Filed 7/3/14 Estate of Buser Trust CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
Estate of FLOYD AND DONNA BUSER TRUST dated September 16, 1997, Deceased. D063381 MARTIN BUSER, Trustee,
Plaintiff and Respondent, (Super. Ct. No. 37-2010-000150555-PR- TR-NC) v.
DOUGLAS BUSER,
Defendant and Appellant.
APPEAL from a judgment and orders of the Superior Court of San Diego County,
Julia C. Kelety, Judge. Affirmed; denial of motion to dismiss is confirmed upon
reconsideration; motion for sanctions on appeal denied.
Snyder & Hancock, Scott A. Hancock; Law Offices of Mary A. Lehman and
Mary A. Lehman for Defendant and Appellant.
Hickson, Kipnis & Barnes, Howard A. Kipnis, Steven J. Barnes; McKenna Long
& Aldridge and Charles A. Bird for Plaintiff and Respondent. This probate matter began as a petition by appellant Douglas Buser (Douglas), a
beneficiary of a family trust set up by his parents, to obtain removal of the trustee and
other relief. (Prob. Code, § 17200 et seq.) The trustee is respondent Martin Buser
(Martin), his brother and another beneficiary. (Burton Buser, their brother, is also a party
and beneficiary and does not appear on appeal; we use first names for convenience,
meaning no disrespect.)
Douglas challenges several orders issued by the probate court that disposed of
various petitions concerning and enforcing a written, court-approved settlement
agreement, containing an arbitration clause that was entered into by the three brothers to
resolve their disputes over administration of the trust. (Prob. Code, § 1300; Code Civ.
Proc.,1 § 904.1, subd. (a)(10).) Another challenged order imposed $8,689.50 monetary
sanctions against Douglas, under the terms of section 128.7, for his pursuit of an
unmeritorious renewed motion or reconsideration petition (to be described later).
(§ 904.1, subd. (a)(12).) In an amended notice of appeal, Douglas also challenges the
money judgment implementing the orders, in favor of Martin as trustee, in the principal
amount of $90,848.84, plus interest, plus attorney fees and costs of $20,144. (§ 1294,
subd. (d).)
As the merits panel, we are also presented with Martin's motion for sanctions for a
frivolous appeal. Previously, this court denied Martin's motion to dismiss the appeal, but
1 All further statutory references are to the Code of Civil Procedure unless noted.
2 without prejudice to our reconsideration. We have examined the dismissal issues and
confirm the order of denial of dismissal, as will be explained.
On the merits of his appeal, Douglas primarily contends the probate court erred in
issuing these orders and judgment, because the court confirmed an arbitration award that
impermissibly included an award of fees and costs for a time period before the settlement
agreement was formally approved by the probate court (six months after the execution of
that agreement). Douglas interprets the settlement agreement as permitting only
arbitration fees to be awarded, if incurred after its effective date of court approval. He
characterizes the $49,772.66 in fees and costs that were incurred in mediation, prior to
the effective date of the settlement agreement, as mediation fees that amounted to a new
claim under the settlement agreement, because that settlement was intended to resolve all
existing claims as of its date of signature. He thus contends the arbitrator exceeded his
power under the arbitration clause, and requests the judgment on the arbitration award be
modified to exclude that $49,772.66 amount. (§ 1286.2, subd. (a)(4).)2
Douglas also objects to the arbitrator's award that charged all the fees and costs
against his own share of the trust estate, as court costs he owed to the estate for this
unmeritorious litigation. He claims this allocation was unjustified, and further, that the
2 Section 1286.2, subdivision (a)(4), provides that the court shall vacate an arbitration award (subject to some exceptions) if it determines: "The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted."
3 trial court erred as a matter of law in sanctioning him under section 128.7. (Douglas also
made other arguments that he has conceded in his reply brief, as will be discussed.)
As will be explained, we conclude the money judgment is properly reviewable, as
is the collateral sanctions order. On the merits, the arbitrator had a sufficient basis to
interpret the settlement agreement in the manner that he did. (§§ 1286.2, subd. (a)(4);
1294, subd. (d).) The probate court did not err in confirming the arbitration award, and
its rulings on the competing petitions were justified to resolve the disputes properly
brought before it. Moreover, the court did not abuse its discretion in awarding sanctions
to Martin under section 128.7, based upon Douglas's repeated attacks on the settlement
agreement.
However, we deny Martin's appellate motion for an award of additional sanctions
against Douglas, as we are unable to conclude this appeal was wholly frivolous.
I
BACKGROUND FACTS
A. Trust Assets; Prior Appeal
A separate appeal filed by Douglas arising from the trust disputes was recently
resolved by this court, concerning issues not directly involved in this appeal. (Buser v.
Buser (Feb. 19, 2014, D064000) [nonpub. opn.]; our prior opinion.) We utilize some of
the introductory material from that opinion, to provide background for describing the
remaining issues.
4 In 1997, Floyd and Donna Buser (the parents) established a trust for the
distribution of their assets upon their death to their three sons (Douglas, Martin, and
Burton). The trust provides for the distribution of the trust assets in equal shares to the
three sons. The parents owned five real estate properties, known as the Padilla, Park,
Bogue, Rosecrans, and San Marino properties. Before Floyd's death, Douglas moved
into the Rosecrans residential property, and spent money maintaining it.
