Opinion
A150551
01-27-2020
NERCILLA MARIE LEWERS, Plaintiff and Respondent, v. PHILIP JAMES PONZO, Defendant and Appellant.
ORDER MODIFYING OPINION AND DENYING REHEARING
[NO CHANGE IN JUDGMENT] BY THE COURT:
It is ordered that the nonpublished opinion filed herein on January 27, 2020, be modified as follows:
On page 2, in the second paragraph under section I.A, Factual Background, sixth line down, the following sentence is deleted in its entirety: "After his divorce was finalized in January 1992, Philip married his second wife, Barbara."
On page 5, second line at the top of the page, in brackets, the words "[Philip's second wife]" should be added in front of the word "Barbara," so that the phrase after the colon in the first line will read: " 'Please do not expect to disclose any confidential information that you do not intend for me to communicate to Philip or [Philip's second wife] Barbara.' "
This modification does not change the judgment.
The petition for rehearing is denied. Dated:
/s/_________
Sanchez, J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SPR86576)
In 1995, Juanita Louise Ponzo (Anita) established a revocable trust named the Juanita Louise Ponzo Trust (Trust). The principal asset of the Trust was a ranch with a working vineyard located in Sonoma County (Ranch). The Trust provided that after Anita's death, her son Philip Ponzo and daughter Nercilla (Bunny) Lewers would "share and share alike" in the Trust's estate (Estate). Anita designated Philip as successor trustee. In 2006, Anita executed an amendment to the Trust (First Amendment) that benefited Philip. The amendment requires Philip to be compensated for his work on the Ranch and reimbursed for his losses and expenses prior to distribution of the Estate.
We will refer to the parties throughout this opinion by their first names to avoid confusion, as several individuals share the surname Ponzo. No disrespect is intended.
After Anita passed away in 2013, Bunny sued Philip, alleging that the First Amendment was procured by undue influence and that Philip had engaged in elder abuse and mismanagement of the Ranch. Following a bench trial, the probate court voided the First Amendment based on a finding of undue influence. It further ordered Philip to pay the Estate $283,492 in unpaid rent and to reimburse it for $139,813 in proceeds from a home equity line of credit that had been secured against the Ranch. The court also removed Philip as trustee based on his antagonistic behavior toward Bunny.
We conclude the probate court erred in voiding the First Amendment because its finding of undue influence was based on a substantive change in law that was not intended to apply retroactively to the formation of this trust instrument. The court further erred by requiring payment for unpaid rent under a legally inoperative crop-sharing lease, and by ordering the repayment of loan proceeds that amounted to an improper double recovery to the Estate. While we are reluctant to prolong this litigation, we must remand to allow the court to conduct an evidentiary hearing on the undue influence claim and to recalculate the distribution of trust assets in a manner consistent with our opinion. We otherwise affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Bunny and Philip are the children of James (Mick) Ponzo and Anita. Mick inherited the Ranch from his mother in 1986. In 1987, he transferred the deed to the Ranch to himself and Anita as joint tenants. At all relevant times, the Ranch consisted of 40 acres, including 29 acres of vineyards. The Ranch had four residences, a 3600-square-foot home built by Philip in 2002, the original Victorian farmhouse, a 1600-square-foot cottage, and a mobile home.
In 1990, Bunny and her husband, and Philip and his first wife, took over managing the vineyard business due to Mick's failing health. The parties agreed that Mick and Anita would receive 50 percent of the business's gross income and the children would receive 25 percent per couple, from which they would absorb the vineyard's operating expenses. In 1991, Philip and his first wife began divorce proceedings and withdrew from the business. Bunny and her husband operated the vineyard that year. After his divorce was finalized in January 1992, Philip married his second wife, Barbara. Following the 1992 harvest, Philip asked Mick if he could rejoin the family business. Bunny and her husband decided to withdraw from the business and Philip took over. Mick died in May 1994, five months after he and Philip had executed a written lease containing a 50/50 crop-sharing agreement (the Lease).
