Powell v. Tagami

• Decision Date: 06 August 2018
• Docket Number: D072566, D073083
• Citation: 236 Cal.Rptr.3d 765,26 Cal.App.5th 219
• Court: California Court of Appeals Court of Appeals
• Parties: Claudia POWELL, as Trustee, etc., Plaintiff and Respondent, v. Charles M. TAGAMI, Defendant and Appellant.

26 Cal.App.5th 219

236 Cal.Rptr.3d 765

Claudia POWELL, as Trustee, etc., Plaintiff and Respondent,

v.Charles M. TAGAMI, Defendant and Appellant.

D072566, D073083

Court of Appeal, Fourth District, Division 1, California.

Filed August 6, 2018

As Modified August 31, 2018

As Amended September 5, 2018

Law Office of Bhashini Weerasinghe and Bhashini Weerasinghe, San Diego, for Defendant and Appellant.

Hughes & Pizzuto, Kent C. Thompson, San Diego, and Anne M. Rudolph, Eureka, for Plaintiff and Respondent.

McCONNELL, P. J.

INTRODUCTION

In these two consolidated appeals—D072566 (Powell I ) and D073083 (Powell II )—Charles M. Tagami¹ challenges two probate orders. The first order settled, allowed, and approved the third and final predeath account and report of trustee (Third Account) and found Charles objected to the Third Account without reasonable cause and in bad faith, which justified an award of costs and fees pursuant to Probate Code section 17211, subdivision (a). Charles contends the probate court applied an incorrect local rule of the San Diego County Superior Court (hereafter, Local Rules) and there was not substantial evidence to support certain expenses. Charles also contends the court erred in finding he contested the Third Account without reasonable cause and in bad faith.²

The second order awarded $42,115.38 in attorney fees and costs pursuant to Probate Code section 17211, requiring Charles to pay these fees from his share of the Tagami Living Trust (the Trust), or personally if his share was inadequate. Charles contends the court should not have awarded fees for trustee Claudia Powell's personal attorney and the fees awarded for Powell and the Trust attorneys were excessive, duplicative and unreasonable.

On our own motion, we consolidated the appeals for disposition. We disagree with Charles's contentions in both appeals and, therefore, we affirm the orders.

BACKGROUND

A

Kenneth M. (Matazo) and Kazu Tagami were grantors of the Trust, which was established on November 10, 1997, and restated on January 3, 2012. Matazo and Kazu had three children: Kenneth K. Tagami, Barbara L. Tagami, and Charles.

A family dispute arose when the settlors suspected the prior trustee, who was Barbara's son, of embezzling funds from the Trust. Matazo and Kazu removed the prior trustee and appointed professional fiduciary Powell as trustee on September 12, 2011. Attorney Nancy Ewin drafted the restatement of the Trust, which was executed in January 2012. Powell hired attorney Kent Thompson to represent her in her fiduciary capacity as trustee of the Trust.

A physician certified in March 2012 that Kazu was unable to make her own financial and medical decisions due to medical issues. Matazo died in August 2012. Kazu died almost three years later, in June 2015.

B

The court settled two prior accountings, the first for trust activity in the period of September 12, 2011, through September 30, 2012, and the second for trust activity in the period of October 1, 2012, through September 30, 2014. Powell gave Charles notice of the prior accountings. Charles did not object.

In settling, allowing, and approving the first accounting, the court determined fees paid for attorney Thompson to give Powell advice regarding the proper administration and conduct of the trust were reasonable, necessary, and for the benefit of the Trust. The court also found Powell performed all duties required of her during the accounting period and had been paid reasonable compensation, calculated quarterly, on a laddered fee schedule based upon the market value of the assets on hand at 1 percent of the first $1 million. The court similarly settled, allowed, and approved the second account and report.

C

Approximately a year after Kazu's death, Charles's attorney requested the third accounting "with supporting documentation" and stated Charles would not approve the accounting "until supporting documentation is received and reviewed."

Attorney Thompson provided the Third Account with an explanation of the accounts where the Trust assets were held. Thompson stated neither statute nor Local Rules required delivery of bank statements or supporting documentation for an accounting. Such a request was beyond the scope of Powell's accounting responsibility "as well as an unnecessary expenditure of time and money." Thompson pointed out the court settled two prior accounts without objection.

