Court Opinion

ID: 3182836
Source: CourtListenerOpinion
Date Created: 2016-03-04 18:15:50.780041+00
Date Added: 2024-06-11T08:38:06.175700
License: Public Domain

Filed 2/10/16 DeJohn v. Wheeler CA1/3
Received for posting 3/4/16

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                       FIRST APPELLATE DISTRICT

                                                DIVISION THREE

LISA DEJOHN,
         Plaintiff and Respondent,                                   A137825, A138421

v.                                                                   (City & County of San Francisco
DAVID WHEELER, et al.,                                               Super. Ct. No. PTR09292931)
         Defendants and Appellants;                                  ORDER MODIFYING OPINION
DARREN WALLACE, as Successor                                         AND DENYING REHEARING;
Trustee, etc.                                                        NO CHANGE IN JUDGMENT
         Real Party in Interest and
         Respondent.

THE COURT:

         It is ordered that the opinion filed January 21, 2016, be modified as follows:

       In the carryover paragraph at the top of page 22, in the sentence that begins with
the word “Moreover,” the words “sole discretion,” currently in quotation marks, are
deleted and replaced with the word “discretion,” without quotation marks.

         There is no change in the judgment.

         The petition for rehearing is denied.

Dated: _______________                          ______________________________
                                                Pollak, Acting P.J.

                                                             1
Filed 1/21/16 DeJohn v. Wheeler CA1/3
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                       FIRST APPELLATE DISTRICT

                                                DIVISION THREE

LISA DEJOHN,
         Plaintiff and Respondent,
                                                                     A137825, A138421
v.
DAVID WHEELER et al.,                                                (City & County of San Francisco
                                                                     Super. Ct. No. PTR09292931)
         Defendants and Appellants;
DARREN WALLACE, as Successor
Trustee, etc.
         Real Party in Interest and
         Respondent.

         This case concerns management of a family trust. Margaret and James Narron
established the trust with their community property, in part to minimize the tax owed by
their two children upon the death of the surviving spouse. After the death of one of them,
the surviving spouse was to become trustee with authority to manage the trust assets. At
the death of the surviving spouse, the Narrons’ children were to share equally in the
remaining assets. To maximize the tax benefits, the surviving spouse trustee’s ability to
take money from the trust was restricted. Distributions of principal and interest had to be
approved by an independent trustee.
         Margaret survived James. She made payments to herself from trust assets without
the approval of the independent trustee, Margaret’s accountant David Wheeler, who
apparently forgot that he had been appointed to act in that capacity. A substantial portion

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of the money Margaret took from the trust went to her son, Stephen Narron (Stephen).
When her other child, Lisa DeJohn, learned of the trust, the funds used by Margaret, and
the money given to Stephen, she petitioned to restore assets to the trust, and to remove
Margaret and Wheeler as trustees. DeJohn alleged that Margaret and Wheeler were liable
for breaches of fiduciary duty, that the accounting firms with which Wheeler was
affiliated, LMGW C.P.A., APC (APC) and LMGW C.P.A., L.L.P., (LLP) were
vicariously liable for his misfeasance, and that the trust was the rightful owner of a home
in Colorado that Stephen acquired and improved with the help of money from the trust.
       The trial court ruled for DeJohn on all issues. It held Margaret, Wheeler, APC,
and LLP jointly and severally liable for all of the money Margaret used from the trust,
with interest from the date of each distribution. It found Stephen liable for the trust assets
he received, with interest, and held Margaret, Wheeler, APC, and LLP jointly and
severally liable with Stephen to repay those same funds. It held Margaret liable for
DeJohn’s attorney fees in the case, and Margaret and Wheeler jointly and severally liable
for DeJohn’s attorney fees in a prior action on the trust she instituted in Colorado.
Margaret, Wheeler, APC, and LLP have appealed from the judgment.
       On Margaret’s appeal, we conclude that: (1) the successor and independent
trustee, Darren Wallace, has standing to defend the judgment on behalf of the trust; (2)
Margaret is liable to the trust to repay unauthorized distributions; (3) Margaret was
authorized to take distributions from the trust that Wheeler approved at trial and after the
sale of a trust asset in 2000; (3) the sums Margaret provided Stephen were loans she was
authorized to make from the trust; (4) Margaret is potentially liable for prejudgment
interest at the rate of ten percent per annum on her unauthorized distributions if her
actions are found to have been unreasonable and in bad faith, which must be reconsidered
in light of our opinion; (5) Margaret’s liability for DeJohn’s attorney fees in the case
must also be reassessed in light of her significant success in this appeal; and (6) Margaret
is liable for DeJohn’s attorney fees in the Colorado action.
       On Wheeler’s appeal and those of APC and LLP, we conclude that Wheeler is not
liable for any breaches of duty to the trust, a conclusion that relieves APC and LLP of

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any liability, and that Wheeler is not liable for DeJohn’s attorney fees in the Colorado
action.
          Margaret’s liability to the trust is significantly reduced and must be recalculated
by the trial court. Wheeler, APC, and LLP have no liability. Thus, we reverse most of
the judgment.
                                      I. BACKGROUND
A. The Trusts
          In 1991, Margaret and her late husband James Narron (James) established the
Narron Family Trust (the Trust). The Trust was fully funded with community property
real estate in San Jose, Scotts Valley, San Francisco, and Sunnyvale, California. The
Trust provided that, upon the death of the first spouse, two trusts would be created, an
irrevocable Decedent’s Trust, which is the focus of this action, and a Survivor’s Trust.
The Decedent’s Trust would receive the maximum amount that could pass to non-spousal
beneficiaries free of federal estate tax, and the Survivor’s Trust would receive the
remainder of the Trust’s assets. Upon the surviving spouse’s death, the assets in the
Decedent’s Trust and the Survivor’s Trust would be divided equally between Stephen and
DeJohn.
          The Decedent’s Trust would be administered by the surviving spouse as trustee,
and by an independent trustee. Wheeler, who was James and Margaret’s accountant, is
named in the Trust as the independent trustee, and he executed the Trust agreement in
that capacity. Article IX of the Trust provides: “The Trustee shall pay to the surviving
Trustor such amounts of income as the Independent Trustee, in its sole discretion, deems
appropriate.” It further provides: “In addition to the income payments hereinabove
provided, the Independent Trustee shall pay to the surviving Trustor such amounts of
principal as the Independent Trustee, in its sole discretion, deems appropriate for his or
her comfortable support, care and maintenance, including a reasonable number of the
luxuries of life.” Article XV states that the independent trustee’s duties are “limited to
those duties specifically set aside to her (sic) in Article IX . . . .”

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       Wheeler testified that the Survivor’s Trust and the Decedent’s Trust were
“classic . . . A/B trust[s].” DeJohn’s expert witness, Michael Boerio, testified that the
Decedent’s Trust, the “B” or “tax bypass,” trust, was structured so “there were not
enough inciden[ces] of ownership for [Margaret] in that trust to cause it to be included in
her estate for estate tax purposes. She had the right to receive an income distribution if it
was approved by an independent trustee. She had the right to receive a principal
distribution . . . if it was approved by an independent trustee. That’s not a sufficient
inciden[ce] of ownership.” Wheeler’s expert witness, Francis Doyle, testified that same
tax advantage could be gained without an independent trustee by restricting the surviving
spouse’s use of B trust assets to expenses for health, education, maintenance, and
support. Boerio said it was uncommon “to have an independent trustee appointed whose
permission is needed to make distributions of income or principal.” He had not drafted
any such provisions for 30 years because of the “problems surrounding [their]
administration.”
       The Trust states that it was created “principally as a means of providing a
convenient vehicle for the administration of [the trustors’] property during their lifetime
and upon the death of one of the Trustors. In exercising any discretion herein provided
for the Trustee, after the death of a Trustor, the Trustee shall regard the interest of the
surviving Trustor as primary . . . .” The Trust grants the surviving spouse trustee the
power to “exercise full rights, powers and dominion over the property, the same as an
owner thereof,” including the right to sell property, borrow money, and make
investments.
       When James died in 1996, Margaret retained Wheeler to divide the Trust assets.
In 1996, the maximum amount that could pass to non-spousal beneficiaries free of estate
tax was $600,000. The Decedent’s Trust was thus funded with the Sunnyvale property,
valued at $537,278, and a 25.19 percent interest in the Scotts Valley property, valued at
$62,722.
B. Margaret’s Dealings With Trust Property

