Court Opinion

ID: 6345052
Source: CourtListenerOpinion
Date Created: 2022-05-27 19:01:32.694782+00
Date Added: 2024-06-11T09:12:48.761552
License: Public Domain

Filed 5/27/22 Balquist v. Ballard CA1/5
                NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 cer-
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tified 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 FIVE

 JOHN BALQUIST,
          Petitioner and
          Respondent,                                  A161293

 v.                                                    (Alameda County
 MATT BALLARD,                                          Super. Ct. No.
                                                       RP18905104)
            Appellant.

        Matt Ballard appeals from an order granting the petition of respondent
John Balquist to approve his accounting as trustee of the Darlene Pyshora
Trust (Trust) and denying Ballard’s cross-petition objecting to various acts by
Balquist as trustee. We reverse.
                                           I. BACKGROUND
        Darlene Pyshora had three living adult children: Ballard, Michael
Pyshora and Margo Moore. Darlene1 executed the Trust in 1995 and an
amendment and restatement of that Trust on June 20, 2016. Balquist was
named as Trustee in the 2016 amendment and served during Darlene’s
lifetime at an agreed hourly rate of $150 per hour.

        With the exception of the two parties to this lawsuit, whom we refer to
        1

by last name, we use first names to ease the task of the reader.
                                                         1
      Among other things, the Trust provided that upon Darlene’s death,
Michael would receive a house located on Bass Drive in Vacaville. Ballard
would receive Darlene’s interest in a condominium located in Hawaii, and the
proceeds from liquidation of the Trust assets would be split between the
children, 45 percent to both Ballard and Margot and 10 percent to Michael.
      Darlene died on August 16, 2016. On May 3, 2017, Michael died
intestate and was survived by two sons: Kevon Spier and Hunter Pyshora,
who received Michael’s share of the trust.
      Balquist filed a verified “Petition for Approval of Trustee John
Balquist’s Second Account,”2 seeking approval of the second accounting and
actions taken in the administration of the Trust. Ballard filed a verified
“Cross-Petition Objecting to Actions of Trustee; Seeking Rejection of Trustee’s
Claim for Fees and Attorney’s Fees; and Surcharging Trustee for Breach of
Trust.”
      Ballard’s cross-petition alleged that Balquist’s hourly fee of $150 and
the total amount of trustee fees billed (about $100,000 on a trust worth less
than $1 million) was excessive, that Balquist had incurred expenses that
were not reasonable, that he had unreasonably delayed in transferring
Michael’s interest in the Bass Street property to his heirs and had
unnecessarily sought court permission to do so, that Balquist had failed to
rent out the Bass Street property, and that Balquist had delayed in taking
the steps necessary to transfer the Hawaii condominium to Ballard. Balquist
filed a response stating, among other things, that the fee was reasonable and
had been agreed to by Darlene, and that the hours billed were necessary in
light of Ballard and Margot’s initial posture that Michael’s share should lapse
at the time of his death, as well as Ballard and Hunter’s conduct with regards

      2   Balquist had provided an informal first account to the beneficiaries.
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to the Bass Drive property and complications regarding the transfer of the
Hawaii condo, which was not held in the name of the Trust.
      The court referred the matter to a referee (Ryan J. Szczepanik) for an
accounting under Code of Civil Procedure section 639, subdivision (a)(1). 3 Its
written order identified the following as included in the reference: “Petition
for Approval of Trustee John Balquist’s Second Account and Report for
Darlene Pyshora Living Trust and any issue related to the Account that is
raised in Matt Ballard’s Cross-Petition. The referee’s report shall identify
which issue in the Cross-Petition is addressed by the referee’s report and
which issue, if any, remains.” Ballard objected orally and in writing to the
appointment of a referee.
      The referee held an evidentiary hearing at Ballard’s request on
December 5, 2019. Balquist did not present any affirmative evidence, but
made himself available for cross-examination and was questioned by Ballard.
Balquist’s billing records were not before the referee. During closing
argument, Ballard argued that the accounting should not be approved
because Balquist had presented no evidence supporting the accounts and had
not carried his burden of proof.
      The referee issued a written decision in which he recommended
approval of the accounting with the exception of fees incurred attempting to
have the Hawaii condominium declared Trust property, as that property was
beyond the territorial limits of the court. The court held a hearing and
ordered the referee to conduct a further hearing in which the billing records
of the Trustee were considered. Ballard argued to the court that Balquist

      3Further statutory references are to the Code of Civil Procedure unless
otherwise indicated.

