Walstad v. Maloney CA2/6 ( 2021 )

Filed 3/18/21 Walstad v. Maloney CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
DAVID WALSTAD, 2d. Civil No. B300586
(Super. Ct. No. 56-2016-
Plaintiff and Appellant, 00479026-PR-TR-OXN)
(Ventura County)
v.
EILEEN MALONEY et al., as
Trustees, etc.,
Defendants and Respondents.
Eileen Maloney and Patricia Farber are co-trustees of
the Lambert Loucks Trust. In May 2017, the co-trustees
petitioned for approval of the Trust accounting covering the
period from November 2006 to March 2017. Trust beneficiary
David Walstad objected. The probate court overruled Walstad’s
objections, approved the accounting, and entered judgment.
Walstad contends: (1) the co-trustees charged the
Trust unreasonable fees, (2) the co-trustees should have rented
out a residence owned by the Trust during the eight years prior
to selling it, (3) we should order disgorgement of all co-trustee
fees, (4) he is entitled to double damages and attorney fees, and
(5) the probate court should have admitted an appraiser’s
estimate into evidence.1 We affirm.
FACTUAL AND PROCEDURAL HISTORY
A. The Trust
Loucks executed the Trust in July 1981. He amended
it several times, including to appoint Maloney (his daughter-in-
law) and Carol Milligan (his longtime bookkeeper) as co-trustees.
Milligan served in that role until her death in 2014, at which
time Farber (Loucks’s former accountant) became a co-trustee.
She and Maloney continue to serve as co-trustees.
As a co-trustee, Maloney regularly met with Trust
administrators, including financial advisors, attorneys,
accountants, and bookkeepers. She compiled materials for the
Trust’s estate tax return, provided input to those managing Trust
assets, paid utilities on Trust properties, and sorted through
Trust possessions. She received monthly trustee fees for
performing these duties from January 2007 (two months after
Loucks’s death) to April 2015. In total, she was paid nearly
$275,000 in fees (about $2,700 per month).
The Trust paid Milligan $800 in monthly
bookkeeping fees, the same amount Loucks had paid her during
his lifetime. In total, the Trust paid Milligan $76,100 between
December 2006 and August 2014.
Farber has never been paid for her services as a co-
trustee.
1 Walstad also urges us to disregard Maloney’s testimony
as not credible. That argument was for the probate court, not us.
(People v. Superior Court (Keithley) (1975) 13 Cal.3d 406, 410.)
2
B. The residence
When Loucks died in 2006, Trust assets were valued
at nearly $9 million. Among the Trust’s properties was Loucks’s
Camarillo residence. The residence was built in the 1950s, and
was virtually unchanged over the next six decades: The carpet
was worn, the walls were “dripping with . . . nicotine” from
cigarette smoke, the septic tank was unusable, and the plumbing
and electrical systems needed to be replaced. There was no hot
water, no heat, and no air conditioning.
The exterior of the residence was similarly
dilapidated. There was fungus and dry rot around the eaves.
Shrubs and trees were overgrown. Rodent holes riddled the
backyard. The pool—which was just inches from the residence—
had begun to sink.
1. Delays in selling the residence
Maloney engaged a realtor in early 2007 to evaluate
the residence for sale. The realtor told Maloney that the
residence would need extensive repairs before it could be sold: a
new septic tank, new plumbing, a new hot water heater, a new
furnace, new electrical and ducting systems, new carpet and
paint, new pool equipment, and extensive landscaping. The
realtor estimated that the market value would be between
$630,000 and $660,000 after these repairs were completed. It
would be difficult to sell the residence—even for a significantly
reduced price—without completing the repairs.
Maloney asked about renting out the residence, and
the realtor said that could only be done after the repairs were
completed.
The following year, Maloney hired an independent
appraiser to estimate the value of the Camarillo residence for the
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Trust’s tax return. The appraiser determined that the residence
was worth $1,265,000 on the date of Loucks’s death.
Over the next four years, the realtor regularly visited
the residence and updated Maloney on developments in the
housing market. In her view, the market had deteriorated so
significantly that selling the residence would net the Trust
hundreds of thousands of dollars less than what it was worth—
even after spending $80,000 to $100,000 on repairs. Renting out
the residence would require the same repairs, but even if
Maloney was able to find suitable tenants the unsecured
swimming pool would pose major safety and liability concerns.
Even then, the most the co-trustees could expect potential
tenants to pay was about $1,800 to $2,100 per month—meaning
it would take years before the Trust could recoup the cost of
repairs. Maloney and her co-trustee decided to wait to sell or
rent out the residence.