                                               4
       In March of 2000, Margaret sold the Sunnyvale property for a gross sale price of
$1,350,000. She transferred $700,000 of the proceeds into a Fidelity Investments account
in her name as trustee of the Decedent’s Trust; used $133,000 of the proceeds to purchase
a condominium at 3900 South Rifle Court in Aurora, Colorado (3900 South Rifle) in the
name of the Decedent’s Trust; and kept $70,000 for herself. In March 2001, Margaret
withdrew $128,490.50 from the Fidelity account to purchase a condominium at 3930
South Rifle Court in Aurora (3930 South Rifle), also in the name of the Decedent’s Trust.
In August 2001, Margaret sold the Scott’s Valley property for 405,000. The Decedent’s
Trust 25.19 percent interest in the proceeds was $102,019.50. Margaret used Scott’s
Valley proceeds to purchase 1249 Harrison Court in Boulder, Colorado (Harrison Court).
       Citing the Fidelity account ($700,000), 3900 South Rifle ($133,000), the Scott’s
Valley property ($102,000), and the money Margaret retained from the Sunnyvale sale
($70,000), the trial court noted that the Decedent’s Trust was at one time worth at least
$1,005,000.
       Stephen moved to Colorado in 2000 or 2001, living first at 3900 South Rifle and
then at 3930 South Rifle. In 2002 or 2003, he purchased 2570 South Carey Way in
Denver (2570 South Carey) for $180,000 he received from Margaret. He testified that he
planned to renovate the home on the property, sell it at a profit, and split the profits
“about . . . half to me and half to [Margaret].” He thought only an additional $150,000
would be needed for the renovations. But the project greatly expanded when defects in
the property were discovered that required its demolition.
       Margaret, 83 years old at the time of trial, testified that she was “really mad” when
she learned Stephen had demolished the home at 2570 South Carey. She had been
lending Stephen money from the Survivor’s Trust, and more loans from that trust would
now be required for the project. Eventually, she had to loan Stephen money from the
Decedent’s Trust to protect her earlier investments. She said that if he did not finish the
house he was building, he could not repay her.
       Stephen said that the house was finished in 2006. He unsuccessfully tried to sell
it beginning in February or March 2007 for $1.4 million. In September 2007, Margaret

                                              5
wrote a document stating that Stephen had borrowed money from her, the Decedent’s
Trust was owed $500,000, the Survivor’s Trust was owed $258,000, and the Decedent’s
Trust was the “ ‘first priority to be repaid.’ ” Stephen has lived at 2570 South Carey
since 2008.
       DeJohn testified that she first learned of the Decedent’s Trust in November 2007.
She said Margaret “told me that there is a decedent’s trust and that I was a beneficiary
and that it was depleted and that most of the money had gone to my brother.” “[S]he told
me that I could sue her for that.”
       Margaret sold 3900 South Rifle in 2004 for $133,000. She put the proceeds in a
personal bank account, transferred $100,000 to Stephen, and used $33,000 to pay her
personal expenses. She sold 3930 South Rifle in 2008 for $155,000. $92,865 of the
proceeds were traced to payment of amounts owed by Margaret on a line of credit.
Margaret prepared an accounting listing $97,586.31 of the sale proceeds as a loan to
Stephen. In 2009, the Survivor’s Trust purchased the Decedent’s Trust’s interest in
Harrison Court for a $81,867 promissory note, secured by the San Jose property still
owned by Margaret.
       By the time of trial, the Decedent’s Trust’s only asset was this $81,867 promissory
note. Stephen testified that he owed Margaret “a little under $1.2 million,” but he did not
know how much he owed the Decedent’s Trust or the Survivor’s Trust.
C. Wheeler, APC, and LLC
       Wheeler testified that he owned his own accounting firm until 2002, when he went
to work full time as chief financial officer of a San Diego company. At that time, he sold
90 percent of his tax practice to APC, including “the part associated with the Narrons.”
He was then acting as trustee of a number of trusts, and his services as trustee were not
part of the sale. He explained that “[t]here’s really no way to transfer a trust relationship
. . . .” APC dissolved in 2008 or 2009. Wheeler said that, when APC dissolved, its
clients were distributed to its shareholders, and “LLP was formed and more partners were
added to the LLP at that time.” He said that partners’ work as trustees is done outside
LLP, and LLP receives no compensation for trustee services. LLP prepares tax returns

                                              6
for the trusts in which he is a trustee, and LLP is paid for that work. Wheeler conceded
that his trusteeships served as an excellent way for LLP to maintain the trusts as tax
clients.
       Wheeler admitted signing the Trust agreement. He did not remember reading it,
but said he would likely have skimmed the document for provisions that pertained to him.
He did not remember being named as independent trustee in the Trust until he was
contacted by a Colorado attorney in 2009.
       DeJohn’s expert Boerio testified that it would be standard practice for an
accountant allocating assets between A/B trusts to read the trust agreement. Wheeler
testified that he did not necessarily need to review the Trust in order to make the
allocation. He said he generally prepares such allocations based on a request of counsel,
who “would provide us with all the values” involved, and advise if there were “any
unusual circumstances with the trust.” However, Wheeler acknowledged that it was
necessary to determine, when tax returns for the Decedent’s Trust were prepared
beginning in 1996 or 1997, whether the trust was a “simple” or “complex” one for tax
purposes. He said that in order to make this determination, “[y]ou need to understand
what the trust instrument says.” He explained that a simple trust is one that requires
distribution of all its net income to the beneficiaries at least annually, and that all other
trusts are considered complex. A trust like the Decedent’s Trust that left distributions to
the discretion of an independent trustee was “[b]eyond the scope of a simple trust.”
       Wheeler testified that he “volunteered” in 2009 to act as the independent trustee of
the Decedent’s Trust because he thought that resolving DeJohn’s concerns would be a
“simple process” because “Margaret had lots of assets in the survivor’s trust. So she
could improve the decedent’s trust by putting other assets in there . . . .”
       Margaret testified Wheeler told her that at the time she sold the Sunnyvale
property she could take $3,000 to $4,000 per month out of the Decedent’s Trust. He did
not tell her, and she did not know, whether he gave that advice as the independent trustee
of the Decedent’s Trust, but she believed “at the time that he did have power to speak . . .
for the trust.” Wheeler testified that he had not approved any distributions to Margaret

                                               7
from the Decedent’s Trust. He said that he writes a check or otherwise documents any
distribution from a trust that he approves as trustee, and that he had no record of any
distributions to Margaret as of the time of trial.
       At trial, Wheeler testified that he was authorizing, in his capacity as independent
trustee of the Decedent’s Trust, distributions to Margaret of the $204,087 in income
shown on tax returns for the trust from 2001 to 2009. Experts Boerio and Doyle agreed
that annual distribution of income is the best practice, because income remaining in the
trust is taxed at a higher rate. Wheeler testified that he was not approving any
distributions of principal.
D. The Colorado Action
       In February 2009, DeJohn petitioned a Colorado court for an accounting of the
Decedent’s Trust. Margaret agreed to provide it, DeJohn withdrew her petition, and an
accounting was provided in April 2009. In July 2009, DeJohn petitioned for a further
accounting alleging that the one Margaret provided was incomplete, and for removal of
Margaret as trustee of the Decedent’s Trust. Margaret furnished a second accounting in
September 2009. At trial, Margaret admitted various inaccuracies in the accountings.
       Margaret filed an affidavit in the Colorado action averring that her primary
residence was in San Francisco. The affidavit stated that she had “a secondary residence”
at Harrison Court in Boulder, but that San Francisco was “the usual place where she
carrie[d] on day-to-day activities as trustee.” At trial, Margaret testified that she moved
to Harrison Court in October 2008, obtained a Colorado identification card, and
registered to vote there. Wheeler filed an affidavit in the Colorado case stating that he
was the independent trustee of the Decedent’s Trust, and that “[h]is day-to-day activities”
in that capacity, “such as reviewing requests for distributions from the trust,” were
conducted in California. Wheeler admitted telling Margaret’s attorney that he had
forgotten that he had been named independent trustee. He acknowledged his duties as
independent trustee to review and approve distributions from the Decedent’s Trust, but
said he had never been asked to approve, or had approved, any such distributions.

