Opinion
NOT TO BE PUBLISHED
Appeals from judgments of the Superior Court of Orange County No. A244846, Mary Fingal Schulte, Judge.
Ezer & Williamson and Mitchel J. Ezer for Defendant and Appellant.
Law Offices of Norbert R. Bunt, Norbert R. Bunt; Sacks, Glazier, Franklin & Lodise, Terrence M. Franklin and Matthew W. McMurtrey for Plaintiffs and Respondents.
OPINION
RYLAARSDAM, ACTING P. J.
This case involves two appeals from judgments on petitions by beneficiaries under the living trust and pour over will of Robert Rubinstein, who died April 21, 2007.
Plaintiff Moshe Amiad, Rubinstein’s son, filed the first petition after the court issued an order declaring his proposed pleading would not violate the no contest clauses of Rubinstein’s trust and will. That petition challenged the validity of four trust amendments Rubinstein made before he died, sought to remove defendant Irene Cohen as trustee, and requested a judicial construction of a trust provision involving disposition of the trust’s assets. The second petition, filed by plaintiff Yariv Amiad, Rubinstein’s grandson, sought an accounting of the trust’s assets, to have defendant removed as trustee, and to surcharge her for trust losses incurred during her tenure. Pending trial, the court suspended defendant’s status as trustee and ordered her to prepare an accounting from the date of Rubinstein’s death to her transfer of assets to the successor trustee.
Although the petitions were never formally consolidated, the court conducted a joint trial on them and thereafter entered two judgments. On the first petition, the court found three of Rubinstein’s trust amendments valid, and rejected plaintiff Moshe Amiad’s request to declare inoperative a clause of one amendment that gave defendant a life estate in Rubinstein’s residence. But the court ruled an April 2007 amendment void for lack of capacity and removed defendant as trustee.
On the second petition, the court removed defendant as trustee, appointed a successor, and imposed nearly $1.5 million in surcharges on defendant. The surcharges included $100,000 defendant paid to her attorney using trust assets, nearly $446,000 for penalties and interest levied by the Internal Revenue Service for defendant’s failure to timely file an estate tax return, and nearly $780,000 for trust investment losses.
Defendant filed notices of appeal challenging each judgment. As to the first petition, defendant argues it violates an article of Rubinstein’s will she construes as “explicitly insulat[ing] the [trust a]mendments... from attack by the [w]ill’s [n]o [c]ontest clause.” On the second petition defendant disputes the surcharges for attorney fees, tax penalties and interest, and trust losses on a variety of grounds.
FACTS AND PROCEDURAL BACKGROUND
In July 2000, Rubinstein created a living trust and pour over will. Article 5.1(b) of the trust provided that if his wife, Irma Hartoch, survived him, she would receive 60 percent of his estate with remaining 40 percent left to plaintiff Moshe Amiad. However, Article 5.1(c) provided an alternative disposition in the event Hartoch predeceased him. Under it plaintiff Moshe Amiad was to receive 50 percent of the estate, with the balance distributed in fractional shares to Rubinstein’s four grandchildren, one of whom was plaintiff Yariv Amiad, plus two nephews and a cousin.
The trust and will contained identical no contest clauses. Each clause disinherited “any... beneficiary, ... who... directly or indirectly (1) institutes any legal proceeding that attacks or contests th[e trust or the will], or attacks or seeks to impair or invalidate any of their provisions; (2) asserts in any manner any claim against my estate or property...; (3) attacks or contests or seeks to change any beneficiary designation...; (4) seeks to change my testamentary plan (such as by challenging the appointment of fiduciaries designated by me or in the manner described by me); (5) objects to any construction or interpretation of th[e trust or the will], or any provision of them, that is adopted or proposed by the Trustee or my Executors[;] (6) frivolously seeks or requests the removal of any person serving as a Trustee or an Executor[;] or (7) conspires with or voluntarily assists any person... do any of these things....”
Hartoch died in July 2005. At the time, Rubinstein and defendant were acquaintances. Several months later, the two began dating. In September of 2006, defendant began living at Rubinstein’s home.
After Hartoch’s death, Rubinstein amended his trust five times. The first amendment changed the successor trustee designation by deleting Hartoch and naming two other persons.
In March 2006, Rubinstein amended Article 5.1 by adding a clause giving defendant “the right to occupy” his residence “for an unlimited period of time, ” provided she pay the taxes, homeowner association fees, insurance, and maintenance expenses.