Maloney maintained the residence until 2014. She
tended to the irrigation system and avocado groves surrounding
the property. She provided access to gardeners and pool
maintenance workers. She secured several bids for the repair
work.
Walstad occasionally asked Maloney about plans to
sell the residence. Maloney told him that they had delayed doing
so due to its dilapidated condition and the collapsing housing
market. Walstad never asked Maloney to sell or rent the
residence. He did not request an accounting or to see any Trust
records prior to 2014.
2. The residence sells in 2015
By 2014, Maloney and the realtor had determined
that the housing market had improved enough that it made sense
4
to renovate the residence and list it for sale. Maloney oversaw
the repairs, which cost $82,000 and took eight months to
complete. Maloney spent several hours each day on the
renovation and repair project, but received no compensation for
her work.
The residence sold in January 2015 for $1,050,000.
Maloney received no compensation in connection with the sale.
Afterward, Walstad thanked her for a “job well done” and
congratulated her “on the success of [her] tireless efforts.”
C. The accounting
Walstad filed a petition for an accounting in March
2016. The probate court granted Walstad’s petition in March
2017.2 In May, the co-trustees petitioned for approval of the
accounting covering the period from November 2006 to March
2017. Walstad objected to the co-trustees’ petition.
The matter went to trial in February 2019. Walstad’s
expert witness testified that the Trust could have earned more
than $330,000 from renting out the residence from 2007 through
2014. He testified that the residence would have sold for $1.2
million in “as is” condition on the date of Loucks’s death. He
based his estimate, in part, on that of the appraiser Maloney
hired in 2008 to assist with the Trust’s tax return, which Walstad
moved to admit into evidence. The probate court took Walstad’s
motion under submission.
2 Walstad requests that we take judicial notice of the order
granting his petition. We grant this request insofar as Walstad
asks us to notice the existence of the order (Evid. Code, § 452,
subd. (d)), but deny it insofar as he requests us to notice the
findings underlying it (People v. Superior Court (Vasquez) (2018)
27 Cal.App.5th 36, 69, fn. 21).
5
The court issued its tentative decision in June. The
court found that the co-trustees’ compensation was not excessive,
and that it was reasonable to wait for the housing market to
improve before renting or selling the residence. The tentative
decision did not resolve Walstad’s request to admit the
appraiser’s estimate into evidence. Walstad did not object to the
tentative decision, and the court adopted it as the final decision.
DISCUSSION
Trustee fees
Walstad first contends the probate court erred when
it determined that the fees paid to the co-trustees were
reasonable. We disagree.
A trustee may be entitled to compensation for
performing trust duties. (Estate of McLaughlin (1954) 43 Cal.2d
462, 467.) The reasonableness of that compensation depends on
the circumstances of each case. (Id. at pp. 467-468.) Among the
factors the probate court should consider include the success of
the trustee’s administration, whether that administration
involved routine work or unusual skill and expertise, the fidelity
shown by the trustee, and the time the trustee spent performing
their duties. (Cal. Rules of Court, rule 7.776.) We review for
substantial evidence. (Estate of Gilliland (1971) 5 Cal.3d 56, 59.)
Substantial evidence supports the probate court’s
determination that the co-trustees’ fees were reasonable. The
residence sold for more than $1 million—more than 60 percent
higher than the realtor’s estimated value in 2007. The
co-trustees showed dedication to the Trust, performing significant
work over the years: Maloney regularly met with Trust
administrators, compiled materials and documents, and sorted
through and disposed of Trust property. She spent hundreds (if
6
not thousands) of hours managing the residence and its
surrounding grounds, including a nearly year-long stint
overseeing a significant repair and renovation project—a project
for which she received no compensation. Milligan remained
similarly dedicated to the Trust and its administration,
continuing to act as Trust bookkeeper after Loucks’s death.
These factors support the probate court’s determination that the
co-trustees’ fees were reasonable.
Renting the residence
Walstad next contends the probate court erred when
it concluded that the co-trustees reasonably declined to rent out
the residence during the eight years prior to its sale. We again
disagree.
A trustee has the duty to “invest and manage trust
assets as a prudent investor would,” exercising “reasonable care,
skill, and caution” in doing so. (Prob. Code,3 § 16047, subd. (a).)
This includes the duty to “make the trust property productive
under the circumstances and in furtherance of the purposes of
the trust.” (§ 16007.) But even if a trustee fails to perform these
duties, a probate court may excuse that failure if it determines
that they “acted reasonably and in good faith under the
circumstances.” (§ 16440, subd. (b).) We review for substantial
evidence. (Orange Catholic Foundation v. Arvizu (2018) 28
Cal.App.5th 283, 292 (Orange Catholic).)
