Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Superior Court County of Santa Barbara Nos. SB224746, 1111613, 1097668 James W. Brown, Judge.
Law Office of Herb Fox, Herb Fox for Plaintiff, Petitioner and Appellant William A. Coln III.
Garrett & Tully, Stephen J. Tully, Efren A. Compean, John B. Greene for Defendants, Respondents and Appellants McGowan Guntermann, a Professional Corporation, and David V. Larson.
PERREN, J.
Appellant William A. Coln III (Bill) seeks to recover taxes paid by his deceased father's estate from respondents David V. Larson and his accounting firm, McGowan Guntermann (collectively Larson). Bill filed two lawsuits against Larson, a civil suit and an action in the probate court. In both he claims that Larson was professionally negligent and breached fiduciary duties by failing to advise decedent to create a family limited partnership (FLP).
We identify appellant and his brother by their first names not out of disrespect but to ease the reader's burden.
A number of other parties were named as defendants in the two lawsuits. Bill has not appealed the judgments in favor of those parties.
A jury found that Larson did not act negligently and did not commit professional malpractice in the civil suit. The trial judge sitting as the probate court found that Larson, in his capacity as trustee, did not breach fiduciary duties.
In the civil suit, Larson successfully objected to the testimony of the only expert Bill called to testify on the accountant's professional standard of care. Bill contends the trial court erred in finding the witness, an attorney specializing in estate planning, not to be a competent witness on the issue of accountant malpractice. Bill also appeals from the court's instruction to the jury concerning his brother's failure to testify due to witness intimidation.
Bill's sole claim in the appeal from the probate judgment is that he is entitled to a new trial in the event this court reverses the jury verdict in the civil suit.
Larson appeals from an award of expert witness fees and attorney fees in the probate action. He asserts the court erred in limiting recovery of those fees to the assets of the trust because the trust fund had been disbursed to the beneficiaries prior to the filing of the two lawsuits and insufficient assets remained in the trust to pay the fee awards.
We consolidated the appeals and now affirm the judgment after jury verdict in the civil case and affirm the judgment after bench trial and order granting attorney fees in the probate case.
FACTUAL AND PROCEDURAL BACKGROUND
Bill is the adult son of William A. Coln, Jr. (father) and the brother of Robert F. Coln (Rob). Bill alleges that father left in trust an estate valued at nearly $11 million at the time of his death in September 2001. He and Rob are sole beneficiaries of the trust. In two related actions, Bill asserts claims of negligence and professional malpractice against Larson, acting in his capacity as father's former accountant and the former cotrustee of father's living trust. Bill's claims against Larson as an accountant were brought in a civil action and his claims against Larson as trustee were brought in a separate probate action. The facts and issues in both actions are the same – whether Larson was negligent or committed professional malpractice in not advising father to form a FLP to save estate taxes.
Larson provided accounting services to father, including estate planning, beginning in the early 1990's. In 1993, father established the 1993 Coln Living Trust. Larson served as accountant for that trust.
In a prior unpublished opinion, we affirmed orders of the trial court permitting this action to go forward. The appellants in that case are not parties to this appeal. (Coln v. Bush (Apr. 29, 2004, B164613 [nonpub. opn.].)
In the summer of 1998, Bill commenced legal proceedings to impose an involuntary conservatorship on father and his estate due to father's declining mental and physical health. Father opposed the petition. He believed the petition was a device to take away his control over the trust funds after he had denied Bill's request for $10,000. The litigation was settled on the following terms: (1) Rob was appointed father's conservator; (2) Bill and Rob, as cotrustees of the 1993 Living Trust, delivered the entire corpus of that trust to the 1998 Coln Living Trust; (3) Larson was designated to serve with father as cotrustee of the 1998 Living Trust (as conservator, Bill acted as de facto cotrustee); and (4) Bill and Rob were designated as sole beneficiaries of the 1998 Living Trust (the 1998 settlement agreement).
In 1999, the William A. Coln, Jr. Charitable Remainder Unitrust was established and funded with $1 million from the 1998 Living Trust. Larson continued to provide accounting services both to the trusts and to father personally.
In the spring of 2001, Bill and his personal accountant began discussing the creation of a FLP to minimize estate transfer taxes on father's death. The accountant sent Bill a letter advising: "[T]he Internal Revenue Service is likely to audit the partnership and other related entities, including personal income tax returns of all family members. Family Limited Partnerships created close to the death of a relative are also very likely to be challenged by the IRS. [¶] . . . [¶] Some of your family members or counselors may simply think that it is just too late or too risky to implement significant changes in their tax strategies and planning. Or, they may simply just not wish to endure new or increased costs and expenses, as well as, all the time and energy it will take to tackle such a project . . . . These concerns, should they exist, are valid and have merit." Bill provided a copy of the letter to Rob. Rob rejected the concept of a FLP.