                                       3
had failed to carry his burden of proving the correctness of the account and
should not be given another opportunity to do so.
      On May 15, 2020, the referee issued a supplemental report in which he
indicated that he had reviewed Balquist’s billing records and those of his
attorneys. The referee found that the billing records were complete and
matched the amount stated in the accounting. He recommended that the
court approve the accounting, with the exception of the fees incurred filing
the petition to have the Hawaii condominium declared Trust property. The
court adopted the referee’s recommendations and approved the accounting.
                               II. DISCUSSION
      A. Scope of Reference
      Section 639, subdivision (a)(1) provides, “When the parties do not
consent, the court may, upon the written motion of any party, or of its own
motion, appoint a referee in the following cases pursuant to the provisions of
subdivision (b) of Section 640: [¶] (1) When the trial of an issue of fact
requires the examination of a long account on either side; in which case the
referee may be directed to hear and decide the whole issue, or report upon
any specific question of fact involved therein.” Ballard argues that the case
should not have been heard by a referee because it did not involve a “long”
account and the cross-petition presented issues that fell outside the
accounting. We disagree.
      Ballard cites no authority for the proposition that the court abused its
discretion by referring the case for an accounting on the theory that the
accounts were not “long” enough or complex enough to warrant a reference.
(See Reed v. Reed (1953) 118 Cal.App.2d 399, 400 [reviewing for abuse of
discretion a decision whether to refer a case under § 639].) We note that the
statements of the account attached to the petition for approval of the second

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accounting were 13 pages in length and the billing records submitted to the
referee at the second evidentiary hearing exceeded 100 pages in length. The
purpose behind a reference under section 639, subdivision (a)(1)—to enable
the account to be examined more efficiently and inexpensively than if the
trial court undertook the task—was satisfied here. (See De Guere v.
Universal City Studios, Inc. (1997) 56 Cal.App.4th 482, 499-500 (De Guere)
[regarding purpose of a reference under § 639, subd. (a)(1)].)
      As to the argument that the referee exceeded his powers under section
639, Ballard relies primarily upon De Guere, supra, 56 Cal.App.4th at pp. 499-
504. There, the court noted that “[t]he proper scope of a referee’s authority
under section 639, subdivision (a) must be defined in a way that comports
with [] the constitutional limitation on delegation of judicial power.” (Id. at
pp. 500-501.) California Constitution, article VI, section 22 “prohibits the
delegation of judicial power except for the performance of subordinate judicial
duties.” (Id. at p. 496.)
      In De Guere, the court referred the case to a referee for an accounting
in an action for breach of contract and other causes of action based on the
plaintiff’s alleged entitlement to profits from a television series he created.
(De Guere, supra, 56 Cal.App.4th at pp. 487-489.) In addition to matters
relating to the accounting, the referee considered a number of legal issues
relating to the interpretation of the underlying contract, including its
enforceability and the proper method of interpreting ambiguities. (Id. at
pp. 492-493.) The court concluded that by making such findings, the referee
exceeded the scope of the reference by resolving questions of law that were
the province of the trial court. (Id. at p. 501.)
      Here, by contrast, the issues raised in Ballard’s cross-petition and
resolved by the referee all involved challenges to the charges underlying the

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accounting itself, and whether Balquist’s actions were necessary and proper.
“If there be but one issue in the action, and that issue involves the
examination of a long account, the whole case may be sent to a referee. . . .”
(Williams v. Benton (1864) 24 Cal. 424, 425; cf. Erwing v. Jones (1945)
69 Cal.App.2d 97, 99 (Erwing) [referee properly determined ownership of
profits; § 639 authorized the court to order the referee to report on an issue of
fact if the trial required the examination of a long account].)
      The referee determined that the $150-an-hour trustee fee was
reasonable, approved the provision of most services by the trustee, and
rejected the cross-petition’s various arguments that Balquist had breached
his duties. These issues went beyond whether the accounting was
mathematically correct. But they involved the validity of the charges and
were not discrete from the accounting itself. This differentiates the case from
De Guere, in which the issues relating to the contract’s validity, which were
found unsuitable for resolution by the referee in that case, were distinct from
the question presented by the accounting, namely, how the profits should be
distributed assuming a certain interpretation of the contract. In this case,
the referee was authorized under section 639 to report on an issue of fact
because the trial court required the examination of a long account and the
issues of fact were part and parcel of the accounting. (Erwing, supra,
69 Cal.App.2d at p. 99.)
      Ballard also argues the reference was procedurally flawed because the
court’s order referring the case did not state a reason for the reference or the
subparagraph under section 639, subdivision (a) under which it was made,
because the referee was appointed by the court unilaterally with no input
from the parties, and because there was no finding Ballard had an ability to
pay. As to the first claim, it appears the order did state the reason for the

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reference and that it was made under section 639, subdivision (a)(1). As to
the other claims, Ballard filed opposition to the appointment of a referee, but
he did not object to the identity of the referee or complain that he lacked an
ability to pay the fees. He has forfeited the claims.
      B. Burden of Proof
      Ballard contends the order approving the accounting should be
reversed because Balquist did not carry his burden of proving his accounts
were necessary and proper. We agree, because although the petition alleged
facts that would have supported approval of the accounting, that petition was
not admissible and there was no other admissible proof of the necessity and
propriety of the accounts.4
      Trustees are obliged not only “to render to beneficiaries a full account
of all their dealings with the trust property,” but also “to prove every item of
their account by ‘satisfactory evidence.’ ” (Estate of McCabe (1950)
98 Cal.App.2d 503, 505; see also Neel v. Barnard (1944) 24 Cal.2d 406, 420
(Neel).) While a trustee is not “required to anticipate and defend against
charges of dereliction of duty and malfeasance which do not arise from
anything on the face of his accounts but are grounded on other matters” (Neel
at p. 420), it is the burden of a trustee to prove the correctness of his or her
accounts (ibid; Purdy v. Johnson (1917) 174 Cal. 521, 527).
      “When a personal representative files an account, it is properly made
under oath, and, generally speaking, if the account is not questioned this is
sufficient proof of the verity of the entries.” (Estate of Miller (1968)
259 Cal.App.2d 536, 549.) If the accounting is contested, however, it must be

