under Probate Code section 15642, subdivision (d) as sanctions.

Scott appealed the final judgment in the trust litigation, and we affirmed the judgment in its entirety. (See Leach v. Kleveland, supra, D054532.) To provide some necessary background information, we cite liberally to that opinion.

The Trust Litigation*fn7

Kendall was the "successor trustee of the Kleveland Family trust (the family trust). Scott . . . , the son of deceased beneficiary Janis Kleveland (Janis), filed a petition in probate court alleging Kendall breached his duties as trustee, seeking title to real property that was the major asset of the trust, an accounting, and removal of Kendall as trustee. Kendall brought a petition for directions, requesting a sale of the real property and instructions as to how to properly distribute the assets of the trust." (Leach v. Kleveland, supra, D054532.)

The Family Trust

"The family trust was established by Chester R. and Jeanne M. Kleveland in 1995. Jeanne passed away in January 2003. Chester passed away in March 2003.

"Chester and Jeanne had two children, Kendall and Janis. Chester and Jeanne's trust provided that, upon their deaths, Kendall would become the successor trustee and the trust estate was to be divided equally between Kendall and Janis. The trust instrument granted Kendall, as successor trustee, discretion to divide the trust estate in any manner he determined to be appropriate, so long as an equal division was accomplished.

"At the time of Chester's death, the primary assets of the trust estate were (1) a house located at 266 Rodney Avenue in Encinitas, California (the Rodney Property); and (2) various bank accounts, life insurance policies and a $107,000 debt owed by Kendall to his parents (the Liquid Assets). The Rodney Property was worth at least $400,000. The Liquid Assets were worth approximately $280,000. In addition, the trust owned a few items of lesser value, including personal property, furnishings inside the Rodney Property, and a Ford Taurus.

"Following the death of their parents, Kendall and Janis discussed the manner in which the trust estate should be divided. Janis wanted the Rodney Property. This was acceptable to Kendall, in part because he and his wife already owned their home in Ventura County, whereas Janis did not own a home. In their discussions, Kendall and Janis developed a conceptual plan for the ultimate distribution of the trust assets. That plan contemplated that Janis would receive the Rodney Property, the furnishings and personal property (except for a few items of sentimental value to Kendall), Kendall would receive the Liquid Assets, and Janis would make an equalization payment to Kendall to effectuate an equal distribution of the trust estate. Based upon a valuation prepared by an accountant and an attorney hired by Kendall to assist with the trust, the expected amount of the equalization payment from Janis to Kendall was approximately $65,000.

"At the time of their discussions, Janis was ill and not working. Janis told Kendall that she was receiving government health care benefits. She also told Kendall that she was concerned that if she received the Rodney Property, then she might no longer qualify for those benefits, and that a distribution of real property to her might result in an increase in property taxes. Janis asked for some time to investigate these issues before any distributions were made.

"By the time of these discussions, Janis and some of her extended family and friends had already moved into the Rodney Property. Kendall was willing to accommodate Janis's wishes and concerns and did so by allowing Janis and her extended family to remain in the Rodney Property while Janis had time to investigate the matters of concern to her and the details of the anticipated equalization payment were being established.

"Kendall believed that he and Janis had a common understanding as to the expected final distribution of the trust assets. Kendall would receive the Liquid Assets and Janis would receive the Rodney Property and would make an equalization payment to Kendall. Kendall also believed that Janis would ultimately resolve her concerns about her continuing entitlement to government benefits. He further believed they would ultimately reach an agreement concerning the amount and timing of the equalization payment to be made by Janis. Kendall allowed Janis and her extended family to continue to live in the Rodney Property even though the overall trust distribution arrangement had not been finalized.

"At this time Kendall also assumed personal control over the Liquid Assets in the trust and used them to purchase items for his own personal use, including a new car and condominium. He did so based upon his belief that a final distribution of the trust's assets was imminent, and he would receive an amount at least equal to the Liquid Assets of the trust.

"Kendall and Janis did not live in the same community and did not have a close relationship. Unbeknownst to Kendall, Janis at some point determined not to resolve the concerns about her receipt of distributions from the trust and determined not to commit to any equalization payment to Kendall. Janis was content to remain in the Rodney Property without receiving any formal distributions from the trust. Janis and her extended family consulted with an attorney about the consequences of Janis not finalizing the distribution from her parents' trust before her own expected death. After consulting with an attorney, Janis took no further action of any significance to resolve the issues pertaining to the distribution from the trust. She took no meaningful steps to resolve her stated concerns about the effect of a trust distribution on her government benefits. She also declined to agree to any equalization payment, even though Kendall, who was unaware of the details of Janis's illness, offered Janis the option of paying the equalization amount over a period of 30 years.

"Janis passed away from lung cancer in October 2005. By that time, Janis and some of her extended family had been living in the Rodney Property for more than two years without paying rent, taxes or insurance. None of Janis's family members informed Kendall of Janis's passing. Kendall learned of Janis's death from a family friend, after Janis's funeral.

"Scott is Janis's son He is the executor of her estate. There were no assets in Janis's estate, other than Janis's interest in the family trust." (Leach v. Kleveland, supra, at pp. 2-6.)

The Dispute

After Janis's death, "Scott took the position that Kendall was required to convey the Rodney Property to him, as executor of Janis's estate, without any equalization payment, even though the Rodney Property is worth more than the combined Liquid Assets of the trust, including the Liquid Assets already spent by Kendall.

"Scott refused to discuss the trust estate with Kendall, instead insisting that he was going to retain an attorney to 'contest the will.' Not long thereafter, counsel for Scott began posing questions to Kendall's attorney about the details of an accounting which had been prepared. Initially, there was some confusion because Scott had obtained a copy of a draft accounting. However, from the outset Merwyn J. Miller, Kendall's trust attorney, explained the accounting was only a draft, and the actual accounting was provided to Scott's attorney well before any litigation commenced. Despite that, Scott's attorney demanded that Kendall submit documentation concerning a series of loans which his parents had made to him over a 20-year period, including a demand that Kendall 'provide an itemization of each loan Kendall received from [his parents], and each payment he made on those loans, noting whether the payment was principal or interest.' Further, Scott demanded that Kendall provide 'documents, such as cancelled checks, that substantiate any payments he has made.'

"Shortly thereafter, Scott filed a petition for breach of trust and removal of successor trustee. In the petition, Scott alleged Kendall breached his duties as trustee by failing to substantiate his accounting and that he owed more to the trust than was disclosed in the accounting. He further requested that the court find Kendall opposed the petition in bad faith and that he be awarded attorney fees and costs. Scott also requested double damages, that Kendall be removed as trustee, and that Kendall not be paid his attorney fees and costs incurred in defending the action.

"At or about the time he filed Scott's petition, Scott's counsel wrote to Kendall's attorney and stated that if Kendall wished to avoid 'long and expensive' litigation, then he would have to transfer the ...

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