IN RE ESTATE OF GOLDSTEIN No. A126507.
Estate of BURTON J. GOLDSTEIN, Deceased. JOHN J. DACEY, Petitioner and Respondent, v. WILLIAM TARADAY, individually and as Administrator, etc. Objector and Appellant, DAVID COLLINS et al., Claimants and Respondents.
Court of Appeals of California, First District, Division Two.
Filed January 12, 2011.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
John J. Dacey and Burton J. Goldstein, who is now deceased, were partners at the law firm Goldstein, Barceloux & Goldstein (GB&G). GB&G had been handling a number of inverse condemnation cases against the State of California (the flood cases) since 1986. When GB&G dissolved in 1990, Goldstein took the flood cases with him and entered into an agreement with Dacey and Jeffrey Baruh, another former partner of GB&G, regarding their respective interests in any future recovery in the flood cases. David Collins worked on the flood cases when an associate with GB&G and he continued working on them after GB&G dissolved while working as an associate at Goldstein's new firm. He also continued to work on the flood cases after leaving Goldstein's new firm and after Goldstein died.
The flood cases finally settled in 2004, after Goldstein had died. There was a large attorney fee recovery (the fee recovery). Numerous attorneys claimed they were entitled to a portion of the fee recovery.
William Taraday (Taraday or the administrator) is the administrator of the estate and, once the flood cases settled, he hired the law firm of Downey Brand LLP (Downey Brand) to represent the estate. After the estate received a significant portion of the recovery, the estate made several payments to various attorneys, including Collins. The administrator told Dacey and Baruh that they were not entitled to any portion of the fee recovery and asserted that their claims were time barred under Code of Civil Procedure section 366.2. Dacey and Baruh filed a complaint in the civil court against the estate, Taraday, and others. They also filed petitions in the probate court. Baruh settled with the estate, but Taraday's civil action proceeded to a bench trial. The appeals from the judgment in Dacey's civil action are now pending in this court.
After the judgment in the civil action, Taraday requested the probate court to authorize him to pay the estate's remaining debt of $27,000 to Collins. Taraday also filed a petition for authority to pay the law firm of Downey Brand $683,876.02 for extraordinary attorney fees connected to the estate's involvement in litigation involving Dacey and associated with a separate interpleader action. The court granted both requests, and Dacey appeals from both of these orders.
Dacey contends that the amounts awarded to both Collins and Downey Brand are inflated. Additionally, with regard to the order concerning payment of $27,000 to Collins, Dacey maintains that the estate may have insufficient funds to pay his claim against the estate and therefore the lower court improperly authorized payment to Collins and essentially gave him a priority claim. In addition to claiming the evidence in the record was insufficient to support the amount of fees claimed by Downey Brand, Dacey asserts that a prior order denying fees to Downey Brand was binding and the court violated the doctrine of res judicata by authorizing the payment of fees to Downey Brand. Finally, Dacey maintains that, alternatively, the court should not have authorized payment to either Collins or Downey Brand without first granting Dacey's request to conduct further discovery.
We are not persuaded by Dacey's arguments and affirm the probate orders.
Goldstein was a partner at GB&G until the firm dissolved in 1990. At that time, he formed his new law firm Goldstein & Goldstein. Dacey and Baruh were partners at GB&G, and Collins became an associate at GB&G in January 1986. After GB&G dissolved, Collins went to work for Goldstein & Goldstein.
Goldstein died in 2001. In January 2002, the probate court appointed Taraday, Goldstein's son-in-law, as administrator of the estate with will annexed, with full authority to act without court supervision under the Independent Administration of Estates Act. Downey Brand provided legal services to Taraday and the estate in litigation involving Dacey and Baruh, and in an interpleader action.
The Flood Cases
In 1986, the law firm of Desmond, Nolan, Livaich & Cunningham (Desmond) associated with Goldstein and his firm of GB&G to represent approximately 1,350 clients in the flood cases, which involved actions for inverse condemnation and tort damages resulting from flooding caused by a break in the Yuba River Levee. A letter agreement in 1986 provided for Desmond and GB&G to share equally in any fee recovery after payment of other attorneys.
GB&G dissolved on April 30, 1990. The partners of GB&G agreed that Goldstein, through his new firm Goldstein & Goldstein, would assume all responsibility for the representation and cost of the flood cases. The GB&G dissolution agreement provided that 70.73 percent of the attorney fees for the flood cases would go to Goldstein and 29.27 percent would go to Dacey and Baruh. It stated that Goldstein could assign a portion of his "individual percentag[e] to other attorneys who participated in the litigation." It also expressly bound its signatories' estates and heirs. Consistent with the agreement, neither Dacey nor Baruh performed any legal services or contributed any costs toward the prosecution of the flood cases after the dissolution of GB&G.
Goldstein continued prosecuting the flood cases as co-counsel with Desmond. In April 1991, Goldstein hired Collins as an associate of Goldstein & Goldstein to work on the flood cases, and the attorneys and their wives signed an agreement (the 1991 agreement). Under the 1991 agreement, Goldstein agreed to pay Collins 20 percent of his 70.73 percent share of the attorney fees for the flood cases. Collins agreed to remain employed by Goldstein & Goldstein until at least December 31, 1991, and "to render legal services and use [his] best efforts in all phases and trial and appellate work in the [flood cases] as reasonably necessary to the completion thereof, including but not limited to legal research and writing, working with potential witnesses, participation in depositions and trials, and any other necessary services in the processing of the [flood cases] to conclusion . . . ." The 1991 agreement entitled Collins to receive his percentage in the flood cases even if Goldstein died, Collins's employment was terminated, Goldstein left voluntarily after December 31, 1991, or Goldstein & Goldstein ceased operations. The agreement expressly bound its signatories' estates and heirs.
The litigation in the flood cases "was protracted and bitterly fought." (Paterno v. State of California (1999) 74 Cal.App.4th 68, 76 (Paterno I).) The matter proceeded to a trial and the plaintiffs lost on some theories, but won on an inverse condemnation (takings) theory. (Id. at p. 75.) In 1999, the Court of Appeal affirmed the defense jury verdict finding no dangerous condition of public property, reversed the inverse condemnation liability verdict in favor of the plaintiffs, and remanded for another trial on inverse liability. (Id. at pp. 75-76.)
Goldstein's involvement in the cases caused him significant financial detriment, including the loss of his primary residence. Collins left Goldstein & Goldstein in December 1995, but continued to work on the flood cases. According to Collins, in 1999 and/or 2000, Goldstein orally agreed to raise Collins's compensation from 20 to 30 percent in the flood cases because the difficulty and duration of the flood cases far exceeded what the parties contemplated in 1991. For similar reasons, Goldstein requested that his former partners Dacey and Baruh agree to reduce their share of the fee recovery. After Dacey and Baruh rejected Goldstein's request that they lower their interest in the fee recovery, Goldstein denied offering to raise Collins's percentage. Collins reserved his right to enforce the oral modification if the flood cases were won. In the fall of 2000, Goldstein became physically and financially unable to participate personally in the prosecution of the flood cases.
Dacey was aware of Goldstein's inability to participate in the litigation of the flood cases, and was aware that the cases were scheduled for retrial in early 2001. After Goldstein died in January 2001, Dacey did not contact any attorney to offer assistance. On March 13, 2002, Collins filed a creditor's claim in the probate court. The creditor's claim stated, "By oral agreement in June 2000, Mr. Goldstein agreed to raise my percentage to 30 percent of his share, in light of additional work that I had performed and the continuation of the litigation far longer than either of us originally anticipated."
The flood cases were retried in 2001, and Collins continued to act as co-counsel. After a four-month court trial, there was a judgment for the defendants. The plaintiffs appealed, and Collins was lead appellate counsel. The Court of Appeal in Paterno v. State of California (2003) 113 Cal.App.4th 998 (Paterno II) reversed the judgment as to the State of California and remanded with directions to the lower court to enter judgment for the plaintiffs and conduct any further necessary proceedings. A settlement followed in the spring of 2004, which resulted in a substantial fee recovery. According to Dacey, the settlement generated, after payment of other attorneys, a fee of over $64 million. Upon learning of the settlement, Taraday hired the law firm of Downey Brand.
