Estate of Howard

• Decision Date: 14 May 1976
• Citation: 58 Cal.App.3d 250,129 Cal.Rptr. 836
• Court: California Court of Appeals Court of Appeals
• Parties: In the Matter of the ESTATE of Charles S. HOWARD, aka Charles Stewart Howard, aka Charles Howard, aka C. S. Howard, Deceased. Barry BRANNEN, Petitioner and Respondent, v. Charles S. HOWARD, III, et al., Objectors and Appellants, Crocker, National Bank, and Marcela H. Fenton, Trustee of the Will of Charles S. Howard, Proponents and Respondents. Civ. 36985.

Page 836

129 Cal.Rptr. 836

58 Cal.App.3d 250

In the Matter of the ESTATE of Charles S. HOWARD, aka Charles Stewart Howard, aka Charles Howard, aka C. S. Howard, Deceased.

Barry BRANNEN, Petitioner and Respondent, v. Charles S. HOWARD, III, et al., Objectors and Appellants, Crocker, National Bank, and Marcela H. Fenton, Trustee of the Will of Charles S. Howard, Proponents and Respondents.

Civ. 36985.

Court of Appeal, First District, Division 4, California.

May 14, 1976.

Michael J. Keady, Matthew F. Quint, San Francisco, for appellants Charles S. Howard, III, and others.

Ernst & Daniels, San Francisco, for appellants Lindsay C. Howard, and others.

Dennis Danield, San Francisco, for appellants Estate of Anita Zabala Vanderbilt, etc., and others.

Barry Brannen, Santa Monica, for petitioner and respondent.

Heller, Ehrman, White & McAuliffe, Robert C. Harris, Lawrence C. Baker, San Francisco, for proponents and respondents Crocker National Bank, and others.

EMERSON, Associate Justice. ^*

FACTUAL HISTORY

Charles S. Howard died in 1952 and his will was admitted to probate. The final distribution of the estate occurred years ago, but the probate court retained jurisdiction Crocker, the managing trustee, entered into an agreement with the owners pursuant to which it has continued to manage the Ione Ranch on behalf of the owners as well as the beneficiaries. At some point, the owners and beneficiaries began to object to the manner in which the Ione Ranch was being managed by Crocker. That property had been leased to Interpace Corporation, and complaints were made about certain terms of the lease and about the amount of royalties paid by Interpace. In August 1971, respondent Brannen, an attorney, was engaged to represent the trustees and the owners in the matter of the Interpace lease. After negotiations which took place over a period of some 23 months, a settlement agreement was concluded pursuant to which the owners and trustees would receive increased royalty payments and other cash consideration from Interpace. The royalties payable under the agreement were to be received by Crocker on behalf of the trustees and owners.

to oversee the administration of certain testamentary trusts. The will created nine such trusts. The assets of each included a one-ninth interest in a parcel of realty called the Ione Ranch. Four of the trusts have terminated and their shares of the Ione Ranch are now owned outright by the former beneficiaries or by their successors in interest. These parties will be referred to hereafter as owners. The other five-ninths interest in the ranch is owned by respondents Crocker National Bank (hereafter Crocker) and Marcella H. Fenton, who are the trustees of the remaining five trusts. The owners and the beneficiaries of the trusts constitute the appellants herein. They appeal (and in some instances do not appeal) from certain orders and decrees as will be more fully discussed below.

PROCEDURAL HISTORY

Between August 1970 and May 1974, the trustees rendered various accounts and petitioned to have them settled. Those among appellants who were present or former beneficiaries filed objections and exceptions and requested, inter alia, that all accounts settled since the inception of the trusts be reopened and that the trustees be surcharged. ¹ It was alleged that the trustees (a) failed to properly care for the property of the trusts; (b) failed to collect rents and royalties from real properties which are assets of the trusts; (c) failed to properly protect and preserve water rights in those properties; (d) failed to exercise that degree of care necessary to produce a reasonable return from the real and personal properties of the trusts; (e) permitted the lessees to remove minerals from that trust property without compensation; (f) improperly allowed waste of trust property by lessees and sublessees; and (g) concealed such misconduct in rendering prior accounts.

The hearing on the petitions for settlement and the objections thereto was subjected to many continuances. By an order filed on June 3, 1974, the court finally established July 1, 1974, as the hearing date. The order further provided that the court would take no testimony concerning the objections to the accounts but would permit appellants to file an offer of proof describing the evidence desired to be introduced in support of the objections. The offer of proof was filed as required. At the hearing, the court informed counsel that it would study the offer and indicated that it would later issue some form of order or decision. No testimony was taken.

