Filed 11/8/13 San Pasqual Fiduciary Trust Co. v. Holt CA4/3




                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE


SAN PASQUAL FIDUCIARY TRUST
COMPANY, as Trustee, etc.,
                                                                       G047029
     Plaintiff and Respondent,
                                                                       (Super. Ct. No. A239915)
         v.
                                                                       OPINION
CLUNIES A. HOLT et al.,

     Defendants and Appellants;

DAVID M. DENHOLM,

     Defendant and Respondent.



                   Appeal from an order of the Superior Court of Orange County, Mary Fingal
Schulte, Judge. Affirmed.
                   Law Offices of William B. Hanley and William B. Hanley for Defendants
and Appellants.
                   Poindexter & Doutré and Jeffrey A. Kent for Plaintiff and Respondent.
              Hinojosa & Wallet, Jeffrey Forer and Shannon H. Burns for Defendant and
Respondent.
                                          *   *   *
              This court has before it several appeals arising from a long drawn out
dispute between the beneficiaries of a family trust formed in 1973. This appeal concerns
a challenge to the probate court’s order granting the interim trustee’s petition for
instructions about what conditions, if any, should be placed on the required distribution
of one-half of the trust’s principal to beneficiary David M. Denholm (Denholm), in light
of the over $5 million civil judgment Denholm may owe the trust if he loses his appeal
challenging that judgment. We affirm the probate court’s order holding (1) Denholm had
a vested interest in 50 percent of the trust assets, which will include the civil judgment
entered in Clunies A. Holt, et al. v. David M. Denholm, et al. (Super. Ct. No.
06CC12290) (hereafter the Civil Action), and (2) the distribution of those assets must be
made whenever the remittitur issues in the pending appeal of the Civil Action.
                                              I
A. Background Facts
              We incorporate by reference the summary of facts contained in our
concurrently filed opinion San Pasqual v. Clunies A. Holt et al. (Nov. 8, 2013, G046003)
[nonpub. opn.] (San Pasqual I). This unfortunate family saga centers on the
interpretation of the David Scott Denholm and Clunies Manson Denholm Trust dated
April 2, 1973 (the Trust). The two trustors died long ago: David Scott Denholm died in
1984, and Clunies Madison Denholm died in 2005. As explained in detail in our opinion
San Pasqual I, the Trust’s beneficiaries have been embroiled in contentious litigation for
many years.
              There are two sides to this ongoing battle. On one side is the Trustors’ son,
Denholm, who served as the trustee until his resignation in December 2007. He is also
one of the Trust’s beneficiaries. The Trust states Denholm was a 50 percent income

                                              2
beneficiary until the fifth anniversary of his mother’s death, which was October 7, 2010.
After that date, Denholm was entitled to receive a distribution of one-half of the Trust’s
estate. The interim trustee postponed this distribution due to the judgment entered
against Denholm in the Civil Action and in favor of the Trust.
              On the other side of the dispute is the trustors’ daughter, Clunies A. Holt,
who has a vested right to income generated by one-half of the Trust’s assets for her
lifetime. Her three children, Clunies E. Holt, James Holt., Jr., and Cameron Holt
Schmidt, are entitled to distribution of the remaining one-half of the Trust’s estate upon
their mother’s death. Holt and her children will sometimes be collectively referred to in
this opinion as the “Holt Beneficiaries.”
B. The Civil Action
              The following facts are taken from the trial court’s statement of decision in
the Civil Action. Clunies A. Holt and her daughter Clunies E. Holt (hereafter the Holts)
sued Denholm on behalf of the Trust for: (1) breach of fiduciary duty (first and tenth
causes of action); (2) constructive fraud (second cause of action); (3) aiding and abetting
breach of fiduciary duty (third cause of action); (4) fraud by concealment (fifth cause of
action); (5) elder abuse (sixth cause of action); and (6) conversion (seventh cause of
action).
              The Holts also sued six limited liability companies for aiding and abetting a
breach of fiduciary duty (third cause of action). Calico HGC I, LLC, and Calico
Properties, LLC, were sued for aiding and abetting breach of fiduciary duty (fourth cause
of action) and for fraud by concealment (eighth cause of action). Calico Properties was
also sued for fraud by concealment (fifth cause of action). The Holts sued 15 other
companies for fraud by concealment (ninth cause of action).
              After the Holts presented their case-in-chief at trial, all the defendants
(except Denholm) requested dismissal. The court granted the motion as to Nicole Biel
(formally appearing as Nicole Denholm), Timothy Harris, Denholm Harris & Company,