After the flood cases had settled, the Desmond firm disputed the estate's claim of an equal 50 percent attorney fees share under the 1986 agreement. The Desmond firm asserted that GB&G, Goldstein & Goldstein, and the estate had failed to meet their obligations under the 1986 agreement.
The estate executed a settlement with the Desmond firm in late July 2005. This settlement provided that the Desmond firm take 60 percent and the estate take 40 percent of the fee recovery for the flood cases and that $1 million of the fee recovery would be held back in a separate account until June 30, 2006, to cover various contingencies and it would thereafter be paid out. According to Taraday, the estate received $12,117,986.88.
On July 13, 2005, the estate and Collins memorialized their earlier agreement regarding his share of the contingency fees (the 2005 agreement). This agreement stated that it expressly "supersed[ed] any oral agreement after April 1991 . . . relating to the subject matter addressed herein" and "modifie[d] and supersed[d] the April 1991 Letter Agreement with respect to the Collins' share of attorney fees[.]" The 2005 agreement provided, "[u]nder this agreement, Collins is entitled to thirty percent (30%) of the contingent attorneys fees payable to the estate [after certain deductions]." The agreement provided, "This letter constitutes the agreement between [Collins] and the estate . . . with respect to defining Collins's claim to a percentage of [the contingency fees]."
On October 3 and November 17, 2005, Collins received initial attorney fee payments totaling about $5.1 million pursuant to the 2005 agreement. On October 3, 2005, Collins and Taraday executed an agreement and acknowledgment of substantial satisfaction of the 2005 agreement. This new agreement stated there could be an additional payment to Collins associated with the $1 million held back by the Desmond firm for one year for legal contingencies pursuant to the agreement between the Desmond firm and the estate. On March 14, 2006, Collins filed a withdrawal of his creditor claim, stating that his claim had been "fully compromised and paid."
The Civil Case
In letters dated November 17, 2005, Taraday notified Dacey and Baruh of the fee recovery. The letters also stated that they would not receive any of the recovery because of their failure to file creditors' claims after Goldstein's death "within the one year required" by Code of Civil Procedure section 366.2.
In 2006, Dacey and Baruh filed a civil action in the Superior Court of the City and County of San Francisco (San Francisco court) against Taraday both as administrator and individually, later adding other individuals and the Desmond firm as defendants. The operative second amended complaint asserted claims against Taraday, as administrator, for breach of the dissolution agreement and for rescission. They also sued Taraday as an individual, the heirs, and Desmond for, among other torts, conversion. They sought punitive damages against Taraday individually.
Downey Brand was counsel for the defendants in the civil action. Prior to trial in the civil action, Baruh settled with the estate for $2.3 million, with the probate court's approval, and without objection by Dacey.
After a bench trial, the court entered judgment in favor of Desmond on March 20, 2009, and entered judgment in favor of all of the other individual defendants on June 30, 2009. Dacey prevailed against the estate only on his breach of contract claim. The court awarded Dacey $5.9 million (including 10 percent prejudgment interest) against the estate for breach of the GB&G dissolution agreement. Dacey appealed from both judgments and the estate filed a cross-appeal from the judgment entered in favor of Dacey's breach of contract claim.
Downey Brand also represented the estate in an interpleader action in the Superior Court of California, County of San Mateo (San Mateo court). During the litigation of the flood cases, Goldstein had retained attorney Frederick Jacobsen to work on the cases on Goldstein's behalf. In exchange for his work, Goldstein had agreed to give him a certain percentage of the fee recovery. As of December 13, 2005, the estate had set aside $2,575,505.02, as the amount owed to Jacobsen.
Nick Chapman alleged that he had a judgment against Jacobsen, and made a demand upon the estate to obtain the portion of the fee recovery owed to Jacobsen. Jacobsen advised the estate that he believed the judgment obtained by Chapman was improper and that he intended to move to set aside and/or vacate Chapman's judgment.
On December 15, 2005, the estate, through its counsel, Downey Brand, filed its complaint in interpleader against Jacobsen and Chapman in the San Mateo court, and deposited $2,575,505.02 with the clerk of the court. On July 3, 2006, the San Mateo court awarded the estate $9,347.50 in reimbursement for the attorney fees incurred by the estate in connection with the interpleader action.
In 2006, Dacey and Baruh filed in the San Francisco court petitions under Probate Code section 850
On April 21, 2006, Taraday petitioned for approval of his verified first report and account (first report). The first report recited the amounts of the 2005 attorney fee payments made to Collins, which were charged half to the estate and half to the community property interest of Goldstein's wife. Dacey filed objections to the first report. The report was taken off calendar when Taraday and Dacey agreed to stay the petitions "pending the civil actions."
On February 22, 2008, the estate filed the administrator's second petition for approval of the report and account, petition for authorization to pay costs of administration, and petition for declaratory relief. This report reiterated the first report's disclosure that attorney fees had been paid to Collins. On this same date, the administrator also filed a petition under sections 10501, 10553, 10811, and 10832 for authorization to pay extraordinary attorney fees. Dacey filed objections and incorporated his 2006 objections to the first report. Dacey urged the court to delay its decision until after the bench trial on his breach of contract, rescission, and tort claims against the estate and other individuals. He declared that he alone was entitled to all of the funds in the estate's accounts.
At the hearing on April 15, 2008, Dacey again entreated the court to wait until after resolution of his civil action. Counsel for Dacey argued: "Now here we are with less than a month of that trial, and what is the rush to have the matter of the nature of the Yuba Levee field recovery that we have stayed. . . . What's the rush to have this court ma[k]e a determination?" After counsel for Dacey argued the merits extensively, the court interrupted and asked: "You say the trial is [in] six weeks?" Counsel responded, "Yes, less than that."
On May 30, 2008, the court denied the administrator's second report and account without any explanation. On this same date, it also denied without explanation the petition for authorization to pay extraordinary attorney fees.
Following the bench trial and judgment in Dacey's civil action, the estate petitioned the court for authorization to pay its attorneys. On June 9, 2009, it submitted its verified petition for authorization to pay attorney fees for extraordinary services and costs of administration. With regard to the request for extraordinary fees to Downey Brand, the petition described how the estate had prevailed on all of Dacey's claims except his breach of contract cause of action. The petition apprised the court that Dacey had sought as much as $17,000,000 from the estate, but the judgment was for $4,330,708.64 plus pre-judgment interest.
On July 10, 2009, the administrator petitioned for approval of his verified third report and account (third report), which renewed his previous requests for approval of the first and second reports. Under the heading, "Payment of Expenses of Administration," Taraday alleged, "The estate has an outstanding obligation due to David Collins, one of the attorneys who worked on the [flood cases], in the amount of $27,000," and cited to the 2005 agreement.
Dacey filed objections to the administrator's third report.
The court held a hearing on September 8, 2009. At the hearing, the court granted the administrator's request to authorize payment of $27,000 to Collins. The court took the administrator's request to pay extraordinary fees under submission.
One month later, on October 8, 2009, the court filed its order authorizing the administrator to pay $683,876.02 to Downey Brand, for fees and costs incurred from January 1, 2006, through December 31, 2008, related to legal services in defending the administrator of the estate against the claims made by Dacey and Baruh in the probate and civil actions. The court also authorized Taraday to pay $9,347.50 to Downey Brand "for fees previously approved by the San Mateo Superior Court as set forth in its order of July 3, 2006" in the interpleader action. Thus, the court authorized and instructed Taraday to pay Downey Brand a total of $693,223.52.
Dacey filed timely notices of appeal from the two probate orders.
The Order Authorizing Payment of $27,000 to Collins
A. Standard of Review
Dacey contends the facts are undisputed and that we should review the probate court's order authorizing Taraday to pay Collins $27,000 under the de novo standard of review. Collins responds that the probate court is vested with broad discretion in approving costs of administration, and we review the probate court's ruling using the abuse of discretion standard. (Estate of Fraysher (1956) 47 Cal.2d 131, 136.)