                                               8
       DeJohn testified that she dismissed the Colorado action because she did not
believe she could prevail in light of Margaret’s and Wheeler’s affidavits that trust
business was conducted in California.
E. This Action
       DeJohn commenced this case in November 2009. Her second amended petition
named Margaret, Wheeler, LLP, Stephen, his wife, Conni George Narron (Conni), and
Does 1-50 as respondents. The petition alleged that Margaret and Wheeler should be
surcharged for breach of duties to the Decedent’s Trust, and removed as trustees. The
petition alleged that LLP was vicariously liable for Wheeler’s wrongdoing, and that the
Decedent’s Trust was entitled to the 2570 South Carey property owned by Stephen and
Conni. The petition sought injunctive relief, attorney fees, and a further accounting.
During trial, DeJohn moved to add APC in place of Doe 1 as a respondent, on the basis
that she was unaware of APC’s existence until “right before the trial commenced.”
F. The Statement of Decision
       The court filed a statement of decision ruling for DeJohn. The court found that
Margaret failed to comply with the Decedent’s Trust’s requirement that she obtain
approval from the independent trustee before taking distributions, and breached multiple
duties she owed to DeJohn as trustee. She breached her duty of loyalty by taking
unauthorized distributions for her personal use, including distributions taken to protect
her investment in 2570 South Carey. (Prob. Code, § 16002 [trustees are to “administer
the trust solely in the interest of the beneficiaries”].) She had a conflict of interest with
DeJohn in 2570 South Carey, and engaged in impermissible self-dealing on that property.
(Prob. Code, § 16004 [“the trustee has a duty not to use or deal with trust property for the
trustee’s own profit or for any other purpose unconnected with the trust, nor to take part
in any transaction in which the trustee has an interest adverse to the beneficiary”].)
       Margaret breached her duty to treat Stephen and DeJohn impartially. (Penny v.
Wilson (2004) 123 Cal. App. 4th 596, 604 [”the trustee must act impartially toward all
beneficiaries”].) “Margaret’s delivery of approximately $500,000 of Decedent’s Trust
funds to Stephen completely thwarted James Narron’s testamentary plan to benefit his

                                               9
children equally from the Decedent’s Trust.” The court rejected Margaret’s claim that
the Decedent’s Trust had made loans to Stephen. “The evidence showed that these were
not loans and that there is no legitimate plan for repayment. . . . Instead, they were
distributions from the Decedent’s Trust to Margaret, in her personal capacity, followed
by subsequent gifts from Margaret to Stephen.”
       Margaret improperly commingled her assets with those of the Decedent’s Trust.
(Prob. Code, § 16009.) She “routinely transferred Decedent’s Trust funds into her own
Wells Fargo Account, which is titled in her name personally. . . . She then used the funds
however she pleased, commingling her own personal funds with those which she had just
caused to be distributed from the Decedent’s Trust.”
       She violated her duty to preserve trust property by depleting the Decedent’s
Trust’s assets. (Prob. Code, § 16006.) The money she paid in connection with 2570
South Carey violated her duty to diversify trust investments. (Prob. Code, § 16048
[investments must generally be diversified]). “While an investment scheme which places
half a million dollars in one house would not run afoul of the diversity requirement in all
trusts, viewing this alleged investment in its proper context and considering it in relation
to the remaining assets of the Decedent’s Trust, such an investment was a flagrant breach
of the duty to diversify.” Those alleged investments also violated the prudent investor
rule. (Prob. Code, § 16047, subd. (a).) “No prudent person would use trust funds to pay
her own bills and deliver approximately $500,000 to her own son, who was not a licensed
contractor or architect, so he could build a speculation home in another state. . . . To the
extent Margaret was incapable of prudently managing the Decedent’s Trust or investing
its assets, she should have delegated that authority to a qualified agent.”
       Margaret breached her duty to keep DeJohn informed of the Decedent’s Trust’s
administration. (Prob. Code, § 16060.) “[DeJohn] testified that she did not learn of the
[Decedent’s] Trust’s existence until November 2007, more that eleven (11) years after
James Narron died.” Margaret breached her duty to provide accurate accountings of the
trust to DeJohn, admitting in her testimony that the accountings she produced were

                                             10
inaccurate. (Blackmon v. Hale (1970) 1 Cal. 3d 548, 560 [trustees must keep full and true
accounts of their dealings with trust property].)
       The court found that Wheeler also breached his duties under the Decedent’s Trust
by neglecting them and giving Margaret unlimited access to the trust’s assets. (Prob.
Code, §16000 [“[o]n acceptance of the trust, the trustee has a duty to administer the trust
according to the trust instrument”].) The court rejected Wheeler’s claim that he did not
accept his appointment as independent trustee until 2009, before he signed the affidavit in
the Colorado action stating that his activities in that capacity were conducted in
California. The court determined that Wheeler agreed to act as independent trustee when
he signed the Trust in 1991, and when he knowingly exercised powers of the independent
trustee in 2000.
       Wheeler was asked, “From the time you signed the trust in 1991 until you received
a telephone call from a Colorado attorney in 2009, did you have any idea that you were
named as independent trustee of the Narron Family Trust?” He answered, “No I don’t
remember and I don’t believe so.” The court did not believe this testimony.
       The court wrote: “Assuming arguendo, Wheeler did not accept his role as
Independent Trustee by signing the Trust instrument, he accepted by knowingly
exercising powers and performing duties of the Independent Trustee. Specifically,
Margaret testified that Wheeler told her she could take $3,000 to $4,000 per month from
the Fidelity Decedent’s Trust account when it was established on June 14, 2000.
Wheeler’s expert, Mr. Doyle, testified that approving of such distributions to Margaret
was consistent with his duties as Independent Trustee so long as he knew he was named
as Independent Trustee.
       “The preponderance of the evidence at trial showed that Wheeler did read the
Trust following James Narron’s death, and therefore knew he was named as Independent
Trustee. The evidence showed that he read the Trust to determine the correct names for
the Trusts to put on the allocation sheet he prepared. . . . He also read the Trust before
filing the initial fiduciary income tax return because he had to determine whether it was a
simple or complex trust. In fact, the evidence showed that, in order to make the

                                             11
simple/complex determination, he read the exact language from the trust which required
the Independent Trustee to approve of distributions of income. Thus, the weight of the
evidence showed that Wheeler read the Trust following James Narron’s death and
therefore knew he was named as Independent Trustee. Any testimony to the contrary
was not credible.”
       The court found that, by abandoning his duty to approve distributions to Margaret,
Wheeler breached his duty of loyalty to the remainder beneficiaries of the Decedent’s
Trust (Prob. Code, § 16002), his duty to reasonably exercise his discretionary power as
independent trustee (Prob. Code, § 16080), and his duty to exercise reasonable care in
that role (Prob. Code, § 16040). Wheeler also wrongly neglected to enforce claims of the
Decedent’s Trust (Prob. Code, § 16010) by failing to require that Margaret return funds
she had taken from it. Wheeler’s affidavit in the Colorado action, which falsely claimed
that he was administering the trust in California, improperly favored Margaret’s interests
over those of DeJohn because it caused DeJohn to pursue a second action in California.
       Boerio traced distributions of Decedent’s Trust assets to Margaret from 2000 to
2009. The statement of decision identified the dates of the disbursements, which totaled
$986,677, and added interest of ten percent per annum from the date of each
disbursement, an additional $706,528.95. The court surcharged Margaret these amounts.
(Prob. Code, § 16440, subd. (a)(1) [trustee is chargeable for any loss in value of the trust
estate resulting from a breach of trust, with interest]; Uzyel v. Kadisha (2010) 188
Cal. App. 4th 866, 922–923 (Uzyel) [awarding prejudgment interest at the rate of 10
percent].)
       The court found that Wheeler’s breaches of duty were also responsible for the
losses suffered by the Decedent’s Trust, and held him jointly and severally liable with
Margaret for the foregoing amounts. The court granted DeJohn’s motion to add APC as a
Doe defendant, finding that APC and LLC “are substantially the same accounting firm
and that it simply changed its entity formation.” The court held APC and LLC jointly
and severally liable with Wheeler, finding among other things that Wheeler’s service as
independent trustee was “broadly incidental” to the firms’ business. (PCO, Inc. v.

