Novak v. Fay

• Decision Date: 28 April 2015
• Docket Number: B256889
• Citation: 236 Cal.App.4th 329,186 Cal.Rptr.3d 451
• Court: California Court of Appeals Court of Appeals
• Parties: Mark S. NOVAK, Petitioner and Appellant, v. Michael FAY, as Trustee, etc., Objector and Respondent.

236 Cal.App.4th 329

186 Cal.Rptr.3d 451

Mark S. NOVAK, Petitioner and Appellant

v.Michael FAY, as Trustee, etc., Objector and Respondent.

B256889

Court of Appeal, Second District, Division 5, California.

Filed: April 28, 2015

Greines, Martin, Stein & Richland, Robin Meadow and David E. Hackett, Los Angeles, for Plaintiff and Appellant.

Susan Stricklin Wilson, Encintas, and Barbara K. Meserve, for Defendant and Respondent.

TURNER, P.J.

I. INTRODUCTION

Plaintiff, Mark S. Novak, seeks to enforce an attorney fee lien on assets held by the Dana Teitler Trust dated August 20, 1999 (Dana Teitler Trust). The present petition to enforce the attorney fee lien arises out of plaintiff's representation of Douglas Kelly between 2007 and 2012. In 2007, plaintiff and Mr. Kelly executed a contingency attorney fee agreement. The contingency fee agreement granted plaintiff lien rights over any settlement Mr. Kelly received. Under the terms of the fee agreement, plaintiff was to represent Mr. Kelly. In 2011, plaintiff filed a probate petition, which alleged Mr. Kelly was a pretermitted spouse of Ms. Teitler. In 2011, plaintiff negotiated a considerable settlement of the probate dispute. The probate court approved the settlement, which awarded Mr. Kelly a substantial interest in the Dana Teitler Trust in an order filed January 27, 2012.

Mr. Kelly died. On June 20, 2013, plaintiff filed the present petition. Plaintiff's petition seeks to enforce the attorney lien in the 2007 fee agreement with Mr. Kelly. The probate court denied plaintiff's petition to enforce the lien against property held by the Dana Teitler Trust. Plaintiff appeals from the probate court's December 16, 2013 order denying his petition to enforce his attorney fee lien. We reverse.

II. BACKGROUND

A. Mr. Kelly's Petition for Distribution of Property from the Trust

Ms. Teitler is a named beneficiary of the Teitler Family Trust. In 1999, Ms. Teitler transferred her beneficiary rights in the Teitler Family Trust to herself as trustee of the Dana Teitler Trust. Ms. Teitler named herself as a life beneficiary of the Dana Teitler Trust. Ms. Teitler's daughter, Abigail Fay, is named in the Dana Teitler Trust as the remainder beneficiary. Mr. Kelly was married to Ms. Teitler from July 10, 2002, until her death on October 15, 2006. Defendant is Michael Fay, Ms. Fay's father and the successor trustee of the Dana Teitler Trust.

On May 16, 2011, Mr. Kelly, represented by plaintiff, filed a petition for distribution of property from the Dana Teitler Trust. Mr. Kelly argued he was a pretermitted spouse and sought a one-half share of the Dana Teitler Trust. Prior to filing the pretermitted spouse probate petition, Mr. Kelly and plaintiff entered into a contingency fee agreement. The contingency fee agreement provides, “[Mr. Kelly] agrees to pay [plaintiff] 40% of all recoveries by way of settlement.... ‘Recovery’ includes, but is not limited to, all distributions to [Ms. Teitler's] estate from the Teitler Family Trust, i.e. distribution to which [Mr. Kelly] is entitled to 50% as [Ms. Teitler's] spouse.” Mr. Kelly agreed to reimburse plaintiff for any advanced legal costs and expenses incurred during the pretermitted spouse probate proceedings. The contingency fee agreement further provides: “It is agreed that Attorney may retain his share in full out of the amount finally collected by settlement; and it is further agreed that Attorney shall have all general, possessory, or retaining liens, and all special or charging liens known to the common law. [Mr. Kelly] expressly assigns to Attorney to the extent of his fees and disbursements, all assets and sums realized by way of settlement, arbitration, or trial.”

On October 11, 2011, a settlement of Mr. Kelly's pretermitted spouse probate petition was entered into with defendant. In entering into the settlement, defendant was acting both as the guardian of Ms. Fay's estate as well as the successor trustee of the Dana Teitler Trust. Under specified circumstances, the settlement contemplated a monthly $3,500 payment to Mr. Kelly. And, Mr. Kelly was entitled to receive 40 percent of all assets to which Ms. Teitler would have been entitled to as a beneficiary of the Teitler Family Trust. The settlement also contained the following proviso regarding distribution of Mr. Kelly's beneficial interest upon his death: “Upon [Mr. Kelly's] death all income and principal of [the Dana Teitler Trust] that have been distributed to him may be disposed of by [Mr. Kelly], by Will, Trust, or gift(s), as he chooses. As to any assets of [the Dana Teitler Trust] in which [Mr. Kelly] has a beneficial interest which have not been distributed to [Mr. Kelly], [Ms. Fay] ... shall receive fifty percent (50%) of [Mr. Kelly's] beneficial interest therein. As to [Mr. Kelly's] other fifty percent (50%) beneficial interest in said undistributed assets, [Mr. Kelly] shall have the right to dispose of them by Will, Trust, or gift(s), except that if [Mr. Kelly] does not so dispose of them, said other fifty percent (50%) interest as to such undisposed assets shall also be received by [Ms. Fay] and, in such case, shall be deemed assigned to [Ms. Fay].”