Where the question is the legal effect of written documents or statutes, we conduct an independent review, and are not bound by the trial court's interpretation. (See, e.g., Estate of Powell (2000) 83 Cal.App.4th 1434, 1439-1440.) However, "[a] judgment or order of the trial court is presumed to be correct. . . . [Citation.] It is the appellant's burden to affirmatively demonstrate error." (In re Marriage of Gray (2002) 103 Cal.App.4th 974, 977-978; Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Where the trial court makes a decision in the exercise of its discretion, we apply the abuse of discretion standard on review. "In passing upon the reasonableness and necessity of expenditures during administration, the court below is vested `with a broad discretion,' which will not be disturbed on appeal except when abused." (Estate of Fraysher, supra, 47 Cal.2d at p. 136.)
B. Discretion to Order Payment to Collins
Dacey contends that the probate order improperly granted priority to Collins's debt over his claims against the estate. He maintains that he has appealed the court's denial of his tort and rescission claims in his civil action against the estate and, on appeal, he may be successful; thus, his claim against the estate may be significantly greater than the judgment. He maintains that the estate may not have sufficient funds to pay his claim and, if he prevails on appeal, there may be a determination that all of the estate's property belongs to him. He argues that Collins, an unsecured creditor, has no right to full payment if Dacey cannot receive his full payment on the judgment in the civil action. He declares that the probate court could not authorize any payment to Collins while his claims against the estate were still pending on appeal.
The Pertinent Law on the Priority and Payment of Debts
With regard to payment of the estate's debts, the Probate Code provides that a personal representative may settle and pay claims against the estate without prior court authorization. (§ 10552.) The personal representative "is not required to pay a debt until payment has been ordered by the court." (§ 11422, subd. (a).) Section 11422, subdivision (b) states: "On the settlement of any account of the personal representative after the expiration of four months after the date letters are first issued to a general personal representative, the court shall order payment of debts, as the circumstances of the estate permit. If property in the estate is insufficient to pay all of the debts, the order shall specify the amount to be paid to each creditor."
The Probate Code also sets forth the priority to be given to debts of the estate. Section 11420, subdivision (a) provides as follows: "Debts shall be paid in the following order of priority among classes of debts, except that debts owed to the United States or to this state that have preference under the laws of the United States or of this state shall be given the preference required by such laws: [¶] (1) Expenses of administration. With respect to obligations secured by mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, only those expenses of administration incurred that are reasonably related to the administration of that property by which obligations are secured shall be given priority over these obligations. [¶] (2) Obligations secured by a mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, in the order of their priority, so far as they may be paid out of the proceeds of the property subject to the lien. If the proceeds are insufficient, the part of the obligation remaining unsatisfied shall be classed with general debts. [¶] (3) Funeral expenses. [¶] (4) Expenses of last illness. [¶] (5) Family allowance. [¶] (6) Wage claims. [¶] (7) General debts, including judgments not secured by a lien and all other debts not included in a prior class."
Thus, under section 11420, subdivision (a), expenses of administration have the highest priority and general debts have the lowest priority. Section 11420, subdivision (b) reads: "Except as otherwise provided by statute, the debts of each class are without preference or priority one over another. No debt of any class may be paid until all those of prior classes are paid in full. If property in the estate is insufficient to pay all debts of any class in full, each debt in that class shall be paid a proportionate share."
Collins and Taraday maintain that the debt to Collins had a higher priority than Dacey's claim against the estate. They contend that Dacey has a disputed general debt, and a general debt has the lowest priority. In contrast, they claim that the debt to Collins was a debt of administration, which has a higher priority over a general debt. Collins also devotes a significant portion of his brief to setting forth the reasons he believes Dacey lacks standing to object to the estate's payment to him.
Collins and Taraday also assert that Dacey offers little or no analysis or argument to support his assertion that both Collins and Dacey are general creditors. Consequently, they maintain that Dacey has forfeited making such an argument on appeal. "`[A]n appellate brief "should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration."'" (Mansell v. Board of Administration (1994) 30 Cal.App.4th 539, 545.) "An appellate court is not required to examine undeveloped claims, nor to make arguments for parties." (Paterno I, supra, 74 Cal.App.4th at p. 106.)
Although we agree that Dacey's brief has serious shortcomings, we consider the merits of his appeal. We, however, need not reach the argument of Collins and Taraday that Collins's debt is of administration and not a general debt or Collins's contention that Dacey lacks standing to challenge the estate's payment to him. As explained below, we conclude that, even if we presume that Dacey has standing and that Collins's debt was a general debt rather than a debt of administration, the probate court properly authorized Taraday to pay Collins the amount owed.
The Effect of Dacey's Disputed Claim
Dacey contends that the probate court could not authorize any payment to Collins because the total amount of Dacey's claims against the estate could exceed the amount of property in the estate. He claims that the probate court's order was error on its face because the court did not specify the amount to be paid to each creditor.
Dacey does not distinguish between a disputed claim against the estate, which he has, and an established debt of the estate, which Collins had. The Probate Code defines a debt as a "claim that is established under Part 4 (commencing with Section 9000) or that is otherwise payable in the course of administration." (§ 11401, subd. (a).) Under section 9300, "all money judgments [except as provided in Section 9303] against the decedent or against the personal representative on a claim against the decedent or estate are payable in the course of administration and are not enforceable against property in the state of the decedent under the Enforcement of Judgments law . . . ." A money judgment conclusively establishes the validity of a person's claim against a personal representative or the estate only when it becomes final. (§ 9301.) Accordingly, Dacey's claim that has not resulted in a final judgment has no priority under the law and, at this point in time, he is not a perfected creditor.
Here, the probate court brought the administration of the estate under court supervision. Section 9611, subdivision (a) provides: "In all cases where no other procedure is provided by statute, upon petition of the personal representative, the court may authorize and instruct the personal representative, or approve and confirm the acts of the personal representative, in the administration, management, investment, disposition, care, protection, operation, or preservation of the estate, or the incurring or payment of costs, fees, or expenses in connection therewith. . . ."
Dacey's disputed claim against the estate did not deprive the probate court of its discretion to order payment of the estate's debt of $27,000 to Collins. The court has the discretion not to distribute funds while a claim is pending, and the probate court initially did this when it issued the 2006 freeze order. The 2006 freeze order provided that the estate funds could "not be distributed, released, or otherwise transferred," except as the court might "deem appropriate" on petition for authorization. Sections 11460 through 11467 concern disputed or contingent debts. Section 11461 provides that "[w]hen all other debts have been paid . . ., the court may make or modify an order or a combination of orders . . . that the court in its discretion determines is appropriate to provide adequately for a debt that is contingent, disputed, or not due, if the debt becomes absolute, established, or due. . . ."
Thus, under the Probate Code, the court may pay established debts while disputed claims are pending; any decision whether to make provision for disputed claims is within the probate court's discretion. As Taraday points out, other provisions of the Probate Code bolster these principles. (See, e.g., §§ 11004 [payment of expenses of administration by personal representative without court approval]; 10552 [payment of claims against the estate]; 10900 [personal representatives' periodic reports to court are to include a statement of debts paid, debts not paid, and unresolved claims]; & 11420.)
The court's discretion is not completely unfettered and, as stated above, section 11420, subdivision (b) provides that in those situations where the "property in the estate is insufficient to pay all debts of any class in full, each debt in that class shall be paid a proportionate share." Similarly, section 11422, subdivision (b) limits interim payments to creditors, and it provides: "On the settlement of any account of the personal representative after the expiration of four months after the date letters are first issued to a general personal representative, the court shall order payment of debts, as the circumstances of the estate permit. If property in the estate is insufficient to pay all of the debts, the order shall specify the amount to be paid to each creditor."
Dacey contends the court was required to allocate the unclaimed funds among all unsecured creditors and that Collins had no right to full payment because, if Dacey prevails on his appeal in the civil action, the estate may not have sufficient property to cover all of the debts. Further, if he succeeds in reversing the lower court's denial of his rescission claim, the fee recovery, according to Dacey, belongs to him and not the estate and Collins might have no right to receive any part of the fee recovery.
Dacey cites no authority requiring a court to refrain from authorizing the administrator to pay the estate's existing debts until after all disputed claims against the estate are resolved.