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Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal. App. 4th
384, 391 (PCO).)
       The court found that Stephen and Conni improperly received $500,000 belonging
to the Decedent’s Trust, and held them jointly and severally liable to the trust for that
amount, plus prejudgment interest of $340,794. 53.
       The statement of decision provided that “[t]he Decedent’s Trust’s total recovery of
$1,693,205.95 ($986,677.00 + $706, 528.95) shall be in addition to attorney’s fees.”
       The statement of decision also held Margaret and Wheeler jointly and severally
liable to DeJohn personally for her attorney fees in the Colorado action. The court found
that Margaret and Wheeler breached fiduciary duties owed to DeJohn by filing false
affidavits in the Colorado case. Margaret falsely claimed to be residing in California, and
Wheeler falsely claimed to be acting in California as independent trustee. Those
misrepresentations caused DeJohn to dismiss the Colorado case, and lose the benefit of
the attorney fees she incurred in that action.
       The statement of decision removed Margaret as trustee and Wheeler as
independent trustee of the Decedent’s Trust.
E. Appointment of a Successor Trustee and Entry of Judgment
       After the statement of decision was filed, and before entry of the second amended
judgment (the judgment), Darren Wallace was appointed successor trustee and successor
independent trustee of the Decedent’s Trust.
       The judgment held Margaret, Wheeler, APC and LLC jointly and severally liable
for $1,693,203.89, the amount specified in the statement of decision and the “total
amount of recovery to which the Decedent’s Trust is entitled . . . to compensate for the
loss suffered by the Trust and its beneficiaries.” Stephen and Conni’s liability was
adjusted to $753,706.85, representing $500,000 plus $253,706.85 in interest. Margaret,
Wheeler, APC, and LLP were made jointly and severally liable for the amount owed by
Stephen and Conni, but to prevent double recovery the judgment specified that “[a]ny
payment to the Decedent’s Trust made by Stephen Narron or Conni Narron, or from the
real property located at 2570 South Carey Way, Denver, Colorado, shall reduce the total

                                                 13
judgment owed to the Decedent’s Trust.” Stephen would be charged with any unpaid
portion of the judgment against him when Margaret died. Margaret and Wheeler were
made jointly and severally liable to DeJohn for her Colorado attorney fees of $45,967.53.
Margaret was ordered to pay DeJohn’s attorney fees of $363,340.42 in this case on the
ground that her defense of the action was without reasonable cause and in bad faith.
(Prob. Code, § 17211, subd. (b).)
       The judgment noted that Wallace had been appointed successor trustee and
independent trustee of the Decedent’s Trust. The judgment stated that Margaret “is
hereby removed” as trustee, Stephen “is disqualified” from acting as a successor trustee,
and Wheeler “is hereby removed” as independent trustee.
F. Appeals
       Margaret (Appeal No. A137825), Wheeler, APC, and LLP (Appeal No. A138421),
and Conni (Appeal No. A138225), appealed from the judgment. Conni settled with
DeJohn and we granted their request to dismiss her appeal. The other appeals were
consolidated for purposes of briefing, oral argument, and decision.
                                    II. DISCUSSION
A. Margaret’s Liability to the Decedent’s Trust
       (1) Wallace’s Standing
       Margaret challenges various facets of the judgment. DeJohn has filed a
respondent’s brief addressing Margaret’s challenges to attorney fees. Wallace, in his
capacity as successor trustee and independent trustee of the Decedent’s Trust, has filed a
respondent’s brief addressing Margaret’s other arguments. Margaret argues that Wallace
has no standing to participate in her appeal for a number of reasons.1 We granted

       1
          We hereby grant Margaret’s unopposed request for judicial notice of documents
filed in the case after entry of judgment, which are offered to show that she objected in
the trial court to Wallace’s standing. Assuming an appellate objection to standing can be
forfeited by inaction in the trial court (but see Payne v. Anaheim Memorial Medical
Center, Inc. (2005) 130 Cal. App. 4th 729, 745 [such an objection can be raised for the
first time on appeal]), we find no forfeiture here.

                                            14
Wallace’s request to file a respondent’s brief without prejudice to any challenge to his
standing to do so.
       Margaret maintains that “allowing [a] successor trustee to oppose an appeal of his
appointment is tantamount to enforcing the judgment on appeal.” However, this is not
“an appeal of [Wallace’s] appointment.” It is an appeal from a judgment entered after
that appointment was made. The order appointing Wallace was appealable (Prob. Code,
§ 1300, subd. (c) [orders authorizing a fiduciary]), and Margaret did not appeal from it.
Wallace’s authority to act as successor trustee has thus been established by a final order
that cannot be contested.
       Margaret also argues that the appointment order did not take effect until the
judgment was entered because, until then, Margaret had not been removed as trustee and
there was no vacancy to fill. In these circumstances, Margaret submits that it would
“exalt[] form over substance” to conclude that Wallace’s appointment was not stayed by
her appeal from the judgment. But finality of the appealable order of appointment is a
substantive matter, and it is immaterial that Wallace and Margaret were for a time
technically co-trustees.
       Margaret contends that the appeals in this case stayed Wallace’s appointment.
Margaret speculates that if she “wins her appeal then a possible outcome is that her
removal will be rendered null and void, and Wallace’s appointment would also be null
and void . . . .” But apart from this statement to support Wallace’s alleged lack of
standing, Margaret does not argue that she is entitled to reinstatement as trustee, and she
identifies no factual or legal scenario that would justify that result.
       Margaret argues that Wallace is not a real party in interest because this case is “in
effect a battle between DeJohn and her” involving disputed claims to trust assets.
Margaret invokes cases where “competing claimants to estate assets vie for ownership of
those assets,” and the executor or administrator “must stand apart from the dispute and
maintain a posture of neutrality.” She contends that, by filing a respondent’s brief in
opposition to her appeal, Wallace has favored DeJohn’s interest in the trust over those of
her and Stephen, and thereby violated his duty of impartiality.

                                              15
       This argument misstates the nature of the litigation. This case is not about
beneficiaries’ competing claims to trust assets. It is about misfeasance by trustees, one of
whom happens to be a beneficiary. Moreover, the judgment creditor is Wallace as
successor trustee of the Decedent’s Trust. He has a duty to preserve recovery of the
losses caused by Margaret’s and Wheeler’s breaches of duty. A trustee “owes fiduciary
duties which require him to defend the trust corpus against unwarranted diminution until
it is distributed to the beneficiaries.” (Estate of Goulet (1995) 10 Cal. 4th 1074, 1082.) A
claim that “may substantially diminish the funds to be distributed . . . implicates the
trustee’s fiduciary duty to protect the trust corpus.” (Ibid.)
       Margaret argues that Wallace lacks standing because “DeJohn, through her
nominee Wallace, is in essence seeking to have her mother’s Trust pay for DeJohn’s
appellate legal fees. Most egregious about this is the fact that even if DeJohn loses the
appeal it is Margaret that would be paying her legal fees, because it is her money that will
be depleted. That is grossly inequitable.” Margaret cites Whittlesey v. Aiello (2002) 104
Cal. App. 4th 1221 (Whittlesey) for this argument, but that case supports our conclusion
that Wallace has standing.
       Whittlesey considered whether counsel for a trustee could recover from the trust
his fees for representing the trustee in litigation. The trust originally named Whittlesey as
primary beneficiary, but the trustor amended the trust to designate others primary
beneficiaries. Whittlesey challenged the amendment and the trustee serving after the
trustor’s death defended it. Whittlesey prevailed and the amendment was voided due to
undue influence by the new primary beneficiaries. The court denied the trustee’s
attorney’s claim for fees, finding that it would be unfair to Whittlesey to require the trust
to pay them.
       The court reasoned that “because the trust amendment was voided and
Whittlesey’s status as the primary trust beneficiary was restored, an award of fees to
[counsel] from the trust would be, in effect, an award from Whittlesey. In other words,
Whittlesey would be required to finance her own trust litigation and that of her opponent,
despite the fact she prevailed. There can be no equity in that.” (Whittlesey, supra, 104