After several further discussions with Bill, Larson, Bill's accountant and other attorneys, Rob changed his mind and agreed, as father's conservator, to file a petition to amend the living trust to authorize the trustee to form a FLP. Larson did not object or voice concerns about the propriety of a FLP in those discussions. On the contrary, in a letter to Bill, Larson stated that a FLP was an "excellent" plan that could save as much as $240,000 in estate taxes.
A petition to amend the trust was filed on August 29, 2001. A hearing was scheduled for September 13, 2001. Father died on September 9, 2001, before the hearing. Unaware of father's death, the probate court granted the motion. Bill's attorney concluded, however, that the creation and execution of the FLP was ineffective because father had died.
On June 7, 2002, Larson filed the final estate tax return for the trust. Out of an estate of approximately $11 million, $5 million in estate tax was assessed. The remaining assets of the trust, except for approximately $17,000, were distributed in equal shares to Bill and Rob. Two weeks later, Bill filed the two lawsuits against Larson.
In this appeal, Bill asserts the trial court erred in excluding the proffered testimony of his expert witness, an estate planning attorney, as to the standard of care applicable to accountants engaged in estate planning. Bill also asserts the trial court erred in admitting evidence that Rob refused to appear at the trial because he had been contacted by Bill's attorney and told that to do so would violate the terms of the 1998 settlement agreement.
Bill's appeal of the decision of the probate court raises no challenge to the substantive merits of the decision. Instead, Bill argues that if the judgment in the civil action is reversed on appeal, the order entered by the probate should also be reversed.
Larson appeals the orders granting expert witness and attorney fees on the grounds that the court erred in limiting payment of the fees to the trust res, as the trust has been distributed and no assets remain for payment of the fees.
DISCUSSION
No Error in Excluding Expert's Testimony
Prior to trial in the civil case, Bill served a list of expert witnesses he intended to call at trial. It included the names of accountants and tax attorneys who would testify to the standard of care applicable to accountants. The only expert who was called to testify on Bill's behalf at trial was an estate planning attorney. Larson sought in limine to exclude the designated expert's testimony. The court granted the motion finding the attorney unqualified to opine as to the standard of care applicable to accountants. Larson's motion for nonsuit was denied on the ground that, without expert testimony, Bill could not meet his burden of proof as to negligence and damages. The court reasoned: "I think this may be one of those rare cases where you get to the jury without an expert opinion." The court did not abuse its discretion in excluding the testimony of Bill's witness.
"A person is qualified to testify as an expert if he has special knowledge, skill, experience, training, or education sufficient to qualify him as an expert on the subject to which his testimony relates." (Evid. Code, § 720, subd. (a).) The trial court is given considerable latitude in determining the qualifications of an expert and its ruling will not be disturbed on appeal unless a manifest abuse of discretion is shown. (People v. Kelly (1976) 17 Cal.3d 24, 39.)
"It is prejudicial error to exclude relevant and material expert evidence where a proper foundation for it has been laid, and the proffered testimony is within the proper scope of expert opinion. [Citation.] Conversely, the courts have the obligation to contain expert testimony within the area of the professed expertise, and to require adequate foundation for the opinion." (Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1523.) Erroneous exclusion of evidence is grounds for reversal if in light of the entire record "'". . . it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of error."'" (Osborn v. Irwin Memorial Blood Bank (1992) 5 Cal.App.4th 234, 254.)
Whether a person qualifies as an expert in a particular case depends upon the facts of that case and the witness's qualifications. "'"The competency of an expert is relative to the topic and fields of knowledge about which the person is asked to make a statement. In considering whether a person qualifies as an expert, the field of expertise must be carefully distinguished and limited."'" (People v. Williams (1989) 48 Cal.3d 1112, 1136.) However, work in a particular field is not an absolute prerequisite to qualification as an expert in that field. (Ammon v. Superior Court (1988) 205 Cal.App.3d 783, 791 .)
Bill's proposed expert is an estate planning attorney. The court conducted an Evidence Code section 402 hearing after Larson objected to the qualifications of the expert. On voir dire, the attorney testified he has a B.A. in accounting, has practiced law for 48 years, and had been a certified specialist in taxation at one time. He has his own law firm and has "always done a fair amount of estate planning and estate administration." He has given continuing education courses in real estate and taxation and given talks on estate planning and tax issues throughout his career to attorneys, accountants, life underwriters, financial planners, trust officers. He has never qualified as an expert witness in a court and has never opined on the standard of care applicable to accountants.
