Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. 05-444516
Swager, J.
Mary L. Richtenburg and C. Kathleen Sipes appeal the trial court’s order denying their motion for a preliminary injunction. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This is our second opinion in this matter. A substantial portion of this section is taken from our earlier published opinion, as indicated by quotation marks. (Wells Fargo Bank, N.A. v. Superior Court (2008) 159 Cal.App.4th 381.) (Wells Fargo.)
“Mary L. Richtenburg and C. Kathleen Sipes [plaintiffs] are beneficiaries of personal trusts maintained by the Bank. They commenced the underlying action on behalf of themselves and the following class: ‘all persons (and their successors) who are or were beneficiaries or successor trustees of trusts whose principal and/or income is or was managed by Wells Fargo as a corporate trustee, in which trusts Wells Fargo collected fees, proceeds or similar compensation or benefits for services provided by affiliates of Wells Fargo in connection with Wells Fargo’s investment or management of trust assets, and/or collected fees, proceeds or similar compensation or benefits from third parties in connection with Wells Fargo’s investment or management of trust assets.’
“Plaintiffs allege the Bank violated California law by: (1) investing trust assets in proprietary mutual funds in order to collect various fees for itself and its affiliates, including ‘investment and advisory’ fees; (2) investing trust assets in nonproprietary mutual funds from which the Bank and its affiliates receive undisclosed compensation; (3) implementing a ‘securities lending program’ by which it places trust assets in a common trust fund so that it can lend securities held in the fund to third parties, charge the third parties fees and interest, and ‘misappropriate’ from plaintiffs 40 percent of the fees and interest received; and (4) charging unreasonable fees for the preparation of tax returns. Plaintiffs allege that by engaging in these acts, the Bank has violated its duties as trustee to avoid conflicts of interests, to make investments solely in the interests of the beneficiaries, and to charge only a disclosed trustee fee for administering the trust. Plaintiffs further allege the Bank failed to provide full disclosure of its actions, including disclosure of payments received from its investments, the nature and extent of any conflicts of interests, and other material facts.
“The above allegations are incorporated into and realleged in all of the causes of action, ‘as though fully set forth [t]herein.’ The complaint alleges six causes of action: (1) breach of fiduciary duty; (2) concealment; (3) violation of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.); (4) conversion; (5) violation of Business and Professions Code section 17200 et seq.; and (6) common count for misappropriation.
“The Bank filed a general demurrer to each of the six causes of action in the second amended complaint, asserting, among other things, that the entire action was preempted by [the Securities Litigation Uniform Standards Act of 1998 (Pub.L. No. 105-353 (Nov. 3, 1998) 112 Stat. 3227) (SLUSA)]. After the trial court overruled the demurrer, the Bank filed a petition for a writ of mandate in this court, seeking a ruling that the action was preempted by SLUSA. We summarily denied the petition. The Bank petitioned to the Supreme Court, which granted review and transferred the matter back to this court with directions to issue an order to show cause why the relief sought by the Bank should not be granted. We did so, and set a date for filing a return.” (Wells Fargo, supra, 159 Cal.App.4th 381, 383–384.)
On May 31, 2007, plaintiffs filed an application for an order to show cause for a preliminary injunction and temporary restraining order. In their application, they alleged that the Bank “is engaged in an ongoing course of conduct in which it falsely represents that it prepares the trusts’ tax returns and that it is ‘necessary’ to charge a $500 fee for this, while concealing the very facts that Probate Code §16063(4) [sic] specifically requires it to disclose: that, in fact, it has hired an outside accounting firm, KPMG, to prepare the returns, that it has a close relationship with KPMG, and that KPMG actually charges a small fraction of the purportedly ‘necessary’ $500 fee for preparing the returns.” Plaintiffs sought the injunction to prevent the Bank from raising this fee and from sending out fee schedules, account statements, or fee increase letters without the statutorily required disclosures. They also requested that the Bank be required to send out corrective disclosure notices to all putative class members.