B. Plaintiff's Petition to Enforce His Attorney Fee Claim

On January 6, 2012, plaintiff filed an attorney fee lien notice with the Dana Teitler Trust and defendant. Plaintiff waived his right to any portion of the $3,500 monthly distribution to Mr. Kelly. Mr. Kelly died on July 24, 2012. He made no will, trust or any gifts.

On June 20, 2013, plaintiff filed a petition entitled, “Petition to Enforce Claim Pursuant to Attorney's Fee Agreement to Real and Personal Property Held by Trustee; and To Remove Trustee for Conflict of Interest, Failure to Report, and Conversion of Petitioner's Funds.” Plaintiff alleges he has standing to pursue his lien rights in probate court on two theories. Initially, plaintiff alleges he has standing because he is a beneficiary of the Dana Teitler Trust as a successor in interest under Probate Code section 24.¹ Also, plaintiff alleges he is a person entitled to take an interest under section 262.

According to the petition, plaintiff and Mr. Kelly entered into a contingency fee agreement. If successful, plaintiff was entitled to receive as a contingent attorney fee 40 percent of Mr. Kelly's 40 percent interest in the Dana Teitler Trust. According to the petition, Mr. Kelly's assignment of a portion of his beneficial interest in the Dana Teitler Trust is a nonprobate transfer under section 5000, subdivision (a). Plaintiff filed a second supplement to his petition which expanded on his section 5000, subdivision (a) argument. According to the supplement, Mr. Kelly made a nonprobate transfer of his estate to Ms. Fay under section 5000, subdivision (a). Plaintiff asserts Mr. Kelly died without assets. Thus, no probate of Mr. Kelly's estate was ever opened. Plaintiff argues the nonprobate transfer rendered a creditor claim to open a probate action against Mr. Kelly's estate pointless.

Defendant filed his opposition on July 25, 2013. Defendant argues plaintiff lacked standing to bring a petition regarding the Dana Teitler Trust. According to the opposition plaintiff was not a beneficiary; the contingency fee agreement did not create a lien on any trust assets; all of Mr. Kelly's interest in the Dana Teitler Trust ceased to exist upon his death when he failed to dispose of it via will, trust or gift; plaintiff is a creditor of Mr. Kelly; plaintiff should have pursued a creditor's claim against Mr. Kelly's estate under section 9000; and plaintiff's petition is time-barred under Code of Civil Procedure section 366.2, subdivision (a). Code of Civil Procedure section 366.2, subdivision (a) provides that an action arising “in contract” against a person who dies must be commenced within one year of death.

C. Events Leading up to the Order Denying Plaintiff's Petition

On July 31, 2013, the hearing was held on plaintiff's June 20, 2013 petition to enforce the fee agreement. The probate court orally indicated that it was unpersuaded by plaintiff's argument premised upon section 5000, subdivision (a). But no order was issued taking plaintiff's petition under submission. Several months passed and the probate court had issued no written order in connection with the merits. Each party had submitted a proposed order in response to the probate court's June 20, 2013 comments. On December 2, 2013, the probate court issued the following order: “The [c]ourt has received two conflicting orders to sign after a hearing heard in this department on July 31, 2013. The [c]ourt has received no indication of the reasons in support of their proposed order[s], nor reasons for opposition of the proposed orders submitted. [¶] The [c]ourt hereby orders each counsel, to submit a brief argument in support of, or opposition to any proposed order, to be filed ... no later than December 13, 2013.” Plaintiff filed a letter on December 12, 2013, which specifically relies upon section 9391. We will discuss section 9391 in greater depth later in this opinion.

On December 16, 2013, the probate court issued a written order denying plaintiff's petition. The probate court ruled the proper procedure to recover attorney fees was pursuant to a creditor's claim against Mr. Kelly's estate under section 9000; plaintiff was required to file a creditor's claim within one year of Mr. Kelly's death; the California Code of Civil Procedure section 366.2, subdivision (a) statute of limitations barred plaintiff's claim; and section 5000, subdivision (a), which provides a nonprobate transfer, was inapplicable. Plaintiff appeals the December 16, 2013 order denying his petition.

III. DISCUSSION

A. Summary of Arguments and Standards of Review

Plaintiff raises two arguments on appeal. Plaintiff first argues under section 9391, he is an equitable lienholder and did not need to file a creditor's claim in probate. Plaintiff alternatively argues Mr. Kelly made a nonprobate transfer of a beneficial...