Additionally, Dacey has completely failed to establish that the estate has insufficient property to pay all debts. Dacey does not even argue the issue of insufficient funds in his "analysis" section of his brief in this court. Rather, Dacey's discussion of the amount of property in the estate is set forth only in the portion of Dacey's brief entitled, "Factual and Procedural Background." Thus, Dacey once again has ignored the California Rules of Court and has failed to support each point in his brief with argument or citation to authority. (See Cal. Rules of Court, rule 8.204(a)(1)(B).)
In the facts section of his brief, Dacey states that the estate received $24 million for the fee recovery. He notes that, after paying various debts and settling claims, the administrator filed a declaration on August 10, 2009, proclaiming that the estate's balance was $7,302,289.32. Dacey cites to subsequent orders authorizing the administrator to make other payments, and Dacey concludes that the balance remaining is "a bit over $7.0 million." Dacey also reports that there are other disputed claims against the estate. Dacey concludes: "In sum, insufficient unclaimed funds remain in Estate Accounts to pay the principal amount of the existing Judgment against the estate, much less postjudgment interest that has accrued since the June 30, 2009 entry of Judgment, much less the increased amounts to which Dacey will be entitled if he prevails on the Consolidated Appeals. Even if none of the disputed or unliquidated claims are allowed, depending on the duration of the Consolidated Appeals, insufficient funds may remain in the Estate Accounts to pay the extant Judgment against the Estate and postjudgment interest."
These statements in the factual portion of Dacey's brief do not establish that the estate has insufficient funds. At best, his argument is that the estate "may" have insufficient funds to pay all debts. Further, as Taraday points out, Dacey ignores other potential funds the estate may have. If Dacey prevails on appeal, even Dacey acknowledges that the estate will recover millions of dollars of income taxes.
Accordingly, we conclude that the probate court has the discretion to approve payments of established debts even when there are other disputed claims against the estate and there is a possibility that the estate may have insufficient property to cover all of the disputed claims against the estate. Moreover, in the present case, Dacey has failed to establish that the estate has insufficient funds to pay his disputed claim.
C. Dacey's Right To Receive a Part of the Fee Recovery
Dacey contends that the court's order must be reversed because he may prevail on his civil claim that the fee recovery does not belong to the estate and it is incorrect for the court to pay debts from assets held by, but not belonging to, the estate. Dacey cites many cases that set forth the unremarkable principle that it is improper to pay an estate's debts from assets that are held, but not owned, by the estate. (E.g., Cramer v. Biddison (1968) 257 Cal.App.2d 720.) He cites no authority to support his assertion that the court cannot pay debts from the assets of the estate simply because someone claims the assets do not belong to the estate.
This argument is essentially identical to the one above. As already discussed, the probate court is not barred from authorizing a payment from the estate simply because a disputed claim against the estate exists. Indeed, as Taraday points out, the language in one of the cases cited by Dacey, Cramer v. Biddison, supra, 257 Cal.App.2d 720, contradicts Dacey's argument. In Cramer, the trial court had sustained a general demurrer to a complaint brought by a former wife against the decedent's executors. (Id. at p. 723.) The former wife's claim for insurance proceeds was based on a divorce judgment awarding a right to such proceeds. (Ibid.) The former wife claimed that the decedent's executors had used the insurance proceeds to pay the debts and expenses of administration of the estate, leaving a sum in the estate that was less than her claim against the estate. (Id. at p. 726.) The appellate court pointed out that an administrator must maintain the right of the estate to property held in trust "`until it has been finally judicially determined that it is not the property of the estate.'" (Id. at pp. 726-727.) The court admonished, "Unfounded claims of trust between the decedent and the claimant cannot be allowed to disrupt the administration of an estate." (Id. at p. 727.)
Here, Dacey's claim that the fee recovery does not belong to the estate was rejected by the court after a trial and the issue is now pending on appeal. He cannot use this speculative claim to disrupt the administration of the estate and the payment of established debts.
D. The Amount of Collins's Claim
The Application of Section 366.2 of the Code of Civil Procedure
Dacey maintains that Goldstein repudiated the agreement to pay Collins 30 percent, which constituted an anticipatory breach of contract and, consequently, Collins had a duty to file a creditor's claim within one year of Goldstein's death under Code of Civil Procedure section 366.2.
Code of Civil Procedure section 366.2, subdivision (a) provides the following: "If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply."
Both Taraday and Collins respond that Dacey waived raising this issue on appeal, because the issue was not properly raised in the lower court. Dacey did not argue statute of limitations at the hearing on the administrator's petition and he mentioned the statute in one sentence on one page in his 63-page objections to the administrator's petition that he filed on August 20, 2009. This one sentence was buried in the two pages of discussion under the heading, "No Further Approval of Payments to Creditors Should Be Made Until the Need for Apportionment Among Holders of Debt of the Same Class is Ascertained and In Light of Questions Over the Propriety of Unauthorized Payments to Date, Including to Creditor David Collins and Creditor Frederick Jacobsen/Nick Chapman (responding to Declaratory Relief Petitions and requests for approval of Reports and Accounts)." Dacey objected to the payment to Collins for various reasons and included the following: "There are other issues that bear on Mr. Collins' creditor's claim. For present purposes, it suffices that Mr. Collins' claim merits no priority over Dacey's claim and the request for further payment to Mr. Collins must be denied. Dacey therefore denies Declaratory Relief Petition, [¶] 17. In light of the Administrator's repeatedly rejected [Code of Civil Procedure section] 366.2 defense, ironically he seeks further payment to Mr. Collins though Mr. Collins has filed a withdrawal of his creditor's claim." As both Taraday and Collins point out, this sentence did not assert that a time bar existed and did not ask the probate court to deny payment to Collins on this basis.
In his reply brief in this court, Dacey does not dispute that his sole reference to Code of Civil Procedure 366.2 section was the one sentence in his 63-page objections. However, he insists that even if he has presented a new theory on appeal, questions of law can be decided for the first time on appeal. He maintains that the facts in this case are not in dispute and the application of the Code of Civil Procedure section 366.2 is therefore a question of law.
Dacey ignores the general rule that the defense of the statute of limitations must be affirmatively invoked in the lower court or it is waived. (See Neptune Society Corp. v. Longanecker (1987) 194 Cal.App.3d 1233, 1243.) Dacey's objections did not raise the statute of limitations under Code of Civil Procedure section 366.2 as a bar to Collins's claim. Rather, he simply mentioned that the statute has been raised as a defense repeatedly by the administrator. He has therefore waived arguing that the statute of limitations prevents the court from paying the estate's debt to Collins. Moreover, we note that, under appropriate circumstances, the doctrine of equitable estoppel may be applied to forestall the operation of Code of Civil Procedure section 366.2. (Battuello v. Battuello (1998) 64 Cal.App.4th 842, 848, superseded by statute on another issue.) The determination of whether equitable estoppel applies "is a factual question entrusted to the trial court's discretion." (Cuadros v. Superior Court (1992) 6 Cal.App.4th 671, 675.) Thus, Dacey is incorrect in his assertion that this issue presents a question of law and the record establishes that the court never heard or considered the facts related to an equitable defense.
We express no opinion as to whether Code of Civil Procedure section 366.2 applies to the present case or, if it does apply, whether the doctrine of equitable estoppel applies. Dacey failed to argue in the lower court that it should not authorize payment to Collins based on the running of the statute of limitations, and has forfeited raising for the first time on appeal the application of Code of Civil Procedure section 366.2.
Consideration and the 2005 Agreement
Dacey contends that the 2005 agreement between Collins and the estate, which increased Collins's fee from 20 percent to 30 percent from the original 1991 agreement between Goldstein and Collins, was invalid because this oral modification was not supported with any new consideration from Collins. Other than argue in a conclusory fashion that there was no consideration, Dacey provides little support for his argument.
The 2005 agreement between Collins and the estate provided that it "modifie[d] and supersede[d] the April 1991 Letter Agreement with respect to Collins['s] percentage share of attorneys fees" and "any oral agreement after April 1991 . . . relating to [that] subject matter[.]" Thus the 2005 agreement provided that— no matter what Goldstein agreed to pay Collins—the administrator was willing to pay Collins 30 percent, because Collins participated in the litigation of the flood cases until the end even though he had no obligation to do so under the terms of his 1991 agreement.