In the trust, Martin was named as successor trustee upon the parents' death or
incapacity and was granted power of attorney. After Donna died, Martin gradually
assumed responsibility for the management of Floyd's financial affairs. Due to Floyd's
dementia, the court appointed counsel for Floyd, and Martin acted as successor trustee.
As trustee, Martin made a proposal for preliminary distribution of the assets, and
Douglas objected. The probate court approved the plan, which gave rise to Douglas's
prior appeal. In our prior opinion, we affirmed the probate court's order, over Douglas's
challenges. We noted that the issue of the final distribution was to be decided at a future
date and that the real property valuations were left undecided in the preliminary
distribution order. The probate court had reasonably declined to calculate at that time
what equalizing payments should be made. In our prior opinion, we took note of this
related appeal, to the extent of stating there should be sufficient assets left in the trust to
make any necessary future adjustments in Douglas's favor, depending on the outcome of
this current pending appeal (with respect to over $110,000 of court costs that the probate
court charged against or allocated to Douglas's share of the trust estate).
5 B. Douglas's Petition Seeking Removal of Trustee, etc.; Mediation
Starting in 2010, Martin and Douglas became involved in litigation relating to the
administration of the trust. Martin, acting as trustee, filed an unlawful detainer action in
October 2010, to reclaim possession of the Rosecrans residence from Douglas and his
wife, Carol.
Douglas responded by filing a petition seeking Martin's removal as trustee and
remedies for breaches of trust. Douglas alleged Martin refused to reasonably provide
financial information regarding the trust, and breached his duty of impartiality by seeking
to evict Douglas and his wife from trust property.
In May 2011, Douglas, Martin and Burton, along with court-appointed counsel for
Floyd, voluntarily mediated their claims before retired superior court judge David B.
Moon, Jr. Martin had an attorney present, and Douglas and Burton represented
themselves in propria persona. On May 17, 2011, the parties signed a settlement
agreement. As relevant here, paragraphs 14 and 15 provided Douglas could continue to
occupy the Rosecrans residence through May 31, 2012, and he would also receive a total
of $21,500 from the Trust (i.e., $3,000 for unreimbursed expenses incurred at the
Rosecrans property, and the remainder within 30 to 60 days, following court approval of
the settlement agreement).
In return, Douglas agreed to approve Martin's accounting through December 31,
2010 and to dismiss his pending petition with prejudice. Each party agreed to fully
release all claims against each other, including a waiver of their rights under Civil Code
6 section 1542. Notably, the parties released one another from all present and future
claims, known or unknown, "arising out of any matter, or thing existing as of the date of
the execution of this Settlement Agreement . . . connected with or incidental to" Martin's
trust administration, including claims and allegations in the legal matters pending in
court. (Italics added.)
Ordinarily, the trust assets were to pay all reasonable fees incurred in connection
with the trust proceedings. Martin would receive compensation for trustee services upon
final distribution. Paragraph 39 of the settlement agreement, entitled "Effective Date,"
stated the agreement "shall be in full force and effect as of the date the court approves the
Settlement Agreement."3
C. Arbitration Clause in Settlement Agreement; Court Approval
Under Paragraph 10 of the settlement agreement, the parties agreed to submit any
dispute regarding the interpretation or enforcement of the settlement agreement, as well
as disputes about trust administration, to mediation and then to arbitration, as follows:
"Any and all disputes between or among MARTIN, DOUGLAS or BURTON regarding the interpretation or enforcement of this Settlement Agreement, the trust administration and/or regarding the care of Floyd shall be referred to Judge Moon for mandatory mediation, and if not resolved at mediation, to be then referred to Judge Moon for binding arbitration in accordance with [American Arbitration Association (AAA)] Arbitration Rules. Each party understands and agrees that he is waiving all right to resolve such
3 Blanks were left for Douglas's and Burton's wives to sign, but Douglas's wife, Carol Buser, refused to sign the settlement agreement. Eventually, further mediation was held, and on August 11, 2011, Martin waived the requirement of her signature.
7 issues and disputes through the filing of a court proceeding, including a waiver of all procedural rights and rights of appeal. Moreover, all costs and reasonable attorney's fees incurred by the prevailing party in such arbitration shall be awarded to the prevailing party and assessed against the party who fails to prevail in an award to be rendered by Judge Moon as arbitrator." (Italics added.)4
On May 23, 2011, court-appointed counsel for Floyd filed a petition to approve
the settlement agreement. On July 6, 2011, Douglas filed objections to this petition.
After several contentious hearings, the court approved the settlement agreement on
October 6, 2011. At that time, the court did not order any payment of fees and costs for
the mediation leading up to the settlement agreement or its approval.
The mediation firm then sent a notice of a mediation scheduled for October 28,
2011. Although the notice was dated October 24, 2011 and postmarked October 26,
2011, Douglas said he did not receive it until the day of the mediation, and could not
attend. The mediation related to the $49,772 that Martin was claiming for mediation and
legal fees incurred for the period May 17, 2011 to October 6, 2011. Douglas was
opposing any such award, as having been incurred after the settlement agreement was
signed, but before it became effective by court order.
On December 15, 2011, Douglas demanded that Martin pay to him the $21,500
sum agreed upon (which included $3,000 for the Rosecrans house expenses). When
Martin did not respond or do so, Douglas sent a letter on December 30, 2011, seeking to
4 This attorney fees clause, regarding arbitration in enforcement of the settlement agreement, superseded the alternate clause that the trust was to pay all reasonable fees incurred in connection with trust proceedings.
