Estate of Sprott CA2/1 ( 2013 )

Filed 11/22/13 Estate of Sprott CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
Estate of BEARL SPROTT, Deceased. B237989
(Los Angeles County
Super. Ct. No. P421084)
WELLS FARGO BANK, N.A.,
Petitioner and Respondent,
v.
DANIEL SPROTT,
Objector and Appellant.
APPEAL from an order of the Superior Court of Los Angeles County,
Mary Thornton House, Judge. Affirmed.
Daniel Sprott, in pro. per., for Objector and Appellant.
Samuel D. Ingham III for Petitioner and Respondent.
_____________________________
Daniel Sprott appeals from an order by the probate court awarding sanctions
against him in the amount of attorney fees and costs incurred by Wells Fargo Bank, as
trustee for a testamentary trust, and an appointed guardian ad litem for the minor
beneficiaries. The court did not abuse its discretion in awarding the sanctions, and we
affirm the order.
BACKGROUND
Bearl Sprott died in 1959. An April 1964 “ORDER SETTLING FINAL
ACCOUNT, APPOINTING TRUSTEES OF TESTAMENTARY TRUST, AND
DECREE OF DISTRIBUTION” (Trust Order) provided that the trust’s duration was until
“the death of the last person entitled to any income or benefits,” or 21 years after the
death of the last children or grandchildren living when Bearl Sprott died, “for as long a
period as allowed by law.” The trust was funded with $344,758.16 in cash. The Trust
Order provided that the trustees “shall use the income of said trust estate for the
education and training of any and all of the blood issue and their blood descendants of
testator that shall desire to take advantage thereof, . . . for a fulltime college course at any
fully accredited college or university of their choice . . . .” The Trust Order also stated
that the trustees had discretion to provide for beneficiaries who became disabled. If the
trustees deemed it necessary, they could make additional distributions to beneficiaries for
their proper support and education, taking their financial resources and income into
consideration. Wells Fargo Bank, N.A. (Wells Fargo, or trustee) is the trustee for the
trust. Daniel Sprott (Sprott), one of Bearl Sprott’s grandchildren at the time of his death,
and his children Barbara, Richard, Matthew, David, and Michael Sprott, were among the
trust beneficiaries. In October 2011, the filing date of the order appealed from, the fair
market value of the trust was approximately $300,000, with an annual income of
approximately $8,000.
In September 2007, Sprott wrote a letter to the trust demanding that 24
beneficiaries be removed from the list of beneficiaries because they were not “known by
the last name of ‘Sprott,’” and threatening legal action against Wells Fargo if it did not
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comply. In response, in October 2007 Wells Fargo filed a “Petition for Order
Ascertaining Beneficiaries” clarifying that the 24 were indeed blood issue of Bearl Sprott
who, as a result of marriage, did not use the last name “Sprott.” Sprott first filed an
objection requesting that the petition not be heard until he obtained counsel, and later
(represented by counsel) filed an objection to the petition. Sprott also filed, in pro. per., a
“Motion for Reconsideration,” apparently before receiving a court order granting the
trustee’s petition. The court granted Wells Fargo’s petition on October 23, 2008, based
on the trust’s provision specifically excluding from disqualification any beneficiary who
changed his or her name as a result of marriage.
In January 2010, Wells Fargo filed a verified “PETITION FOR ORDER
MODIFYING TRUST DUE TO CHANGED CIRCUMSTANCES,” stating that the fair
market value of the trust had decreased by half in just two years, as a result of extensive
distributions under the discretionary provisions of the Trust Order. Wells Fargo therefore
recommended the modification of the trust by adding new language providing that annual
distributions for college educational expenses were limited to five percent of the value of
the trust’s assets at the beginning of each year to be paid from trust income, and to the
extent that income was not sufficient, from the trust principal. On March 5, 2010, Sprott
filed in pro. per. an “OBJECTION TO MODIFICATION OF TRUST: FRIVOLOUS &
WASTE OF TRUST ASSETS.” The objection argued that only trust income should be
used. In a pro. per. “ADDENDOM [sic] OBJECTION,” Sprott argued that if given
discretion, the Trustee would favor other, less needy family members over Sprott’s
family. Sprott also complained that the Trustee had not provided financial assistance
when he was hospitalized for a heart attack. The court ordered the appointment of a
guardian ad litem, Lawrence J. Kalfayan, to represent minor and unascertained trust
beneficiaries.
After a hearing, the court ordered the parties to participate in mediation. At a
further hearing in September 2010, the parties reported that three meetings with a
mediator had not resolved the issues. Sprott objected that Kalfayan was subject to a
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conflict of interest, in that he was representing not only minors but unborn potential
beneficiaries, and expressed his concerns that his sons now attending college might not
receive enough to remain in school. The court ordered further briefing.