The parties dispute whether the 2005 agreement was a new contract or a modification. This disagreement is of no consequence. No matter whether this 2005 agreement is characterized as a modification or a new agreement, the agreement was enforceable because there was new consideration.
Evidence Code section 622 provides, "The facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, or their successors in interest; but this rule does not apply to the recital of a consideration." Although the recital of consideration is not conclusive (Civ. Code, § 1614 ["A written instrument is presumptive evidence of a consideration"]), the party challenging the validity of the instrument has the burden of proof as to its invalidity, which may be established through extrinsic evidence establishing the absence of consideration. (Civ. Code, § 1615 ["The burden of showing a want of consideration sufficient to support an instrument lies with the party seeking to invalidate or avoid it"].) "If the presumption is wholly irreconcilable with the facts and surrounding circumstances, it has been overcome. The burden of showing lack of consideration rests upon the party seeking to avoid or invalidate the instrument. [Citation.] This may be accomplished through direct evidence or upon one or more circumstances." (Kott v. Hilton (1941) 45 Cal.App.2d 548, 552.)
Dacey claims the 2005 agreement lacked consideration, but the facts set forth in the 2005 agreement establish that there was consideration. The 2005 agreement required Collins to agree not to object to a compromise the estate had made with the Desmond law firm, which reduced the estate's share from 50 to 40 percent, and therefore reduced the amount owed Collins. The 2005 agreement also specified that Collins would not be able to recover any additional benefit if the estate were able to achieve a reduction in the percentage owed to Dacey and Baruh. Clearly, under the express terms of the agreement, the estate received consideration for increasing Collins's percentage of the fee recovery as Collins agreed to settle his claim and to forego claiming additional money should the estate recover a greater percentage of the fee recovery.
Dacey completely fails to meet his burden, as he cites to no evidence that shows an absence of consideration or that the 2005 agreement was a sham. Accordingly, the probate court did not abuse its discretion in authorizing the remaining $27,000 payment to Collins.
E. Denial of Leave to Conduct Discovery
Dacey contends that he was entitled to obtain leave to conduct discovery once he filed objections to Taraday's accounting. He stresses that the discovery procedures found in the Code of Civil Procedure "are available for use in probate proceedings." (Forthmann v. Boyer (2002) 97 Cal.App.4th 977, 987.)
Dacey does not address the standard of review we apply. The trial court's exercise of its discretion in ruling on requests to continue and extend discovery will not be disturbed in the absence of clear abuse appearing on the record. (Forthmann v. Boyer, supra, 97 Cal.App.4th at p. 984.) The complaining party has the burden on appeal of demonstrating from the record that an abuse of discretion has occurred. (Id. at p. 985.) Although courts have liberal policies with regard to discovery, there is also a strong policy of expeditious estate administration. (Collection Bureau of San Jose v. Rumsey, supra, 24 Cal.4th at p. 312.)
Dacey does not specify exactly what discovery he would conduct if permitted to conduct further discovery. In the lower court, on page 51 of his objections to Taraday's petition, Dacey wrote that he was requesting "the opportunity to conduct appropriate discovery" "[i]f the court is inclined to approve any of the petitions . . . ." In his opening brief in this court, he asserts: "The scope of Dacey's discovery would depend upon this court's decision. If this court neither bars Collins' entire claim under [Code of Civil Procedure section] 366.2 nor holds the alleged agreement to increase Collins' fee unenforceable for lack of consideration, then Dacey seeks to conduct discovery into Collins' claims of consideration. The Probate Court's ruling on Collins' claim without permitting Dacey to conduct discovery requires reversal of the Appealed Order."
Here, Dacey and Baruh filed their petitions in the probate court in 2006. Prior to that, in November 2005, Collins told Dacey that the estate had agreed to pay him 30 percent rather than 20 percent of his percentage as set forth in the 1991 agreement. On April 21, 2006, Taraday filed his first accounting, and this report stated that Collins was to receive 30 percent of the fee recovery. The probate court did not issue its ruling until September 8, 2009. Thus, Dacey had years to conduct discovery regarding payment of 30 percent of the estate's share of the fee recovery to Collins, and has provided no reason for his failure to conduct any relevant discovery. Indeed, Dacey took Collins's deposition in his civil action against the estate and others, and had ample opportunity to ask Collins any relevant questions.
Dacey has failed to meet his burden of establishing that the probate court abused its discretion in refusing Dacey's request for additional discovery regarding the authorization of payment to Collins.
F. Prior Payments to Collins
Collins argues that we should resolve an issue raised but not expressly decided below: the approval of Taraday's prior payments to him. He argues that we should decide this issue under the implied findings doctrine. (See Paterno II, supra, 113 Cal.App.4th at p. 1023.) Collins maintains that we should resolve this issue because Dacey has raised arguments in this appeal that are identical to the objections he has made to the estate's earlier payments to him, Dacey asserts in this appeal that the facts are undisputed, and Dacey has requested in this appeal that we dispose of Collins's entire claim and determine that Collins is entitled to nothing.
The orders from which Dacey appeals do not concern the prior payments of the estate to Collins and the question of prior payments is not properly before us. The record before us is completely inadequate to consider whether the facts and issues in the present appeal are the same as those underlying the prior payments to Collins.
The Payment of Extraordinary Fees to Downey Brand
On February 22, 2008, Taraday filed his petition requesting the court to authorize him to pay extraordinary attorney fees to Downey Brand. At the hearing, counsel for Dacey argued, among other things, that the probate court should postpone any ruling until after the trial of Dacey's claims against the estate in the civil action. The probate court's order on May 30, 2008, denied, without any elaboration, Taraday's petition for authorization to pay extraordinary attorney fees to Downey Brand.
Following the judgment on June 9, 2009, in the civil action, Taraday submitted a verified petition for authorization to pay attorney fees for extraordinary services and costs of administration. On October 8, 2009, the court filed its order authorizing the administrator to pay $683,876.02 to Downey Brand, for fees and costs incurred from January 1, 2006, through December 31, 2008, related to legal services in defending the administrator of the estate against the claims made by Dacey and Baruh in the probate and civil actions. The court also authorized Taraday to pay $9,347.50 to Downey Brand "for fees previously approved by the San Mateo Superior Court as set forth in its order of July 3, 2006." Thus, the court authorized and instructed Taraday to pay Downey Brand a total of $693,223.52.
Dacey claims that the court's subsequent order authorizing the payment of extraordinary attorney fees to Downey Brand was error because the earlier order on May 30, 2008, had res judicata effect. He also objects to the amount awarded. He contends that there was a double recovery, that the court should have apportioned the fees between those incurred by the estate and those associated with the individual defendants, and that the evidence did not support the fee award.
B. Standard of Review
The parties dispute the applicable standard of review. Resolution of the issues related to the payment of extraordinary fees to Downey Brand involves the application of several different standards of review.
Services that are not involved in the typical probate case, commonly known as "extraordinary services," may be paid out of the estate assets at the discretion of the probate court. (Estate of Hilton (1996) 44 Cal.App.4th 890, 894-895.) The grant or denial of such fees, as well as the amount awarded, is addressed to the sound discretion of the probate court. (§ 10811, subd. (a); Estate of Trynin (1989) 49 Cal.3d 868, 874; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096.) "If, under all the relevant circumstances, the amount awarded as ordinary compensation is fair and reasonable for all the attorney services, the court may disallow a request for extraordinary compensation even though some extraordinary services have been performed." (Estate of Trynin, supra, 49 Cal.3d at p. 874.)
One of Dacey's arguments is that Downey Brand was not entitled to attorney fees because the court's order of May 30, 2008, denying Taraday's petition for authorization to pay such fees barred the court from later awarding fees under the doctrine of res judicata. The question of a party's entitlement to attorney fees is a legal issue subject to de novo review. (Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175-1176.) "The burden of proving that the requirements for application of res judicata have been met is upon the party seeking to assert it as a bar or estoppel." (Vella v. Hudgins (1977) 20 Cal.3d 251, 257.) Where there are factual findings that provide the basis for the ruling, the factual findings are subject to review under the substantial evidence standard. (See, e.g., SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 461.) All inferences and presumptions are indulged to support the judgment and error must be affirmatively shown. (Atlantic Richfield Co. v. State of California (1989) 214 Cal.App.3d 533, 538.)