Two months later, Rubinstein executed an amendment that made two changes to his trust. One change deleted the bequests to his nephews and cousin and directed the trustee to “distribute from the trust residue... []$250,000[] to [defendant].” The second change named defendant and another person as successor trustees.
Then in December, Rubinstein added Article 5.1(d) to the trust. It declared his residence “shall be given to... [defendant], ” and provided she “has the right to keep all my personal propert[y] as long as she wishes....”
Finally, on April 18, 2007, three days before he died, Rubinstein again amended Article 5.1(c) to give defendant 60 percent of the residue of his estate.
In August, plaintiff Moshe Amiad sought a determination on whether his filing the first petition would violate the trust’s and will’s no contest clauses. After a hearing, the court issued an order declaring “the proposed contest... does not violate the no-contest clause provisions of the Robert Rubinstein 2000 Revocable Living Trust... and... pour[]over... Will....” Thereafter, plaintiff Moshe Amiad filed the first petition. In October 2008, plaintiff Yariv Amiad filed the second petition.
The court held a trial on both petitions that covered part or all of five days over a six-week period. The court then issued a statement of decision and entered judgments ruling the merits of each petition.
DISCUSSION
1. The No Contest Clause Claim
a. Introduction
As noted, before filing the first petition, plaintiff Moshe Amiad sought a ruling under former Probate Code section 21320 on whether the filing of that petition would “violate the no[]contest clause provisions of the... Trust... and the pour[] over... Will....” The trial court ruled in his favor and no appeal was taken from this ruling.
Defendant’s opening brief argues Article 4.3 of Rubinstein’s will rendered the first petition a contest under the will’s no contest clause. Article 4.3 states, “The Trust Agreement may be amended. It is my intention that each reference in this Will to the Trust Agreement shall include any amendments to the Trust Agreement made after the execution of this Will.” Based on article 4.3, defendant claims the order declaring plaintiff Moshe Amiad could “file his Contest without violating the [w]ill’s [n]o [c]ontest Clause... did not give him the right to bypass... Article 4.3 insulating the Trust Amendments from attack.” In addition, citing the “‘conspires or voluntarily assists’ segment, ” of the no contest clauses, she contends plaintiff Yariv Amiad should also be disinherited. Finally, defendant suggests the 60 percent share of Rubinstein’s estate bequeathed to her in the invalidated April 2007 amendment should be reinstated on equitable grounds.
b. Analysis
Plaintiffs attack defendant’s arguments on several grounds, including the claim her “argument regarding the contest is precluded as untimely.” We agree with this point. The merits of her argument concerning the effect of Article 4.3 of the will notwithstanding, defendant’s failure to timely appeal from the order declaring the first petition would not violate the no contest provisions of either the trust or the will bars her from asserting the issue in these appeals.
Part 3 of Division 11 of the Probate Code governs no contest clauses. (Prob. Code, § 21310 et seq.) Before January 2010, Part 3 contained a separate chapter authorizing “a beneficiary [to] apply to the court for a determination of whether a particular... petition... would be a contest within the terms of [an instrument’s] no contest clause.” (Former Prob. Code, § 21320, subd. (a), added by Stats. 1990, ch. 79, § 14 and repealed by Stats. 2008, ch. 174, § 1, eff. Jan. 1, 2010.) At the time, Probate Code sections 1303, which applies to a decedent’s estate, and 1304, which applies to trusts, each declared an order “[d]etermining whether an action constitutes a contest under Chapter 2 (commencing with Section 21320) of Part 3 of Division 11” constitutes an appealable ruling. (Prob. Code, §§ 1303, subd. (j), 1304, subd. (d).)
Code of Civil Procedure section 906 governs the scope of an appellate court’s review in civil actions. In part it declares, “The provisions of this section do not authorize the reviewing court to review any decision or order from which an appeal might have been taken.” This statute applies to probate matters. (Prob. Code, § 1000 [“[e]xcept to the extent that this code provides applicable rules, the rules of practice applicable to civil actions... apply to, and constitute the rules of practice in, proceedings under this code”].) Thus, “[a] notice of appeal from a judgment alone does not encompass other judgments and separately appealable orders, ” and “[i]f an order is appealable, an aggrieved party must file a timely notice of appeal from the order to obtain appellate review. [Citation.]” (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 239; see also Weygandt v. Larson (1933) 130 Cal.App. 304, 309-310 [applying rule in trust proceeding].)