Substantial evidence supports the probate court’s
determination that the co-trustees acted reasonably and in good
faith when they declined to rent out the residence between 2007
and 2014. The evidence admitted at trial showed that the
residence was uninhabitable and in need of more than $80,000 in
3 Unlabeled statutory references are to the Probate Code.
7
repairs. Those repairs would have had to be completed before the
residence could be rented. And once completed, there remained
safety and liability concerns due to the unsecured pool at the
residence. Walstad’s conclusory assertions to the contrary
notwithstanding, these circumstances support the determination
that the co-trustees acted properly when they decided to wait for
the housing market to recover before undertaking the necessary
repairs. (Orange Catholic, supra, 28 Cal.App.5th at pp. 294-295.)
Disgorgement
Next, Walstad claims we should order the co-trustees
to disgorge and repay all the fees they earned from the Trust
because they “stipulated” that his 2016 petition for accounting
was granted in “all respects.” But he cites nothing in the record
to support this claim. (Cf. Alki Partners, LP v. DB Fund Services,
LLC (2016) 4 Cal.App.5th 574, 590, fn. 8 [declining to consider
assertion unsupported by citation to record]; Cal. Rules of Court,
rule 8.204(a)(1)(C) [briefs must “[s]upport any reference to a
matter in the record by a citation to the volume and page number
of the record where the matter appears”].) Nothing in the
probate court’s ruling on his petition suggests that it was granted
in “all respects.” Walstad moved the court to consolidate his
petition for an accounting and the co-trustees’ petition for
approval of the accounting for trial. Consolidation would have
been unnecessary had the probate court granted his petition in
“all respects.”
Double damages and attorney fees
Walstad next invites us to order the co-trustees to
pay double damages to the Trust, plus his attorney fees. We
decline this invitation.
8
A person who files a petition pursuant to section 850
may recover double damages from “a person [who] has in bad
faith wrongfully taken, concealed, or disposed of property
belonging to . . . a trust” plus their attorney fees and costs.
(§ 859.) But Walstad points to nothing in the record showing that
he filed a section 850 petition. And even if he did, he points to
nothing in the record showing that he provided the co-trustees
with 30 days’ notice of his request (§ 851, subd. (a)) or a
description of the relief he sought (id., subd. (c)(2)). The probate
court thus did not abuse its discretion when it denied Walstad’s
request for section 859 relief.4 (Estate of Roberts (1990) 225
Cal.App.3d 1017, 1020-1022 [abuse of discretion to grant motion
that does not comply with statutory requirements].)
The appraiser’s estimate
Finally, Walstad contends the probate court erred
when it did not rule on his request to admit into evidence the
appraiser’s estimate of the residence’s value. But Walstad did
not object to the court’s tentative decision or otherwise point out
the court’s omission of his request. His contention is forfeited.
(In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134.)
It also lacks merit. The appraiser’s estimate was
hearsay (In re Marriage of Smith (1978) 79 Cal.App.3d 725, 752-
753), and Walstad cites no authority for his claim that it was
admissible pursuant to Evidence Code section 1222 as the
statement of a party-opponent. And even if it were, exclusion of
4 We also reject Walstad’s argument, made for the first time
on appeal, that we should direct the probate court to exercise its
equitable powers and order the co-trustees to pay his attorney
fees. (Willden v. Washington Nat. Ins. Co. (1976) 18 Cal.3d 631,
636, fn. 5.)
9
the appraisal was clearly harmless: The probate court knew that
Maloney had obtained the appraisal, and Walstad’s own expert
discussed it as the basis for his valuation of the residence.
Moreover, information “identical” to that in the appraisal was
admitted into evidence as part of the Trust’s estate tax return. It
is thus not reasonably probable that admission of the original
appraisal would have affected the probate court’s decision. (In re
Marriage of Smith, at p. 751.)
DISPOSITION
The judgment is affirmed. Maloney and Farber shall
recover their costs on appeal.
NOT TO BE PUBLISHED.
TANGEMAN, J.
We concur:
YEGAN, Acting P. J.
PERREN, J.
10
Kevin G. DeNoce, Judge
Superior Court County of Ventura
______________________________
Catanese & Wells, T. Randolph Catanese and
Douglas R. Hume for Plaintiff and Appellant.
Ferguson Case Orr Paterson, David B. Shea and
Joshua S. Hopstone for Defendants and Respondents.