Philip continued operating the vineyard while also working a full-time job as an airplane pilot. Philip and Anita did not have a set profit-sharing plan, but agreed every year on a division of profits following a discussion of revenues and expenses. As recited above, Anita established the Trust in 1995 and transferred the Ranch into the Trust, designating Philip as successor trustee. In 2001, Anita invited Philip and Barbara to build a house on the Ranch. Philip and Barbara obtained a series of mortgages cosigned by Anita, encumbering the Ranch. In 2006, Anita executed the First Amendment. After disagreements between the children intensified, Anita considered revoking the First Amendment with a second amendment, but never did so. In November 2012, Anita fell and suffered a serious head injury. She lost most of her cognitive function and passed away in October 2013. By the August 2016 trial, the Ranch had a pending offer for sale.
B. Cross-petitions by Bunny and Philip
In April 2015, Bunny filed an amended petition to determine distribution of the Estate and to invalidate the First Amendment. She asked the probate court to compel an accounting, remove Philip as trustee, impose a constructive trust, and deny his attorney fees. She further alleged claims of financial elder abuse, intentional and negligent misrepresentation, and intentional interference with her inheritance, and prayed for damages, punitive damages, and her attorney fees.
Bunny passed away during the pendency of this appeal. On November 18, 2019, we granted counsel's unopposed motion to substitute Rody Richard Jonas, executor of the estate of Nercilla Lewers, as respondent in this matter.
Bunny asserts that Philip manipulated Anita by controlling her finances, withholding vineyard profits, and isolating her from the family to exert influence and control over her. She alleges that Philip used the Ranch to secure mortgages for his personal benefit and mismanaged the Ranch's assets. Bunny further claimed that Anita lacked the capacity to execute the First Amendment in 2006 and that Philip exerted undue influence to procure it. Philip denied the allegations and cross-petitioned for the recovery of $27,000 Anita had paid Bunny. The matter proceeded to a lengthy bench trial.
C. Bench Trial
i. The First Amendment
The relevant paragraph of the First Amendment provides as follows: "The Distribution of trust assets shall proceed as described in the JUANITA LOUISE PONZO TRUST of 1995 except that the valuation and distribution of assets shall be equalized considering the demonstrable costs, losses, and expenses incurred by PHILIP JAMES PONZO, and the accrued unpaid compensation to PHILIP JAMES PONZO arising from the operation, maintenance and improvement of the estate. The valuation of the distributed shares of the estate shall not be offset by any compensation paid to PHILIP JAMES PONZO during the operation, maintenance and improvement of the estate which shall be deemed fair compensation for those periods in which it was actually paid, and shall be deemed accrued for those years in which it was not actually paid."
The First Amendment was drafted by Philip's good friend, an attorney, Benjamin Graves. Graves represented Philip in his capacity as trustee before the probate court, and referred to Philip as his "closest comrade." According to Graves, the First Amendment was designed to compensate Philip for costs, losses, and expenses associated with operating the Ranch. Graves testified that Anita had told him in the summer of 2005 that she was worried about potential conflicts between her children. While he stated that Anita was concerned Philip was giving her money even though the vineyard was operating at a loss, tax records showed that the business was actually yielding a positive cash flow. Anita wanted to figure out a way to modify her estate plan to compensate Philip for the work he was doing on the Ranch. She asked Graves to "do this for her."
Graves drafted a will codicil along with the First Amendment for Anita to have "before [he] sent her to an estate planner." He also gave Anita a conflict letter entitled, "Discussion of potential conflicts and disclosure of formal representation." The letter contained the following disclaimer: "Please do not expect to disclose any confidential information that you do not intend for me to communicate to Philip or Barbara." Graves testified that he referred Anita to attorney Brian Rondon. However, Rondon testified that Graves first contacted him in February 2008, almost two years after Anita signed the First Amendment, asking him to review the document in preparation for a potential will contest from Bunny. Rondon did not meet Anita until December 2010, when she came with Philip to discuss subdividing the Ranch. Rondon advised her to see a real estate attorney.
It is undisputed that the codicil is invalid because it was not properly witnessed.