                                              16
Cal.App.4th at p. 1230.) This reasoning rested on the fact that “the parties primarily
interested in the outcome of the litigation were Whittlesey on the one hand and [the new
primary beneficiaries] on the other. To the extent [counsel] defended the amendment, he
was representing the interests of one side of the dispute over the other, not representing
the interests of the trust or the trustee.” (Id. at p. 1231.)
       However, the court recognized that attorney fees would be compensable from the
trust if they were incurred in “litigation [that] was for the benefit of the trust estate. . . .
For example, the defense of a lawsuit that has the potential for depleting trust assets
would be for the benefit of the trust, justifying the employment of counsel.” (Id. at
p. 1227.) “ ‘[W]here litigation is necessary for the preservation of the trust, it is both the
right and duty of the trustee to employ counsel in the prosecution or defense thereof, and
the trustee is entitled to reimbursement for his expenditures out of the trust fund.’ ” (Id.
at pp. 1226–1227.) Since the appeals in this case, unlike the litigation in Whittlesey, have
“the potential for depleting trust assets,” Wallace has both the “right and duty” to dispute
them. (Ibid.) Whittlesey thus supports Wallace’s standing.
       (2) Credit for Approved Distributions
       Margaret testified that Wheeler told her that upon the sale of the Sunnyvale
property in March 2000 she could take $3,000 to $4,000 per month out of the Decedent’s
Trust. According to the statement of decision, Margaret testified that Wheeler said she
could take this amount from the Fidelity account into which some of the Sunnyvale
proceeds were deposited, but Margaret testified to amounts that could be taken from all
of the sale proceeds. “Q. . . . [D]id [Wheeler] also tell you that you could take three or
$4,000 a month out of the trust each month after you sold the Sunnyvale property? A.
Yes. [¶] . . . [¶] Q. Did you understand that the 3,000 or $4,000 a month Mr. Wheeler
told you could take out of the decedent’s trust was from the proceeds of the sale of
Sunnyvale? [¶] . . . [¶] A. Yes.”
        In any event, the court apparently concluded Margaret’s testimony was credible.
In its statement of decision, the court found, on the basis of this testimony, that Wheeler
was “knowingly exercising powers and performing duties of the Independent Trustee” in

                                                17
2000, and thereby “accept[ed] his role as Independent Trustee” at that time. Despite this
finding, the court further found that “Wheeler did not approve of any income or principal
distributions from the time of inception of the Decedent’s Trust up until the present.” As
Margaret observes, these findings are irreconcilable.
       Margaret contends, and we agree, that she is entitled to credit against her liability
to the Decedent’s Trust of $4,000 per month beginning in March 2000 for the Sunnyvale
proceeds she took with Wheeler’s authorization, which the trial court determined was
given in his capacity as independent trustee. Wallace argues this credit should be denied
because the court found Margaret’s “testimony lacked credibility on several issues,
including her accountings and the amount of Decedent’s Trust funds transferred to
Stephen.” However, the court believed Margaret’s testimony about what Wheeler told
her regarding the Sunnyvale sale. Wallace suggests that Margaret is not entitled to this
credit because she “took large sums at irregular intervals in contrast with the alleged
permission to take $3,000-$4,000 [per] month,” but Wheeler’s advice most reasonably
means that Margaret was entitled to an aggregate amount as time went on, rather than a
specific limit on what she could withdraw in any particular month.
       We also agree with Margaret that she is entitled to credit for distributions of
interest income shown on tax returns for the Decedent’s Trust, as Wheeler approved at
trial. Wheeler and his expert testified, and DeJohn’s expert agreed, that such
distributions are prudent, and nothing in the Trust prohibited their retroactive approval.
The court found that Wheeler’s retroactive approval of the income distributions was “an
idle act,” because DeJohn “contends that such income distributions violated the terms of
the Decedent’s Trust, but the Decedent’s Trust was not damaged by them.” We fail to
follow this reasoning. Wheeler’s belated approval of the distributions did not violate any
term of the Trust and was not inconsequential. It determined whether Margaret
permissibly or properly took them.
       Wheeler testified that he was not approving distributions of principal at trial, but
he could not retroactively negate the approval he gave Margaret in 2000 for the proceeds
of the Sunnyvale property. That prior approval was separate from the approval of income

                                             18
distributions he gave at trial, and must be taken to refer to distributions of principal.
Margaret is entitled to credit for principal distributions of $4,000 per month as long as
there were proceeds for her to take from the sale of the Sunnyvale property.
       (4) Credit for Loans From the Decedent’s Trust
        Margaret contends that the sums she took from the Decedent’s Trust and gave to
Stephen were loans from the Decedent’s Trust, not gifts, an argument Wallace
characterizes as “the central tenet she advanced at trial.” She contends that the evidence
compelled a ruling in her favor on this issue, citing her testimony and that of Stephen that
the amounts he received were loans, her testimony that she took out a $1,000,000
insurance policy on Stephen’s life, and several trial exhibits, which she describes as
“contemporaneous writings . . . acknowledging and/or reflecting the fact that Margaret
had loaned Stephen sums . . . .”
       Exhibit 14 is a September 2002 letter from Stephen to Margaret and “who it may
concern,” which “convey[ed] the spirit” of his agreement with Margaret. The letter
states: “My mother, Margaret, established a line of credit for me. This line of credit is to
be used only to purchase and remodel a single-family residence. The ownership in reality
rests with her and in the event I was unable to complete the project for any reason, the
project is hers to finish any way she deems reasonable. My interest in this project is to
substantially upgrade the property and upon its sale, any monies above the line of credit
balance would be realized as my profit.”
       Exhibit 15 is a June 2006 letter from Stephen to Margaret and “who it may
concern” stating: “My mother, Margaret Narron, has loaned me in direct monies, accrued
interest, and defer[r]ed rents a total of $1,200,000 (approximately). Margaret has all
necessary documentation to substantiate the above amount.”
       Exhibit 16 is a September 2007 letter, mentioned earlier, from Margaret to “whom
it may concern” stating that Stephen “borrowed money from me,” $500,000 of the money
came from the Decedent’s Trust, additional amounts came from the Survivor’s Trust,
with the Decedent’s Trust “first priority to be repaid.”

                                              19
       Exhibit 18 is a “short note” dated July 7, 2008, from Stephen to Margaret “to
make formal our verbal communications and previous agreements.” The note stated, “I,
Stephen Narron, son of Margaret Narron, will repay approximately half of the loan
balance upon the sale of 2570 S. Carey Way, Denver. An amount of $500,000.00 will be
directly transferred to Margaret Narron from escrow at closing. This note is for the
protection of Margaret Narron in the event I, Stephen Narron become incapacitated or am
no longer in the picture.”
       Exhibit 50 is a deed of trust on 2570 South Carey Way securing a $500,000
promissory note dated June 30, 2009, from Stephen to Margaret.
       In its statement of decision, the court found that Margaret’s September 2007 letter
showed her “recognition and awareness that the Decedent’s Trust has been depleted and
that it must be repaid.” Taking into account the other evidence Margaret cites, the court
rejected her claim that she did not need the independent trustee’s approval to take money
from the Decedent’s Trust to give to Stephen because the disbursements were for loans to
him. The court wrote:
       “Margaret did not provide the Court with a tracing of the money taken from the
Decedent’s Trust and allegedly loaned to Stephen. The evidence merely showed that she
took large sums of money from the Decedent’s Trust, placed that money into her personal
account and then delivered some portion of it to Stephen.
       “Stephen testified that he owed money to his mother and all of the documentary
evidence supported that testimony. None of the notes he signed acknowledging his debt
named the Decedent’s Trust as the lender to be repaid. Instead, they all named Margaret
Narron as the lender and stated that he would pay back the debt obligation to her. (Exs.
14, 15, 18.) In addition, there was testimony that Stephen had a life insurance policy that
named Margaret Narron as the beneficiary, not the Decedent’s Trust. Even the Deed of
Trust on the South Carey Way property was executed in favor of Margaret Narron, and
not the Decedent’s Trust. (Ex. 50.)
       “Furthermore, even if the funds had been delivered to Stephen directly from the
Decedent’s Trust, they still would not be loans. Loans have interest rates, fixed payment

