Court Opinion

ID: 1086654
Source: CourtListenerOpinion
Date Created: 2013-10-23 18:49:19.966513+00
Date Added: 2024-06-11T12:51:41.808015
License: Public Domain

Filed 10/23/13 McDonnell v. Jarvis CA6
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      SIXTH APPELLATE DISTRICT

JOHN MCDONNELL, JR., as TRUSTEE,                                     H036490
etc.,
                                                                    (Monterey County
         Plaintiff and Respondent,                                   Super. Ct. No. P31598)

         v.

TODD JARVIS,

         Defendant and Appellant.

                                              I. INTRODUCTION
         The Jarvis Ranch, which includes more than 300 acres of agricultural land in
Monterey County, is an asset of the Jarvis Replacement Administrative Trust (the Trust).
Appellant Todd Jarvis and his brother James Jarvis1 are co-settlors and beneficiaries of
the Trust. Respondent John McDonnell, Jr. is the court-appointed trustee.
         In his capacity as trustee, McDonnell filed a petition for authority to perform a real
estate purchase contract for sale of the Jarvis Ranch to Hancock National Resources
Group, Inc. (Hancock) for $11.6 million. The terms of the Trust required McDonnell to
petition the court since Todd had objected to the proposed sale while James had

         1
        For ease of reference and meaning no disrespect, we will refer to Todd Jarvis and
James Jarvis by their first names.
consented. The trial court granted the petition on December 4, 2010. For the reasons
stated below, we conclude that the court did not abuse its discretion and we will affirm
the order.
                    II. FACTUAL AND PROCEDURAL BACKGROUND
          A. The Petition
          In August 2010 McDonnell filed a verified petition for authority to perform a real
estate purchase contract pursuant to Probate Code section 17200.2 The petition stated
that “[t]he Trust was created as part of a court-supervised settlement of a protracted
dispute between brothers [Todd] and [James] concerning the Jarvis Family Trusts,
created under an agreement between Todd and [James] dated December 18, 1998.” In
2004, Todd and James executed a first amendment to the Trust and McDonnell was
confirmed as trustee by court order.
          As stated in the petition, the Trust provides that “[t]he primary purposes of the
settlors in the creation of this trust (in no particular order) are to provide (1) for the
management and administration of the JARVIS RANCH . . . and the JARVIS
PROPERTIES real estate . . . ; (2) the distribution of income from the trust assets . . . .;
(3) an evaluation of the economic viability of the sale and development of the JARVIS
RANCH and JARVIS PROPERTIES real estate; and (4) the negotiation [of] the sale and
the development of the JARVIS RANCH and JARVIS PROPERTIES real estate.”
          The Trust further provides that “[t]he trustee and settlors agree that, at this time,
the settlors are only interested in selling the JARVIS RANCH for a value substantially
greater than that which would be paid for just farmland, meaning that the sale should be
for the property entitled for a use greater than farmland (such as mixed use, residential
use, or commercial use).”

          2
              All statutory references hereafter are to the Probate Code unless otherwise
stated.

                                                 2
       The petition specified that the subject of the proposed real estate purchase contract
was the Jarvis Ranch, which consists of 333.5 acres currently zoned and used for
agriculture. In his capacity as trustee, McDonnell “began to pursue the possibility of
accomplishing the stated goal” of entitling the Jarvis Ranch for a purpose other than
farmland. Before McDonnell’s appointment, Todd was the trustee and an attorney
retained by Todd had negotiated an agreement with Centex Homes, Shea Homes and
Shea Properties (Centex/Shea) for the possible acquisition and development of the Jarvis
Ranch. After McDonnell was appointed, he pursued the creation of an alternative
highway route known as the “ ‘West Side Bypass’ ” to improve freeway access to the
Jarvis Ranch.
       However, as stated in the petition, it became “clear that the West Side Bypass will
not be constructed in the foreseeable future for a complicated combination of political
and economic reasons.” Also, Centex/Shea exercised its right to withdraw from the
agreement to acquire and develop the Jarvis Ranch. McDonnell consulted John Piini, a
real estate broker and appraiser with knowledge of property values and property
development in Monterey County. McDonnell also consulted Jeffrey Gilles, an attorney
with experience in Monterey County land use and property development. The petition
stated that McDonnell “has been informed by Mr. Piini and Mr. Gilles, and believes, that
it is highly unlikely that the Jarvis Ranch can be entitled for mixed use within the
foreseeable future, not only within the remaining less than four-year term of the Trust,
but possibly for many years beyond that time.”
       In 2009, McDonnell received an unsolicited proposal from Hancock for purchase
of the Jarvis Ranch for $11 million, based on the property’s value as farmland.
McDonnell notified Todd and James that he believed that it was in the best interests of
the Trust to negotiate a sale to Hancock since development of the Jarvis Ranch would be
impossible in the foreseeable future. After investigating Hancock and determining it was
a well-known and respected company specializing in the acquisition of agricultural

                                             3
property, McDonnell negotiated a sales price of $11.6 million. He also negotiated
contract terms regarding the need for court approval of the contract if a beneficiary
objected to the sale and also a hearing at which overbids would be solicited, as well as a
provision permitting termination of the contract if James or Todd agreed to purchase the
other’s interest in the Jarvis Ranch prior to final approval of the contract.
       In August 2010 McDonnell sent James and Todd a notice of proposed action that
“informed them that he intended to perform the terms of the executed real estate purchase
contract with Hancock (‘the Hancock contract’).” James signed a consent to the
proposed action, while Todd signed an objection. McDonnell stated in the petition that
he believed that Todd’s objection was unreasonable. Although the statement of intent in
the Trust provided that Todd and James were “ ‘at this time’ ” only interested in selling
the Jarvis Ranch for a value substantially greater than would be paid for farmland, that
intent was “based upon an economic climate in which development was booming and
real estate values were steadily climbing.”
       McDonnell further explained in the petition that “the Trust was created and
[McDonnell] appointed as trustee because of a bitter and longstanding dispute between
Trust beneficiaries Todd and [James]. . . . In addition, although [McDonnell’s]
relationship with Todd was cordial at the time the Trust was established, and, in fact, it
was Todd who nominated [McDonnell] to serve as independent trustee of the Trust, for
the past several years Todd has become increasingly hostile towards [McDonnell]. This
hostility has significantly interfered with [McDonnell’s] administration of the Trust and
has dramatically increased the cost of the Trust administration.”
       In conclusion, McDonnell stated that he “is in complete agreement [with James]
that the Hancock contract is a fair and reasonable contract which will allow the Jarvis
Ranch to be sold and the net proceeds distributed so that these brothers can sever the
business relationship which has been so extraordinarily costly to them both for many
years. If the Jarvis Ranch is not sold pursuant to the Hancock contract, [McDonnell]