The attorney testified that in the estate planning area, lawyers and accountants sometimes do the same things, and that he often collaborates with accountants to serve common clients. He said he had used FLP's as an estate planning device for 35 to 40 years, and that attorneys and accountants often work together to create a FLP.
The attorney admitted he was not conversant with the licensing statutes governing accountants and CPA's, but opined that the appropriate standard of care could be ascertained without that knowledge because attorneys and accountants in the estate planning field perform essentially the same work. He stated that, based on his experience and interaction with various estate planning professionals, he could make a determination as to the standard of care for tax and estate planning professionals, including accountants, because both give advice in the same areas about the same subject matters. He also noted that lawyers and accountants practicing before the IRS are governed by the same set of rules.
The attorney testified he had read a law review article stating that lawyers and accountants practicing in the estate planning area are held to the same standard. On cross-examination, he said, "My opinion was, my own personal experience and knowledge and reinforced by the Law Review article, was that the courts would treat the standard of care for attorneys and accountants operating in the same arena the same. So I'm familiar . . . with my standard of care, and I assume the same would apply to an accountant. . . . I don't know why that would be different."
Todres, Tax Malpractice: Areas in Which It Occurs and the Measure of Damages-An Update (2004) 78 St. Johns L.Rev. 1011.
The record shows that the attorney has an impressive list of credentials and lengthy experience in the field of estate planning. However, these qualifications are those of a lawyer, not an accountant or CPA. What an accountant or CPA is obligated to know, and how that knowledge should be applied, must be judged by the standards of the accounting profession, and not viewed through the prism of a lawyer's training, knowledge, and experience, unsupported by any evidence the lawyer also has knowledge of the accountant's training, knowledge or experience.
Bill argues that because both lawyers and accountants work together in estate planning matters, this "overlap" between the professions qualifies a lawyer to opine on an accountant's negligence. This assertion conflicts with California law concerning the foundational prerequisites for expert testimony. (See, e.g., Osborn v. Irwin Memorial Blood Bank, supra, 5 Cal.App.4th 234, 282 ["professional prudence is defined by actual or accepted practice within a profession, rather than theories about what 'should' have been done"].)
We have not been cited to, nor have we found, any published case, in California or elsewhere, in which a court has admitted the testimony of a lawyer as an expert on the standard of care applicable to accountants. The out-of-state cases that Bill cites to support his position are not helpful. Delmar Vineyard v. Timmons (1972) 486 S.W.2d 914, a Tennessee case; University National Bank v. Ernst & Whinney (1989) 773 S.W.2d 707, a Texas case; Vernon J. Rockler & Co., Inc. v. Glickman, Isenberg, Lurie &Co. (1978) 273 N.W.2d 647, a Minnesota case; and World Radio Laboratories, Inc. v. Coopers & Lybrand (1995) 538 N.W.2d 501, a Nebraska case, all make the general observation, with which California courts agree (see, e.g., Estate of Beach (1975) 15 Cal.3d 623, 635), that accountants are held to the same standard of reasonable care as lawyers, doctors, architects, and other professionals engaged in furnishing skilled services for compensation. That is not in issue.
Hnath v. Vecchitto (Conn. Super. 2003) WL 1995440, the case cited in the law review article relied on by Bill's expert, is not a published case.
Rather, our concern is whether an expert in one field may testify to the standard of care of a professional in another field. Here, the trial court decided that this expert lacked the requisite credentials. The ruling was not arbitrary, capricious or whimsical. (People v. Jackson (2005) 128 Cal.App.4th 1009, 1018.) The trial court did not abuse its discretion in granting Larson's in limine motion to exclude the lawyer's testimony.
Jury Instruction Regarding Rob's Failure to Testify
The trial court gave a special instruction to the jury that the parties had agreed not be given. We conclude the court's mistake in this regard did not amount to prejudicial error.
The jury was instructed with a modified form of CACI No. 204, as follows:
"You may consider whether one party intentionally concealed or destroyed evidence. If you decide that a party did so, you may decide that the evidence would have been unfavorable to that party.
"A threat made by or on behalf of plaintiff against a prospective witness, with the evident purpose of intimidating the witness, may be considered by you an admission of the weakness or lack of merit of plaintiff's case. An effort to suppress adverse testimony by threats of reprisal or other intimidation may tend to indicate a party's consciousness of guilt or of weakness or lack of merit of the case.