A notice sent by the Bank to Richtenburg on March 10, 2005, states: “To meet the demands of a changing financial environment and to ensure that we continue to provide you with the kind of service that you expect, it is necessary to charge the trust account with an annual fee associated with the preparation of the trust’s annual fiduciary income tax returns.” The enclosed fee schedule sets this fee at $500 for irrevocable trusts.
On July 31, 2007, the trial court filed a thorough order denying the motion for a preliminary injunction. Plaintiffs filed a notice of appeal on August 21, 2007.
On January 25, 2008, we granted the Bank’s writ petition and directed the superior court to vacate its order overruling the Bank’s demurrer and to issue a new and different order sustaining the demurrer with leave to amend. (Wells Fargo, supra, 159 Cal.App.4th 381, 395.) We held that SLUSA precluded the complaint insofar as it purported to assert a class action with respect to claims based on state law alleging misrepresentations or omissions in connection with the purchase or sale of securities. We noted, however, that the complaint could be amended to “(1) assert state claims for a group of fewer than 50 plaintiffs; or (2) exclude allegations that trigger SLUSA preclusion.” (Wells Fargo, supra, at p. 394.) We observed that the allegations regarding the Bank’s tax preparation fees were outside the scope of SLUSA. (Ibid.)
DISCUSSION
I. Standard of Review
The parties disagree on the appropriate standard of review. Plaintiffs insist that we must review this case under the de novo standard, while the Bank contends we must apply the standard of abuse of discretion.
A. General principles
The decision to grant or deny a preliminary injunction rests in the sound discretion of the trial court. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 999.) In exercising that discretion, the court must consider “two interrelated factors: the likelihood the moving party ultimately will prevail on the merits, and the relative interim harm to the parties from the issuance or nonissuance of the injunction.” (Ibid.) The standard of review ordinarily applied to each determination is abuse of discretion. (DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 890.) Only where “the determination on the likelihood of a party’s success rests on an issue of pure law not presenting factual issues to be resolved at trial,” do “we review the determination de novo.” (14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1403.)
B. The trial court’s decision
At the July 3, 2007 hearing, plaintiffs’ counsel stated that the purpose of their application was to enjoin the Bank from “sending the account statements out [to beneficiaries] in their current form without the required statutory disclosure” as required by Probate Code sections 15686 and 16063, subdivision (a)(4) (section 16063(a)(4)). In arguing that trust beneficiaries would be harmed in the absence of injunctive relief, plaintiffs’ counsel asserted that beneficiaries would be unlikely to challenge the Bank’s tax preparation fee if they did not know “the truth” of how the tax returns were being prepared. Counsel also argued the Bank would not be harmed by disclosing both that KPMG prepares the tax returns and the fee incurred by the Bank for this service.
Probate Code section 15686, subdivision (b), provides, in part: “A trustee may not charge an increased trustee’s fee for administration of a particular trust unless the trustee first gives at least 60 days’ written notice of that increased fee” to specified beneficiaries. Subdivision (c) provides “If a beneficiary files a petition under [Probate Code] Section 17200 for review of the increased trustee’s fee or for removal of the trustee and serves a copy of the petition on the trustee before the expiration of the 60-day period, the increased trustee’s fee does not take effect as to that trust until otherwise ordered by the court or the petition is dismissed.”
Probate Code section 16063, subdivision (a)(4) provides: “An account furnished pursuant to [Probate Code] Section 16062 shall contain the following information: [¶] . . . [¶] The agents hired by the trustee, their relationship to the trustee, if any, and their compensation, for the last complete fiscal year of the trust or since the last account.”
In opposing the application, the Bank submitted evidence that it contracts with KPMG to provide tax-related services, including the preparation of tax returns for various types of fiduciary accounts. The Bank pays KPMG from corporate funds based on the number of returns prepared and other services provided under the contract. Additionally, the Bank has its own fiduciary tax department consisting of 35 full-time employees who provide “additional tax services and support, both during tax season and year round,” including processing cost basis adjustments and reviewing other events for potential tax consequences.