                                            20
schedules, and some reasonable prospect of the borrower repaying the funds loaned. The
transactions at issue here had none of these characteristics.
        “Moreover, the terms of the alleged loans were different in every document
relating to them . . . and the terms even changed throughout the course of Stephen’s
testimony. He first testified that he and Margaret would split the profit upon the sale of
the South Carey Way house. Later he said that Margaret would be happy if she got to
participate in some of the profit. In a legitimate debtor/creditor relationship, the terms of
the loan do not fluctuate this way.”
        Whether a payment is a loan or a gift is generally a question of fact, which
“depends principally upon [the transferor’s] intent at the time he advanced the
funds . . . .” (Burkle v. Burkle (2006) 141 Cal. App. 4th 1029, 1036.) “ ‘In ascertaining
the validity of a gift the intent with which delivery was made is an important and
essential element to be considered. Intention is a question of fact to be determined by the
trial court from all the evidence, and the circumstances of the transaction and the words
and acts of the donor enter into the establishment of the fact. [Citations.] As in any other
case where the decision of the trial court is sustained by substantial evidence, the findings
will not be disturbed on appeal although different conclusions may reasonably be drawn
from the evidence by different minds.’ ” (Matson v. Jones (1969) 272 Cal. App. 2d 826,
829.)
        Margaret argues, and we agree, that “[t]here is not a scintilla of evidence in this
record that [she] intended the amounts that went to Stephen to be gifts . . . .” Although
the terms of the loans were never formalized, there is no substantial evidence that they
were anything other than loans. Moreover, as Margaret observes, the court’s decision is
“inconsistent in charging Stephen with repayment of money that Margaret loaned him,
but failing to give Margaret credit for lending it in the first place.”
        There are no grounds to hold Margaret liable for making the loans. The
Decedent’s Trust restricted her dealings with trust assets only insofar as they were used
for her living expenses. She was otherwise entitled to treat trust assets for what they in
essence were: her money. Under the terms of the trust, she had “full rights, power and

                                              21
dominion over the property, the same as an owner thereof,” including the right to “invest
and reinvest any property held hereunder” as she saw fit. The trial court was mistaken
when it found that Margaret had a duty “to preserve trust property” for the benefit of her
children, and related duties to make prudent, diversified investments. She did not have a
“duty of loyalty which require[d] her to administer the trust solely in the interest of the
beneficiaries,” or related duties to avoid conflicts of interest and self-dealing. The trust
explicitly provided that her interests were primary to those of her children. Moreover,
Margaret was empowered in her “sole discretion” to loan funds from the Decedent’s
Trust, “it being Trustors’ intent that this discretion be exercised liberally.” Margaret had
every right to make loans to protect her investment in Stephen’s project. The trial court
found that Margaret failed to treat Stephen and DeJohn impartially, but its finding hinged
on the determination that the money Stephen received was a gift, not a loan.
       (4) Prejudgment Interest
       The trial court found that all of the distributions Margaret took from the
Decedent’s Trust were unauthorized, and awarded prejudgment interest at the rate of 10
percent per annum from the date of each distribution as reflected on a chart in the
statement of decision. Since Margaret is entitled to substantial credit against that
liability, at a minimum prejudgment interest will need to be recalculated. Margaret
argues that prejudgment interest could not be awarded, and that the rate of any such
interest should be seven rather than 10 percent. We disagree on both points.
       The award of prejudgment interest of 10 percent from the date of each
unauthorized withdrawal of trust assets adhered to the decision in Uzyel, supra, 188
Cal. App. 4th 866. In Uzyel, the beneficiaries of two trusts terminated the trusts and sued
the trustee for breach of trust. The court held that the beneficiaries were entitled to
prejudgment interest under Probate Code section 16440, subdivision (a)(1), on the
damages caused by the trustee’s failure to protect the value of a trust investment. (Uzyel
at pp. 922–923.) This statute provides: “(a) If the trustee commits a breach of trust, the
trustee is chargeable with any of the following that is appropriate under the
circumstances: [¶] (1) Any loss or depreciation in value of the trust estate resulting from

                                             22
the breach of trust, with interest.” The court affirmed an award of prejudgment interest at
the rate of 10 percent per annum pursuant to Probate Code section 16441, subdivision (a),
which provides that a trustee owing interest under Probate Code section 16440 is liable
for the greater of: “(1) The amount of interest that accrues at the legal rate on judgments
in effect during the period when the interest accrued,” and “(2) The amount of interest
actually received.” The legal rate of interest on judgments is 10 percent. (Code Civ.
Proc., § 685.010, subd. (a).) The interest begins to accrue “on the date of the loss or
depreciation in value.” (Uzyel, supra, 188 Cal.App.4th at p. 923, fn. 42.)
       The Uzyel decision and the statutes on which it relied apply here. To the extent
Margaret took unauthorized distributions from the Decedent’s Trust she, committed a
breach of trust that caused a “loss or depreciation in value of the trust estate,” and she is
liable for the amount of the losses plus 10 percent annual interest from the dates they
occurred. (Uzyel, supra, 188 Cal.App.4th at pp. 922–923; Prob. Code, § 16440, subd.
(a)(1), § 16441, subd. (a)(1).) Margaret argues for a different result based on In re Estate
of Kampen (2011) 201 Cal. App. 4th 971 (Kampen), but Kampen is distinguishable.
       In Kampen, the executor of two estates negligently delayed distributing the
estates’ assets to a beneficiary. The beneficiary sought prejudgment interest on all of the
estates’ assets under Probate Code section 9601, subdivision (a)(1), which parallels
Probate Code section 16440 as follows: “(a) If a personal representative breaches a
fiduciary duty, the personal representative is chargeable with any of the following that is
appropriate under the circumstances: [¶] (1) Any loss or depreciation in the value of the
decedent’s estate resulting from the breach of duty, with interest.” The court held that the
executor’s liability under this statute was limited to executor-bond premiums that would
not have been owed had the distributions been timely. (Kampen, supra, 201 Cal.App.4th
at p. 989.) However, the court found no liability for “loss or depreciation” in the value of
the rest of the estates because “the undisputed evidence established that [the executor] did
not profit from the delay. There was no evidence that the estate[s] lost any profit as a
result of [the executor’s] breach. . . . An executor is similar to a trustee in many respects
but, unlike a strict trustee, an executor has no statutory duty to invest money belonging to

                                              23
the estate.” Unlike the executor in Kampen who took nothing from the estates, Margaret
appropriated some trust assets for herself without permission of the independent trustee,
and wrongly caused “loss or depreciation” of the Decedent’s Trust to the extent she
depleted it without authorization. Kampen is thus consistent with Uzyel, and with the
award of prejudgment interest here.
       Margaret contends that prejudgment interest was proper in Uzyel but not in
Kampen because the beneficiaries in Uzyel were not “contingent remaindermen” like
those in Kampen, but rather “vested beneficiaries seeking to redress a breach of trust the
proceeds of which they were immediately entitled to.” Margaret notes that DeJohn is not
entitled to any distribution from the Decedent’s Trust unless and until DeJohn survives
her. Margaret’s argument and observation are misplaced because they erroneously
assume that DeJohn, and not the Decedent’s Trust, will receive the prejudgment interest.
       Margaret points out that awards of prejudgment interest pursuant to Probate Code
sections 16440, subdivision (a) and 16441, subdivision (a) are not mandatory, because
subdivision (b) of both statutes states that “[if] the trustee has acted reasonably and in
good faith under the circumstances as known to the trustee, the court, in its discretion,
may excuse the trustee in whole or in part from liability under subdivision (a) if it would
be equitable to do so.” The court will need to reconsider Margaret’s reasonableness and
good faith in light of her considerable success in the appeal.
       (5) Attorney Fees in This Case
       Margaret contends that the court erred when it held her liable for DeJohn’s
attorney fees in this case. The court’s proposed statement of decision discussed the issue,
and determined that attorney fees were recoverable under Probate Code section 17211.
DeJohn’s objections to the proposed statement of decision requested an additional finding
that attorney fees were recoverable under the common fund doctrine. DeJohn moved for
attorney fees, and the court filed its statement of decision before briefing on the motion
was completed. The statement of decision did not discuss any rationale for fees, and
simply stated that the Decedent Trust’s recovery would be “in addition” to attorney fees.
The court then granted the fee motion, and entered judgment holding Margaret liable to