                                              4
fears that the remaining four years term of the Trust will be similar to the last few years,
in which an inordinate amount of Trust assets are spent dealing with Todd’s efforts to
impede administration of the Trust.” McDonnell also stated that “Todd’s opposition to
this proposed action is unreasonable and that granting [McDonnell] the authority to
perform the Hancock contract is not only in the best interests of Todd and [James] but
offers the only possible solution to a deeply troubling and intractable situation.”
       B. Declarations Filed in Support of the Petition
       In support of the petition, McDonnell submitted the declarations of himself, Piini,
and James.
                                   Declaration of James
       In his declaration, James stated, among other things, that when he “entered into
negotiations with Todd Jarvis in 2004 to create a new trust agreement, [he] was assured
by Todd and his attorneys that the Centex ‘deal’ was legitimate and that Centex was in
the process of presenting a serious offer. [He] agreed to this second trust under the belief
that the Jarvis Ranch and Jarvis Properties would be sold, one of the four specific
purposes of the trust. Only after the Agreement was signed did [he] discover that Centex
considered development of the property unfeasible. . . . [¶] . . . The 2004 Trust
memorializes [his] thinking where it states that ‘at this time’ [he] hoped for the Jarvis
Ranch to be sold for more than agricultural value as [he] had been led to believe by Todd.
However, [he] also recognized that such a sale might not be possible if circumstances
changed. . . . ‘AT THAT TIME’ we did hope to sell to a developer for greater than
farmland value, based solely on Todd’s representations. However, the reason that phrase
is in there is in recognition that ‘times can change,’ which they have. If we never
intended to sell to anyone but a developer, we would have said so and the phrase ‘at this
time’ would not have been included.”
       James also stated: “We have before us an all cash offer from a legitimate buyer
for $11.6 million which, [he] understand[s], is at or above fair market value. There is no

                                              5
assurance that other or better offers will be forthcoming. In fact, a number of similar
properties near the Jarvis Ranch which have been for sale for a number of years have
received no offers.” Referring to “Todd’s enmity towards [him],” James concluded that
“[t]he equitable solution to this problem is to permit the sale of the Jarvis Ranch to
Hancock, sell Jarvis Properties through a managed court-ordered process, terminate the
trust, and allow us to go our own ways.”
                                    Declaration of Piini
       Piini stated in his declaration that he is a licensed real estate broker and has been a
professional real estate appraiser for 35 years, with a specialty in agricultural property.
He was familiar with the Jarvis Ranch and had prepared a 1997 appraisal of the property
in another matter. He determined that “the acreage useable for agricultural purposes is
328.5 acres. In evaluating a purchase offer for agricultural property, the proposed
purchase price is divided by the useable acreage in order to obtain a per-acre value.”
Piini also stated that he was very familiar with land use issues in Monterey County and
“the history of efforts to obtain entitlements for other than agricultural use for properties
such as the Jarvis Ranch on the west side of the City of Salinas.” He did not “believe that
the Jarvis Ranch property has a potential for development as other than agricultural land
in the foreseeable future.”
       Piini was asked to evaluate Hancock’s offer to purchase the Jarvis Ranch for
$11 million. He advised McDonnell that the price was “ ‘a little low,’ ” and McDonnell
might be able to negotiate an increase. In Piini’s opinion, the negotiated purchase price
of $11.6 million, based on a rent estimate of approximately $1,800 per acre, “represents a
return to the buyer of 5.1% on the sales price of $11,600,000. . . . [T]his is consistent with
current rates reflected in sales of similar agricultural property in the Salinas area, which
are generally between 5.0% and 5.5% and most recently between 5.0% and 5.25%.”
       Finally, Piini stated that when he was deposed he “was candid with respect to [his]
belief that ordinarily it is good practice to market property for a period of time in order to

                                              6
expose it to a range of potential buyers. However, . . . when a good offer is received from
a reputable buyer, [he] believe[s] that such an offer should be taken seriously. In [his]
opinion, Hancock is a reputable [buyer] and the current offer should be taken seriously.”
                                 Declaration of McDonnell
       McDonnell stated in his declaration, among other things, that he understood at the
time the Trust was created that Todd and James hoped to increase the value of the Jarvis
Ranch by obtaining entitlements to develop the property for a use other than agricultural
use. However, “the collapse of the real estate market and the dramatically changed
political climate in Salinas over the past six years have made it clear that this hope cannot
be realized in the the foreseeable future.” When he negotiated the $11.6 million sale to
Hancock, McDonnell insisted that the sale be subject to “confirmation and possible
overbid in accordance with a sale of real property conducted in an estate under the
California Probate Code.” McDonnell had also entered into a letter agreement with
Hancock that amended the proposed real estate purchase agreement “to provide that the
buyer will cooperate with a [Internal Revenue Code section] 1031 exchange and to
extend close of escrow to sixty (60) days after the environmental contingencies have been
removed or waived.” If the petition was granted, McDonnell intended to immediately
begin marketing the Jarvis Ranch to other prospective bidders with the assistance of real
estate brokers and agents.
       McDonnell also stated that he has “worked hard as a trustee of the Jarvis Trust for
six years, under difficult conditions. [He] believe[s] that it is in the best interests of the
two beneficiaries that this sale be approved; the price is a fair one, and the level of
animosity between the two beneficiaries has risen to the point that [he] fear[s] that the
administrative costs will continue to climb in this Trust, driven by the continuing dispute
between these two brothers. [His] interactions with each them lead [him] to believe that
they are unable to co-own property if they must deal directly with each other.”