Kalfayan filed a supplemental report, stating that in order to accommodate one of
Sprott’s objections, he supported an order requiring no modification of the trust language.
He also supported limiting annual distributions to five percent of the fair market value of
the trust, and allowing for trustee discretion within that fixed amount. The report also
noted that at the current rate of distribution, the trust would be completely exhausted by
the time Sprott’s two youngest children were ready to enroll in college. Sprott filed
another objection, accusing Kalfayan of a conflict of interest in that he would favor the
wealthy families over Sprott’s family. Wells Fargo filed a response to the objection,
noting that the trust corpus had diminished in the nine months since the filing of Sprott’s
objections, due to distributions and the cost of litigation. Pursuant to a request by
Kalfayan based on the conflict identified by Sprott, the court ordered that Sprott’s
children be excluded from the class of beneficiaries represented by Kalfayan. The court
declined to appoint an additional guardian ad litem for Sprott’s children. Sprott filed
additional briefing, continuing to object on several grounds. On November 5, 2010,
Sprott filed a pro. per. and in forma pauperis “Petition for Order Restricting Further
Restrictions for Persons Not Born with the Name ‘SPROTT.’”
The court signed a decision dated November 29, 2010, stating: “It is the duty of
this court to adhere as closely to the testamentary intent of Bearl Sprott; the compromise
reached between Wells Fargo and the [guardian ad litem], after considering the concerns
of Daniel Sprott, comprises this goal.” The court pointed out that the trust document
made no provisions for a “need analysis” in determining distributions. In an “ORDER
INSTRUCTING TRUSTEE,” filed December 28, 2010, the court noted that the scope of
Kalfayan’s representation as guardian ad litem was modified to exclude Sprott’s children.
The order denied the request for modification without prejudice, and instructed Wells
Fargo to make distributions for educational purposes in an amount not more than five
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percent of the net fair market value of the trust assets, paid from income and, if income
was insufficient, from principal. The order included distribution guidelines.1
On March 2, 2011, Wells Fargo filed another petition for an order modifying the
trust based on changed circumstances. “The proposed modification would deem a
beneficiary whose litigation concerning this trust causes him or her to qualify as a
‘vexatious litigant’ as defined in Code of Civil Procedure [section] 391[, subdivision] (b)
a ‘Vexatious Litigant Beneficiary.’ Any mandatory or discretionary distributions which a
Vexatious Litigant Beneficiary would otherwise receive from this trust would be reduced
dollar for dollar by the reasonable costs of litigation with the Vexatious Litigant
Beneficiary incurred by the trustee.” The petition also requested orders determining that
Sprott was a vexatious litigant beneficiary. Sprott filed in pro. per. and in forma pauperis
a motion to dismiss the petition, and an objection to paying the guardian ad litem fees and
costs. On April 27, 2011, Sprott also filed a pro. per. “INNOCENCENT [sic] OF
VEXATIOUS LITIGANT CHARGE: DEMAND FOR JURY TRIAL” as well as a
request for change of venue and an objection to the modification, arguing: “Wells Fargo
Bank is threatening to ‘euthanize’ Daniel Sprott if he continues to exercise his right of
due process under the law.”
Wells Fargo filed an amended petition to modify the trust on May 13, 2011,
requesting that the trust “deem a beneficiary whose litigation concerning this trust meets
specific standards to be an ‘Injurious Beneficiary,’” and seeking an order determining
that Sprott was an injurious beneficiary. Kalfayan, the guardian ad litem, filed a report
stating that he supported the petition. Sprott filed an “INNOCENCENT [sic] OF
‘INJURIOUS BENEFICIARY’ CHARGE: DEMAND FOR JURY TRIAL,” which
1 Sprott and his minor sons Michael and David filed a pro. per. appeal from the
order. We dismissed the appeal for lack of jurisdiction, concluding that Sprott and his
sons lacked standing to appeal, and ordered each party to bear its own costs; no attorney
fees were awarded. We draw some of the operative facts from the statement of facts in
our unpublished opinion dismissing Sprott’s earlier appeal, In re Estate of Sprott
(Oct. 26, 2012, B230531) [nonpub. opn.].
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also requested appointment of a new trustee, and a change of venue, made a request for
mediation, and further objections to the trust modification, and asked for a continuance to
obtain legal counsel. Sprott argued the trustee was acting in bad faith and with malice.