Philip testified he and Anita discussed the First Amendment and he was present when she signed it. He denied discussing the amendment with Graves. Philip understood that the amendment would allow him to retain his house and recover the money he had invested in the Ranch. He believed the amendment would also entitle him to recover his home's construction costs, as well as costs incurred in managing the vineyard. Philip did not disclose the existence of the First Amendment to Bunny for five years.
After Anita's sister died in 2010, Anita decided to meet with another attorney named John DeMeo to make sure she was leaving her estate to her two children in equal shares. Evidence offered at trial substantiated that Anita had always desired to treat her children equally in the disposition of her estate. Anita agreed to hold a family meeting at DeMeo's office in December 2011. Philip brought Graves to that meeting. At trial, Graves testified that he was acting as Anita's attorney, though he admitted she had not asked him to come. Bunny testified that Graves was very aggressive at the meeting, challenging DeMeo's representation of Anita. DeMeo later drafted a second amendment to the Trust that, among other things, would have revoked the First Amendment. The new amendment would have made Philip solely liable for his debts. Anita said it reflected what she wanted to do and DeMeo told her to take it home and study it. Anita never signed the proposed second amendment.
ii. The 1994 Lease
In January 1994, Philip and Mick executed the Lease with a crop-sharing agreement that required Philip to pay Mick 50 percent of the vineyard's gross profits. The relevant provision stated: "Lessee will pay Lessor 50% of gross proceeds of all payments from winery within 30 days of receipt of check from winery. This includes picking advances, partial payments, and final payments in the next calendar year."
Philip testified he discussed vineyard business arrangements with Anita after Mick's death but did not recall mentioning the Lease to her. He and Anita did not have a fixed profit-sharing plan. Instead, they agreed that every year he would go over the vineyard's financial status with her and they would discuss income, costs, and expenses. If the vineyard made a profit he would give Anita whatever amount of income she said she needed. Between 1994 and 2001 Anita received at least 50 percent of the vineyard's gross income. After that, her share fluctuated. Philip paid Anita nothing in the years from 2010 to 2013 due to bad weather and recovery from prior losses.
iii. Expenditures of Loan Proceeds
Philip financed construction of his new home through a series of loans secured against the Ranch. The first loan was obtained in May 2002 for $500,000. The mortgage lender required Philip to be on the title to the Ranch. Bunny testified that around this time Philip's son told one of her daughters that Philip owned the Ranch. Bunny researched county property records and discovered the Ranch was held by Philip and Anita in joint tenancy. She raised the Ranch's status with Anita. Bunny, Anita, and Philip later met with an attorney and the Ranch was transferred back into the Trust.
A second loan was secured for $600,000 in September 2003, followed by a January 2005 line of credit for $200,000. Philip obtained a fourth loan in May 2006 for $734,000, and the fifth and final loan for $900,000 in December 2007. Each loan satisfied the previous one. In early 2008, Bunny became concerned when she discovered the Ranch was subject to the $900,000 home loan. She was worried that Anita would not be able to remain in her home if the mortgage payments were not made. She called a family meeting in February to discuss her concerns. When she informed Anita about the $900,000 mortgage on the Ranch, Anita did not believe her. Philip became angry and denied taking out the loan.
It is undisputed that Philip spent a total of $139,813 for purchases unrelated to the construction of his home. He used $105,000 of the $200,000 line of credit to purchase property in Plumas County, $6,610 to pay off a Ducati motorcycle, and $3,605 to satisfy credit card debt. Philip made all the loan payments and by the trial, the current principal balance on the final loan was between $700,000 and $750,000.
iv. Philip's Actions as Trustee
As noted above, Bunny asked the probate court to remove Philip as the successor trustee. After Anita died, Philip installed an electronic gate at the entrance to the Ranch and ordered Bunny, her family and experts to stay off the ranch from 2014 until its sale in September 2016. Graves told Bunny's attorney that he would call the police if she came on the Ranch without permission. Although Bunny, in her capacity as a trust beneficiary, sought information about the Ranch and trust business, Philip refused to provide access to the property or pertinent records, earning a rebuke from the probate court.