After further communications, attorney Thompson asked for clarification of what documents Charles wanted. In his 41 years of practice representing professional fiduciaries, Thompson had never had a request for documentation after submission of a complete account formatted as required by the Probate Code, although he had responded to questions about specific receipts, distributions, or disbursements.

Charles's attorney demanded bills, statements and engagement letters with respect to expenses listed in the account including fees for Thompson's firm, fees for Powell, fees for attorney Ewin, and mediation fees. Charles's attorney stated failure to comply with the demands could be interpreted as bad faith. The attorney gave notice of Charles's objection to the Third Account and his intent to request attorney fees and surcharges against Powell.

Thompson denied Powell's actions could be interpreted as being in bad faith. He explained the Third Account was presented in conformity with the Probate Code and the two prior accounts, with the same categories, were approved without objection. Nevertheless, Thompson stated there were no engagement letters for Powell, attorney Ewin, or the mediation firm. He asserted the attorney-client privilege as to the engagement letter and billing statements for his firm. As to other billing statements requested, Thompson stated Powell would comply if the court authorized delivery of the requested statements.

On September 19, 2016, Powell filed her Third Account for the period of October 1, 2014, through June 20, 2015, the date of Kazu's death. The Third Account showed all assets and distributions during the accounting period. This included a schedule listing itemized administrative expenses incurred during the accounting period. The property on hand at the close of the third accounting period had a market value of over $4 million and a carry value of more than $2.4 million. Charles received notice of the Third Account.

Charles filed his objection to the Third Account on February 2, 2017. Charles objected stating it miscalculated the number of days between October 1, 2014, and June 20, 2015. He stated he had insufficient information to judge Powell's compliance with the Probate Code for inventoried investments because she had not produced financial records. Charles objected to Powell's fees as well as to the attorney fees paid for attorney Thompson, attorney Ewin, and a mediation firm as excessive or inappropriate. He claimed Local Rules, rule 4.16.2(C)(4) required Powell to submit a declaration in support of fees. He complained about Powell's conduct as trustee throughout her service as trustee, including actions prior to and after the Third Account period at issue. Charles submitted 26 exhibits, which included documents and correspondence prior to and after the Third Account period.

Powell submitted a supplement to the Third Account stating administrative expenses during the accounting period totaled $29,482.19 in trustee fees and $14,658.28 in attorney fees. She stated these expenses were necessary, beneficial to the Trust, and reasonable. After an initial hearing, the court continued the matter to allow discovery about the Third Account.

Thereafter, attorney Thompson submitted a declaration responding to Charles's requests for documents. Thompson lodged the engagement letter for his firm, bank statements reconciling the balances of the accounts at financial institutions as of the closing of the accounting, and redacted billing statements from his firm, attorney Ewin, and the mediator's firm. He also submitted bank letters and statements of accounts.

The parties agreed the court would take the matter under submission. The court set a briefing schedule for a supplemental objection and reply, but noted the parties could submit a stipulation if they reached an agreement.

Charles submitted a supplemental objection consisting of approximately 200 pages, including 38 additional exhibits. Charles accused Powell of abusive billing practices and "double dipping" into the Trust by delegating what he claimed were routine administrative tasks to attorney Thompson, who charged a higher hourly rate.

Charles complained it was inappropriate for attorney Thompson to bill for reviewing communications on which he was copied if the subject matter was not a legal issue. Charles pointed to communications between Powell, Charles, a caregiver, and a potential case manager regarding arranging for an assessment of Kazu at her home. Charles submitted a list of charges where he thought Thompson's fees should be reduced by $35 to $140 (one to three tenths of an hour at a rate of $350 per hour), or disallowed as either unnecessary or not legal services. Charles claimed, "at the very least" $6,125 in Thompson's fees were charged for unnecessary or nonlegal services. Charles extrapolated from this figure to claim there was a pattern of overbilling and estimated the first and second accounts paid more than $45,000 in inappropriate fees.

Charles challenged the fees charged by attorney Ewin for attending two family mediations during the accounting period involving issues regarding whether the Trust should pay for Charles's dental expenses and for Barbara's management of care for Kenneth. Charles claimed attorney Ewin was not Kazu's personal attorney and contended the mediations were unsuccessful and unnecessary. Charles also made personal attacks against Powell and Ewin alleging "cronyism" led Ewin to recommend Powell as the trustee. He also alleged Powell relied on Ewin's "willingness to rubber stamp" Powell's actions.

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