                                               7
       McDonnell denied Todd’s allegations that terms of the Hancock contract were
“ ‘hidden’ ” from Todd and that he had engaged in “ ‘secret’ discussions” with James.
McDonnell also denied Todd’s allegations that he favored James in his administration of
the Trust and that his law firm was responsible for changing the structure of the Trust in a
way that interfered with Todd’s ability to complete an Internal Revenue Code section
1031 exchange. McDonnell stated that the primary drafting attorney for the Trust was
Todd’s attorney and that the Trust was negotiated between Todd, James, and their
respective counsel before the final version was agreed upon.
       C. Todd’s Opposition to Petition
       Todd filed a memorandum of points and authorities in opposition to the petition.
He argued that the proposed sale of the Jarvis Ranch to Hancock was contrary to the
express intent of the Trust settlors that the Jarvis Ranch be sold for a value substantially
greater than its farmland value. Additionally, Todd argued that James had “secretly
solicited” the Hancock offer and failed to disclose “defects involving the drainage and
CalTrans issues”; the sale was a “[d]esperation” sale that was not in the best interest of
the Trust; based on Piini’s deposition testimony, the sale should be delayed until the
market for agricultural land strengthened and the property was put on the open market;
the drainage and CalTrans issues should be resolved before selling the property; the
proposed sale would require modification of the Trust to permit a sale for farmland value;
the proposed sale will result in a $1 million tax liability to Todd because the Trust is not
structured to accommodate an Internal Revenue Code section 1031 exchange; and the
trustee had not been impartial but had favored James’s interests and ignored “Todd’s
legitimate desire to maintain the favorable income stream from Jarvis Ranch.”
       Todd also filed evidentiary objections in opposition to the petition. His objections
to nine sentences and paragraphs in the petition included lack of foundation, hearsay, and
speculation. Todd also requested an evidentiary hearing “if the Court is going to consider
any of these allegations [in the petition] respecting [Todd’s] objections to unspecified

                                              8
trustee activities, [Todd’s] objection to the Trustee’s purported settlement of litigation
with CalTrans and alleged but unspecified costs to the Trust.” Todd also requested an
evidentiary hearing “if the Court is inclined to consider any of those allegations [about
Trust expenses] as ‘evidence.’ ”
       D. Declarations Filed in Support of Todd’s Opposition
       In support of his opposition, Todd submitted his own declaration and the
declarations of his attorneys with deposition excerpts attached.
                                   Declaration of Todd
       In his declaration, Todd stated that the Jarvis Ranch “remains a lucrative business”
due to farm rents paid by tenants and he did not want to sell the property to “Hancock for
their price.” Todd asserted that when the Trust was formed in 2004, he had no intention
of selling the Jarvis Ranch if a developer did not purchase the property. The proposed
sale to Hancock violates the intent of the settlors, according to Todd, because the Trust’s
language reflects an intent to sell the Jarvis Ranch only for development and to provide
income to the beneficiaries.
       Todd also asserted that a provision in an earlier draft of the Hancock contract
included the trial court’s modification of the Trust to permit the sale of the Jarvis Ranch
for farmland and that provision was “secretly removed” from the signed version of the
Hancock contract without his knowledge. He urged the trial court to reject the Hancock
contract on the grounds that the contract “is very bad and unfair to the beneficiaries.”
Finally, Todd stated that he would lose the ability to “defer approximately $1,000,000 in
tax liability if the sale is consummated” due to McDonnell’s “gross negligence” in
“disrupting a tax structure set up by the trust attorneys who created the 1998 Trust.”
       In his supplemental declaration, Todd stated that his objections to the proposed
actions of McDonnell as trustee were based on advice from his attorneys and were not
due to “a sense of animus towards my brother [James] or anyone else . . . .” Todd also
recounted his disputes with James regarding their parents’ estate and the Trust, denied

                                              9
that he had guaranteed the Centex/Shea developer opportunity “would bear fruit,” and
denied that he had ever been removed as trustee or committed any misconduct when he
was the trustee.
                            Declarations of Todd’s Attorneys
       Attorney Vernon H. Granneman submitted a declaration in which he stated that he
represented Todd in connection with the petition. According to Granneman, the proposed
sale to Hancock would “take away the Trust’s primary income producing asset.”
Granneman also stated that if the Jarvis Ranch is not sold before the Trust terminates in
2014 and the result is a partition action, “it is not a negative.” He attached excerpts from
the depositions of James, McDonnell, and Piini.
       Attorney Timothy P. Burns stated that he is a tax attorney and had “analyzed the
question whether or not the current trust agreement for the [Trust] is structured to
accommodate a[n] [Internal Revenue Code] Section 1031 exchange.” His conclusion
was “that the trust is not structured to accommodate a Section 1031 exchange of Todd’s
50% interest in the Trust property.” If the sale price for the Jarvis Ranch is $11 million,
Burns estimated that Todd would incur tax liability of $850,000 “in comparison to what
he could instead obtain in a tax efficient exchange.”
       Attorney Scott A. Sommer stated that he also represents Todd and had reviewed
the transcripts of the depositions of Piini, Jeffrey Gilles, and McDonnell. In Sommer’s
opinion, the sale of the Jarvis Ranch should be delayed “until at least 2011” to maximize
the value of the property by resolving issues arising from the Caltrans project and related
drainage problems and to allow a marketing plan to be developed.
       E. Order After Hearing
       The hearing on the petition was set for November 5, 2010. When the hearing
began, the trial court noted that the parties had filed additional documents during the two
days immediately preceding the hearing and that Todd had filed documents on the
morning of the hearing. The court continued the hearing to November 8, 2010, to allow