At the conclusion of the hearing, the trial court determined that there was not a “reasonable probability” plaintiffs would succeed on the merits of their claim. The court also found the equities balanced against plaintiffs because their accounts had already been charged the annual tax preparation fee for 2007 and there were no allegations that the 2007 returns had been improperly prepared. In contrast, the court found the Bank would be harmed by the issuance of the proposed injunction because it would be compelled to send potentially confusing corrective notices to beneficiaries.
C. The de novo standard does not apply
Plaintiffs contend our review must be under the de novo standard, claiming the material facts “establish” that the Bank is violating the notice and disclosure requirements of sections 15686 and 16063(a)(4) because the Bank “misrepresents” that it prepares and files the returns, and conceals the fact that it pays KPMG “barely a third” of the tax preparation fee it charges to the trusts. It appears, however, that the factual basis for plaintiffs’ contentions is not quite as clear cut as they claim.
In finding that plaintiffs failed to demonstrate a substantial likelihood they would prevail on the merits, the trial court took account of the Bank’s evidence regarding how its own fiduciary tax department ensures that KPMG is provided accurate information regarding trust assets. Thus, there was evidence that both the Bank and KPMG provide tax services to the trusts. In delivering its ruling at the close of the hearing, the court concluded that “The question of who’s doing what to cause the tax return to be prepared and what work is appropriate and necessary and the like is a factual question that has not been resolved here.” The court affirmed this finding in its written order: “There are unresolved factual questions regarding what work is appropriate and necessary to cause tax returns to be prepared and who is performing that work. While Plaintiffs have raised factual arguments that [the Bank] is not accurately describing the services that it provides or the purpose of those services, the Court cannot conclude on the facts presented that KPMG is ‘preparing the returns’ for purposes of section 16063(a)(4).” (Italics added.)
An additional complication noted by the court was the issue of choice of law as the injunction would potentially affect the administration of trusts located in other states.
We observe that as an appellate court we do not resolve conflicts in evidence, reweigh the evidence, or assess the credibility of witnesses regardless of whether the trial court granted or denied a preliminary injunction. (Hilb, Rogal & Hamilton Ins. Services v. Robb (1995) 33 Cal.App.4th 1812, 1820.) “ ‘[T]he trial court is the judge of the credibility of the affidavits filed in support of the application for preliminary injunction and it is that court’s province to resolve conflicts.’ [Citation.]” (Ibid.) Even when presented by declaration, “ ‘if the evidence on the application is in conflict, we must interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court’s order.’ [Citation.]” (Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1450.) Our task is to “determine whether substantial evidence supports the discretion exercised by the trial court.” (People v. Mobile Magic Sales, Inc. (1979) 96 Cal.App.3d 1, 8.)
As there appears to be a factual dispute regarding tax services provided by the Bank and KPMG in the preparation of the tax returns, we decline to apply a de novo standard of review and instead consider whether the court abused its discretion in denying the injunction.
II. Preliminary Injunctions
A. General principles
As noted above, the trial court considers two factors in determining whether to issue a preliminary injunction: “(1) the likelihood that the plaintiff will prevail on the merits of its case at trial and (2) the interim harm that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. The latter factor involves consideration of such things as the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo.” (Abrams v. St. John’s Hospital & Health Center (1994) 25 Cal.App.4th 628, 635–636.) “ ‘The ultimate goal of any test to be used in deciding whether a preliminary injunction should issue is to minimize the harm which an erroneous interim decision may cause. [Citation.]’ [Citation.]” (White v. Davis (2003) 30 Cal.4th 528, 554.)
B. The trial court did not abuse its discretion in concluding there was not a reasonable likelihood plaintiffs would prevail on the merits
Plaintiffs assert that “Although section 16063(a)(4) has never been interpreted in a reported case, there can be no question that a tax preparer like KPMG is an ‘agent’ whose identity and relationship to the trustee and compensation must be disclosed under section 16063(a)(4).” In support of this assertion, they rely on section 16247, which allows trustees to “hire persons, including accountants” or “other agents” to assist in the performance of their duties.