On August 9, 1974, the probate court issued a memorandum decision stating that the accounts were approved and the objections, rejected, and that appellants' request The foregoing proceedings leading to the settlement of the disputed accounts were paralleled by those relating to respondent Brannen's claim for an award of fees and costs for his services in the matter of the Interpace lease. In January 1973, the trustees requested compensation for Brannen's services in an amendment to one of their accounts. On October 25, 1973, in an apparent effort to free this issue from the continuing controversy over the accounts, Brannen filed his own petition for an award. That petition described in detail the nature of his services in the Interpace matter. The probate court stated in its memorandum decision, referred to above, that Brannen's request for fees was proper and would be paid.

previously made, for a jury trial was denied. The memorandum contained the following statement: 'The Court finds the accounts in order and proper, accounting wise. Disputes about propriety of actions are or may be the subject of another type of litigation, but the accounts are in order. . . .' Thereafter, on October 8 and November 14, 1974, the court issued its decrees approving the disputed accounts. Those decrees expressly corporated the memorandum decision. However, the decrees also stated, inter alia, that the trusts had been 'faithfully managed and conducted strictly in accordance with the terms thereof,' and that the accounts rendered by the trustees were 'approved, allowed and settled in all respects as rendered and presented for settlement.'

On September 4, 1974, the court entered its order providing that Brannen be awarded judgment against The trustees for the amount of his fees and costs. The order further, determined, in effect, that the trustees' liability would be charged proportionately against the five remaining testamentary trusts and against income received by the trustees on account of the nontrustee owners of the Ione Ranch. The trustees were awarded a lien against such income for this purpose. This order was entered upon Brannen's own petition, rather than upon the petition of the trustees.

THE APPEALS AND THE PARTIES

The court entered separate decrees settling the accounts as to the several beneficiaries and owners. The accounts ranged from the seventeenth to the twenty-first annual accounts. Two of the trusts terminated during the period involved and, as to them, final accounts were approved. We set forth the decrees, and the parties appealing from them in the margin. ²

QUESTIONS PRESENTED

A. Did the probate court err in granting the petitions to settle the accounts?

1. Should the court have considered appellants' claims of trustee misconduct?

2. Were appellants denied a fair hearing?

3. Should a jury trial be held on the issues raised by appellants' objections?

B. Did the probate court err in granting respondent Brannen's petition for fees and costs?

1. Did the court have the power to entertain the petition?

2. Did the court have the power to enter an order affecting the property interests of the owners?

3. Were appellants denied a fair hearing?

DISCUSSION

A. Did the probate court err in granting the petitions to settle the accounts?

1. Should the court have considered appellants' claims of trustee misconduct?

It is apparent from the record that the probate court, in ruling on the trustees' petitions to settle their accounts, refused to consider appellants' claims that the trustees committed various forms of misconduct harmful to the trusts. The court was aware of the existence of the misconduct issue, since it was stated in the memorandum opinion that the accounts were in order 'accounting wise' and that '(d)isputes about propriety of actions are or may be the subject of another type of litigation. . . .' The court apparently believed that it was required to do no more than determine the accuracy of the trustee's accounting for simple recepits and disbursements.

The range of the hearing is much greater than that. The accounts were rendered for settlement pursuant to Probate Code section 1120. That statute confers upon a probate court the power to pass upon a testamentary trustee's 'acts as trustee.' ³ The scope of a proceeding under section 1120 includes virtually all controversies that might arise between trustees and beneficiaries, including matters of trustee misconduct. (See Estate of Bissinger (1964) 60 Cal.2d 756, 765--766, 36 Cal.Rptr. 450, 388 P.2d 642; Coberly v. Superior Court (1965) 231 Cal.App.2d 685, 688, 42 Cal.Rptr. 64; Estate of Hensel (1956) 144 Cal.App.2d 429, 437, 301 P.2d 105; 7 Witkin, Summary of Cal. Law (8th ed. 1974) Wills and Probate, § 257, p. 5759.) For example, in Coberly v. Superior Court, supra, 231 Cal.App.2d 685, 42 Cal.Rptr. 64, the court said the following: 'It appears to us that a hearing on a testamentary trustee's petition for approval of its accounts is the proper time and place for a beneficiary to raise the issue of the trustee's neglect of duty or failure to properly discharge its office. (Citations.) Indeed failure to challenge the trustee's accounting at that time would in all probability preclude any challenge at a later date and make everything in the accounts res adjudicata. (Citations.)' (Id., at p. 688, 42 Cal.Rptr. at p. 66.)

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