                                             10
the court to review the recently filed documents. Todd did not request an evidentiary
hearing on November 5. During argument on November 8, Todd’s attorney stated that
“the only proper way to resolve this is through an evidentiary hearing” because it was not
“appropriate for a matter of this magnitude to be decided on declarations and argument of
this type.” The record does not reflect an express denial by the trial court of Todd’s
request for an evidentiary hearing or any express rulings on Todd’s evidentiary
objections.
       The trial court filed its order after hearing on December 4, 2010. The court stated
that the issues raised by Todd in opposition to the petition included (1) “he had not been
kept apprised of contract negotiations”; (2) “full disclosure had not been made to the
proposed purchaser”; (3) “no competent evidence ha[d] been submitted regarding the
developmental potential of the property”; (4) “the trust must be modified before the
property can be sold for mere farm value”; and (5) “the purchase price is speculative.”
       The order includes the following findings: (1) McDonnell advised Todd and
James of Hancock’s offer in December 2009; (2) Copies of the proposed contract and a
request for comments were provided to Todd and James in April 2010; (3) No comments
were received from Todd, who at all times was represented by counsel; (4) the
involvement of the property in eminent domain actions was public record, the buyer had
been given the opportunity to discuss the eminent domain issues with the Trust’s
attorney, and it would not be appropriate to release confidential documents until there is a
signed contract; (5) the proposed contract allows for a net reduction of the purchase price
if the net farmed and irrigated acreage falls below a specified amount due to the eminent
domain actions; and (6) the purchase price of $11.6 million is consistent with the sales of
similar agricultural property in the Salinas area, as stated in Piini’s declaration.
       The trial court also ruled on the issue of whether the terms of the Trust permitted
the sale of the Jarvis Ranch for farm value. The court began its interpretation by
addressing the Trust’s provision that the “ ‘trustee and settlors agree that, at this time, the

                                              11
settlors are only interested in selling the Jarvis Ranch for a value substantially greater
than that which would be paid for just farmland . . . .’ ” The court determined that “[b]y
its own terms, [the Trust] states that ‘at this time’ (this time being June of 2004), the
settlors were only interested in selling the property for more than farm value. At that
time, discussions were being conducted with national developers Centex/Shea. Those
discussions ended soon after establishment of the [Trust]. More than six (6) years have
now passed since the [Trust] was established and more than thirteen (13) years since the
original Petition for Modification was filed. It does not appear that any other serious
proposals have appeared on the horizon since.”
       Further, the trial court determined that “[w]hile the settlors were, and presumably
still are, interested in selling the trust property for its highest price, built in to the [Trust]
is the recognition that development may not be economically feasible. Among the four
purposes of the trust was for ‘an evaluation of the economic viability of the sale and
development of the Jarvis Ranch and Jarvis Properties real estate.’ This language would
not have been necessary if the settlors’ intent was only to sell the properties for
development. Further, John W. Piini, an expert initially retained by Todd Jarvis as
Trustee of the [Trust], states ‘I do not believe that the Jarvis Ranch property has a
potential for development as other than agricultural land in the foreseeable future.’ ”
       The trial court therefore determined “that it is in the best interest of the trust to
take the proposed action” and granted the petition for authority to perform a real estate
purchase contract. Todd filed a timely notice of appeal.3

       3
          The trial court’s order is appealable pursuant to section 1304, subdivision (a),
which provides, “With respect to a trust, the grant or denial of the following orders is
appealable: [¶] Any final order under Chapter 3 (commencing with Section 17200) of
Part 5 of Division 9 . . . .” Section 1304 also provides exceptions for nonappealable
orders that are not relevant here.

                                                12
                                     III. DISCUSSION
       A. Standard of Review
       McDonnell’s petition for authority to perform a real estate purchase contract was
filed pursuant to section 17200, which provides in part: “Except as provided in Section
15800, a trustee or beneficiary of a trust may petition the court under this chapter
concerning the internal affairs of the trust . . . . [¶] (b) Proceedings concerning the
internal affairs of a trust include, but are not limited to, proceedings for any of the
following purposes: [¶] . . . [¶] (8) Granting powers to the trustee.” (§ 17200, subds. (a),
(b)(8).)
       “The probate court has wide discretion to make any order and take any action
necessary or proper to dispose of matters presented by a petition under section 17200.
(§ 17206.) The applicable standard of review is therefore abuse of discretion. We are
mindful, however, that ‘[t]he abuse of discretion standard is not a unified standard; the
deference it calls for varies according to the aspect of a trial court’s ruling under review.
The trial court’s findings of fact are reviewed for substantial evidence, its conclusions of
law are reviewed de novo, and its application of the law to the facts is reversible only if
arbitrary and capricious.’ [Citation.]” (Manson v. Shepherd (2010) 188 Cal.App.4th
1244, 1258-1259 (Manson).)
       B. Issues Cognizable On Appeal
       At the outset, we must determine which of the many issues that Todd attempts to
raise may be considered on appeal. “As a general rule, ‘issues not raised in the trial court
cannot be raised for the first time on appeal.’ [Citations.]” (Sea & Sage Audubon
Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 417.) Thus, an argument raised for
the first time on appeal is usually forfeited. (Kaufman & Broad Communities, Inc. v.
Performance Plastering, Inc. (2006) 136 Cal.App.4th 212, 226 (Kaufman & Broad).)
We will apply this rule to the issues Todd seeks to raise in his opening brief and his
supplemental opening brief.

                                              13
       In his opening brief, we understand Todd to attempt to raise the following issues:
(1) the trial court’s failure to allow an evidentiary hearing as required by section 1022
constitutes prejudicial error; (2) the court erred in failing to analyze the Hancock contract
“in the context of the California Prudent Investor Act . . . [§ 16047]”; (3) the court
erroneously interpreted the language of the Trust to allow sale of the Jarvis Ranch for
agricultural land value because the settlors only intended to sell the property for
development; (4) there was evidence that McDonnell’s original opinion was that the
Trust had to be modified to allow a sale for agricultural land value; and (5) the court
acted in excess of its jurisdiction in effectively changing the terms of the Trust absent
compliance with Probate Code procedures, and a remand for consideration of whether
changed circumstances warrant a modification of the Trust is not the appropriate remedy.
       We understand Todd to make the following additional arguments in his
supplemental opening brief: (1) the appeal is moot because the Hancock contract expired
in March 2011 and the trustee has no authority to extend it; (2) the Hancock contract is
not enforceable because it is “a disguised option contract”; (3) the Hancock contract is
unenforceable under Civil Code section 1611 because the amount of the consideration is
left to Hancock to determine; (4) the trustee is collaterally estopped from asserting that
there will be no development of the Jarvis Ranch in the foreseeable future because he
sought funds for payment of a land use planner in the related eminent domain action; and
(5) contrary to the trustee’s assertions, there is no evidence that the Jarvis Ranch could
not be partitioned between Todd and James.
       Our review of the record shows that Todd did not raise several of the above issues
in the trial court, including whether the court erred in failing to analyze the Hancock
contract “in the context of the California Prudent Investor Act . . . [§ 16047]”; whether
the court acted in excess of its jurisdiction in effectively changing the terms of the Trust
absent required Probate Code procedures; whether the appeal is moot because the
Hancock contract expired in March 2011 and the trustee has no authority to extend it;