                                              3
Waterpoint Development Companies, LLC, and HGC Irvine, LLC. The court reserved
ruling on the motions made by the other defendants. Two months later, at the end of trial,
the court found in favor of all the remaining defendants, leaving only Denholm in the
action.
              The court found in favor of Denholm and against the Holts on the third,
fourth, fifth, and sixth causes of action. It dismissed the tenth cause of action. It found in
favor of Holts, “on behalf of the Denholm Trust” and against Denholm on the first,
second, and seventh causes of action (breach of fiduciary duty, constructive fraud, and
conversion respectively).
              In the statement of decision prepared in the Civil Action, the trial court
discussed the terms of the Trust, providing for equal distribution of net income to
Denholm and Holt for a period of five years, ending on October 7, 2010. The court noted
the Trust provided Denholm with a one-half interest in the principal “outright free of
trust,” while Holt’s one-half interest remained in the Trust for her lifetime. The court
determined Holt was entitled to the net income from her one-half interest, but she had “no
power of invasion of the Trust property in a manner antagonistic to the intent of the
[s]ettlors to generally provide income to the beneficiaries for their support and care for
life.”
              The court determined Denholm, as trustee, had absolute discretion to
manage the Trust’s assets, but could not use or deal with Trust’s property for his own
profit, or for any other purpose unconnected with the Trust in any manner without
consent of the other beneficiaries. (Citing Prob. Code, § 16004, subd. (a), formerly Civ.
Code, § 2229; Coberly v. Superior Court (1965) 231 Cal.App.2d 685, 688.)1
              The court determined Denholm was “liable to the Trust because he engaged
in self-dealing without [Clunies A. Holt’s] consent . . . . Specifically, Denholm borrowed

1             All further statutory references are to the Probate Code, unless otherwise
indicated.

                                              4
money from the Trust at interest rates and repayment terms he set without [Clunies A.
Holt’s] consent . . . . Further, he personally took an interest in and personally benefitted
from investments of Trust assets without the consent of his co-beneficiary.” The court
determined the Trust vested Denholm with absolute discretion in the use of Trust’s assets,
but he was not free to neglect his fiduciary duty to the Trust through self-dealing without
the consent of the beneficiaries. The court noted, “Certainly, Denholm did not have the
discretion to bet all of the [Trust’s] assets ‘on red’ as testified to by several witnesses.
Nor does the Trust authorize the [t]rustee to neglect [the T]rust or abdicate its judgment.”
              The court concluded Denholm breached his fiduciary duty when he
borrowed money from the Trust for his own benefit and without Clunies A. Holt’s
consent. It stated, “Since an inherent conflict arises when the [t]rustee acts as both debtor
and creditor, such a loan constitutes a breach of the undivided loyalty which the [t]rustee
owes to the [T]rust . . . .” The court stated there was no evidence Holt consented to
Denholm borrowing money from the Trust or consented to his self-dealing.
              As to the constructive fraud action, the court based its decision on evidence
Denholm “breached his fiduciary duty of loyalty by borrowing money from the Trust and
engaging in self-dealing transactions. Denholm obtained monies from the Trust for his
own personal use and benefit and used [the] Trust for his own personal use and benefit.
[¶] The legal basis for the [c]ourt’s decision is that Denholm as [t]rustee of the Trust,
was a fiduciary. [Citation.] Constructive fraud is a species of fraud applicable to a
fiduciary. [Citation.] A breach of fiduciary duty constitutes constructive fraud.”
              As to the seventh cause of action for conversion, the court based its
decision on the fact Denholm, as trustee, was “directed by the terms of the Trust to
engage in specific actions” and it does not permit any self-dealing. The court determined
“Denholm used the Trust’s assets for his personal use and benefit, contrary to the purpose
and terms of the Trust, and converted the Trust’s money to and for his own benefit.
Denholm commingled the Trust money in his personal bank accounts for extended