8 rescind the settlement agreement for failure of performance pursuant to Civil Code
section 1689, subdivision (2).
D. Further Litigation; Previous Separate Appeal Dismissed
On February 6, 2012, Martin brought an ex parte request for the appointment of an
arbitrator, under the settlement agreement's paragraph 10, the arbitration clause. After
holding hearings, the court ordered on February 23, 2012 that Judge Moon was appointed
as arbitrator. At an ex parte hearing on March 29, 2012, Douglas objected on numerous
grounds to the appointment of an arbitrator (e.g., an ex parte application was not
appropriate because Douglas was claiming he had rescinded the settlement agreement
and Judge Moon was not impartial). The court denied Douglas's objections, stating the
issue of rescission was "technically not before me."
On March 30, 2012, Judge Moon recused himself as arbitrator. On April 3, 2012,
the superior court issued an amended order appointing Attorney B. James Brierton as
successor arbitrator. Douglas sought to disqualify the appointed arbitrator, who denied
his disqualification notice. When Floyd died on May 3, 2012, his survivor's trust became
irrevocable.
On April 19, 2012, Douglas filed a notice of appeal from the February 23, 2012
order appointing the arbitrator. This appeal was dismissed by this court as a
nonappealable order on June 1, 2012. Although Douglas sought rehearing of that
dismissal, his request was denied.
9 E. Arbitration Award; Subject Motions
Around the time of the scheduled June 14, 2012 arbitration hearing, numerous
filings were being made by Douglas and Martin. On May 1, 2012, Douglas filed a
"Petition for Relief Based on Rescission (Civ. Code, § 1689), from Breach of Trust
(Probate Code §16420), and Complaint for Damages for Breach of Contract" ("Douglas's
May 1, 2012 rescission petition"). Douglas asserted the settlement agreement should be
rescinded based on the lack of "consideration" and failure of performance by Martin.
On June 8, 2012, Douglas filed a "Renewed Motion for Relief to Vacate or Set
Aside Appointment of Arbitrator" ("Douglas's June 8, 2012 renewed motion to vacate,"
citing §§ 1008, 1281.2 & 1281.6). This motion pertained to the April 3, 2012 amended
order that appointed Attorney Brierton as arbitrator.
At the June 14 hearing, Douglas appeared telephonically. The arbitrator took
testimony from both sides and admitted exhibits.
After the hearing and while the decision was pending, on June 18, 2012, Martin
filed a motion for an order compelling arbitration of the issues raised by Douglas's
May 1, 2012 rescission petition.
After the June 14 hearing concluded, the arbitrator rendered his award on June 29,
2012. The award cited to Estate of Ivey (1994) 22 Cal.App.4th 873, 882-883, and other
cases, as authority for the probate court's equitable supervision of trust administration, to
provide remedies for unfounded and bad faith conduct. The arbitrator concluded that
10 Douglas's "reprehensible" actions were taken to thwart the settlement agreement, and
Douglas's intent was evidently to negotiate a new and better deal for himself.
In the award, the arbitrator ruled in favor of Martin and against Douglas and made
findings as follows: (a) Douglas had violated the terms of the settlement agreement, as
well as a confidentiality clause in the mediation agreement, and therefore Martin was
entitled to recover against Douglas all attorney fees and costs incurred by the trust in
defense of the settlement agreement (from its date of signature), totaling $90,848.84
through the date of the arbitration hearing; (b) Martin was not obligated to pay Douglas
the $21,500 due to him under the settlement agreement, but instead was entitled to satisfy
that obligation by offsetting it with the now established amount that Douglas owed the
trust, because of his breaches of the settlement agreement; (c) Martin's failure to pay
Douglas $21,500 due to him under the settlement agreement did not operate to give
Douglas the right to rescind the settlement agreement.
In the modified and corrected award, the arbitrator ruled that to the extent the net
amount due the trust from Douglas remained unsatisfied, "Martin shall offset against
Douglas's entitlements and interests as a remainder Trust Beneficiary, all amounts due
and owing . . . before any entitlements and interests in the Trust are distributed to
Douglas."
F. Hearing on the Motions; Four Challenged Orders
On August 10, 2012, Martin moved to confirm the award. Meanwhile, the North
County probate division was being closed and all matters were being reassigned to the
11 central probate division. Hearing dates were continued on the various motions.
Eventually, the probate court heard arguments on October 2, 2012, on Martin's three
motions and on Douglas's June 8, 2012 renewed motion to vacate. The court first
discussed with the parties whether a new motion filed by Douglas on September 5, 2012,
to vacate the arbitration award, should be accelerated or continued until the scheduled
hearing date, which was November 6, 2012. Ultimately, the court treated Douglas's
newly filed motion as opposition to Martin's motion to confirm the award. (§ 1285 et
seq.)
At the hearing, Martin argued that he had attempted to schedule an October 2011
mediation on the fees issues, but Douglas did not attend, and therefore Martin was
authorized to treat the postsignature, preapproval fees as a matter of allocation in trust
administration. He could then obtain an offset against Douglas's share of the ultimate
distribution.