Section 16247 provides: “The trustee has the power to hire persons, including accountants, attorneys, auditors, investment advisers, appraisers (including probate referees appointed pursuant to Section 400), or other agents, even if they are associated or affiliated with the trustee, to advise or assist the trustee in the performance of administrative duties.”
As the Bank notes, “The existence of an agency relationship is usually a question of fact, unless the evidence is susceptible of but a single inference.” (Violette v. Shoup (1993) 16 Cal.App.4th 611, 619.) As detailed above, there are disputed factual issues regarding the extent to which the Bank participates in the preparation of the tax returns. Inasmuch as neither section 16063(a)(4) nor section 16247 has been authoritatively construed, we cannot conclusively say that the trial court erred in finding that there are disputed factual and legal issues not subject to resolution at this stage of the proceedings. Accordingly, we find that the court did not abuse its discretion when it concluded that it was unlikely plaintiffs’ claim would succeed on the merits.
These disputed facts also render uncertain plaintiffs’ claim under Business and Professions Code section 17200 et seq., that the Bank is unfairly “marking up” the charges for the tax services provided by KPMG.
C. Plaintiffs did not prove they would suffer any cognizable harm
Plaintiffs claim that the existence of irreparable injury must be “presumed” because the Legislature “has specifically authorized injunctive relief on these facts.” Noting that Code of Civil Procedure section 526, subdivision (a)(7), provides that an injunction may issue “[w]here the obligation arises from a trust,” they assert that under this section “an irreparable injury is presumed when a breach of trust has been proven and an injunction can be granted.” Plaintiffs rely on Paul v. Wadler (1962) 209 Cal.App.2d 615 (Paul), a case that did not involve a breach of trust.
In Paul, the court held that irreparable injury need not be shown to support injunctive relief under former Agricultural Code section 4361, which prohibited the sale of milk below a minimum price. (Paul, supra, 209 Cal.App.2d 615, 625.) Citing to federal law, the court held that “irreparable injury need not be shown in cases involving a preliminary injunction, where the injunction is authorized by statute, and the statutory conditions are satisfied.” (Ibid.) Cases following Paul have required “a substantial showing of prospective violation of California statutes” in order to create a presumption of irreparable injury. (California Assn. of Dispensing Opticians v. Pearle Vision Center, Inc. (1983) 143 Cal.App.3d 419, 434 [order granting plaintiff association a preliminary injunction based on plaintiffs’ complaint alleging defendants’ violation of professional regulatory statutes].) As demonstrated by our analysis of the merits, plaintiffs have yet to make a “substantial showing” of a statutory violation.
Plaintiffs also rely on Wind v. Herbert (1960) 186 Cal.App.2d 276, 283 (Wind) for the proposition that “a court should intervene to prevent a breach of trust, regardless [of] whether there is any irreparable injury in a conventional sense.” In Wind, the plaintiffs claimed that a member of their limited partnership had violated the terms of the partnership agreement by setting up bank accounts that allowed him to make withdrawals without any additional signatures. The plaintiffs also alleged that the defendant had taken an unauthorized salary and had authorized other irregular expenditures. (Id. at pp. 280–282.) The trial court issued an injunction prohibiting the defendant from using bank accounts without the added signatures. Against the argument that the plaintiffs failed to show irreparable injury (because the alleged harm could be compensated for in damages after trial), the appellate court found that the wrongs complained of “were obviously of ‘a repeated and continuing character’ ” and that injunctive relief was therefore justified. (Id. at pp. 285–286.)
We note that, unlike in the present case, the plaintiffs in Wind had made a showing of tangible harm such that the trial court “could, and undoubtedly did, weigh the probable injury which would ensue to plaintiffs by denying the temporary relief as against the absence of probable injury which would accrue to the defendants by granting it.” (Wind, supra, 186 Cal.App.2d 276, 284.) Moreover, the trial court “could further have determined that [the allegedly improper] disbursements could not be adequately traced and that the accounting ordered by the court incident to dissolution of the partnership might not fully disclose the damages suffered by plaintiffs.” (Id. at p. 285.) No such danger appears in the present case.