                                               5
periods of time in order to sustain his business investments and expenses and to maintain
his personal income and lifestyle. The proceeds of the loans by the Trust to Denholm and
the financial benefit derived from the loan proceeds are products of the Trust.” The court
noted conversion is a “‘strict liability tort.’” It explained, “‘The foundation of the act
rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in
the breach of an absolute duty; the act of conversion itself is tortious. Therefore,
questions of the defendant’s good faith, lack of knowledge, and motive are ordinarily
immaterial. [Citations.]’”
              Finally, the court concluded Denholm did not act reasonably or in good
faith when he engaged in self-dealing, and consequently, the court would not relieve
Denholm from liability under section 16440, subdivision (b). It awarded the Trust
damages as follows: (1) $213,971 for underpaid interest resulting from loans to
Denholm; (2) $25,824 damages from loans to third party entities; (3) over $1.4 million
for disgorgement of profit and income belonging to the Trust from Denholm’s
investments in which he had an interest; (4) damages for the use of Trust assets in
connection with Denholm’s investments that did not make a profit ($1,406,743); and
(5) over $1.7 million in damages from Denholm’s investments in which he held an
interest.
              The court in the Civil Action also explained in its statement of decision
why it rejected the other causes of action against Denholm and the other defendants. It
reasoned the evidence presented did not establish any factual basis to support those
claims. The court explained those causes of action were all based on allegations
Denholm, the various entities, partners, and Denholm’s ex-spouse, “engaged in a
‘fraudulent scheme and plan to use [the Trust] and its assets for their own personal use,
gain and profit and to the detriment of the Trust and its beneficiaries.’ [The Holts] claim
these defendants entered into this ‘scheme’ for the ‘purpose of looting [the Trust is]



                                              6
unsupported by the evidence.” Specifically, the court found no evidence the defendants
acted with the intent to induce reliance or with the intent to deceive or defraud.
              The court determined the Holts’ action for elder abuse (regarding
Denholm’s mother) was also unsupported by the evidence. It concluded Denholm’s
mother did not suffer any financial harm or loss due to her son’s conduct. The court also
denied the request for punitive damages against Denholm, stating, “Denholm did not
commit any of the alleged acts with actual fraud, malice or oppression. The court finds
that the commission of actual fraud requires the intent to deceive. [Citation.] In the
instant case, the court finds [Denholm] did not harbor the intent to deceive during the
commission of any of the acts alleged in this action.” And finally the court deferred to
the probate court on the issue of whether Denholm, as trustee, was entitled to have
attorney fees paid from the Trust (the tenth cause of action).
              The final judgment in the Civil Action, filed May 6, 2011, “awards
compensatory damages only in favor of [the Holts], on behalf of the [T]rust, and against
[Denholm], individually, in the sum of $5,416,315,77 . . . and costs of suit . . . [to be
determined at a future date].” On July 12, 2011, the judgment was amended nunc pro
tunc to account for prejudment interest ($5,751,682,17).2
C. The Ongoing Dispute Regarding Denholm’s Accounting
              The Holts objected to Denholm’s accounting, filed for the period of time he
served as trustee. They filed a petition to expand the time period of the accounting and
objected to a portion of the credits Denholm took as trustee, seeking to surcharge him
over $2 million. These accounting matters have not yet been tried in the probate court.



2              An appeal of the Civil Action judgment is currently pending before this
court, in addition to related appeals concerning postjudgment attorney fee awards. We
granted San Pasqual’s motion to consider the appeals arising from the court’s instructions
immediately and separately from the Civil Action rulings.


                                              7
D. The Petitions For Instructions
              The Trust provided Denholm was to receive a distribution of his one-half
interest in the Trust on October 7, 2010. Before that distribution, San Pasqual filed a
petition for instructions concerning distribution of the Trust’s principal in view of the
then pending Civil Action as well as the outstanding challenges to Denholm’s
accounting.
              This initial petition, filed September 13, 2010, asked the court if there
should be preconditions “imposed on principal distribution to [Denholm] in view of the
ongoing litigation between [him and the Holts].” San Pasqual informed the court that the
Civil Action judgment was expected in a few weeks, and if Denholm was found to be
liable to the Holts or the Trust, his one-half of “the Trust estate would be subject to
significant, if not complete, offset.” San Pasqual asked if Denholm’s distribution should
be conditioned upon the following requirements: (1) expiration of all appeal periods
relating to the Civil Action and accounting disputes; (2) payment to the Trust or
liquidation of the amounts Denholm may owe the Trust, so that an offset for such
liabilities can be taken against the principal amounts distributed to him; and (3) payment
to the Trust of any fees and costs Denholm may owe arising from the accounting dispute
or the Civil Action. San Pasqual requested instructions about which Trust assets should
be used to make the distribution to Denholm because much of the Trust’s value was tied
up in leased real property.
              On December 1, 2010, San Pasqual filed a supplemental petition (hereafter
first supplemental petition), advising the court a minute order had been issued in the Civil
Action awarding the Trust over $5 million in damages. San Pasqual provided a list of the
Trust’s current assets, having a net equity of over $2.5 million. San Pasqual noted the
Holts did not agree with San Pasqual’s position the Civil Action judgment was for the
benefit of the Trust and all its beneficiaries. San Pasqual stated the amount of the
judgment award should be added as an asset of the Trust, increasing the net assets of the