At a hearing on June 17, 2011, with Sprott representing himself, the trial court noted that
it had yet to adjudicate whether Sprott “ha[s] been filing . . . repeatedly frivolous
petitions,” but the trust was being dissipated by the cost of responding. The court
suggested that Wells Fargo proceed under Code of Civil Procedure section 128.52 rather
than requesting a modification of the trust, and denied Wells Fargo’s amended petition.
On July 28, 2011, Wells Fargo filed the motion for sanctions. The motion argued
that Sprott’s litigation had cost the trust over $100,000, Sprott’s sole purpose was to
benefit himself and his family, and although he had been unsuccessful, he continued
without regard to the cost to the other beneficiaries. His actions were in bad faith and
were frivolous. The motion requested instructions to the effect that Sprott’s future
distributions would be reduced by the amount of the sanctions until the amount was paid
in full. The motion listed 17 matters that resulted from Sprott’s actions. Sprott filed an
opposition with points and authorities, and a demand for jury trial. Sprott argued that he
acted in good faith because he was acting to protect and provide for his family, and
because he was known to have good character in his community. Sprott also argued that
the trustee sought to use the distributions to pay its legal fees “and let Mr. Sprott die,” as
he would no longer receive distributions that he needed for medical care.
At a hearing on September 30, 2011, Sprott argued that he was not acting in bad
faith; instead he was “outmanned,” “like a David and Goliath,” as he had no money to
hire an attorney. He continued to argue that Kalfayan’s appointment as guardian ad litem
discriminated against his family in favor of wealthier beneficiaries. The court responded:
“Mr. Sprott, this is the problem that exists right how. You have made the same argument
over and over and over again. You’ve made, I think, 16 petitions.” It was unfortunate
2All further statutory references are to the Code of Civil Procedure unless
otherwise indicated.
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that Sprott was unrepresented, but Sprott was held to the same level as an attorney. The
court explained: “I think you’re confusing bad faith with having a bad character. And
that’s because, in a legal sense, frivolous or tactics that are cause for delay, don’t
necessarily mean the person who’s making—doing those actions has a bad character, but
that the actions of the continual filing in the face of the arguments having already been
determined—or the theme of the arguments having been determined is what we’re talking
about here.”
The court issued its decision on the motion on October 28, 2011. The decision
noted that if Sprott’s arguments had been successful, the outcome would benefit his
immediate family to the detriment of other trust beneficiaries (because those with the last
name “Sprott” numbered 13, of which Sprott’s family would be seven, in contrast to the
44 beneficiaries currently entitled to distributions). Every judicial officer reviewing
Sprott’s arguments since 2007 had told him that the trust instrument did not require that
only those surnamed “Sprott” receive distributions, and had rejected the argument that
wealthier beneficiaries should receive a smaller distribution amount. The court referred
to the list of the petitions and motions included in the motion for sanctions as made by
Sprott or required to be made in response to Sprott’s litigation, and stated that all but two
had been decided adversely to Sprott.3 The court concluded: “Daniel Sprott’s actions
were calculated not only to cause delay but were also (1) intended to alter the terms of the
trust so as to benefit his own children, and (2) were frivolous in that the positions he took
were not supported by legal authority or the plain language of the trust document. The
rulings of the court made it clear to Daniel Sprott that his arguments were without merit,
yet he continued to re-make them.” These tactics were “frivolous and injurious to the
other trust beneficiaries” because the trustee, Wells Fargo, had expended $119,783.55 in
attorney fees and costs and had also paid the guardian ad litem’s fees and costs of
3These two included the prior appeal which we later dismissed for lack of
standing, and the amended petition to modify the trust and declare Sprott an injurious
beneficiary, which the court had denied.
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$14,181.70. The other beneficiaries should not have to share in those costs. The court
awarded as sanctions attorney fees and costs of $91,125 incurred by Wells Fargo4 and
$14,181.70 in fees and costs incurred by the guardian ad litem, to be deducted from
Sprott’s discretionary distributions.
Sprott filed this timely appeal in pro. per.
DISCUSSION
Under its equitable powers and its authority to administer the trust, as well as
under section 128.5,5 the trial court has the authority to charge one beneficiary’s share of
the trust for the attorney fees and costs incurred by the trust in defending against the
frivolous claims of that beneficiary. (Estate of Ivey (1994) 22 Cal. App. 4th 873, 882–883;
Rudnick v. Rudnick (2009) 179 Cal. App. 4th 1328, 1334–1335; see Wells Fargo Bank v.
Superior Court (2000) 22 Cal. 4th 201, 213, fn. 4.) As in Estate of Ivey, supra, 22
Cal.App.4th at page 880, the court in this case found that the beneficiary’s (Sprott’s)
court filings were frivolous and in bad faith. Further, the trial court concluded that
Sprott’s actions were “intended to cause unnecessary delay.” (§ 128.5, subd. (a).)