C. The Effect of the May 30, 2008 Order
The probate court filed its order denying Taraday's request for compensation to Downey Brand for extraordinary services before final distribution under section 10832, on May 30, 2008.
As Dacey asserts, the probate court's rulings pursuant to section 10832 are appealable under section 1300, subdivision (e). When no timely appeal is taken from an appealable order, the issues determined by the order are res judicata. (In re Matthew C. (1993) 6 Cal.4th 386, 393, superseded by statute on another issue.) "[A] prior appealable order becomes `res judicata' in the sense that it becomes binding in the same case if not appealed." (Lennane v. Franchise Tax Bd. (1996) 51 Cal.App.4th 1180, 1185; see also Estate of Hilton, supra, 44 Cal.App.4th at p. 912 ["partial statutory fee allowances are final in the sense that barring reversal or modification by direct appeal the recipient cannot be ordered to disgorge sums paid thereunder"].)
"The doctrine of res judicata precludes parties or their privies from relitigating an issue that has been finally determined by a court of competent jurisdiction. [Citation.] `Any issue necessarily decided in such litigation is conclusively determined as to the parties or their privies if it is involved in a subsequent lawsuit on a different cause of action.' [Citation.]" (Levy v. Cohen (1977) 19 Cal.3d 165, 171.) Three elements must be met for res judicata to adhere: "(1) Was the issue decided in the prior adjudication identical with the one presented in the action in question? (2) Was there a final judgment on the merits? (3) Was the party against whom the plea is asserted a party to or in privity with a party to the prior adjudication? [Citations.]" (Id. at p. 171.)
Res judicata does not apply in the present case because the record does not establish that the probate court ruled on the merits when issuing its order in May 2008, and the issues underlying the two orders were not necessarily identical. Dacey completely ignores that a court may deny extraordinary fees without ever deciding the reasonableness of the fee request.
Section 10832 provides that the "court may allow compensation to the personal representative or to the attorney for the personal representative for extraordinary services before final distribution when any of the following requirements is satisfied: [¶] (a) It appears likely that administration of the estate will continue, whether due to litigation or otherwise, for an unusually long time. [¶] (b) Present payment will benefit the estate or the beneficiaries of the estate. [¶] (c) Other good cause is shown." (Italics added.)
At the hearing in 2008 on the administrator's petition requesting authorization to pay extraordinary attorney fees to Downey Band, counsel for Dacey asked the court to deny the request or, alternatively, wait to consider any award until after the civil action involving Dacey and the estate had been litigated. In his objections filed April 1, 2008, Dacey argued that the fees should not be awarded prior to a judgment in the trial and that the request was essentially a request for reconsideration of the stay.
A court has discretion to award extraordinary fees prior to final distribution, but its decision not to award fees at that time does not necessarily mean that it made any ruling on the merits of the actual amount requested. Rather, an attorney is not ordinarily entitled to compensation in advance of the final distribution of the estate unless good cause is shown. (See § 10832.)
Whether the probate court in its 2008 order was deferring its ruling or denying the request for extraordinary fees under section 10832 on its merits is immaterial. To establish that the order in May 2008 had a binding effect on the October 2009 order, Dacey has to establish on this record that the same issues were adjudicated in both orders. Dacey cannot meet this burden. The court must find good cause to authorize compensation in advance of the final distribution of the estate. (§ 10832.) Thus, the facts related to good cause were significantly different in 2008 than they were in 2009 because the trial on Dacey's claims against the estate had not occurred at the time of the first petition, but judgment had been entered in that trial by the time of the second petition. The factors involving a determination of good cause under section 10832, which the court had to determine at the two hearings, were significantly different. Consequently, the court's denial of the administrator's petition in 2008 does not mean that the court made any finding about the appropriateness of the request, as it may simply have found the facts did not support the good cause exception to waiting until the final distribution.
Dacey is correct that an appealable interim order, not timely appealed, becomes binding on the parties. In the present case, that means that Downey Brand cannot challenge the court's ruling that there was no good cause to authorize extraordinary fees in 2008. It does not prevent Downey Brand from arguing that good cause existed at a later point in time.
The cases cited by Dacey, which he simply cites with little analysis, do not compel a different result. (Estate of Gilkison (1998) 65 Cal.App.4th 1443; Estate of Hart (1962) 204 Cal.App.2d 631; Estate of Lindauer (1942) 53 Cal.App.2d 160.) Estate of Hart simply sets forth the principle that "[e]ach order and decree of a superior court exercising its probate function and acting within its jurisdiction is conclusive against collateral attack unless it is void on its face." (Id. at pp. 632.) The court in Estate of Lindauer held that the failure to appeal from an order approving attorney fees and costs of the estate, which were included in a prior accounting, precluded the appellant from challenging these same items on appeal from the final accounting. (Id. at pp. 165-166.) In approving the fees, the court necessarily found that the fees were warranted. Here, the court did not necessarily make any finding about the reasonableness of the request for fees.
The facts of the present case are in stark contrast to those in Estate of Gilkison, supra, 65 Cal.App.4th 1443, one of the cases cited by Dacey. In Estate of Gilkison, the record clearly established that the court had reached the question of the necessity for and the reasonableness of the request for extraordinary fees. At the first hearing in Estate of Gilkison, on June 28, 1993, an attorney retained by the executor requested extraordinary fees and claimed that the administrator had orally agreed to pay him extraordinary fees. (Id. at p. 1446.) The probate court denied his request for extraordinary fees, and the attorney moved to vacate the court's order. (Ibid.) The lower court treated the request as a motion for reconsideration and explained that extraordinary fees were not warranted. The appellate court quoted the lower court's reasons for denying the request as follows: "`1. There was no agreement by the executor . . . to pay [the attorney] any fees beyond those statutorily authorized; [¶] 2. Much of the claimed extraordinary fees did not advance the interests of the estate or its beneficiaries. In fact, they may have resulted from advice of counsel . . . which actually delayed distribution of the estate, and prevented the testator's desires from being carried out. . . . [¶] 3. The only services for which extraordinary fees could be granted would be facilitating Robert Gilkison's purchase of the estate's realty. The court finds he has not met his burden in showing any efforts he expended contributed to the necessary re-financing.'" (Id. at p. 1447.) Not only did the court expressly find that the attorney was not entitled to extraordinary fees, but it reported him to the California State Bar for taking the money without notice to the court, the executor, or the heirs. (Id. at p. 1447, fn. 4.)
Despite the lower court's specific finding in Estate of Gilkison that the attorney was not entitled to the extraordinary fees, the attorney appealed from the final accounting and petition for final distribution and argued that he was entitled to these exact same fees that the lower court had earlier found were not warranted. (Estate of Gilkison, supra, 65 Cal.App.4th at p. 1448.) The appellate court stated that the attorney had failed to establish that the denial of the fees in the second order was an abuse of discretion, as "the trial court articulated a sound factual basis for the denial of extraordinary fees. The record unquestionably shows that the probate court did not misunderstand the law with respect to extraordinary fees." (Id. at p. 1449.) The reviewing court further noted that the "trial court reasonably concluded, based on the value of the estate and appellant's services which delayed distribution of the estate, that the ordinary compensation allowed by statute was adequate." (Id. at p. 1450.)
After deciding the case on its merits, the appellate court stated in a footnote in Estate of Gilkison, supra, 65 Cal.App.4th 1443 that it "also observe[d] that [the attorney was] precluded from challenging the order in this appeal." (Id. at p. 1450, fn. 5.) The court observed that the attorney had never appealed from the original minute order, which became final and was appealable. (Ibid.) The appellate court provided no further analysis, did not suggest that an interim order regarding fees would always be binding, and simply announced that an independent basis for denying the appeal existed.
In contrast to the record in Estate of Gilkison, supra, 5 Cal.App.4th 1443, here, nothing in this record shows that the lower court in 2008 ever reached the question of the reasonableness of the extraordinary fee request and the court did not articulate any factual basis for the denial. Accordingly, Dacey has failed to establish that the interim fee order in 2008 barred the court in 2009 from finding that good cause existed to justify an award of extraordinary fees and that the fees requested were warranted and reasonable.