                                              8
Trust to $8,272,568. San Pasqual proposed distributing Denholm his one-half interest in
the principal as a credit against the $5 million he owed the Trust.
              San Pasqual noted there was also a federal tax lien in the amount of
$317,945.37 against Denholm’s property interests. San Pasqual did not believe the
Trust’s spendthrift clause would prevent the IRS from foreclosing its lien on Denholm’s
interest in the Trust. San Pasqual requested instructions about whether it must satisfy the
lien before making any distribution to Denholm.
              And finally, San Pasqual asked for instruction about making income
payments to Denholm because his rights as an income beneficiary terminated on
October 7, 2010. San Pasqual recognized Denholm would be entitled to interest on his
one-half vested interest in the undistributed trust principal.
              The Holts filed objections to both petitions. On October 3, 2011, the court
held a trial and considered the testimony of witnesses, reviewed exhibits, and heard oral
argument. The court took the matter under submission and filed a lengthy statement of
decision.
              In the statement of decision, the probate court stated San Pasqual’s petition
for instructions about how to distribute Denholm’s one-half interest in the Trust appeared
to be a simple request. It stated the petition, however, was complicated by the following
facts: (1) it was filed before the judgment in the Civil Action, and that judgment is being
appealed; and (2) there are still actions pending in the probate department regarding
Denholm’s accounting and $2 million in surcharges against Denholm.
              The court summarized the Holts’ objections to the petition as follows:
“The Holts argue . . . that ‘there is no plausible scenario’ under which [Denholm] is
entitled to anything.” The probate court concluded it could not “make that finding” and
prepared a lengthy statement of decision addressing over 16 arguments raised by the
Holts, as well as, a few concerns raised by Denholm. The probate court ultimately
concluded (1) 50 percent of the Trust’s assets as of October 7, 2010, vested with

                                              9
Denholm, and (2) those assets should be distributed to Denholm when the remittitur is
filed in the appeal concerning the Civil Action. Because the Holts do not challenge all
the findings made in the 13-page statement of decision, we have limited our discussion of
the statement of decision to the specific issues raised by the Holts on appeal.
                                               II
A. The Civil Action Judgment Is Only in Favor of the Trust
              The Holts’ first contention on appeal is “Denholm is not entitled to half of
the judgment in the Civil Action.” Their argument is based on the premise Denholm’s
interest in the Trust was “fixed” as of October 7, 2010, and cannot include the judgment.
They also maintain Denholm cannot, as a matter of law, benefit from his own wrong.
“Denholm would be unjustly enriched by virtue of misconduct if he were entitled to
one-half of the Civil Action: ‘No one can take advantage of his own wrong’ [citation],
must trump any right Denholm had to receive one-half of the Trust on October 7, 2010.”
              The probate court rejected this argument for several reasons. First, the
probate court noted the civil court did not order Denholm to pay the civil judgment while
that matter was pending on appeal. Moreover, the Trust clearly provided the trustee must
distribute Denholm’s share. The court concluded, “Nowhere in the Trust, case law, or
statute is it required that [Denholm] pay his ‘damages’ to the Trust prior to receiving his
distribution therefrom.” The Holts fail to provide us with any authority to the contrary.
We found no authority holding Denholm must pay compensatory damages to the Trust
before receiving his vested share of the Trust.
              The probate court also recognized the Holts were not framing the issue
correctly: “The issue of allocation of the civil judgment (which clearly belongs to the
Trust) is a matter that concerns the internal affairs of the Trust, was clearly at issue in this
trial, and the [c]ourt has determined it accordingly.” The probate court clarified that
“contrary to what the Holts argue, the Civil Action did not determine any allocation of
the civil judgment. . . . True, the judgment was against [Denholm] only, but it was not