D. Statement of Decision
On October 24, 2016, the probate court issued its statement of decision. Based on medical records and testimony from family members and experts, the probate court concluded that Anita was "fundamentally mentally sound" until her head injury in 2012. While there were signs that her mental capacity began declining in 2009, the court found that at all relevant times she did not suffer from diminished mental capacity. Regarding Bunny's claim that the vineyard had been mismanaged to the detriment of the Estate, the court concluded that while a professional might have done better, Philip's management was adequate for a family-owned and operated vineyard. The court also rejected Bunny's claim of elder abuse, holding that under the four-year statute of limitations, Philip's potential liability was limited to allegations of abuse concerning deficient rent payments under the 1994 Lease. The court found Philip had not intentionally deprived Anita of these payments and that she did not suffer harm because she had adequate funds at all times to meet her needs.
However, the court found Philip had used undue influence to procure Anita's execution of the First Amendment. The court noted he had a "close and confidential" relationship with an elderly mother who trusted him in financial matters. He exploited her trust and gained an unjust result by allowing his own attorney to draft a "complex and ambiguous document that would result in a highly inequitable division of assets between [Anita's] two children." The court further found Philip liable to the Estate for $139,813 in diverted loan proceeds and $283,492 in unpaid rent. The court also removed him as trustee, based on his inability to communicate effectively with Bunny due to the parties' "extreme antagonism." Recovery on Philip's cross-petition was denied after Bunny testified credibly that the funds were a gift from Anita.
After objections were filed, the probate court reaffirmed its October 24, 2016 statement of decision without alteration. On December 30, 2016, the probate court filed its judgment. This appeal followed.
Bunny filed a cross-appeal from the probate court's order denying postjudgment interest. She has not pursued this appeal in her appellate briefs and at oral argument counsel confirmed that the cross-appeal had be abandoned. Accordingly, that appeal is dismissed.
II. DISCUSSION
On review of a judgment entered following a bench trial, we resolve in favor of the lower court's decision " 'any conflict in the evidence or reasonable inferences to be drawn from the facts . . . .' " (Estate of Young (2008) 160 Cal.App.4th 62, 75-76.) We review the trial evidence as well as those facts cited in the probate court's statement of decision. (See In re Shaputis (2011) 53 Cal.4th 192, 214, fn. 11; Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096, 1106 [substantial evidence review extends to entire appellate record].) "Under the doctrine of implied findings, the reviewing court must infer, following a bench trial, that the trial court impliedly made every factual finding necessary to support its decision. . . . If the appellant fails to [raise ambiguities and omissions in the factual findings of the statement of decision to the trial court's attention], the reviewing court will infer the trial court made every implied factual finding necessary to uphold its decision, even on issues not addressed in the statement of decision." (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 48 (Fladeboe); see In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134 (Marriage of Arceneaux)).
A. Undue Influence
Philip contends the probate court erroneously invalidated the First Amendment by relying on Welfare and Institutions Code section 15610.70 (section 15610.70), a statutory change to the definition of "undue influence" that did not exist at the time the trust amendment was executed. He is correct.
Before reaching the merits of his claim, we address Bunny's contention that Philip forfeited this argument by failing to object to the probate court's statement of decision on this issue. Neither Bunny nor Philip referenced section 15610.70 at trial. In his closing argument, Bunny's counsel relied on the common law presumption of undue influence as set forth in Estate of Sarabia (1990) 221 Cal.App.3d 599 (Sarabia), and asserted that the influencer (Philip) had a confidential relationship with the settlor (Anita), actively participated in procuring the trust instrument, and unduly benefitted from the amendment. Counsel argued that Philip could not rebut the presumption of undue influence by proving the First Amendment was fair and reasonable or that it had been obtained after full disclosure. In its statement of decision, the probate court listed the factors to be considered under the statutory definition of undue influence in section 15610.70 and concluded that Philip exerted undue influence on Anita in the execution of the First Amendment. When Philip filed objections to the probate court's statement of decision, he did not object to the court's reliance on section 15610.70.