                                             14
whether the Hancock contract is unenforceable because it is “a disguised option
contract”; whether the Hancock contract is unenforceable under Civil Code section 1611;
whether the trustee should be collaterally estopped from asserting that there will be no
development of the Jarvis Ranch in the foreseeable future because he sought funds for
payment of a land use planner in the eminent domain action; and there is no evidence that
the Jarvis Ranch could not be partitioned between Todd and James. Since all of these
issues are raised for the first time on appeal, with the exception of the mootness issue that
we will discuss below, we will not consider them. (Kaufman & Broad, supra,
136 Cal.App.4th at p. 226.)4
       In his reply brief, Todd adds two new arguments that we understand as follows:
(1) the trial court failed to consider whether the Hancock contract would result in a
capital loss to the beneficiaries, in conflict with unspecified Trust provisions that aid
deferral of large capital gains; and (2) the trial court failed to consider the adverse tax
consequences of the Hancock contract. However, “[p]oints raised in the reply brief for
the first time will not be considered, unless good reason is shown for failure to present
them before.” (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3 (Campos).)
“The California Supreme Court long ago expressed its hostility to the practice of raising
new issues in an appellate reply brief.” (Reichardt v. Hoffman (1997) 52 Cal.App.4th

       4
          Additionally, we observe that Todd’s argument in support of the collateral
estoppel issue depends upon documents that were not before the trial court at the time of
the November 2010 hearing on the petition. Todd has requested judicial notice of a
number of documents apparently filed in the trial court after the December 4, 2010, order
granting the petition. We will deny Todd’s request for judicial notice because “[i]t has
long been the general rule and understanding that ‘an appeal reviews the correctness of a
judgment as of the time of its rendition, upon a record of matters which were before the
trial court for its consideration.’ [Citation.]” (In re Zeth S. (2003) 31 Cal.4th 396, 405.)
Accordingly, we will disregard Todd’s collateral estoppel argument because it is based
upon the documents for which he requested judicial notice.

                                              15
754, 764.) “ ‘Obvious reasons of fairness militate against consideration of an issue raised
initially in the reply brief of an appellant.’ [Citation.]” (Ibid.)
       We determine that Todd has forfeited the capital loss issue because he has raised it
for the first time on appeal in his reply brief. (Kaufman & Broad, supra, 136 Cal.App.4th
at p. 226; see Campos, supra, 57 Cal.App.4th at p. 794, fn. 3.) Although Todd makes the
adverse tax consequences argument for the first time in his reply brief, to the extent he
raised the tax issue below and makes that argument in connection with the issue of
whether the trial court abused its discretion in granting the petition, we will consider it.
       For these reasons, we determine that the following issues are cognizable in this
appeal: (1) whether the appeal is moot; (2) whether the Trust may be interpreted to allow
the sale of the Jarvis Ranch for agricultural land value; (3) whether the trial court erred in
failing to allow an evidentiary hearing; and (4) whether the trial court abused its
discretion in granting the petition for authority to perform a real estate purchase contract
for sale of the Jarvis Ranch to Hancock.
       C. Mootness
       We will begin our evaluation with consideration of Todd’s claim that the appeal is
moot. We understand Todd to argue, in his supplemental opening brief filed in
September 2012, that the appeal is moot because the Hancock contract terminated by its
own terms on March 9, 2011, which was the deadline for close of escrow, and
McDonnell did not seek court approval of a contract extension. Todd has not requested
dismissal of the appeal.5
       James does not agree that the appeal is moot. He points out that the trial court’s
order granting the petition was automatically stayed pending appeal pursuant to section
1310 and that McDonnell, as trustee, entered into a January 2011 letter agreement with

       5
         This court denied Todd’s May 2012 request for permission to file a “motion to
reverse and directions to probate court to dismiss” on September 6, 2012.

                                               16
Hancock acknowledging that the contract “remains in full force and effect during the
appellate stay.” James explains that the performance deadlines in the contract, including
the deadline for close of escrow, run from the date that court approval of the Hancock
contract is final, not the date of entry of the court order approving it. Further, James
urges that “[i]f Todd could thwart the completion of the Contract . . . by forcing its
expiration simply by filing an appeal of the approval, it would make the entire Petition
process required by the Trust meaningless and work a grave injustice.”
       We determine that the appeal is not moot. Section 1310, subdivision (a), provides
that with certain exceptions not relevant here, “an appeal pursuant to Chapter 1
(commencing with Section 1300) stays the operation and effect of the judgment or
order.” As we have previously noted, the December 4, 2010 order granting the petition
and giving McDonnell authority to sell the Jarvis Ranch to Hancock is appealable
pursuant to section 1304, subdivision (a). Under section 1310, subdivision (a), therefore,
the trial court’s December 4, 2010 order is stayed pending appeal in both its operation
and its effect. Accordingly, the performance deadlines in the Hancock contract,
including the deadline for close of escrow that is argued by Todd as a basis of his
mootness argument, have not expired since the trigger for those deadlines—court
approval of the contract—is not yet effective.6
       Having determined that the appeal is not moot, we will next consider the threshold
issue of whether the Trust may be properly interpreted to allow the sale of the Jarvis
Ranch for agricultural land value, beginning with an overview of the rules governing the
interpretation of trust instruments.

       6
         Paragraph 2 of the real estate purchase contract attached to the petition states:
“No later than ten (10) business days following the date the performance of this Contract
is approved by the court . . . Buyer shall open escrow . . . .”