                                              10
allocated to favor only the Holts either. The civil court ruled that judgment was found in
favor of the ‘plaintiffs [Holts] on behalf of the [T]rust . . . .’ It was a credit to the [T]rust
not to the Holts.” On appeal, the Holts do not explain why this reasoning was incorrect.
We find no reason to disturb the probate court’s determination the civil judgment became
an asset of the Trust, payable to its beneficiaries.
               The probate court accurately explained Denholm’s entitlement, as the
Trust’s beneficiary, to the Trust’s assets was not before the civil court and was not
decided in the Civil Action. The only issue concerning Denholm’s entitlement as one of
the Trust’s beneficiaries was related to the financial elder abuse cause of action and the
court found in his favor on that claim. Consequently, the civil court “never considered
the issue of a forfeiture of [Denholm’s] share of the Trust under the Probate Code. The
allocation of Trust assets (which includes the civil judgment), is a matter that concerns
the internal affairs of the Trust, is clearly at issue in this trial, and the court has disposed
of it accordingly.”
               We conclude the probate court’s assessment of the limited issue before it
was correct. Nothing in the Civil Action’s judgment indicated Denholm forfeited his
interests as a beneficiary. The entire judgment was allocated in favor of the Trust, not the
Holts individually, nor Denholm individually. The only issue left for the probate court to
decide was how the Trust assets should be allocated.
               Consequently, we find the Holts have mischaracterized the issue on appeal
as relating to whether Denholm should be awarded one-half of the $5 million judgment in
the Civil Action. The probate court had nothing to do with the determination or award of
that judgment. It simply determined that under the terms of the Trust, Denholm was
entitled to one-half of the Trust’s estate. This is the only ruling we are reviewing in this
appeal. And for this reason, we deem irrelevant the Holts’ discussion and analysis of
case law regarding allocation of civil judgments, unclean hands, and civil actions against
trustees.

                                               11
B. The Civil Judgment Is Considered a Trust Asset
              The parties are in agreement that the $5 million judgment is an asset of the
Trust. This conclusion is amply supported by the record. As recited in the statement of
decision in the Civil Action, the judgment was in favor of the Trust, not the Holts
individually. The trustee must seek collection of the judgment as it is now one of the
Trust’s assets.
              On appeal, the Holts maintain that because the Civil Action judgment was
entered after Denholm’s interest in the Trust vested on October 7, 2010, it was not an
asset of the Trust at that time, and therefore, Denholm is not entitled to any of it. We
note this argument is an interesting departure from one raised in San Pasqual I. There
the Holts argued Denholm’s Trust interests terminated on October 7, 2010, and because
the trustee delayed distribution, Denholm lost the right to collect his inheritance. In this
appeal, the Holts argue that when the Trust terminated in 2007, Denholm’s financial
interest was “fixed” as of that date. In any event, both contentions are wrong.
Denholm’s interest vested in one-half of the entire Trust estate as it existed on October 7,
2010, not a particular dollar value. One of the Trust’s assets as of October 7, 2010, was
the right to recover the $5 million Denholm had misappropriated. That the judgment on
the claim was not entered until after October 7, 2010, is of no legal consequence. The
judgment was simply the fruition of the right to recover the loss.
              Citing to Salvation Army v. Price (1995) 36 Cal.App.4th 1619
(Salvation Army), the Holts argue Denholm’s interests would not be determinable on the
date of the delivery of the Trust’s assets (or include the Civil Action judgment), but rather
should be determined from the date the Trust instrument terminated as to him. The Holts
have misconstrued the case. We conclude the Salvation Army case supports the probate
court’s conclusion that because Denholm’s interest in one-half of the Trust vested, his
share will be valued on the date of distribution. The amount of his share was not “fixed”
on October 7, 2010.