"Any contract or agreement that attempts to prevent or suppress evidence from a witness is illegal and unenforceable."
The court then gave the following special instruction:
"Prior to the commencement of trial, Robert Coln had agreed with defense counsel to appear in and testify as a witness in this trial. On or about July 15, 2005, plaintiff William Coln III, acting through his attorneys, contacted Robert Coln, first by telephone and then in writing, threatening to involve him in future litigation if he appeared as a witness in this trial. The subpoena power of this Court does not extend to persons residing outside of the State of California. And, accordingly Robert Coln cannot be compelled to appear and testify in this matter. Robert Coln has declined to appear and testify in this matter as a result of the perceived threats of reprisals and intimidation conveyed to him telephonically and by writing by plaintiffs attorneys. You are further instructed that intimidation of any witness has no legitimate part in the trial process."
The special instruction was requested by Larson with reference to the following facts. Bill named Rob as a defendant in the lawsuits. In 2003, the brothers entered into a settlement agreement. In the agreement, Rob agreed to "reasonably cooperate in good faith with William" in the pending litigation to accomplish the terms and objectives of the litigation.
Subsequently, Rob agreed to testify for the defense in the lawsuits. On or about July 15, 2004, one of Bill's attorneys spoke to Rob by telephone. In that conversation, Rob purportedly said he had agreed to testify on behalf of the defendants so that he could "screw" Bill.
Rob did not appear at trial. He provided a declaration that recounted his conversation with Bill's attorney and submitted a follow-up letter he received from the attorney, both of which, he claimed, were "greatly upsetting."
The letter from Bill's attorney states in part: "I strongly encouraged you to seek independent counsel before deciding to travel to California and testify at the pending trial. In particular, I urged you to seek legal advice concerning your obligations under section 1.5 [of the settlement agreement] and whether voluntarily testifying at the trial, admittedly knowing that your testimony will hurt your brother's case, would be a violation of your duties under the Settlement and Release Agreement of September 2003. [¶] Please be advised that any breach of the Agreement between you and your brother will not be overlooked and shall not be tolerated."
Rob's declaration states: "Before the recent contacts from plaintiff's counsel, I was willing to voluntarily travel to California to testify as a witness at the trial of this matter, if my travel expenses were paid. Now, I am greatly concerned about doing this, given what Mr. Adams stated and insinuated in the phone call and in his July 18 letter. After considerable thought, I have decided that I will not go to California to testify in the face of Mr. Adams' threats."
The trial court admitted Rob's declaration and the letter from Bill's attorney. The trial court also permitted Bill's attorney to testify at length as to his intent in talking to Bill and writing him a letter.
Bill asserts the special jury instruction took from the jury the contested factual issue of whether Bill's attorney intended to intimidate or threaten a potential witness. Bill asserts giving the instruction was prejudicial error because it implicitly endorsed the defense theory of the case—that Bill was the disfavored son who was motivated by greed and antipathy toward his brother Rob—and "invited the jury to punish Bill for conduct that may well not have occurred." Bill argues that "even if jurors believed that the accountants were negligent in their failure to recommend and implement a FLP earlier in time, there were encouraged by the trial court's findings of fact to punish Bill for threatening his brother." Larson asserts that Bill waived any error by failing to object at trial, and the instruction was neither erroneous nor prejudicial.
The giving of the special instruction was error. It was not, however, prejudicial. The instruction merely summarized other evidence previously admitted—Rob's declaration and the letter from Bill's attorney. Any arguable inference that the instruction was characterizing this evidence as "threatening" was offset by the extensive testimony by Bill's attorney as to his intent in contacting Rob. In that testimony, Bill's attorney vehemently denied threatening Rob. Given these conflicting versions of the facts, the jury was left to decide the intent of Bill's attorney.
Moreover, we agree with Larson that Bill waived the error. A defendant's failure to object at trial to judicial statements, which, the defendant later contends, constituted unfair commentary on the evidence, bars his claim of error on appeal where the court could have clarified any possible misunderstanding. (People v. Cash (2002) 28 Cal.4th 703, 730; People v. Sanders (1995) 11 Cal.4th 475, 531-532; People v. Mitcham (1992) 1 Cal.4th 1027, 1052-1053.)