                                             17
       D. Interpretation of Trust Instrument
       “In construing trust instruments, as in the construction and interpretation of all
documents, the duty of the court is to first ascertain and then, if possible, give effect to
the intent of the maker.” (Estate of Gump (1940) 16 Cal.2d 535, 548; accord, Ephraim v.
Metropolitan Trust Co. (1946) 28 Cal.2d 824, 834 [“the primary rule in construction of
trusts is that the court must, if possible, ascertain and effectuate the intention of the
trustor or settlor”]; § 21102, subd. (a) [trustor’s intent controls].)
       “It is axiomatic that we must look to the instrument creating the trust to determine
the nature, extent and object of said trust.” (Moxley v. Title Ins. & Trust Co. (1946)
27 Cal.2d 457, 463.) “Accordingly, in ascertaining the intention of the trustor the court is
not limited to determining what is meant by any particular phrase but may also consider
the necessary implication arising from the language of the instrument as a whole.”
(Brock v. Hall (1949) 33 Cal.2d 885, 890 (Brock); see §§ 21120, 21121.)
       The court also examines the relevant circumstances surrounding creation of the
trust. (Estate of Powell (2000) 83 Cal.App.4th 1434, 1440.) “ ‘ “In interpreting a
document such as a trust, it is proper for the trial court in the first instance and the
appellate court on de novo review to consider the circumstances under which the
document was made so that the court may be placed in the position of the testator or
trustor whose language it is interpreting, in order to determine whether the terms of the
document are clear and definite, or ambiguous in some respect.” ’ [Citations.]” (Estate
of Powell (2000) 83 Cal.App.4th 1434, 1440.) “ ‘Thus, extrinsic evidence as to the
circumstances under which a written instrument was made is admissible to interpret the
instrument, although not to give it a meaning to which it is not reasonably susceptible.’ ”
(Ike v. Doolittle (1998) 61 Cal.App.4th 51,73; see Burch v. George (1994) 7 Cal.4th 246,
258, fn. 8 [“Evidence of the circumstances surrounding the execution of the trust
instrument is properly admissible to ascertain its meaning and intent. [Citations.]”].)

                                               18
       In reviewing a trial court’s construction of a trust, “ ‘we are free to independently
interpret the instrument as a matter of law unless the trial court’s interpretation turned
upon the credibility of extrinsic evidence or required resolution of a conflict in the
evidence. [Citations.] “The possibility that conflicting inferences can be drawn from
uncontroverted evidence does not relieve the appellate court of its duty independently to
interpret the instrument; it is only when the issue turns upon the credibility of extrinsic
evidence, or requires resolution of a conflict in that evidence, that the trial court[’s]
determination is binding.” [Citation.]’ [Citation.]” (Estate of Goyette (2004)
123 Cal.App.4th 67, 71.)
       On appeal, Todd acknowledges that the Trust instrument does not expressly
prohibit the sale of the Jarvis Ranch for agricultural land value. He argues, however, that
the trial court erred in determining that the Trust permits the sale of the Jarvis Ranch for
agricultural land value because the language of the Trust instrument, specifically the
phrases “ ‘at this time’ ” and “ ‘sale and development,’ ” shows that the settlors only
wanted to sell Jarvis Ranch if it could be developed. Todd also asserts that McDonnell
stated in an email earlier in the case that James was no longer interested in amending the
Trust to allow a sale for agricultural land value.
       According to James, it is undisputed that the settlors’ intent when the Trust was
created was to sell the Jarvis Ranch for a value greater than agricultural land value, and
the circumstances “ ‘at this time’ ” included negotiation with Centex/Shea to buy the
Jarvis Ranch for development. However, James argues that the Trust instrument includes
language demonstrating the settlors’ contemplation of the possibility that the land could
not be sold for development; in particular, the language stating that the Trust’s purposes
included evaluation of the “ ‘economic viability of the sale and development’ ” of the
Jarvis Ranch and giving the trustee the authority to sell the Trust property.
       Having reviewed the language of the Trust instrument and the evidence of the
circumstances surrounding its making, we agree with the trial court that the Trust permits

                                              19
the trustee to sell the Jarvis Ranch for agricultural land value. In our analysis, we look
first to the language of the Trust as a whole, as required by the standard of review.
(Brock, supra, 33 Cal.2d at p. 890.)
        The Trust instrument includes the following statement of intent, at paragraph 1.3:
“The primary purposes of the settlors in the creation of this trust (in no particular order)
are to provide (1) for the management and administration of the JARVIS RANCH . . .
and the JARVIS PROPERTIES real estate . . .; (2) the distribution of income from the
trust assets as provided in section 5.1; (3) an evaluation of the economic viability of the
sale and development of the JARVIS RANCH and JARVIS PROPERTIES real estate; and
(4) the negotiation of the sale and the development of the JARVIS RANCH and the
JARVIS PROPERTIES real estate.” (Italics added.)
        The statement of intent also provides that “[t]he trustee and settlors agree that, at
this time, the settlors are only interested in selling the JARVIS RANCH for a value
substantially greater than that which would be paid for just farmland, meaning that the
sale should be for the property entitled for a use greater than farmland (such as a mixed
use, residential or commercial use).” (Italics added.)
        At paragraph 7.8, the Trust states the general powers of the trustee, which include
in part: “[T]he trustee shall have all of the following powers, in his fiduciary
capacity . . . [¶] . . . With or without court authorization, negotiate, sell (for cash or on
deferred payments and with security), convey, exchange, partition, and divide trust
property . . . .”
        The Trust also specifies special powers and duties of the trustee relating to the
proposed sale of the Jarvis Ranch, including (1) “The trustee shall reasonably cooperate
with any requests from the beneficiaries . . . that the sale of the JARVIS RANCH real
estate . . . be structured to accommodate an Internal Revenue Code Section 1031
exchange in order to defer income taxes on the proceeds of the sale”; and (2) “The trustee
may, but is not required to, execute an exclusive negotiation agreement (‘ENA’) by and