                                             12
              In the Salvation Army case the trustor’s will created two testamentary
trusts, Trust A and Trust B, for the benefit of her husband for his life. (Salvation Army,
supra, 36 Cal.App.4th at p. 1621.) Upon husband’s death, the assets in Trust B were to
be paid to five specified charities (including the Salvation Army) in amounts that totaled
$240,000. (Ibid.) The will provided the residue, if any, was to be paid to the trustor’s
nephew’s children, or to their issue (who included defendant). The trustor died in 1971
and was survived by her husband. When he died four years later, Trust B had assets
valuing over $178,000, and included an interest in a parcel of land that was the subject of
several lawsuits. (Id. at p. 1622.) The court directed the trustee to postpone
administration of Trust B pending resolution of the lawsuits. (Ibid.)
              After 18 years passed, the trustee advised the court the lawsuits had been
concluded and Trust B’s assets had increased in value to nearly $900,000.
(Salvation Army, supra, 36 Cal.App.4th at p. 1622.) The trustee petitioned the court for
instructions indicating the $900,000 should be paid to the five charities proportionately.
Defendant opposed the petition, claiming the charities were entitled only to $240,000,
plus interest from 1974. The trial court agreed with defendant, and the charities
appealed. The appellate court decided the charities had acquired a vested interest in all of
Trust B’s assets, reversing the trial court’s ruling the charities had acquired a vested
interest in no more than $240,000. (Id. at pp. 1622-1625.)
              The court in Salvation Army reasoned section 15407, subdivision (a),
provides a trust terminates when the terms of the trust expire. The court explained,
however, that “[s]ection 15410, subdivision (c), provides, in relevant part, that upon
termination of a trust which terminates under its own terms, the trust property shall be
distributed ‘as provided in the trust instrument or in a manner directed by the court that
conforms as nearly as possible to the intention of the settlor as expressed in the trust
instrument.’ [Citation.] [¶] ‘When the objects of a trust have been fully performed the
title of the trustee ceases and the legal as well as the equitable title vests in the beneficial

                                               13
owner unless the intention of the creator clearly appears that the legal title should
continue in the trustee.’ [Citations.] Moreover, ‘[i]n the absence of any indication to the
contrary a testator contemplates prompt distribution.’ [Citation.] [¶] In this case Trust
B’s purpose was to provide [the trustor’s husband] with income during his lifetime, and
[the trustor’s] clear and stated intent was that the Trust B assets were to be distributed
upon [the trustor’s husband’s] death. The parties do not dispute the probate court’s
finding that Trust B terminated upon [the trustor’s husband’s] death on November 11,
1974. [¶] We conclude, as a matter of law, that upon [husband’s] death, the trust
terminated after having been fully performed, and the beneficiaries’ rights vested. At the
time of termination the Trust B assets had a value of approximately $178,000 and were
insufficient to fully satisfy the $240,000 in specific pecuniary charitable bequests.
Consequently, the specific charitable beneficiaries each received a vested beneficial share
of the Trust B assets proportionate to their specific bequests. [The charities] are correct
that because at the time the trust terminated and the beneficial interests vested there was
no residue, the residuary beneficiaries’ interests were extinguished. That actual physical
distribution of the Trust B assets was postponed 20 years does not affect the earlier
vesting of title upon the trust’s termination. [Citation.] Consequently, the court erred in
determining that [the charities] were entitled only to $240,000 plus interest thereon and
that [defendant] and the other residuary beneficiaries were entitled to all remaining
Trust B assets.” (Salvation Army, supra, 36 Cal.App.4th at pp. 1624-1625.)
              In other words, the court held the charities had a vested interest (in
proportionate shares) to the entire trust’s principal, valued now at $900,000. Their
interest was not fixed at $178,000 when the trust terminated. During the 20-year delay in
distribution, the trust estate could have decreased or increased in value. Each charity was
simply entitled to its share of the trust, valued at the time of long awaited distribution.
              For the reasons already set forth in San Pasqual I, we reiterate that when
the Trust terminated on October 7, 2010, Denholm gained a beneficial interest in one-half

                                              14
of the Trust’s principal. In that opinion, we held the postponement of his distribution did
not change the nature of this vested interest. Contrary to the Holts’ contention, the
Salvation Army case does not support the theory the dollar amount of Denholm’s share of
the Trust became fixed. Just as the charities in Salvation Army could collect the
substantial sum of money that accumulated when distribution was delayed for 20 years,
Denholm can collect money the Trust recovered while his distribution of the Trust was
delayed. As stated above, the judgment did not represent a new asset, but rather the
recovery of money wrongfully taken from the Trust.
                As aptly stated in the probate court’s statement of decision: “The [c]ourt
has previously ruled [and this court has affirmed on appeal] that [Denholm] remains a
beneficiary of the Trust until his share is completely distributed to him or otherwise
disposed. [Denholm’s] interest in the Trust is present, unconditional and vested . . . .
The civil judgment arose from a civil complaint that was filed against [Denholm] while
he was a beneficiary of the Trust (as he continues to be). Even though the civil judgment
was entered after expiration of the [five-year] vesting period, [Denholm] is still entitled to
his portion of the civil judgment as it has changed from a chose in action to an obligation
by [Denholm] to the Trust.”
C. Forfeiture
                Alternatively, the Holts suggest Denholm forfeited his right to a
distribution under the terms of the Trust because a civil judgment was entered against
him. They have no authority to support this contention. Nor do they have any authority
to support the notion they are entitled to Denholm’s vested one-half share of the Trust.
As aptly stated by the probate court, “The Holts believe that the civil judgment against
[Denholm] is a de facto forfeiture of his interest in the Trust. This is not true. The civil
judgment, against [Denholm] individually, is for the benefit of the Trust. The Holts, as
beneficiaries of one-half of the Trust brought the civil action on behalf of the Trust and
the judgment was for the benefit of the Trust. Thus, the civil judgment became another