In response, Douglas argued that only inadequate notice had been given of the
October 2011 mediation that he was unable to attend, and the mediation fees amounted to
a new claim under the settlement agreement, of which he was entitled to separate notice
under AAA rules. He also contended the arbitrator had failed to follow such rules and
had not made the proper disclosures, although Douglas did not know of any potential
conflicts of interest. He said he went to arbitration only "under a duress situation."
Although the tentative ruling was in favor of Douglas's argument that the
arbitrator's award of attorney fees and costs in the amount of $49,772.66 (for the period
12 of time between May 17, 2011 and October 6, 2011) was unjustified, the final ruling was
in favor of Martin as trustee and included that amount. The probate court rejected
Douglas's position that such an award of fees and costs incurred after the settlement
agreement was signed, but before the court approved it, was in excess of the arbitrator's
authority, because the settlement agreement was enforceable and it provided for
arbitration of trust administration issues. The court denied Douglas's June 8, 2012
renewed motion to vacate.
The probate court thus confirmed the arbitration award, for $90,848.84 as the
principal amount, plus interest. It also awarded Martin arbitration fees ($11,084) and
other fees and costs incurred in bringing the motion to confirm (for a total of $20,144).
With respect to Martin's motion for sanctions under section 128.7, the court made
findings that Douglas had made four unwarranted attacks on the appointment of the
arbitrator, including his ex parte opposition, his unsuccessful appeal and reconsideration
request, and his June 8, 2012 renewed motion to vacate, which had just been denied. The
court sanctioned Douglas under section 128.7, awarding Martin as trustee $8,689.50 in
sanctions, subject to his proper documentation.
Finally, on the remaining June 18, 2012 motion by Martin to compel additional
arbitration of the issues raised by Douglas's May 1, 2012 rescission petition, the reporter's
transcript shows that the probate court granted the motion to compel arbitration under the
settlement agreement, and then put the matter over for review of any results at the next
case management conference on February 11, 2013.
13 II
PROCEDURAL CONCERNS ON APPEALABILITY
Douglas appealed January 3, 2013. On February 1, 2013, a money judgment was
entered, providing that Douglas was not entitled to rescind the settlement agreement, and
further, to the extent Douglas did not pay the judgment amount, Martin as trustee was
allowed to offset the amounts awarded against Douglas's ultimate distribution from the
trust. The judgment also awarded attorney fees and costs. Martin then filed a motion to
dismiss portions of this appeal on February 13, 2013 and Douglas opposed it. On
March 13, 2013 Douglas filed an amended notice of appeal from the judgment.
On March 18, 2013, this court denied Martin's motion to dismiss, without
prejudice to reconsideration by this panel when hearing the merits of the appeal. Later,
Martin's "Petition for Rehearing of Motion to Dismiss Portions of Appeal" (opposed by
Douglas) was denied on April 19, 2013.
Martin separately argues for enforcement of a term in the settlement agreement
that pertains to waiver of a right to appeal. In relevant part, paragraph 10 of the
settlement agreement reads: "Each party understands and agrees that he is waiving all
right to resolve such issues and disputes through the filing of a court proceeding,
including a waiver of all procedural rights and rights of appeal."
However, the filing of a money judgment clarified that each of the subject orders
that it formalized is properly appealable within the standards of section 904.1 for
appealability. (§ 904.1, subds. (a)(1), (2) [an appeal may be taken from a judgment (with
14 certain exceptions), or from an order made after an appealable judgment].) Under section
1294, subdivision (d), Douglas retained his right to appeal the money judgment, which
subsumes the order confirming the arbitration award, and the order denying Douglas's
June 8, 2012 renewed motion to vacate. There is no dispute that the order granting the
motion by Martin for sanctions against Douglas under section 128.7 is appealable under
section 904.1, subdivision (a)(12).
Under all these circumstances, it is appropriate to resolve the merits of the claims
about the money judgment, including its finding that "the failure of [trustee] Martin to
pay Douglas $21,500 upon court approval of the [settlement agreement] on October 6,
2011 did not operate to give Douglas the right to unilaterally rescind the [settlement
agreement]." We note that the parties are still arguing conflicting positions on the
appealability of the probate court's order granting Martin's petition to compel arbitration
of Douglas's May 1, 2012 rescission petition (as later amended Aug. 31, 2012, which was
after the June arbitration was completed). The record is unclear on whether any such
separate and additional arbitration proceeding is taking place, and in any case, no such
postrecord issues would properly be before us. Moreover, for purposes of this appeal,
Douglas's reply brief has abandoned at least some of his rescission theories.
For purposes of reviewing all these related orders and the money judgment, it is
unnecessary for us to reconsider the order that denied Martin's motion for dismissal of a
portion of the appeal, and that order is confirmed. We resolve only the propriety of the
15 subject orders upon the existing record, and then address the various sanctions issues (pts.
IV-V, post).
III
MERITS OF MONEY JUDGMENT ON ARBITRATION RELATED ORDERS
To review the trial court's judgment confirming the arbitration award, we apply the
standards of section 1286, requiring " '[t]he court shall confirm the award as made . . .
unless in accordance with this chapter it corrects the award and confirms it as corrected,
vacates the award or dismisses the proceeding.' " (Ikerd v. Warren T. Merrill & Sons
(1992) 9 Cal.App.4th 1833.) "Our review of an arbitration award requires us to extend to
it every intendment of validity and the party claiming error has the burden of supporting
his contention." (Ibid., citing Cobler v. Stanley, Barber, Southard, Brown & Associates
(1990) 217 Cal.App.3d 518, 526 (Cobler).)