                                              24
DeJohn for attorney fees of $362,340.42 in this case pursuant to Probate Code
section 17211. None of the briefing on the fee motion is included in the appellate record.
       Probate Code section 17211, subdivision (b) provides: “If a beneficiary contests
the trustee’s account and the court determines that the trustee’s opposition to the contest
was without reasonable cause and in bad faith, the court may award the contestant the
costs of the contestant and other expenses and costs of litigation, including attorney’s
fees, incurred to contest the account. The amount awarded shall be a charge against the
compensation or other interest of the trustee in the trust. The trustee shall be personally
liable and on the bond, if any, for any amount that remains unsatisfied.”
       Margaret contends that she cannot be held liable to DeJohn for attorney fees under
this statute because the statute is limited to contested accountings and DeJohn, as a
remainder beneficiary, is not entitled to any accounting. Probate Code section 16062,
subdivision (a) provides, subject to inapplicable exceptions, that “the trustee shall
account at least annually, at the termination of the trust, and upon a change of trustee, to
each beneficiary to whom income or principal is required or authorized in the trustee’s
discretion to be currently distributed.” Because this statute refers only to income
beneficiaries, a trustee “does not have a statutory duty to account to remainder
beneficiaries.” (Esslinger v. Cummins (2006) 144 Cal. App. 4th 517, 528; but see Prob.
Code, § 16061 [subject to inapplicable exceptions, “on reasonable request by a
beneficiary, the trustee shall report to the beneficiary by providing requested information
to the beneficiary relating to the administration of the trust relevant to the beneficiary’s
interest”].
       Whether DeJohn has a statutory right to annual accountings is irrelevant to
Margaret’s liability for attorney fees in this case. DeJohn asked Margaret for an
accounting, and Margaret provided two of them in Colorado. DeJohn’s California
petition alleged that Margaret’s accountings were incomplete, and disclosed multiple
breaches of duty on her part, including most notably unauthorized and improper
distributions. This case was in essence a contest to a trustee’s account, and Probate Code
section 17211, subdivision (b) is squarely applicable. (Leader v. Cords (2010) 182

                                              25
Cal. App. 4th 1588, 1599 [“[a] beneficiary may, of course, contest a trustee’s account on
the basis of a distribution made from the trust”].)
       Margaret cites Soria v. Soria (2010) 185 Cal. App. 4th 780 (Soria), for the
proposition that fees are recoverable under this statute only insofar as they were incurred
in connection with DeJohn’s request for an accounting, not her demand that Margaret be
surcharged. Soria was a dispute among family members concerning an agreement that
was determined to be a trust. The suit was prosecuted as a civil action rather than a
special proceeding in probate. The family members found to be trustees presented an
account, which served as the basis for calculating the amount the trustees owed the
family members found to be beneficiaries. The beneficiaries “did not contest a trustee’s
accounting” (id. at p. 786), and even “if [they] did anything at trial that could be
construed as a contest to the account, the contest was unsuccessful” (id. at p. 787). Soria
is thus entirely inapposite. The Soria court was concerned that a Probate Code
section 17211, subdivision (b) fee award in that case would turn the statute into a “basis
for recovery of attorney fees in virtually any case in which the existence of a trust is in
dispute or any action of a trustee is challenged.” (Id. at p. 789.) No such risk is created
by a fee award under Probate Code section 17211 in this case.
       While we agree with DeJohn that she is eligible for an award of attorney fees
under the statute, her entitlement to those fees must be reexamined in light of Margaret’s
considerable success. DeJohn won an unqualified victory in the trial court, but Margaret
has prevailed on several issues. In view of that result, the trial court must reconsider
whether Margaret’s opposition to DeJohn’s petition was “without reasonable cause and in
bad faith” within the meaning of the statute. (See Uzyel, supra, 188 Cal.App.4th at pp.
926–928 [reversing a Prob. Code, § 17211, subd. (b) fee award even though the trustee
was found liable for millions of dollars of compensatory and punitive damages].)
       We reject DeJohn’s argument that she is entitled to attorney fees under the
common fund doctrine. “The common fund doctrine is based on the principle that ‘where
a common fund exists to which a number of persons are entitled and in their interest
successful litigation is maintained for its preservation and protection, an allowance of

                                             26
counsel fees may properly be made from such fund.’ [Citation.] The purpose of the
doctrine is to allow a party, who has paid for counsel to prosecute a lawsuit that creates a
fund from which others will benefit, to require those other beneficiaries to bear their fair
share of the litigation costs. [Citation.]” (Northwest Energetic Services, LLC v.
California Franchise Tax Board (2008) 159 Cal. App. 4th 841, 878 [italics added].)
       DeJohn cannot be deemed to have prosecuted this case in the interest or for the
benefit of Margaret or Stephen when the common fund she created, a judgment
increasing the value of the Decedent’s Trust, was done at their expense. In common fund
cases “the applicant for attorney fees and the parties from whom fees [are] sought [are]
similarly situated with mutual interests in and mutual rights to proceed and recover the
sums representing the fund which they shared.” (Lindsay v. County of Los Angeles
(1980) 109 Cal. App. 3d 933, 938.) DeJohn on the one hand and Margaret and Stephen on
the other were adversaries in the case, not “similarly situated with mutual interests” in the
outcome. As Margaret puts it, to apply the common fund doctrine here “would turn[] the
concept of a ‘common fund’ on its head.”
B. Wheeler’s Liability to the Decedent’s Trust
       Wheeler contends that he did not breach his “[l]imited [d]uties as the
[i]ndependent [t]rustee.” He argues that he committed no breach because under the terms
of the Decedent’s Trust, “he had ‘sole discretion,’ not an obligation, to approve
payments” to Margaret. The California Society of Certified Public Accountants
(CSCPA) makes this same argument in an amicus curiae brief in support of Wheeler’s
appeal, and contends that Wheeler had no duty to act unless and until Margaret requested
a distribution.
       With respect to income distributions, CSCPA submits that “the only way for the
Independent Trustee to exercise his duty concerning the distribution of income would be
for the Trustee to present the Independent Trustee with a request to approve the
distribution of income. Until the Trustee makes the request, the Independent Trustee has
no duty or power to act.” With respect to principal, CSCBA notes that the trust provides
for payments by Wheeler to Margaret, but gives Margaret “ ‘full rights, powers and

                                             27
dominion over [trust] property, the same as an owner thereof,’ ” which CSCPA construes
as a directive that trust assets “must be held by the Trustee.” Given this apparent
contradiction, CSCPA reasons that “the only logical interpretation of [the payment]
provision would be for the Trustee to request a principal distribution and for the
Independent Trustee to exercise his discretion to ‘pay’ the principal to the surviving
trustor. As with the income distributions, however, the Trustee, Margaret Narron, never
made any request for a principal distribution to the Independent Trustee, Wheeler. Thus,
he was never called upon to exercise his discretion to approve or not to approve any such
request.”
       CSCPA observes the court stated in Crocker-Citizens National Bank v. Younger
(1971) 4 Cal. 3d 202, 211 (Crocker-Citizens) that “in general, trustees are bound by the
terms of the trust and possess only that authority conferred upon them by the trust.
[Citations.] . . . ‘Insofar as the trust instrument expressly or by implication imposes duties
or confers powers upon the trustee, the terms of the trust determine the extent of his
duties and powers . . . .’ Wheeler cites Ringrose v. Gleadall (1911) 17 Cal. App. 664
(Ringrose), to the same effect. In Ringrose, the court stated that a trustee had performed
his two duties under the terms of the trust, and asked, “Was there anything else for him to
do in order to discharge his trust? It would be impossible to so hold without reading into
the declaration of trust something not found therein. . . . [W]e have nothing to do but to
give effect to the language has we find it.” (Id. at p. 668.) CSCPA has also marshaled
out-of-state cases for the principle that the powers and duties of special trustees and
advisors are limited “to those provided by the trust instrument.”
       The trial court found that Wheeler breached his duties as independent trustee by
giving Margaret “free rein to take as much money from the Decedent’s Trust as she
desired.” In the trial court’s view, this dereliction constituted a breach of Wheeler’s duty
of loyalty to the remainder beneficiaries (Prob. Code, § 16002), his duty to reasonably
exercise his discretionary power as independent trustee (Prob. Code, § 16080), and his
duty to exercise reasonable care in that capacity (Prob. Code, § 16040). The trial court
further determined that Wheeler breached a duty to enforce claims of the Decedent’s