Philip has not forfeited the argument by failing to object below. "[A] party does not waive objections to legal errors appearing on the face of the statement of decision by failing to respond to it." (Fladeboe, supra, 150 Cal.App.4th at p. 59; see United Services Auto. Assn. v. Dalrymple (1991) 232 Cal.App.3d 182, 185-186 [rejecting argument that under Marriage of Arceneaux, the failure to object to an erroneous legal determination in a statement of decision waived the claim on appeal].) Because the court's retroactive application of section 15610.70 has been challenged as legal error appearing on the face of the statement of decision, we may consider it and we conclude that the court erred in relying on section 15610.70 to determine the validity of the First Amendment.
People may generally dispose of their property as they see fit without regard to whether the dispositions are appropriate or fair, as "[t]estamentary competence is presumed." (Sarabia, supra, 221 Cal.App.3d at p. 604.) However, the presumption can be overcome and a testamentary document may be set aside if it was procured by undue influence. (Rice v. Clark (2002) 28 Cal.4th 89, 96-97.) Undue influence has been characterized as "pressure brought to bear directly on the testamentary act, sufficient to overcome the testator's free will, amounting in effect to coercion destroying the testator's free agency." (Id. at p. 96.) The doctrine applies to any testamentary document, including an inter vivos trust. (David v. Hermann (2005) 129 Cal.App.4th 672, 684.)
Civil Code section 1575, operative at the time the First Amendment was executed, defined undue influence as "(1) In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him; [¶] (2) In taking an unfair advantage of another's weakness of mind; or, [¶] (3) In taking a grossly oppressive and unfair advantage of another's necessities or distress."
Section 15610.70, part of the Elder Abuse and Dependent Adult Civil Protection Act (Welf. & Inst. Code, § 15600 et seq.), became effective on January 1, 2014 (Stats. 2013, ch. 668, § 3 (Assem. Bill No. 140)). As part of the same Act, the Legislature added section 86 to the Probate Code, which provides: " 'Undue influence' has the same meaning as defined in Section 15610.70 of the Welfare and Institutions Code."
Section 15610.70 provides as follows:
"(a) 'Undue influence' means excessive persuasion that causes another person to act or refrain from acting by overcoming that person's free will and results in inequity. In determining whether a result was produced by undue influence, all of the following shall be considered:
"(1) The vulnerability of the victim. Evidence of vulnerability may include, but is not limited to, incapacity, illness, disability, injury, age, education, impaired cognitive function, emotional distress, isolation, or dependency, and whether the influencer knew or should have known of the alleged victim's vulnerability.
"(2) The influencer's apparent authority. Evidence of apparent authority may include, but is not limited to, status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification.
"(3) The actions or tactics used by the influencer. Evidence of actions or tactics used may include, but is not limited to, all of the following:
"(A) Controlling necessaries of life, medication, the victim's interactions with others, access to information, or sleep.
"(B) Use of affection, intimidation, or coercion.
"(C) Initiation of changes in personal or property rights, use of haste or secrecy in effecting those changes, at inappropriate times and places, and claims of expertise in effecting changes.
"(4) The equity of the result. Evidence of the equity of the result may include, but is not limited to, the economic consequences to the victim, any divergence from the victim's prior intent or course of conduct or dealing, the relationship of the value conveyed to the value of any services or consideration received, or the appropriateness of the change in light of the length and nature of the relationship.
"(b) Evidence of an inequitable result, without more, is not sufficient to prove undue influence." (Section 15610.70.)
"It is well settled that a new statute is presumed to operate prospectively absent an express declaration of retrospectivity or a clear indication that the electorate, or the Legislature, intended otherwise." (Tapia v. Superior Court (1991) 53 Cal.3d 282, 287.) We presume that amendatory legislation accomplishing substantive change is intended to have only prospective effect. (See Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 244, fn. 4.) It is apparent that section 15610.70 made substantive additions to the earlier definition of undue influence. It sets forth detailed criteria for determining whether undue influence has been exerted by one person over another. Probate Code section 86 further states that "[i]t is the intent of the Legislature that this section supplement the common law meaning of undue influence without superseding or interfering with the operation of that law" (italics added). A legislative analysis of section 15610.70 further noted: "The definition of 'undue influence' and the factors set forth in this bill are potentially more expansive than in existing statute and case law. The author contends, however, that this new definition is needed in order to take account of our contemporary knowledge about how elders are unduly influenced and the nature and extent of financial elder abuse that occurs today—not that which might have occurred in 1872." (Assem. Floor Analysis, Assem. Bill No. 140 (2013-2014 Reg. Sess.) Sept. 11, 2013, italics added.) No indication has been given that the Legislature clearly intended to apply the definition of undue influence in section 15610.70 to the formation of trust instruments predating the passage of this law.