The Bank also claims that plaintiffs were required to show imminent harm or irreparable injury because they were seeking a “mandatory injunction” in that the proposed injunction would require the Bank to do more than just preserve the status quo. While it is unnecessary for us to address that issue, the Bank’s argument has merit.
D. Balance of hardships
Plaintiffs claim “where, as in this case, the undisputed facts clearly show a violation of the law, an injunction should not be denied based upon the balance of the hardships or absence of irreparable injury.” In our view, this statement unduly minimizes the discretion that trial courts have in ruling on preliminary injunction applications.
It is established that “The likelihood of plaintiffs’ ultimate success on the merits ‘does affect the showing necessary to a balancing-of-hardships analysis. That is, the more likely it is that plaintiffs will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue. This is especially true when the requested injunction maintains, rather than alters, the status quo. [Citation.] . . . [I]t is the mix of these factors that guides the trial court in its exercise of discretion.’ [Citations.] The presence or absence of these interrelated factors ‘is usually a matter of degree, and if the party seeking the injunction can make a sufficiently strong showing of likelihood of success on the merits, the trial court has discretion to issue the injunction notwithstanding that party’s inability to show that the balance of harms tips in his favor. [Citation.]’ [Citation.]” (Right Site Coalition v. Los Angeles Unified School Dist. (2008) 160 Cal.App.4th 336, 342, italics omitted.)
Even if plaintiffs are correct both that the Bank has violated sections 15686 and 16063(a)(4), and that these violations create an unrebutted presumption of irreparable injury, this finding would not prevent the trial court from weighing the relative harms that the parties would incur following the issuance or nonissuance of a preliminary injunction. “[A] principal objective of a preliminary injunction ‘is to minimize the harm which an erroneous interim decision may cause’ [citation], and thus a court faced with the question whether to grant a preliminary injunction cannot ignore the possibility that its initial assessment of the merits, prior to a full adjudication, may turn out to be in error.” (White v. Davis, supra, 30 Cal.4th 528, 561.)
In finding that the balance of hardship weighed against plaintiffs, the trial court observed that they were not exposed to any “real monetary risk” because the Bank would not be collecting the annual tax preparation fees again until the second quarter of 2008. In contrast, the Bank would be harmed if the injunction were to issue due to the expense and inconvenience involved in sending out disclosures before the content of such disclosures had been finally determined at trial, “which could result in confusion on the part of trust beneficiaries as well as a need to send out further notices when and if other disclosures are determined to be required.” We see no abuse of discretion in the court’s determination that the balance of harms weighed against the issuance of the preliminary injunction.
Plaintiffs also claim that irreparable injury will ensue because “In just a few months the Bank will again be taking the increased $500 tax preparation fee from the trusts, based upon deceptive and incomplete notices, without having complied with the prior notice prerequisites for charging this increased fee under [section] 15686.” We are evaluating the merits of the trial court’s order as of the date it was issued on July 31, 2007, not as it could have been adjudicated over six months later.
We emphasize that an order granting or denying preliminary relief reflects nothing more than the trial court’s evaluation of the controversy on the record before it at the time of its ruling; the order “is not an adjudication of the ultimate merits of the dispute.” (People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090, 1109; Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286.) Plaintiffs are entitled to proceed to trial to prove the allegations of their complaint. (Butt v. State of California (1992) 4 Cal.4th 668, 678, fn. 8.) We hold only that the trial court did not abuse its discretion in denying the request for a preliminary injunction.
DISPOSITION
The order denying plaintiffs’ application for a preliminary injunction is affirmed.
We concur: Stein, Acting P. J., Margulies, J.
All further statutory references are to the Probate Code except as otherwise indicated.