      4The rules of evidence applicable to judicial proceedings also apply to a
hearing before a referee. (Sy First Family Ltd. Partnership v. Cheung (1999)
70 Cal.App.4th 1334, 1341; Evid. Code, § 300.)
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resolved at an evidentiary hearing with competent evidence, and the verified
pleading of the trustee in support of his account is not sufficient to support
approval. (Evangelho v. Presoto (1998) 67 Cal.App.4th 615, 621; Estate of
Lensch (2009) 177 Cal.App.4th 667, 676 (Lensch); see Estate of Bennett (2008)
163 Cal.App.4th 1303, 1309.) “Probate Code section 1022 provides, ‘[a]n
affidavit or verified petition shall be received as evidence when offered in an
uncontested proceeding under this code.’ Thus, when challenged in a lower
court, affidavits and verified petitions may not be considered as evidence at a
contested probate hearing.” (Evangelho at p. 620.)
      Ballard sent out an email in advance of the hearing before the referee
objecting to resolution of the issues through argument and affidavit and
demanding an evidentiary hearing. Thus, the proceeding was contested, and
under Probate Code section 1022 Balquist could not rely on his verified
petition as evidence to support his position that the accounting should be
approved. Yet his counsel presented no affirmative evidence at the hearing
before the referee and argued only that verified pleadings were properly
considered in probate proceedings. As noted, this is not the law when the
proceeding is contested.
      When Ballard commenced cross-examination of Balquist, the record
indicates the petition for approval of the second accounting was marked for
identification. But Ballard did not move to have it admitted as evidence, did
not examine Balquist regarding its contents, and argued during closing
argument that Balquist could not rely on his petition to prove his account in
a contested hearing and had failed to carry his burden of proof. Under the
circumstances, he cannot be deemed to have agreed to have the verified
petition considered as evidence of its contents.

                                        8
      Although Balquist presented himself for cross-examination at the
hearing before the referee and was in fact cross-examined, he did not in that
testimony establish that his accounts were necessary and proper. There was
no evidence apart from the petition itself from which the referee could have
recommended approval of the accounts, and the petition could not be
considered as evidence.
      At oral argument and in supplemental briefing, Ballard has argued
that because Balquist failed to present any evidence to meet his burden of
proof, and because his motion for judgment should have been granted, we
should simply order judgment entered in his favor rather than remanding the
case for further proceedings. We disagree. When a court improperly
considers an affidavit that should have been excluded as evidence, the proper
remedy is a remand for a new hearing, and we shall employ that remedy
here. (Target National Bank v. Rocha (2013) 216 Cal.App.4th Supp. 1, 9-10;
Lensch, supra, 177 Cal.App.4th at p. 676.)
      Ballard argues that this is not a case in which inadmissible evidence
was offered and considered by the court (referee); instead, Balquist failed to
offer any evidence at all. But the referee’s report, which was adopted by the
court, expressly considered the verified petition as evidence supporting his
recommendation that the petition be granted. The referee’s reliance on the
petition as evidence brings this case in line with those authorities supporting
a remand when evidence is erroneously considered.
      C. Remaining Issues
      Ballard argues that Balquist’s fees should be disallowed because
Balquist did not adequately document his time. Our conclusion that the
evidence at the referral hearing did not support an order approving the
accounts makes it unnecessary to consider this issue on appeal. We note,

                                       9
however, that the billing statements were provided to the referee after the
first hearing and reviewed before he issued his supplemental report.
      Ballard also argues that the evidence justifies a finding that Balquist
should be surcharged for various acts of malfeasance (refusing to account,
delay in transferring the Hawaii condominium, and initiating litigation over
Bass Drive). Ballard did not present any evidence to support his cross-
petition, and it was properly denied. “The beneficiary of the trust has the
initial burden of proving the existence of a fiduciary duty and the trustee's
failure to perform it; the burden then shifts to the trustee to justify its
actions.” (LaMonte v. Sanwa Bank California (1996) 45 Cal.App.4th 509, 517;
see also Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819, 853.)
                               III. DISPOSITION
      The judgment (order approving second accounting) is reversed, and the
matter is remanded for further proceedings consistent with this opinion. On
remand, the court may elect to hold a hearing regarding the accounting, or it
may elect to return the matter for hearing before a referee. Ordinary costs on
appeal to appellant.

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                      SIMONS, J.

We concur.

JACKSON, P. J.

BURNS, J.

(A161293)

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