Defendant cites case law to the effect that, while no contest clauses are strictly construed, courts must give effect to the testator’s intent. In response to plaintiffs’ claim the absence of a transcript of the hearing on plaintiff Moshe Amiad’s declaratory request bars her from overcoming the presumption the trial court considered Article 4.3 of the will when issuing its ruling, defendant successfully augmented the record to include that transcript. She argues it establishes the court never considered the application of the will’s Article 4.3. In addition, she claims the construction of Rubinstein’s will presents a question of law subject to de novo review, thereby defeating plaintiffs’ reliance on the theory of trial doctrine.
These arguments are beside the point. Plaintiff Moshe Amiad sought a determination of whether his proposed petition would constitute a contest under the terms of either the trust or the will and the court found it would not violate either instrument’s no contest provision. Defendant acknowledges she never appealed this ruling. “The time for appealing a judgment is jurisdictional; once the deadline expires, the appellate court has no power to entertain the appeal. [Citation.]” (Van Beurden Ins. Services, Inc. v. Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal.4th 51, 56; see also Glasser v. Glasser (1998) 64 Cal.App.4th 1004, 1010.)
Defendant’s claim the trial court failed to consider the effect of Article 4.3 of the will is an alleged defect that could have been challenged in a timely appeal from the order. As a consequence, even assuming the declaratory ruling was erroneous, it “is now final and binding upon defendant... and upon this court. [Citations.]” (Guenter v. Lomas & Nettleton Co. (1983) 140 Cal.App.3d 460, 465.) Based on defendant’s failure to appeal from it, we lack jurisdiction to now consider the claim. (Sole Energy Co. v. Petrominerals Corp., supra, 128 Cal.App.4th at p. 239.)
The claim plaintiff Yariv Amiad should be disinherited on the theory he either conspired with or assisted plaintiff Moshe Amiad in prosecuting the first petition is both moot for the reasons discussed above and unsupported by the record. Finally, her argument for equitable reinstatement of the April 2007 amendment is not only moot but, since it effectively seeks a ruling on the merits of the underlying petition, is contrary to the law. “As a general rule, the decision about whether the beneficiary’s proposed action would be a... contest may not involve a determination of the merits of the action itself, a rule that ‘makes sense’ because the summary safe harbor procedure could otherwise ‘be used to allow the very form of challenge and protracted litigation the testator sought to prevent.’ [Citation.]” (Estate of Davies (2005) 127 Cal.App.4th 1164, 1173.)
Therefore, defendant’s contest claim lacks merit.
2. The Surcharges
a. Introduction
As noted, the trial court surcharged defendant over $1.5 million for her handling of the trust. She challenges the surcharges imposed for attorney fees paid to her counsel, trust losses that occurred during her tenure as trustee, plus penalties and interest the Internal Revenue Service levied due to her failure to timely file an estate tax return.
Plaintiffs dispute her arguments on both procedural and substantive grounds. They note that, even though the appellate record contains a reporter’s transcript of the entire trial, defendant failed to “state any of the material facts relating to the surcharge issues in her opening brief.” In addition, they claim she is improperly raising arguments that were not asserted in the trial court and, at least with respect to the tax penalties and interest, relying on postjudgment events. In any event, plaintiffs claim the evidence supports the trial court’s findings as to these surcharges.
b. The Attorney Fee Surcharge
Rubinstein’s trust allowed a trustee to recoup legal expenses from the trust for defending against “any... of the actions described” in the no-contest clauses. Based on this clause, defendant claims the trial court erred by surcharging her for using $100,000 of trust funds to pay her attorney fees. We find no error.
Courts “apply an abuse of discretion standard” to review an order concerning a request to pay a trustee’s attorney fees from the trust’s assets. (Donahue v. Donahue (2010) 182 Cal.App.4th 259, 268-269.) “In reviewing whether the trial court abused its discretion, ‘we are mindful that “[t]he underlying principle which guides the court in allowing costs and attorney fees incidental to litigation out of a trust estate is that such litigation is a benefit and a service to the trust.” [Citation.]’ [Citation.] ‘If litigation is necessary for the preservation of the trust, the trustee is entitled to reimbursement for his or her expenditures from the trust; however, if the litigation is specifically for the benefit of the trustee, the trustee must bear his or her own costs incurred, and is not entitled to reimbursement from the trust.’ [Citation.]” (Id. at p. 270.)