Bill could have objected after the instruction was read and requested immediate clarification from the court. Indeed, Bill's counsel had only to bring to the court's attention that the wording used deviated from that agreed to by the parties at the instructions conference. There is no reason to believe the court would not have corrected the error. "'"In the hurry of the trial many things may be, and are, overlooked which would readily have been rectified had attention been called to them. The law casts upon the party the duty of looking after his legal rights and of calling the judge's attention to any infringement of them. If any other rule were to obtain, the party would in most cases be careful to be silent as to his objections until it would be too late to obviate them, and the result would be that few judgments would stand the test of an appeal."'" (In re Seaton (2004) 34 Cal.4th 193, 198.) In this case, clarification of the instruction would have been a simple matter. Bill's failure to raise the issue during trial and allow the court to correct the mistake precludes consideration of the error on appeal.
The Probate Court's Decision
Bill filed an action in the probate court asserting that Larson breached his fiduciary duties in his role as cotrustee. After a trial lasting several days, during which an estate planning attorney was permitted to testify that Larson was negligent in performing his duties as trustee for failing to advise father of a FLP, the probate court found that Larson was not negligent and had not committed malpractice.
Bill does not claim any error occurred in the trial. Instead, he argues that if his appeal of the civil case is successful, he should be permitted a retrial in the probate case because "[h]ad the jury found that Larson was professionally negligent . . ., the trial court would likely have found that he was also derelict in his duties as trustee."
A reviewing court is limited by the record on appeal. Speculation as to the outcome of a separate appeal has no place in determining whether the trial court erred in the instant case. We are bound by the well-established rule that the trial court's judgment is presumed to be correct. The appellant has the burden of demonstrating prejudicial error. Where, as here, an appellant offers no argument or authority challenging the trial court's order, the order must be affirmed. (See, e.g., Spitler v. Chidren's Institute International (1992) 11 Cal.App.4th 432, 442.)
Larson's Appeal -Expert Witness Fees and Attorney Fees
Prior to trial, Larson offered to settle both cases for $150,000. Bill refused. After Larson prevailed in the probate action, he filed a memorandum of costs and a motion for attorney fees. The probate court granted expert witness fees in the amount of $61,130.91 and attorney fees in the amount of $250,000. The court qualified the order, however, by limiting the source of the fee awards to the trust assets because it believed it had no authority to order that they be paid from Bill's personal assets, relying on Estate of Lee (1981) 124 Cal.App.3d 687, 692-693.
Larson cites no relevant authority to support his position that the probate court has jurisdiction to order that fees be paid from Bill's personal assets and we have found none. The case law is to the contrary. The jurisdiction of the probate court is in rem and the res is the decedent's estate. (Estate of Radovich (1957) 48 Cal.2d 116, 121.) The "power of the probate court extends only to the property of the decedent. An attempt to take and distribute the property of a living person is a violation of due process." (Estate of Lee, supra, 124 Cal.App.3d 687, 692; see also Estate of Scott (1987) 197 Cal.App.3d 913, 918-919; Estate of Nicholas (1986) 177 Cal.App.3d 1071, 1092.) It follows therefore that the probate court has no jurisdiction to award the payment of attorney fees from property that is no longer a part of the estate. (Estate of Baird (1919) 181 Cal. 742, 744; Lee, at p. 693; see also Estate of Trynin (1989) 49 Cal.3d 868, 876 [without express contractual, statutory or case authority, attorney fees in probate proceedings are generally to be paid by the party employing the attorney and are not recoverable as damages or costs]; Estate of Bevelle (1947) 81 Cal.App.2d 720, 722 [same]; Estate of Harvey (1964) 224 Cal.App.2d 555, 561-562 [disallowing attorney fees to be assessed personally against representative of an estate]; David v. Hermann (2005) 129 Cal.App.4th 672, 689-690 [reversing award of attorney fees in probate case that imposed a personal judgment against the unsuccessful party].)
Larson argues that he is entitled to expert witness fees under Code of Civil Procedure section 998, a statute whose purpose is to encourage settlement. It provides that "[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer. In addition . . . the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses . . . actually incurred and reasonably necessary." (Code Civ. Proc., § 998, subd. (c)(1).) Again, Larson cites no relevant authority to support his argument and we have found no published probate case on point. The above-cited cases are clear that the power of the probate court is defined and limited by statute. To accept Larson's argument would be an improper expansion of the jurisdiction of the probate court. (See, e.g., Woodland Joint Unified School Dist. v. Commission on Professional Competence (1992) 2 Cal.App.4th 1429, 1452 ["'our judicial task is to decide what the Legislature has done, not what it should have done. "Courts do not sit as super-legislatures to determine the wisdom, desirability or propriety of statutes enacted by the Legislature"'"].)
We affirm the judgment after jury verdict in the civil case and affirm the judgment after bench trial and order granting attorney fees in the probate case. Respondents are to recover costs.
We concur: GILBERT, P.J., COFFEE, J.