It is well accepted " ' "[t]he powers of an arbitrator are limited and circumscribed
by the agreement or stipulation of submission." ' " (Cobler, supra, 217 Cal.App.3d 518,
530.) However, a reviewing court will refrain from substituting its own judgment for the
arbitrator's determinations about the contractual scope of the powers granted by the
arbitration agreement. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th
362, 372 (Advanced Micro Devices, Inc.).) "The remedy an arbitrator fashions does not
exceed his or her powers if it bears a rational relationship to the underlying contract as
interpreted . . . by the arbitrator and to the breach of contract found . . . by the arbitrator."
(Id. at p. 367; see Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186
16 Cal.App.4th 696, 705 [doubts as to the scope of an agreement to arbitrate are to be
resolved in favor of arbitration].)
"In determining whether an arbitrator exceeded his powers, we review the trial
court's decision de novo, but we must give substantial deference to the arbitrator's own
assessment of his contractual authority." (Kelly Sutherlin McLeod Architecture, Inc. v.
Schneickert (2011) 194 Cal.App.4th 519, 528; Advanced Micro Devices, Inc., supra,
9 Cal.4th at p. 376, fn. 9.) We examine the terms of the settlement agreement and its
interpretation by the arbitrator, and the trial court's application of these legal standards.
A. Terms of Settlement Agreement
As mentioned above, both the trial court and the arbitrator rejected Douglas's
rescission claims, based on nonperformance by Martin, and Douglas is not pursuing them
here. Instead, we focus on Douglas's arguments that the arbitrator misapplied the terms
of the settlement agreement or exceeded his authority, when he awarded certain attorney
fees and costs that were chargeable to Douglas's interest in the trust assets. Douglas
claims that the bills for the proceedings that took place between the signature date and the
effective date of the agreement amounted to a new claim that had not been made before.
Thus, Martin should have been deemed to have released any such future claims in the
other portions of the settlement agreement. Douglas argued his own releases could only
apply to claims "arising out of any matter, or thing existing as of the date of the execution
of this Settlement Agreement . . . ." (Italics added.) Thus, any confidentiality breaches
after mediation should not be actionable.
17 A settlement is valid, binding, and enforceable under section 664.6 if the parties
agreed to all material settlement terms. (Hines v. Luke (2008) 167 Cal.App.4th 1174,
1182.) This settlement agreement contains very broad language regarding the scope of its
coverage: "Any and all disputes between or among [the brothers] regarding the
interpretation or enforcement of this Settlement Agreement, the trust administration
. . . shall be referred to Judge Moon for mandatory mediation, and if not resolved at
mediation, to be then referred . . . for binding arbitration in accordance with AAA
Arbitration Rules." (Italics added.)
Under this settlement agreement, all costs and reasonable attorney fees incurred by
the prevailing party in arbitration about the meaning of the agreement shall be awarded to
the prevailing party, to be assessed against the unsuccessful party. (See § 1284.2 [allows
the parties to shift individual fee responsibility by agreement].) Martin thus sought an
order pursuant to sections 1284.2 and 1293.2, awarding reasonable attorney fees and
costs incurred by the trustee in connection with the petition, as well as all arbitrator's fees
charged to the trust.
B. Interpretive Powers of Arbitrator; Probate Context; Analysis
This settlement was reached in the context of trust proceedings in probate. The
parties agreed that trust administration matters would fall within the scope of the
settlement. It is well settled that the probate court has the ability to exercise its equitable
powers and authority to supervise the administration of a trust. (Estate of Ivey, supra,
22 Cal.App.4th 873, 883-884; Rudnick v. Rudnick (2009) 179 Cal.App.4th 1328, 1333-
18 1334 (Rudnick).) That equitable power is to be distinguished from the basic supervisory
power of a court to impose sanctions upon motion. (Ibid.)
Where a trustee or executor incurs legal expenditures in defense of a beneficiary's
challenges to his or her conduct in the administration of the estate, and where that
challenged conduct is found to have been proper, the expenditures for the "successful
defense against exceptions to his account are chargeable against the estate." (Estate of
Beach (1975) 15 Cal.3d 623, 644.) Similarly, where the beneficiary's challenges to the
trustee's or executor's administrative conduct were made in good faith, even though
unsuccessful, the beneficiary's shares of the trust or estate is not chargeable for the
defense expenditures. Where the beneficiary has questioned "the stewardship of
executors and administrators through proceedings brought in good faith," the court has no
authority to order that the entire burden of such extraordinary defense compensation for
the executor/trustee and its attorney must be paid from the beneficiary's share of the
estate or trust. (Id. at pp. 645-646.)
However, a probate court order that charges attorney fees to a beneficiary's future
trust distributions, rather than to the trust as a whole, is justified if the court concludes
that "it would be unfair to burden the majority beneficiaries with the payment of the fees
that were incurred in responding to . . . bad faith [litigation or opposition to trustee's
administration or proposals]." (Rudnick, supra, 179 Cal.App.4th 1328, 1334.) "[S]uch
an order is authorized by the probate court's equitable powers and authority over the
administration of the trust." (Ibid.)