                                               20
between the trust and a developer or developers. Attached as Exhibit B is a copy of an
ENA with [Centex/Shea] which was signed by them and dated December 29, 2003,
which the trustee shall promptly consider and may amend and sign if the trustee deems it
in the interests of the trust to pursue this opportunity.”
       As Todd acknowledges, the Trust instrument does not expressly provide that the
settlors (Todd and James) intended that sale of the Jarvis Ranch be prohibited unless the
property could be sold for a value greater than agricultural land value. We find that the
plain language of the Trust authorizes the trustee to sell Jarvis Ranch property and does
not restrict the use for which the property may be sold. Additionally, the Trust
instrument expressly provides that one of the Trust’s purposes is to evaluate “the
economic viability of the sale and development” of the Jarvis Ranch, which necessarily
implies that the settlors contemplated that sale of the Jarvis Ranch for development might
not be economically viable. Moreover, as the trial court noted, the phrase “at this time”
in the statement of intent (“[t]he trustee and settlors agree that, at this time, the settlors
are only interested in selling the JARVIS RANCH for a value substantially greater than
that which would be paid for just farmland . . . .”) would not have been necessary if the
settlors had intended to sell the Jarvis Ranch only for development or did not contemplate
a sale for agricultural land value at a later time. We therefore determine that the Trust
authorizes the trustee to sell the Jarvis Ranch for agricultural land value.
       Our interpretation of the Trust instrument is supported by substantial evidence of
the circumstances surrounding the creation of the Trust. (See Cutrera v. McClallen
(1963) 215 Cal.App.2d 604, 608.) It is undisputed that when the Trust was amended in
2004, negotiations with Centex/Shea to purchase the Jarvis Ranch for development were
pending and the sale had not been agreed upon. It is also undisputed that Centex/Shea
withdrew from those negotiations shortly after the Trust was established and the trustee
thereafter determined on the basis of expert opinion that sale and development of the
Jarvis Ranch was not economically viable in the foreseeable future. Accordingly, we

                                               21
interpret the Trust instrument to authorize McDonnell, as trustee, to sell the Jarvis Ranch
for agricultural land value after negotiations to sell the property to Centex/Shea for
development failed and development of the property was no longer economically viable.
         E. Evidentiary Hearing
         Todd contends that the trial court erred in failing to grant his requests for an
evidentiary hearing in this contested proceeding, since section 1022 only allows the use
of affidavits as evidence in uncontested probate proceedings.
         James responds that the failure to hold an evidentiary hearing does not constitute
reversible error because Todd did not request an evidentiary hearing on material factual
issues and both parties submitted evidence by declarations with attached documents. We
agree.
         Section 1022 provides that in a proceeding under the Probate Code, “[a]n affidavit
or verified petition shall be received as evidence when offered in an uncontested
proceeding.” 7 Therefore, “when challenged in a lower court, affidavits and verified
petitions may not be considered as evidence at a contested probate hearing. [Citation].”
(Evangelho v. Presoto (1998) 67 Cal.App.4th 615, 620 (Evangelho).) Under that general
rule, where a party opposing a motion in probate court requested an evidentiary hearing
on the ground that there were “factual conflicts presented by the parties’ competing
declarations,” the trial court committed reversible error in denying the request for an
evidentiary hearing. (Estate of Bennett (2008) 163 Cal.App.4th 1303, 1309-1310
(Bennett); see also Estate of Lensch (2009) 177 Cal.App.4th 667, 676 (Lensch).)

         7
         “Most statutes refer to affidavits rather than declarations, but [Code of Civil
Procedure] section 2015.5 authorizes a declaration to be used whenever the law requires
an affidavit.” (Harbour Vista, LLC v. HSBC Mortgage Services, Inc (2011)
201 Cal.App.4th 1496, 1515, fn. 7.)

                                               22
       However, there is an exception that is applicable in the present case. “[W]here the
parties do not object to the use of affidavits in evidence, and where both parties adopt that
means of supporting their positions, the parties cannot question the propriety of the
procedure on appeal. [Citation.]” (Estate of Nicholas (1986) 177 Cal.App.3d 1071,
1088; see Estate of Fraysher (1956) 47 Cal.2d 131, 135; Evangelho, supra, 67
Cal.App.4th at p. 620.) Here, both parties submitted declarations as evidence in support
of their positions on the petition. Todd made evidentiary objections, such as lack of
foundation, to certain portions of James’s declarations, but Todd did not object to the use
of declarations as evidence.
       Moreover, Todd’s written request for an evidentiary hearing did not identify any
material factual conflicts arising from either McDonnell’s verified petition or the parties’
declarations that required an evidentiary hearing. (See Lensch, supra, 177 Cal.App.4th at
p. 676; Bennett, supra, 163 Cal.App.4th at p. 1309.) Todd only requested an evidentiary
hearing “if the Court is going to consider any of these allegations [in the petition]
respecting [Todd’s] objections to unspecified trustee activities, [Todd’s] objection to the
Trustee’s purported settlement of litigation with CalTrans and alleged but unspecified
costs to the Trust;” or “if the Court is inclined to consider any of those allegations [about
Trust expenses] as ‘evidence.’ ” The record does not reflect that the trial court
considered these matters in deciding the petition or that they constituted material factual
conflicts with respect to the petition. Moreover, Todd’s oral request for an evidentiary
hearing on the day of the hearing on the petition was based on the insufficient conclusory
assertion that “the only proper way to resolve this is through an evidentiary hearing”
because it was not “appropriate for a matter of this magnitude to be decided on
declarations and argument of this type.”
       We therefore determine that the trial court did not err in failing to grant Todd’s
request for an evidentiary hearing on the petition.