D. The Amount of the Fees Awarded
The court authorized Taraday to pay $683,876.02 to Downey Brand for fees and costs incurred from January 1, 2006, through December 31, 2008, related to litigation involving the estate in the probate and civil actions. It also authorized payment of the sum of $9,347.50 to Downey Brand for fees previously approved by the San Mateo Court in the interpleader action.
The Award of $9,347.50
Dacey maintains that payment of $9,347.50 for the interpleader action represented a double recovery for Downey Brand. He, however, fails to cite to evidence in the record establishing a double recovery.
The record shows that the estate, through its counsel, filed a complaint in interpleader in the San Mateo court. On July 3, 2006, the San Mateo court awarded the estate attorney fees in the amount of $9,347.50 when discharging the estate from liability in the interpleader action. The 2006 freeze order went into effect on March 3, 2006. William R. Warne, a partner at the firm of Downey Brand, filed a declaration and asserted that Downey Brand never received the $9,347.50 in attorney fees awarded to the estate in the interpleader action because of the 2006 freeze order put in place by the probate court.
Dacey claims that the $9,347.50 was retained and not deposited into the estate account. He refers to various pages in the record without providing any discussion of how these documents support his position. The documents in the record cited by Dacey are statements of the estate attached to the judgment in the civil action. It is unclear how these statements support Dacey's position. For example, Dacey cites to a document entitled, "Estate of Burton J. Goldstein," but neglects to specify what exactly in this document shows that the estate did not receive the money from the interpleader action. This document simply sets forth the interest income, partnership income, and tax refunds. Without providing this court with any discussion of these documents, Dacey has completely failed to meet his burden of establishing that the lower court abused its discretion in authorizing payment of $9,347.50 for the interpleader action to Downey Brand.
Warne's declaration, the 2006 freeze order of the probate court, and the order awarding fees in the interpleader action support the lower court's authorization of payment of $9,347.50 to Downey Brand for the interpleader action and Dacey has not shown that this award constitutes double payment.
Judicial Estoppel and Apportionment
Dacey maintains that the award of $683,876.02 includes fees connected to defending the individual defendants in the civil action and that these fees should be apportioned between those connected to the estate and those related to the individual defendants. The doctrine of judicial estoppel, according to Dacey, prevents the estate from asserting it should pay the legal fees of the individual defendant. Dacey stresses that he argued in the civil action that Taraday and the other individual defendants had a unity of interest with the estate, but the court rejected this argument. Consequently, Dacey asserts, judicial estoppel should bar the estate from claiming in this probate action that the estate should pay the costs related to the individual defendants.
In proper circumstances, the doctrine of judicial estoppel prevents a party who has taken one position in litigation from taking an inconsistent position later. (In re Stier (2007) 152 Cal.App.4th 63, 80) The doctrine comes into play when "(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position; (4) the two positions are completely inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake." (County of Imperial v. Superior Court (2007) 152 Cal.App.4th 13, 34.)
Dacey has not established that judicial estoppel applies in this case, because he has not demonstrated that the estate took two different positions. Dacey cites to the court's judgment in the civil action where the court found that "the individual defendants did not share a unity of interest with the estate." However, he has presented no evidence to show that the estate argued there was no unity of interest. Furthermore, the issue before the probate court was not whether there was a unity of interest between the estate and the individual defendants in the civil action.
In any event, Dacey's argument of judicial estoppel is irrelevant. It would be relevant only if the evidence supported his claim that the fee award included costs and fees related to legal services provided by Downey Brand to the individual defendants. Dacey has not made the necessary showing.
In support of his argument that the fees and costs awarded include those related to Taraday and the other individual defendants, Dacey asserts the following: "The generality of Respondents' description of Downey Brand services, which Dacey's unsuccessful request for leave to conduct discovery sought to pierce, prevents a comprehensive identification of charges allocable solely to non-Estate Taraday Defendants." The record citations in Dacey's brief, however, do not establish that Downey Brand requested fees related to the litigation on behalf of the individual defendants.
The record does contain evidence supporting the lower court's implied finding that the fees requested reflected fees and costs associated solely with the defense of the estate in the civil action. In support of the petition, Warne stated in his declaration the following: "I am the principal partner in charge of overseeing the cases referenced in the Fee Petition. This includes defense of petitioner, Janet Goldstein, Barrie Taraday, and Gail Hart in the civil action brought by plaintiffs John Dacey and Jeffrey Baruh . . .; defense of petitioner in the parallel probation petition brought by Dacey and Baruh; and prosecution of the interpleader action by the Estate against competing stakeholder Frederik Jacobsen and Nick Chapman. The Fee Petition includes a request for payment of attorneys fees and costs incurred by the Estate spanning from January 1, 2006[,] to December 31, 2008, as applicable for each of the three matters. The Fee Petition seeks an order to permit payment from the Estate of that portion of fees and costs attributable to work performed for the Estate, and not for Janet Goldstein or other parties represented by Downey Brand LLP. . . ."
Dacey maintains that the petition establishes that the individual defendants may be paying these exact same fees. He cites the language in Warne's declaration providing that Janet Goldstein, Barrie Taraday, and Gail Hart "may" pay an unspecified part of Downey Brand fees outside of probate, and he complains that the petition does not set forth the amount. Although his argument is somewhat obtuse, he seems to be contending that Downey Brand will receive a double recovery from the estate and the individual defendants.
Warne's declaration specifies that funds attributable to the individual defendants "will be addressed by separate petition to this court." It adds that the administrator "will ask the court for a formal declaration at such time that Janet Goldstein's community property share of the subject fee recovery does not constitute Estate funds and thereby, are not subject to the Probate Court's jurisdiction. Upon obtaining such declaration, fees and costs attributable to the defense [of the individual defendants] and due to Downey Brand LLP, may be paid by such individuals from their funds." There is absolutely nothing in these statements that suggests Downey Brand included in the request for $683,876.02 any fees and costs related to the litigation involving the individual defendants.
Finally, Dacey also objects to the reimbursement to Taraday for payments to Downey Brand that he made. Again Dacey's argument is less than clear, and he fails to establish that any of the requested money was not owed to Taraday. In Warne's declaration, he stated that the total amount sought would be "appropriately distributed between William Taraday, individually, as reimbursement for those payments previously made by him to Downey Brand LLP on behalf of the Estate pending this petition, and Downey Brand LLP for those amounts presently due and owing for services provided to the Estate through December 31, 2008." Taraday was entitled to reimbursement for money he paid to Downey Brand on behalf of the estate. "[A] representative is not required to advance his own funds for the protection of the assets of the estate, although he is entitled to reimbursement if he does so for a necessary purpose. [Citation.] He must therefore normally use the assets of the estate for such purpose." (Estate of Sidebotham (1956) 138 Cal.App.2d 412, 417.)
The petition and the supporting declaration describe each of the tasks that Downey Brand performed on a month-by-month basis, the number of hours each attorney billed each month, and the billing rate. Dacey has completely failed to meet his burden of establishing that the lower court abused its discretion in determining that all of the requested fees related to litigation involving the estate.
Evidence in Support of the Fee
Dacey contends that the evidence in support of the extraordinary attorney fee award was inadequate as a matter of law. Dacey objects to the award because Downey Brand failed to identify which of the firm's 24 attorneys did which tasks and how much was requested for each category of service. He also challenges the award on the basis that Downey Brand did not provide the background for all of the people who worked on the litigation for the estate.
California Rules of Court, rule 7.702 provides the following: "A petition for extraordinary compensation must include, or be accompanied by, a statement of the facts upon which the petition is based. The statement of facts must: [¶] (1) Show the nature and difficulty of the tasks performed; [¶] (2) Show the results achieved; [¶] (3) Show the benefit of the services to the estate; [¶] (4) Specify the amount requested for each category of service performed; [¶] (5) State the hourly rate of each person who performed services and the hours spent by each of them; [¶] (6) Describe the services rendered in sufficient detail to demonstrate the productivity of the time spent; and [¶] (7) State the estimated amount of statutory compensation to be paid by the estate, if the petition is not part of a final account or report." In the present case, Dacey contends that the petition did not satisfy criteria four, five, and six of rule 7.702 of the California Rules of Court.