19 "Although section 1286.2 permits the court to vacate an award that exceeds the
arbitrator's powers, the deference due an arbitrator's decision on the merits of the
controversy requires a court to refrain from substituting its judgment for the arbitrator's in
determining the contractual scope of those powers." (Advanced Micro Devices, Inc.,
supra, 9 Cal.4th at p. 372.) In this case, the arbitrator's appointment by the probate court
gave him the task of interpreting and implementing the settlement agreement. The parties
do not expressly discuss whether the appointed arbitrator was authorized under this
settlement agreement to exercise such administrative supervision in this trust context,
inasmuch as such supervision is normally carried out by the probate court itself. (Estate
of Ivey, supra, 22 Cal.App.4th 873, 884-885.) In his respondent's brief, Martin complains
that Douglas did not acknowledge in his opening brief that the arbitrator was awarding
the mediation phase fees and costs under the probate court's equitable power to charge a
beneficiary with the trustee's expenses in responding to bad faith litigation. Martin then
seems to state that such an equitable power for the arbitrator did not arise under the
settlement agreement, although he does not explain how else it could have arisen.
Douglas's arguments did not address the source of the arbitrator's powers in this
respect. We find the parties have forfeited any objections on this legal point, and in any
case, the scope of this settlement agreement was broad enough to include such arbitral
authority, over trust administration issues concerning the settlement and its enforcement.
Under the agreement, the parties released each other from all claims, known or
unknown, "arising out of any matter, or thing existing as of the date of the execution of
20 this Settlement Agreement . . . connected with or incidental to," e.g., Martin's trust
administration, which included the claims and allegations in the legal matters pending in
court. The arbitrator was therefore justified in interpreting the scope of the submission as
including trust administration matters, and in relying on the authority of Estate of Ivey,
supra, 22 Cal.App.4th 873, 882-885, for such trust allocation issues that arose during the
relevant time periods. Douglas cannot show this was a new claim that arose after the
settlement document was signed. The arbitrator determined that Douglas's objections to
the actions of Martin, as trustee, had been frivolous and "reprehensible." Further,
Douglas's violation of the terms of the confidentiality clause in the mediation agreement,
by litigating the mediation phase, also justified Martin's recovery of fees and costs he
incurred, as trustee, in defending the settlement agreement. The award was justified in
charging the expenses against Douglas's distributive share. (Ibid.; Rudnick, supra, 179
Cal.App.4th 1328, 1333-1334.)
Nevertheless, we think Martin goes too far in arguing that Douglas was solely
responsible for all the disputes. Very short notice (four days) was given for the failed
October 2011 mediation of fees, and it did not expressly identify the issue as a trust
administration one. Since Douglas was representing himself in propria persona in the
probate court, it is possible that he did not fully understand the very broad scope of the
trust administration issues he was settling and conceding were arbitrable, although it is
too late for challenges now. Martin has made no explanation why at least a $3,000
payment could not have been made for the residence maintenance expenses, as originally
21 agreed. However, on the record before us, we conclude the arbitration award and the
resulting money judgment for trust administration and related expenses have a sufficient
basis in the record and in the applicable legal principles.
IV
TRIAL COURT'S AWARD OF SECTION 128.7 SANCTIONS
A. Standards and Contentions
Martin's motion under section 128.7, subdivision (c) sought fees and costs
incurred in opposing the Douglas's June 8, 2012 renewed motion to vacate, and in
bringing Martin's sanctions motion. Martin had served an appropriate "safe harbor"
request for retraction of Douglas's motion, without success. (§ 128.7, subd. (c).) The
probate court imposed $8,689.50 in sanctions on Douglas for filing and pursuing, beyond
a reasonable extent, his June 8, 2012 renewed motion to vacate. The court gave its
reasons for the award at the hearing, finding that there was no evidence of true duress in
this matter in support of Douglas's June 8, 2012 motion to vacate, and the motion was
untimely, unsupported and had not moved the matter forward at all.
Douglas contends the probate court abused its discretion in making this award, and
its reasons were legally impermissible. First, he argues that he was entitled to resist the
appointment of the arbitrator, which had been made on an ex parte basis in March 2012.
Once the appointing court stated that the rescission issue was not before it for resolution,
only the appointment issue, Douglas filed his May 1, 2012 rescission petition, then
renewed it. He argues his June 8, 2012 renewed motion to vacate included some of the
22 rescission claims, and some of them were still pending as of the time of the sanctions
motion (the subject of the order for another arbitration). Douglas argues the probate
court should not have cited to his unsuccessful appeal of the appointment order in this
court, as grounds for sanctions, since he had a right to appeal to a higher court. Finally,
he claims that the probate court was wrong in stating that since Douglas had attended the
arbitration hearing (albeit under protest), his objections to the appointment were moot.
Under section 128.7 and the federal rule on which it was modeled, "there are
basically three types of submitted papers that warrant sanctions: factually frivolous (not
well grounded in fact); legally frivolous (not warranted by existing law or a good faith
argument for the extension, modification, or reversal of existing law); and papers
interposed for an improper purpose." (Guillemin v. Stein (2002) 104 Cal.App.4th 156,
167; Fed. Rules Civ.Proc., rule 11, 28 U.S.C.)
" 'While section 128.7 does allow for reimbursement of expenses, including
attorney fees, its primary purpose is to deter filing abuses, not to compensate those
affected by them. It requires the court to limit sanctions "to what is sufficient to deter
repetition of [the sanctionable] conduct or comparable conduct by others similarly
situated." ' " (Optimal Markets, Inc. v. Salant (2013) 221 Cal.App.4th 912, 920-921
(Optimal Markets).)