                                             23
       F. Abuse of Discretion
       We next consider the ultimate issue of whether the trial court abused its discretion
in granting the petition. As we have stated, the abuse of discretion standard of review is
applicable where, as here, the trial court’s order concerns a petition filed under section
17200. (§ 17206; see Manson, supra, 188 Cal.App.4th 1244, 1258.)
       “ ‘[O]ne of the essential attributes of abuse of discretion is that it must clearly
appear to effect injustice. [Citations.] Discretion is abused whenever, in its exercise, the
court exceeds the bounds of reason, all of the circumstances before it being considered.
The burden is on the party complaining to establish an abuse of discretion, and unless a
clear case of abuse is shown and unless there has been a miscarriage of justice a
reviewing court will not substitute its opinion and thereby divest the trial court of its
discretionary power.’ [Citations.]” (Denham v. Superior Court (1970) 2 Cal.3d 557, 566
(Denham).) In other words, “[a] trial court will abuse its discretion by action that is
arbitrary or ‘that transgresses the confines of the applicable principles of law.’
[Citations.]” (Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281 (Shaw.))
       Although neither party framed his arguments regarding the merits of the trial
court’s order under the abuse of discretion standard, we understand their arguments with
respect to the trial court’s exercise of its discretion to be as follows.
       Todd contends that the trial court erred because the Trust does not permit the sale
of the Jarvis Ranch for agricultural land value; the proposed sale to Hancock will cause
him to suffer adverse tax consequences; the Hancock contract is unfair and uncertain; and
McDonnell secretly changed language in the draft contract.
       James argues to the contrary that the trial court appropriately determined that sale
of the Jarvis Ranch to Hancock was in the best interest of the Trust and its beneficiaries;
it is undisputed that the sale price of $11.6 million is fair market value; there was no
evidence that the Jarvis Ranch could be sold for development in the foreseeable future;
the Hancock contract includes a process for opening the sale to overbids; an Internal

                                               24
Revenue Code section 1031 exchange will be accommodated as required by the Trust;
and the Hancock contract expressly provides for disclosure of the pending eminent
domain actions and environmental disclosures and does not provide a warranty relating to
environmental issues.
       We determine that Todd has failed to meet his burden as the appellant to show a
clear case of abuse of discretion resulting in a miscarriage of justice. (See Denham,
supra, 2 Cal.3d at p. 566.) As we have previously determined as a matter of law, the
trial court did not err in interpreting the Trust to permit the sale of the Jarvis Ranch for
agricultural land value. Further, the trial court properly relied on the undisputed expert
opinion of Piini, a real estate broker specializing in agricultural land sales, that the
purchase price of $11.6 million was consistent with the sales of similar agricultural
properties and that there was no potential for sale of the property for development in the
foreseeable future.
       As to Todd’s claim regarding the adverse tax consequences of the Hancock
contract, which the trial court implicitly rejected, we observe that McDonnell stated in his
declaration that he had entered into a letter agreement with Hancock that amended the
proposed real estate purchase agreement “to provide that the buyer will cooperate with a
[Internal Revenue Code section] 1031 exchange.” Additionally, the Trust expressly
provides that “[t]he trustee shall reasonably cooperate with any requests from the
beneficiaries . . . that the sale of the JARVIS RANCH real estate . . . be structured to
accommodate an Internal Revenue Code Section 1031 exchange in order to defer income
taxes on the proceeds of the sale.”
       The trial court’s finding that the sale of the Jarvis Ranch to Hancock was in the
best interests of the Trust was also supported by McDonnell’s evidence, as stated in his
verified petition and his declaration, that the sale would benefit the Trust by reducing the
high conflict between beneficiaries Todd and James and by reducing the administrative
costs caused by their conflict. Accordingly, Todd has not shown that the trial court

                                              25
abused its discretion by an action that was arbitrary or transgressed the applicable
principles of law. (Shaw, supra, 170 Cal.App.4th at p. 281.)
       For these reasons, we conclude that the trial court did not err in granting the
petition for for authority to perform a real estate purchase contract for sale of the Jarvis
Ranch to Hancock for $11.6 million and we will affirm the order.
       G. Sanctions Motions
       Finally, we address the parties’ motions for monetary sanctions.
       Todd has filed a motion for monetary sanctions against McDonnell’s attorneys.
We understand Todd to argue in his 44-page motion that McDonnell’s attorneys filed a
frivolous motion for sanctions against him; filed a frivolous defense of the appeal;
submitted false and misleading statements to the court; and committed unreasonable
violations of unspecified rules of the California Rules of Court.
       McDonnell has filed a motion for monetary sanctions against Todd on the ground
that Todd filed a frivolous “motion to reverse with directions to the probate court to
dismiss case.” McDonnell argues that Todd misled this court by asserting that he did not
know the grounds for the motion to reverse (mootness of the appeal) before filing his
opening brief, when the record clearly shows otherwise.
       Under Code of Civil Procedure section 907 and California Rules of Court,
rule 8.276(a)(1), an appellate court may impose sanctions against a party or an attorney
for taking a frivolous appeal. In In re Marriage of Flaherty (1982) 31 Cal.3d 637, the
California Supreme Court set forth the standard for determining whether an appeal is
frivolous and deserving of sanctions. The court stated that sanctions “should be used
most sparingly to deter only the most egregious conduct.” (Id. at p. 651.) An appellate
court may also impose sanctions where a party or attorney included in the record any
matter not reasonably material to the appeal’s determination; filed a frivolous motion; or
committed any other unreasonable violation of the California Rules of Court. (Cal. Rules
of Court, rule 8.276(a)(2)-(4).)

                                              26
       In this case we determine that neither party’s arguments justify an award of
sanctions. McDonnell cannot be faulted for defending Todd’s appeal and we are not
convinced by Todd’s other arguments in support of a sanctions award against
McDonnell. We are also not convinced by McDonnell’s argument that a sanctions award
against Todd is warranted due to his filing of the “motion to reverse with directions to the
probate court to dismiss case.” The “motion to reverse with directions to the probate
court to dismiss case” was not actually filed since this court’s September 6, 2012 order
denied Todd’s request for leave to file that motion. We will therefore deny both
sanctions motions.

                                            27
                                    IV. DISPOSITION
       Appellant Todd Jarvis’s motion for sanctions is denied. Respondent John
McDonnell’s motion for sanctions is denied. The December 4, 2010 order granting the
petition for authority to perform a real estate purchase contract is affirmed. Costs on
appeal are awarded to respondent.

                                    ___________________________________________
                                          BAMATTRE-MANOUKIAN, J.

WE CONCUR:

__________________________
ELIA, ACTING P.J.

__________________________
MÁRQUEZ, J.

                                            28