Plaintiffs note the trial court found defendant “paid her lawyers... from the trust to defend her in the contest.... She was not defending the trust but the amendment[s] that benefitted her.” Thus, the trial court found, in effect, “[t]he essence of the underlying action was... a dispute over who would control and benefit from [the trust]” and, regardless of “[w]hether or not the contest prevailed, the trust would remain intact.” (Whittlesey v. Aiello (2002) 104 Cal.App.4th 1221, 1228.) In light of the trial court’s finding, defendant’s reliance on a trust provision concerning reimbursement for litigation expenses incurred to defend against an action that purportedly violates the no contest clause is not persuasive.
Further, by failing to provide a summary of the material evidence on this issue, defendant waived her right to dispute the factual basis for the trial court’s decision. “‘A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.’” (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) In addition, “‘[i]t is well established that a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact.’ [Citations.]” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) Thus, an “appellant has the burden to demonstrate there is no substantial evidence to support the findings under attack. [Citation.]” (North American Capacity Ins. Co. v. Claremont Liability Ins. Co. (2009) 177 Cal.App.4th 272, 285.) Where an appellant fails to set forth in its opening brief all of the material evidence, “‘the error is deemed to be waived.’ [Citations.]” (Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 881.)
Given the trial court’s finding on why defendant used trust funds to pay her litigation expenses, we find no abuse of discretion occurred.
c. The Surcharge for Trust Losses
Defendant argues the surcharge for trust losses is excessive because the accounting she prepared after her suspension showed the trust earned dividend and interest income and gains on sales of over $206,000. She claims these gains should have been offset against the losses, thereby reducing the surcharge. Plaintiffs dispute this claim, arguing defendant cannot claim a credit for the income earned by the trust because she “had no personal claim to the income” and, given her “duty to make the trust’s assets productive” (Prob. Code, § 16007), she was “supposed to earn an income by properly investing the principal.”
The record supports the trial court’s decision. “A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.” (Prob. Code, § 16047, subd. (a).) “If the trustee commits a breach of trust, the trustee is chargeable with any of the following that is appropriate under the circumstances: [¶] (1) Any loss or depreciation in value of the trust estate resulting from the breach of trust, with interest. [¶]... [¶] (3) Any profit that would have accrued to the trust estate if the loss of profit is the result of the breach of trust.” (Prob. Code, § 16440, subd. (a).)
At trial, Jonathon Cohen, defendant’s grandson, testified he worked as a broker for Morgan Stanley. Before Rubinstein died, Cohen helped him invest approximately $300,000 with Morgan Stanley in what was described as a covered call strategy. Just before his death, Rubinstein transferred the balance of his securities portfolio, worth approximately $4.6 million, to Morgan Stanley. After Rubinstein died, Cohen and defendant reallocated the portfolio, placing one-third of it into covered calls. Plaintiffs’ expert witness testified that upon Rubinstein’s death, defendant should have liquidated the trust’s assets “within a reasonable period of time in order to be in a position to pay debts, expenses and... federal estate tax[es]....” In addition, the expert witness opined that investing trust funds in covered calls was inappropriate because it is a “speculative and very, very risky” investment, particularly given the fact that once “taxes are paid, expenses are paid, liquidation is effected, [and] estate tax clearance is obtained, distribution will be made.”
Defendant cites no authority for the proposition she was entitled to offset trust income and gains against its losses. Furthermore, as discussed above, she failed to provide a complete summary of the material evidence concerning her handling of the trust assets after Rubinstein died. “‘When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.’ [Citations.]” (Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 881.) Given the foregoing, we conclude the trial court properly surcharged defendant for the entirety of the trust’s losses during her tenure as successor trustee.
d. The Surcharge for Tax Penalties and Interest
Finally, without any citation to the record, defendant seeks reversal of the nearly $446,000 in surcharges for penalties and interest arising from her failure to timely file a federal estate tax return. She claims the “sum has almost been entirely recouped by... a settlement with the IRS[, ]... [and]... settlement of a suit prosecuted by [the s]uccessor [t]rustee” against an accountant and other advisors.
This argument lacks merit. “Matters occurring after entry of judgment are ordinarily not reviewable. The appeal reviews the correctness of the judgment or order as of the time of its rendition, leaving later developments to be handled in subsequent litigation. [Citations.]” (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 337, p. 387.) While exceptions to this rule exist (see Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 813), defendant has not shown any of them apply in this case. At best, the postjudgment settlements may potentially reduce her personal liability for the penalties and interest charged due to her breach of fiduciary duty in handling the trust.
DISPOSITION
The judgments are affirmed. Respondents shall recover their costs on appeal.
WE CONCUR: BEDSWORTH, J., O’LEARY, J.