"A trial court is to apply an objective standard in making its inquiry concerning
the attorney's or party's allegedly sanctionable behavior in connection with a motion for
sanctions brought under section 128.7. [Citations.] Thus, for example, whether an action
23 is frivolous under section 128.7 is measured by an objective standard. [Citation.] [¶]
Ordinarily, a ruling on a motion for sanctions brought under section 128.7 is reviewed
under a deferential abuse-of-discretion standard. [Citations.] But where a question of
statutory construction is presented in the course of the review of a discretionary decision,
such issues are legal matters subject to de novo review. [Citations.] Thus, to the extent
the trial court's denial of the motion for sanctions here involved an interpretation of the
language of section 128.7, our review is de novo." (Optimal Markets, supra, 231
Cal.App.4th at pp. 921-922; see Bockrath v. Aldrich Chemical Co. (1999) 21 Cal.4th 71,
82.)
In Optimal Markets the trial court had referred the case before it to contractual
arbitration. The prevailing party then requested sanctions for certain allegedly frivolous
conduct that had occurred during the arbitration. The trial court denied the motion and
the appellate court affirmed, finding that the trial court had not expressly asserted
continuing jurisdiction over the matter, but had stayed all activity in the judicial action.
Thus, the analysis applied, that " 'the action at law sits in the twilight zone of abatement
with the trial court retaining merely a vestigial jurisdiction over matters submitted to
arbitration.' [Citation.]" (Optimal Markets, supra, 231 Cal.App.4th at p. 923.)
In Optimal Markets, supra, 221 Cal.App.4th 912, 924 the court cited to
Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487-488,
for the concept that once a matter is sent to arbitration, unless the parties have agreed to
withdraw the controversy from arbitration, the court should not take other merit-related
24 judicial acts. "In the interim, the arbitrator takes over. It is the job of the arbitrator, not
the court, to resolve all questions needed to determine the controversy. [Citations.] The
arbitrator, and not the court, decides questions of procedure and discovery. [Citations.]
It is also up to the arbitrator, and not the court, to grant relief for delay in bringing an
arbitration to a resolution." (Ibid.) In Optimal Markets, the court's jurisdiction did not
include awarding sanctions for bad conduct that occurred during the arbitration.
(Optimal Markets, supra, at p. 924.)
B. Analysis
Here, the probate court was authorized to implement the settlement agreement by
appointing the arbitrator, and the court was not required to accept Douglas's vague
challenges to the appointment, at those ex parte proceedings. Douglas then filed his
May 1, 2012 rescission petition to object to the arbitrator's appointment (for lack of
proper disclosures under AAA rules). The disclosure objections were again discussed at
the hearing on the petition, and were again found to be made without any justification.
In Douglas's June 8, 2012 renewed motion to vacate, he continued to argue he was
entitled to unilaterally rescind the agreement for lack of receipt of a check under the
settlement terms. He also stated he no longer wanted to be subject to a settlement
agreement that provided he could not appeal or obtain a trial de novo on the arbitration
decision. The probate court could properly consider those items to be "buyer's remorse,"
not new facts, and thus to be inappropriate subjects for reconsideration of the
25 appointment under section 1008, the basis of the June 8, 2012 renewed motion to vacate.
In turn, that conclusion supported the sanctions award under section 128.7.
Douglas alternatively argues that the probate court could not, as a matter of law in
awarding sanctions, rely upon activity in a different tribunal or court (i.e., his appellate
filings, as opposed to his probate filings). He cites to Optimal Markets, supra, 221
Cal.App.4th 912, which is distinguishable as dealing with a separate arbitral forum, not
with two phases of civil court proceedings, as here. In any case, even if we disregard
Douglas's unsuccessful, dismissed previous appeal, the facts remain that the arbitrator
was properly appointed and was given the authority to resolve the disputes about the
settlement agreement that had occurred up until the time of the hearing. Douglas raised
no meritorious "reconsideration" argument in his petition or motion for relief regarding
the appointment, nor about his release claims. He did not show that the settlement
agreement failed to support the appointment of the arbitrator, nor that there was any
excessive scope of submission of issues. Under an objective standard, sanctions were
properly imposed for his continued pursuit in court of the rescission-related arguments.
(Id. at pp. 921-922.)
Even assuming section 128.7 imposes "a lower threshold for sanctions," i.e., solely
a finding that the conduct was "objectively unreasonable," there is still a discretionary
element to the award, which the court "may" make. (§ 128.7, subd. (c); Guillemin v.
Stein, supra, 104 Cal.App.4th 156, 167.) The probate court could well conclude that
Douglas's renewed motion was presented primarily for an improper purpose, at least for
26 causing unnecessary delay or needless increase in the cost of litigation, due to its lack of
well-founded claims or contentions under existing law. (Ibid.) Section 128.7,
subdivision (d) allowed the court to impose monetary sanctions "sufficient to deter
repetition of this conduct or comparable conduct by others similarly situated," including
"reasonable attorney's fees and other expenses incurred as a direct result of the violation."
The court had a sufficient basis for the award and gave an adequate explanation for the
ruling, and we affirm it. (§ 128.7, subd. (e).)