“On appeal, our function is limited to determining if there is any substantial
evidence to support the trial court’s order. We may not reweigh the evidence or
substitute our discretion for that of the trial judge. [Citations.]” (Estate of Ivey, supra, 22
Cal.App.4th at pp. 881–882.) The trial court’s order is amply supported by the record.
As we describe in some detail above, Sprott wrote to the trust in 2007 arguing that
the beneficiaries who did not have the surname “Sprott” should be removed from the list
of beneficiaries. In response, the trust filed a petition in the probate court, which Sprott
4 The court reduced the attorney’s hourly rate to reach this total.
5 Section 128.5, subdivision (a), provides that the court may order a party “to pay
any reasonable expenses, including attorney’s fees, incurred by another party as a result
of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary
delay,” including in subdivision (b) making or opposing motions. Subdivision (c)
provides that the court’s order “shall recite in detail the conduct or circumstances
justifying the order.”
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opposed, represented by counsel. (Subsequently Sprott proceeded in pro. per.) The court
granted the petition based on a trust provision specifically excluding from
disqualification those with a different last name as a result of marriage. In 2010, Sprott
objected to the trustee’s petition to modify the trust given a drastic decrease in its fair
market value, by arguing that the trust should be limited to distributions from income
only, the trustee would favor wealthier families than his, and the trust had failed to help
him when he was hospitalized with a heart attack. After the court appointed Kalfayan as
guardian ad litem for the minor and unborn beneficiaries, and after three fruitless
meetings with a mediator, Kalfayan filed a supplemental report attempting to
accommodate Sprott, who filed an objection that Kalfayan had a conflict of interest. The
trial court excluded Sprott’s children from the class represented by Kalfayan. Sprott
continued to object on the previously rejected ground that only those with the surname
“Sprott” should receive distributions. The court entered an order allowing the
modification that Sprott opposed. He appealed and we dismissed his appeal for lack of
standing. Wells Fargo then filed petitions requesting modification of the trust to declare
Sprott a vexatious litigant and an injurious beneficiary; Sprott opposed these petitions and
demanded a jury trial, the appointment of a new trustee, and a change of venue, arguing
that the trustee was acting in bad faith and with malice. At the court’s suggestion Wells
Fargo filed another petition for sanctions under section 128.5, which Sprott opposed,
arguing that Wells Fargo was acting in bad faith (including by attempting to deprive him
of the money he needed for his medical care). He continued throughout to assert that his
family was being discriminated against in favor of wealthier beneficiaries.
The evidence supports the trial court’s conclusion that Sprott’s objections were
frivolous, as they were “totally and completely without merit.” (§ 128.5,
subd. (b)(2)(A).) Sprott’s continual reassertion of his rejected objections also supports a
finding that they were frivolous because they were “for the sole purpose of harassing an
opposing party.” (Id. at subd. (b)(2)(B).) Further, we will not second-guess the trial
court’s determination that Sprott’s actions were in bad faith, as that determination is
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supported by Sprott’s repeated assertion of objections that had as their goal only the
enrichment of Sprott and his children, at the expense of most of the trust beneficiaries and
to the detriment of the trust, which was required to spend more than $100,000 in legal
fees (and whose value at the time of the sanctions order was approximately $300,000).
Finally, substantial evidence supports the trial court’s finding that Sprott’s actions were
for purposes of delaying the implementation of the trust’s requested modification in the
manner of making distributions for educational expenses, which Sprott repeatedly
claimed (to no avail) would benefit wealthier beneficiaries.
Sprott argues that the trial court’s order was not sufficiently detailed. While the
order did not list each of the filings that resulted from Sprott’s frivolous arguments, it
referred to the pages in the moving papers listing the petitions or motions made by Sprott
or made in response to Sprott’s arguments. The court identified the arguments that Sprott
made and which the court had repeatedly rejected. The order was not deficient in detail.
As we do not reweigh the evidence or substitute our discretion for that of the
probate court, and we perceive no abuse of discretion, we affirm the order awarding
sanctions.6
6 In his reply brief Sprott requests sanctions against Wells Fargo and its counsel in
the event that we reverse the trial court’s order. No sanctions are in order, as we affirm
the court’s order, and as Sprott’s request for sanctions does not meet the requirements of
California Rules of Court, rule 8.276(b)(1).
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DISPOSITION
The order is affirmed. The parties are to bear their own costs.
NOT TO BE PUBLISHED.
JOHNSON, J.
We concur:
ROTHSCHILD, Acting P. J.
CHANEY, J.
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