We are in no position to address the merits of Bunny's undue influence challenge on appeal. Whether a will or trust, or portions thereof, has been procured by undue influence is a question of fact that the fact finder—the court or jury—must determine based on all of the facts and circumstances. (See Lintz v. Lintz (2014) 222 Cal.App.4th 1346, 1355; In re Marriage of Burkle (2006) 139 Cal.App.4th 712, 734, fn. 11.) Whether a party has made such a showing must be decided in the first instance by the court or jury sitting as the trier of fact, not the appellate court. (See Estate of Gelonese (1974) 36 Cal.App.3d 854, 863.) We cannot presume, as Bunny urges us to do here, that the probate court would have reached the same result had it applied the appropriate legal standard. On remand, the probate court must evaluate the undue influence claim in accordance with Civil Code section 1575 and common law principles set forth in Rice and Sarabia.
B. Unpaid Rent Under 1994 Lease
Philip contends that the 1994 Lease did not override the crop-sharing agreement he had with Anita, asserting the probate court erred in requiring him to make unpaid rent payments to the Estate based on the contract he had with his father. He claims he and Anita operated under an oral arrangement whereby they would divide the vineyard's proceeds every year in accordance with her wishes. In its statement of decision, the probate court stated it was "not convinced that Anita understood the financial effect of the [Lease] modification that Philip has testified to." While she may have agreed to postpone rent payments in certain years, "she clearly did not agree to change the terms of a lease that she was not even aware of." The court concluded any purported oral modification was "null and void," finding that Philip remained liable from 1994 until Anita's death for 50 percent of the gross proceeds from grape sales. The court thus found he owed the Trust $283,492 in unpaid vineyard compensation. The court erred.
We apply a de novo standard of review to the interpretation of a lease. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266.) " 'The precise meaning of any contract, including a lease, depends upon the parties' expressed intent, using an objective standard. [Citations.] When there is ambiguity in the contract language, extrinsic evidence may be considered to ascertain a meaning to which the instrument's language is reasonably susceptible. [Citation.] . . . [¶] We review the agreement and the extrinsic evidence de novo, even if the evidence is susceptible to multiple interpretations, unless the interpretation depends upon credibility.' " (Id. at pp. 1266-1267.)
The Lease, which was signed in 1994, operated for a one-year term but included language allowing for month-to-month extensions: "Should Lessee hold over after the expiration of the term such tenancy shall be from month-to-month only, and be on the same terms and conditions as herein stated." It further provided: "It is further understood and agreed that all the provisions of this lease shall extend to and be binding upon the heirs, executors, administrators, successors, and assignees of the respective parties." We find these terms cannot be construed to extend the Lease's effectiveness in perpetuity.
Mick and Anita held the Ranch in joint tenancy from December 1987 until Mick's death in May 1994, when the property became Anita's by operation of law as the surviving joint tenant. In California, when one joint tenant leases joint tenancy property without the consent of the other joint tenant the lease does not destroy the joint tenancy or diminish the survivorship rights of the nonconsenting joint tenant. (Tenhet v. Boswell (1976) 18 Cal.3d 150, 158.) Rather, upon the death of the lessor/joint tenant the surviving joint tenant takes the property free of the lease. (Id. at p. 159.) Anita was not a party to the 1994 Lease and, as the probate court found, there is no evidence that she consented to it or was even aware of its existence. Instead, Anita and Philip organized their affairs as they deemed necessary over the next 18 years. In short, the Lease was not binding on Anita after Mick's death, leaving her free to negotiate whatever agreement she desired with Philip. (See id. at p. 160 ["The estate of joint tenancy is firmly embedded in centuries of real property law and in the California statute books. Its crucial element is the right of survivorship, a right that would be more illusory than real if a joint tenant were permitted to lease for a term continuing after his death."].)