Estate of Fulcher (1965) 234 Cal.App.2d 710 is instructive on the showing needed to justify an award of fees. In Fulcher, the court reversed an order awarding extraordinary fees to the executrix of an estate and her attorneys, as the petition did not adequately specify the nature of the services provided. The court explained, "The attorneys' bare statement that `they have reasonably expended approximately four hundred (400) hours of their time on legal matters concerning the estate which were, are and will be of a nature to qualify said services as extraordinary,' standing alone, and failing to disclose the time consumed in performing each individual item of service is in no manner enlightening nor persuasive and in the case at bench insufficient as the basis for a determination by the trial court of the amounts to be awarded." (Id. at p. 717.)
Thus, a request for statutory compensation must be substantiated by detailed declarations and exhibits, informing the court about the nature of the services performed, the time spent, and the necessity for those services. (Estate of Fulcher, supra, 234 Cal.App.2d at p. 718.) Here, the petition and declaration explained that the services were rendered in connection with the civil, probate, and interpleader actions. There is no suggestion that such litigation was not a reasonable expenditure for the preservation of the asset of the estate. These documents also explained that these actions were factually, legally, and procedurally complex. They further detailed the various pleadings, motions, and discovery that had to be completed as well as the work for and during the bench trial. They also set forth how this litigation benefited the estate. Finally, the petition and the supporting declaration described the tasks that Downey Brand performed on a month-by-month basis, the number of hours each attorney billed each month, and the attorney's billing rate. The petition named the attorneys primarily involved in performing legal services, specified the hours they worked for each month, and set forth their hourly rate of pay. For example, Warne specified that his hourly rate of pay was $350 for January though December 2006, $385 for January 2007 through December 2007, and $410 beginning in January 2008. He reported the number of hours he devoted to working on litigation involving the estate and, for example, specified that he worked 7.3 hours on legal services for the estate in January 2006.
No probate case cited by Dacey requires the detail that he maintains is required.
Dacey also relies on the probate case Donahue v. Donahue (2010) 182 Cal.App.4th 259 (Donahue). In Donahue, the appellate court reversed an award of approximately $5 million in attorney fees incurred on behalf of a former trustee in defending against the beneficiary's allegations of self-dealing and conflict of interest. (Id. at p. 262.) The fees included the costs of eight attorneys from three major law firms, and four to five of those attorneys simultaneously appeared on behalf of the former trustee at the 14-day court trial. (Ibid.) The billing rates went up to $690 an hour. (Id. at p. 264.) The beneficiary appealed from two separate orders authorizing attorney fees. (Id. at pp. 266-267.) The lower court granted the first request for fees and issued a minute order that directed the current trustees "`to reimburse the fees and costs prayed for in the petition'" with a few enumerated exceptions. (Id. at p. 266.) After the former trustee filed an additional request for $300,000 in past attorney fees, the court, with no explanation, ordered the current cotrustees to pay $175,000 in attorney fees; it also granted the former trustee's request for future attorney fees. (Ibid.) Both the former trustee and the beneficiary objected to the trial court's failure to specify how it arrived at the amount of the fees and costs in this second order, but the trial court declined to reconsider or further clarify its fee order. (Id. at p. 267.)
When reviewing the two fee orders in Donahue, supra, 182 Cal.App.4th 259, the appellate court stated that the first order was "notable for what it [did] not say." (Id. at p. 270.) There was no explanation for why the court concluded the former trustee reasonably incurred the fees and the court did not expressly specify the amount of the fee award. (Ibid.) The reviewing court explained that the trial court "merely stated that it would allow the amount `prayed for in the petition with [several specified] exceptions.'" (Ibid.) The appellate court emphasized that it could not conduct any meaningful review of the order and could not tell whether the lower court exercised its discretion to review carefully the attorney documentation and determine the reasonableness and necessity of the fees, particularly in relationship to the trust's interest and purposes. (Ibid.) The court noted that the second fee order was "equally cryptic." (Ibid.) The second order did specify an amount, but was silent as to why and how it reached its conclusion. (Ibid.)
The appellate court in Donahue, supra, 182 Cal.App.4th 259, stressed that scrutiny was particularly warranted in the case before it because the services of so many top attorneys may have benefitted the former trustee, but the record did not make clear that using so many attorneys benefitted the trust. (Id. at p. 273.) The court observed: "Such a spare-no-expense strategy calls for close scrutiny on questions of reasonableness, proportionality and trust benefit. `Consequently, where the trust is not benefited by litigation, or did not stand to be benefited if the trustee had succeeded, there is no basis for the recovery of expenses out of the trust assets.' [Citation.] [The former trustee's] defense by so many top-flight lawyers may have benefitted [the former trustee], but was it also reasonable and beneficial to the trust? Did [the former trustee] demand a Rolls Royce defense when a prudent trustee could have arrived at the same destination in a Buick, Chrysler or Taurus?" (Ibid.)
Dacey asserts that, here, too, the lower court as in Donahue did not provide any explanation in its order to support the fee award, and Downey Brand did not provide information detailing what attorneys provided what particular tasks. Dacey also contends that, like the situation in Donahue, the record indicates that the billing was inefficient and the attorneys' efforts were duplicative. Dacey proclaims: "Although [Downey Brand's] failure to carry [its] burden compels a finding of abuse of discretion, [Downey Brand's] vague showing affirmatively reveals red flags of duplicative and inefficient billing, including a) myriad conferences amount unstated numbers of Downey Brand attorneys and probate counsel concurrently representing the Estate in the probate, for most of which no subject matter is stated and without explanation for the dual retention, and b) multiple partners from Downey Brand and probate counsel's firm attending the same hearings." (Fns. omitted.)
Dacey, however, ignores that the record in Donahue actually established double billing. Dacey has not cited to any evidence in the record that proves double billing occurred in the present case. Moreover, here, unlike the situation in Donahue, the case does not warrant special scrutiny. There was no issue that the fees were incurred for the benefit of the administrator, as the fees were the costs associated with defending the estate against the claims by Dacey and Baruh. Additionally, only one law firm was involved in the litigation and the fees of just under $700,000 for services in both a probate action and a civil trial for the time period of January 1, 2006, through December 31, 2008, do not on their face seem unreasonable. In contrast, the fees requested in Donahue were $5 million for one 14-day trial. These fees far exceeded the attorney fees incurred by the beneficiary and appeared to be excessive.
In the present case, the court expressly stated in its order that it reviewed the petition, objections, all other responsive pleadings, and oral argument. The judge in this case is deemed an expert on the value of legal services and the judge in this case could rely on his own experience about reasonable and proper fees. (Donahue, supra, 182 Cal.App.4th at p. 276.) Dacey complains that the judge issuing the attorney fees order was not familiar with the civil litigation, but he did know the issues involved in the civil action and Downey Brand apprised him of the discovery and motions involved in the civil action. The record does not indicate that the amount requested was unreasonable or that the number of attorneys or the number of hours worked was excessive. Thus, the fees do not have to be detailed, as argued by Dacey; they simply need "`to be rationalized to be affirmed on appeal.'" (Id. at p. 269.)
We have reviewed the material submitted to the trial court and conclude it was well within the trial court's discretion to direct payment of the compensation requested by the administrator's petition.
E. Denial of Leave to Conduct Discovery
Dacey contends that he was entitled to obtain leave to conduct discovery once he filed objections to Taraday's accounting. As already discussed, Dacey has the burden on appeal of demonstrating from the record that an abuse of discretion has occurred. (Forthmann v. Boyer, supra, 97 Cal.App.4th at p. 985.)
Dacey completely fails to show any abuse of discretion. Indeed, in his opening brief in this court, he does not even explain what discovery he needs to conduct. To the extent that Dacey sets forth what relevant information he needs to discover in his reply brief, we will not consider this information.
We decline to consider the new points raised by Dacey in his reply brief. Accordingly, Dacey has failed to establish that the lower court abused its discretion in denying any request for leave to conduct discovery.
The probate orders are affirmed. Dacey is to pay the costs of appeal.
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