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Trust (Prob. Code, § 16010) by failing to demand that Margaret return the money she
took from it.
       All of these findings were in error because the Decedent’s Trust did not direct
Wheeler to control Margaret’s access to trust assets or require him to enforce trust claims.
The trust gave Margaret, not Wheeler, “full rights, powers and dominion over the [trust]
property, the same as an owner thereof,” and expressly limited Wheeler’s duties to
discretionary approvals of distributions of principal and income to her. He had no duties
beyond those specified in the trust agreement. (Crocker-Citizen’s, supra, 4 Cal.3d at p.
212; Ringrose, supra, 17 Cal.App. at p. 668.)
       Our conclusion is supported by comments on section 81 of the Restatement Third
of Trusts, which concern the duties of co-trustees. This section states: “(1) If a trust has
more than one trustee, except as otherwise provided by the terms of the trust, each trustee
has a duty and the right to participate in the administration of the trust. [¶] (2) Each
trustee also has a duty to use reasonable care to prevent a co-trustee from committing a
breach of trust and, if a breach of trust occurs, to obtain redress.” (Ibid.) However,
comment b to this section, addressing the “[e]ffect of the terms of the trust,” notes that
‘[t]he duties of multiple trustees as discussed in this Section may be reduced, modified or
specially allocated by the terms of the trust.” The comment then explains, as directly
relevant here:
       “Thus, trust provisions may and often should allocate roles and responsibilities
among the trustees, or relieve one or more of the trustees of duties to participate in
particular aspects of the trust’s administration. A settlor may even designate, or provide
for the appointment of, a ‘special trustee’ to handle only one or more specified functions
or types of decisions (e.g., the exercise of tax-sensitive powers of distribution, when the
general trustee or trustees are beneficiaries of those powers), with the special trustee
having no authority in or responsibility for other aspects of the trust’s administration.
The settlor’s limiting of a trustee’s functions or allocation of functions among the trustees
usually, either explicitly or as a matter of interpretation, has the effect of relieving the
trustee(s) to whom a function is not allocated of any affirmative duty to remain informed

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or to participate in deliberations about matters within that function.” (Rest.3d Trusts,
§ 81, com. b, p. 171.) Under the terms of the Decedent’s Trust, the independent trustee’s
only function is approval of distributions to the surviving spouse, and he or she has “no
authority in or responsibility for other aspects of the trust’s administration.” (Ibid.)
       Our conclusion is further supported by comments on section 75 of the Restatement
Third of Trusts, which address the power to control the acts of a trustee. The section
states: “[I]f the terms of a trust reserve to the settlor or confer upon another a power to
direct or otherwise control certain conduct of the trustee, the trustee has a duty to act in
accordance with the requirements of the trust provision reserving or conferring the power
and to comply with any exercise of that power . . . .” (Rest.3d Trusts, § 75, p. 50.) A
comment to this section explains: “The duties of a trustee under a trust provision of this
type include a duty to provide the designated person with such information and
opportunity to respond as may be expressly or impliedly called for by the terms of the
provision. . . . [¶] Where certain actions the trustee may wish to take are not to be taken
without the consent, direction, or authorization of a designated person . . . it is implicit in
the nature of the provision that the trustee must inform that person of any desired actions
and allow a reasonable opportunity to respond.” (Rest.3d Trusts, § 75, com. b(1), p. 52.)
Under this authority, Margaret was required to seek Wheeler’s approval for distributions,
and he had no obligation to act if she did not initiate any such requests.
       Accordingly, we conclude that Wheeler breached no duty under the Decedent’s
Trust, and is not liable for Margaret’s unauthorized distributions.
C. APC’s and LLP’s Liability to the Trust
       The judgment holds APC and LLP vicariously liable for Wheeler’s alleged
breaches of duty to the Decedent’s Trust. Since there were no such breaches on
Wheeler’s part, APC and LLP have no liability.
D. Margaret’s and Wheeler’s Liability to DeJohn Personally
       The court held Margaret and Wheeler jointly and severally liable to DeJohn for
$45,967.53 in attorney fees she incurred in the Colorado action because they filed false
affidavits in that case that caused her to dismiss it and re-file it in California. Margaret

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falsely claimed that her primary residence at the time was in California, and Wheeler
falsely claimed that “[h]is day-to-day activities as the Independent Trustee of the
Decedent’s Trust, such as reviewing requests for distributions from the trust,” were
conducted in California.
        Margaret does not dispute the falsity of her 2009 affidavit. The affidavit stated
that she maintained her primary residence in California, but she testified that she moved
into a residence in Colorado in 2008. However, Wheeler contends, and we agree, that his
affidavit was not false. The court found that he approved distributions to Margaret—his
only activity, “day-to-day” or otherwise, as independent trustee—after the sale of the
Sunnyvale property in 2000. Wheeler testified that, when he signed the affidavit, he was
preparing tax returns for Margaret and assisting with potential settlement of the Colorado
action. He said that he furnished information for the accountings Margaret filed in that
case. Whereas the evidence showed that Margaret engaged in trust-related activity in
Colorado, no evidence suggested that Wheeler approved the Sunnyvale distributions or
took any other action involving the Decedent’s Trust while he was outside California.
        Margaret contends that her false affidavit did not damage DeJohn because DeJohn
incurred her Colorado legal fees before the affidavits were filed. But the affidavit led to
DeJohn’s dismissal of the Colorado case, and the potential loss of the benefit of those
fees.
        Margaret argues that “awarding attorneys fees as tort ‘damages’ to a beneficiary is
impermissible in the trust law context.” Her argument is predicated on Probate Code
section 16440, which provides: “(a) If the trustee commits a breach of trust, the trustee is
chargeable with any of the following that is appropriate under the circumstances: [¶] (1)
Any loss or depreciation in value of the trust estate resulting from the breach of trust,
with interest. [¶] (2) Any profit made by the trustee through the breach of trust, with
interest. [¶] (3) Any profit that would have accrued to the trust estate if the loss of profit
is the result of the breach of trust.” However, attorney fees were awardable under
Probate Code section 17211, subdivision (b) for unreasonable and bad faith defense of
the Colorado action.

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       Margaret contends that “a California court lacks jurisdiction to award fees for
work before a Colorado Court. Such an award would also violate the sovereignty of
Colorado’s courts.” We do not address these arguments because they are raised
improperly for the first time in Margaret’s reply brief. (Reed v. Mutual Service Corp.
(2003) 106 Cal. App. 4th 1359, 1372, fn. 11, disapproved on another point in Haworth v.
Superior Court (2010) 50 Cal. 4th 372, 382–388.)
                                   III. DISPOSITION
       The judgment is reversed insofar as it denies Margaret credit for the income
distributions Wheeler approved at trial and the principal distributions he approved in
2000 after the sale of the Sunnyvale property. The superior court is directed to determine
the amount to be credited to Margaret for those distributions, to reassess Margaret’s
reasonableness and good faith in deciding whether the Decedent’s Trust is entitled to
prejudgment interest, and, if prejudgment interest is awarded, to recalculate the amount in
light of the reduced amount she owes the trust. The judgment is reversed insofar as it
holds Margaret liable for DeJohn’s attorney fees in this case, and the court is directed to
reassess Margaret’s fee liability in light of our decision in this appeal. The judgment is
reversed insofar as it makes Margaret jointly and severally liable with Stephen for the
loans he received from the Decedent’s Trust. The judgment is reversed insofar as it holds
Wheeler, APC, and LLP liable. The judgment is affirmed insofar as it holds Margaret
liable to DeJohn personally for fees incurred in the Colorado. The case is remanded for
further proceedings consistent with this opinion. The parties will bear their own costs on
appeal.

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                                 _________________________
                                 Siggins, J.

We concur:

_________________________
Pollak, Acting P.J.

_________________________
Jenkins, J.

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