Even if the Lease had survived the death of Mick, Anita was free to modify it at any time. When a lease expires but the tenant remains in possession, the relationship of the landlord and tenant changes. (Schmitt v. Felix (1958) 157 Cal.App.2d 642, 647.) The "lessor-lessee relationship" based on " 'privity of contract' " ends, and a new "landlord"-"tenant" relationship based on " 'privity of estate' " springs into being by the operation of law. (Ibid.; see Civ. Code, § 1945.) This new "hold[]-over" tenancy is "presumed" to continue under "the same terms" contained in the now expired lease " 'except [as those terms] may have been . . . modified' " by the landlord and tenant. (Miller v. Stults (1956) 143 Cal.App.2d 592, 598, italics added.) Because, as the court found, Anita was mentally sound throughout this period, she was capable of managing her own affairs and determining an appropriate allocation or deferral of payments from the vineyard operation as circumstances warranted. And the court found Philip's testimony credible that in certain years when he experienced financial difficulties, he and Anita agreed that payments to her need not be made. We find no basis in law or fact to support the probate court's determination that Philip owed the Estate $283,492 in unpaid rent under the Lease.
C. Repayment of Loan Proceeds
As described above, Philip took out a series of loans to finance the construction of his home on the Ranch, culminating in a $900,000 mortgage. The court found that Philip's loan payments had reduced the principal balance on the mortgage to between $700,000 and $750,000. The court also determined, after hearing from competing appraisers, that Philip's home had increased the value of the Estate in an amount equivalent to the remaining loan balance. The court concluded that Philip should get credit in the disposition of the Ranch for the remaining balance on the loan. It therefore ordered that when the Ranch was sold, the remaining loan balance was to be paid off by the Estate before any distribution was made. However, after finding that Philip had diverted $139,813 in loan proceeds for his personal expenses, the court ordered him to pay this sum to the Estate because he had "deprived the estate of these amounts."
Philip claims the probate court's disposition order amounts to an improper double recovery to the Estate. While the court charged Philip with reimbursing the Estate for $139,813 for personal use of the loan proceeds, he was not credited with paying down the loan balance by at least the same amount. He asserts this violates the rule against double recovery for the same item of damages. (See Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1159 (Tavaglione.)
In Tavaglione, the high court relied on the rule that "[d]ouble or duplicative recovery for the same items of damage amounts to overcompensation and is therefore prohibited." (Tavaglione, supra, 4 Cal.4th at p. 1159.) While the case does not squarely apply as the present matter does not involve damages, the equitable principle of avoiding double recovery remains the same. The evidence is undisputed that Philip made payments that reduced the balance owing on the final loan from $900,000 to somewhere between $750,000 and $700,000. These loan payments benefited the Estate and were at the least the same, if not greater than, the amounts he used for his personal expenses. Because Philip had repaid his personal debt to the lender, the Estate was not deprived of these funds and would enjoy an improper windfall if Philip were charged a second time.
Bunny contends that the probate court found that Philip was "responsible for overbuilding and overspending on his residence," and the court's charge to Philip for his personal expenses took this factor into account. The statement of decision does not support her argument. The court found that the value of the new home was roughly equivalent to the outstanding balance on the loan. It did not link its determination to other, hidden calculations proposed by Bunny, or mention an offset based on "overbuilding." Indeed, the court addressed the expenditure of loan proceeds in a separate section from its discussion of the value of Philip's home, and we will not infer a connection where none is apparent or necessary to support the judgment. Accordingly, we reverse the order requiring Philip to pay $139,813 to the Estate.