V
MOTION FOR SANCTIONS ON APPEAL
In light of the above conclusions, that the record supports the orders and judgment
and that no legitimate bases for challenging them have been raised, we consider Martin's
request that this court impose additional monetary sanctions on Douglas. In his motion
filed April 17, 2014, he argues that this appeal was meritless and he seeks $49,918.84 in
attorney fees and costs. (Cal. Rules of Court, rule 8.276(a).) Douglas's opposition to the
motion has been received and considered.
Martin further gave notice that an order might issue, to compensate this court for
its own costs of processing a frivolous appeal. (Kleveland v. Siegel & Wolensky, LLP
(2013) 215 Cal.App.4th 534, 560; Pierotti v. Torian (2000) 81 Cal.App.4th 17, 35-36
(Pierotti).) At this stage of the proceedings, we decline to make such a court
reimbursement order.
27 A. Authority
A reviewing court "may add to the costs on appeal such damages as may be just"
when that court determines that an appeal "was frivolous or taken solely for delay."
(§ 907.) Standards for evaluating whether an appeal is frivolous are set forth in In re
Marriage of Flaherty (1982) 31 Cal.3d 637, 650 (Flaherty), including both an objective
and a subjective standard. An appeal is frivolous "when it is prosecuted for an improper
motive--to harass the respondent or delay the effect of an adverse judgment--or when it
indisputably has no merit--when any reasonable attorney would agree that the appeal is
totally and completely without merit." (Ibid.)
"The subjective standard looks to the motives of the appealing party and his or her
attorney, while the objective standard looks at the merits of the appeal from a reasonable
person's perspective. [Citation.] Whether the party or attorney acted in an honest belief
there were grounds for appeal makes no difference if any reasonable person would agree
the grounds for appeal were totally and completely devoid of merit." (Cox v. County of
San Diego (1991) 233 Cal.App.3d 300, 313.)
The subjective and objective standards may be considered together, in evaluating
any substantive lack of merit of the legal positions taken by the appellant. (Millennium
Corporate Solutions v. Peckinpaugh (2005) 126 Cal.App.4th 352, 360, fn. 5.) Sanctions
should be sparingly used to "deter only the most egregious conduct." (Flaherty, supra,
31 Cal.3d at p. 651.) If an appeal merely lacks merit, that determination alone will not
28 establish that it is frivolous in nature. (See Dodge, Warren & Peters Ins. Services, Inc. v.
Riley (2003) 105 Cal.App.4th 1414, 1422.)
"We impose a penalty for a frivolous appeal for two basic reasons: to discourage
further frivolous appeals, and to compensate for the loss that results from the delay."
(Pierotti, supra, 81 Cal.App.4th 17, 33; Flaherty, supra, 31 Cal.3d at p. 651.) The courts
may consider the cost of attorney fees on appeal, "the degree of objective frivolousness
and delay; and the need for discouragement of like conduct in the future." (Pierotti,
supra, at pp. 33-34.)
B. Analysis of Record
Martin seeks compensation for the attorney fees he, as trustee, has incurred in
responding to this meritless appeal. He complains that he was required to respond to
Douglas's rescission argument based on nonperformance, until Douglas withdrew it in his
reply brief at least "for purposes of this appeal only." Martin assumes that the arbitrator
had some kind of probate court-related equitable power to allocate expenses, whether or
not the settlement agreement conferred it, but he did not fully discuss the authorities in
that respect. Martin mainly relies on the saga of the arbitration, disqualifications, prior
appeal, and the rest of the alleged "harassment" by Douglas.
In opposition, Douglas takes the position that the "settled litigation went into a
tailspin when Martin suddenly assessed Douglas's fees incurred before the effective date
of the settlement agreement. By Martin's unilateral dictum, a major benefit of the
settlement agreement to Douglas vanished." Douglas continues to assert that he
29 legitimately raised arguments about the interpretation of the settlement agreement, and
such arguments were subject to de novo review on appeal regarding the legal limitations
upon the arbitrator's powers, as defined by the agreement. Douglas points out that the
probate court's tentative ruling originally agreed with his position.
In applying the above standards, we are not satisfied that any reasonable person
must agree that all of Douglas's grounds for appeal "were totally and completely devoid
of merit." (Cox v. County of San Diego, supra, 233 Cal.App.3d 300, 313.) Douglas
presented at least some colorable, although unsuccessful, claims for relief. He did not
fail to present an adequate appellate record, nor attempt to impugn the opposing party's
character without any factual support in the record. (See, e.g., Pierotti, supra,
81 Cal.App.4th at p. 32 & fn. 9.) Neither party, however, completely explained the effect
of the probate court's order for further arbitration on Douglas's remaining rescission
issues, if any.
It is most regrettable that the arbitration and probate court proceedings, together
with the process of appellate review, have consumed so much time and money.
However, the issues presented on appeal are complex enough in nature to have required
some degree of diligent analysis for resolution. For these reasons, we deny Martin's
request for sanctions. However, since Martin has prevailed, Douglas shall bear Martin's
ordinary appellate costs in this appeal, and consistent with the prior orders, they shall be
chargeable to his share of the trust estate.
30 DISPOSITION
The judgment and orders are affirmed. The denial of the motion to dismiss the
appeal is confirmed. The motion for sanctions on appeal is denied, with the exception
that Douglas shall bear Martin's ordinary appellate costs in this appeal, and consistent
with the prior orders, they shall be chargeable to Douglas's share of the trust estate.
HUFFMAN, Acting P. J.
WE CONCUR:
McINTYRE, J.
AARON, J.