D. Removal of Philip as Trustee
The removal of a trustee is a matter entrusted to the sound discretion of the probate court. (Estate of Gilmaker (1962) 57 Cal.2d 627, 633.) The power is one that the court "should not lightly exercise," particularly where the trustee has been appointed by the settlor of the trust. (Estate of Bixby (1961) 55 Cal.2d 819, 826.) Hostility or antagonism between the trustee and the beneficiary may be a sufficient ground for removal of the trustee if it is shown that the hostility or antagonism "impairs the proper administration of the trust." (Gilmaker, at p. 632 [removal of trustee was required where trust provided that beneficiary was to be an active consultant on trust investments but intense hostility and lack of cooperation between the trustee and beneficiary prevented that from taking place]; Copley v. Copley (1981) 126 Cal.App.3d 248, 288 ["Hostility, antagonism and inevitable future conflict can justify an order of removal of the trustee when those factors impair the proper administration of the trust."].) "The purpose of removing a trustee is not to inflict a penalty for past action, but to preserve the trust assets. [Citation.] 'The question in each case is whether the circumstances are such that the continuance of the trustee in office would be detrimental to the trust.' " (Getty v. Getty (1988) 205 Cal.App.3d 134, 139-140.)
The probate court found removing Philip as trustee was necessary "because of the extreme antagonism between the beneficiaries and inability of Philip to communicate effectively with his sister because of this antagonism." It is true that the statement of decision does not make further factual findings to buttress its determination, but Philip failed to bring any ambiguities or omissions in the statement of decision to the probate court's attention. His objection to the statement of decision on this issue merely stated, in conclusory fashion, that "[t]here was no basis exists [sic] to remove Philip Ponzo as trustee."
Under Code of Civil Procedure section 634, if an omission or ambiguity in a statement of decision's factual findings is brought timely to the trial court's attention, "it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue." The "clear implication" of section 634 is that "if a party does not bring such deficiencies to the trial court's attention, that party waives the right to claim on appeal that the statement was deficient in these regards, and hence the appellate court will imply findings to support the judgment." (Marriage of Arceneaux, supra, 51 Cal.3d at pp. 1133-1134, italics added.) Under these circumstances, we will "infer the trial court made implied factual findings favorable to the prevailing party on all issues necessary to support the judgment, including the omitted or ambiguously resolved issues." (Fladeboe, supra, 150 Cal.App.4th at p. 60.) The trial court's implied findings of fact are reviewed on appeal under the substantial evidence standard. (Ibid.; see SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462.)
Evidence was admitted that Philip installed a gate on the Ranch to limit Bunny's access, threatened to have her and her experts arrested if they came on the Ranch without permission, and impeded her ability to obtain evidence during the discovery process leading up to trial. For example, after viewing a video of Philip's deposition, the probate court denied an objection stating: "I think it's extremely material and improper behavior by [Philip's trust attorney] Mr. Graves. I am shocked by this quite frankly. [¶] [Bunny's attorney] was entitled to answers to those questions and Mr. Graves is doing his best to make the deposition fall apart because he's trying to get his client not to answer legitimate questions. This is not good behavior and very relevant in this case." Philip was under a general duty as trustee to give Bunny access to the Estate and complete and accurate information relative to the administration of the trust upon her request. (See Strauss v. Superior Court (1950) 36 Cal.2d 396, 401.)
It is reasonable to infer that the probate court's findings of "extreme antagonism" and a lack of communication between Philip and Bunny were based on these and other events detailed in the record. We may also infer that the court impliedly found that Philip's hostile and antagonistic behavior toward Bunny had impaired the proper administration of the trust and that preservation of trust assets could only be accomplished by the appointment of an impartial professional trustee. We accord the probate's court's implied findings substantial deference and conclude the court did not abuse its discretion in removing Philip as trustee.
DISPOSITION
The judgment and order removing Philip as trustee is affirmed, and directing Philip to repay the trust for unpaid rent and diverted loan proceeds is reversed. On remand, the court shall hold an evidentiary hearing on the undue influence claim and shall recalculate the distribution of trust assets and issue such other orders as consistent with this opinion. Bunny's appeal from the order denying prejudgment interest is dismissed. The parties shall bear their own costs on appeal.
/s/_________
Sanchez, J. WE CONCUR: /s/_________
Humes, P. J. /s/_________
Banke, J.