                                              15
asset of the Trust, along with the Trust’s interests in the Sawtelle property, [etc.,] . . . .”
Moreover, the court noted, “Nothing in the Trust expressly allows for withholding [his]
share.” We agree there are no grounds to find Denholm forfeited his interest in the Trust.
               The probate court provided a detailed explanation about why it rejected the
Holts’ claim Denholm forfeited his inheritance and their assertion Denholm cannot be
allowed to profit from his own misconduct, bad faith, fraud, and deceit. Primarily, the
court based its decision on the conclusion the Holts had misstated the basis for the
judgment in the Civil Action. The probate court reasoned Denholm was found liable in
tort, but “clearly exonerated of any fraud or deceit . . . . No punitive damages were
awarded. $5.3 million, roughly, is the sum of compensatory damages, which were
awarded to the Trust. . . . The [c]ivil [c]ourt found no intent to deceive or defraud. . . .
Constructive fraud was based on the finding of breach of fiduciary duty. The same is true
for the finding of conversion, which the [c]ivil [c]ourt notes is a strict liability tort, not
requiring knowledge or intent. . . . [The Civil Action trial judge] found [Denholm] was
not relieved of liability under . . . section 16440, [subdivision (b),] because he did not
meet his burden of proof to show he acted reasonably and in good faith. This is not the
same as a finding of bad faith . . . . This is not the same as saying [Denholm] forfeits his
share. (Fns. omitted.)” We have carefully read the lengthy statement of decision issued
in the Civil Action and reach the same conclusion. Contrary to the Holts’ arguments,
Denholm was exonerated of elder abuse, fraud, deceit, and bad faith.
               We therefore also agree with the probate court’s conclusion that because
Denholm was not found liable for elder abuse, the forfeiture statute (§ 259) was
inapplicable.3 And there is no other legal basis or reason to hold Denholm forfeited his
inheritance.


3             Section 259, subdivision (c), provides a person found liable of elder abuse
or to have acted in bad faith cannot “receive any property, damages, or costs that are
awarded to the decedent’s estate” resulting from an action arising out of the abuse.

                                               16
              To the contrary, as aptly noted by the probate court, the case Estate of
Frank Dito (2011) 198 Cal.App.4th 791 (Dito), held a section 259 finding would not
necessarily eliminate a beneficiary’s entire inheritance. In the Dito case, the testator’s
grandson petitioned for a hearing about whether the testator’s widow was exempted from
receiving a share of the estate as an omitted spouse because of allegations she committed
financial elder abuse. The court held the financial elder abuse allegations had no bearing
on the determination of whether the widow is an omitted spouse under sections 21610
and 21611. Section 259, “does not necessarily disinherit an abuser entirely but rather
restricts the abuser’s right to benefit from his or her abusive conduct. [Citations.]” (Dito,
supra, 198 Cal.App.4th at p. 803, fn. omitted.) The statute “restricts the value of the
estate to which the abuser’s percentage share is applied and prevents that person from
benefiting from his or her own wrongful conduct.” (Id. at p. 804.) The abusers are
considered “to have predeceased the decedent only to the extent the person would have
been entitled through a will, trust, or laws of intestacy to receive a distribution of the
damages and costs the person is found to be liable to pay to the estate as a result of the
abuse.” (Id. at pp. 803-804, fn. omitted.)
              The Dito court concluded the section 259 claim “does not affect or threaten
the prior determination that [the widow] is a surviving omitted spouse under
section 21610. [The widow] retains that status and is entitled to her share of the estate as
specified in section 21610, although she is not allowed to share in any damages and costs
she could be liable to pay to the estate as a result of the alleged elder abuse. It is
conceivable that any damages and costs [the widow] might be liable to pay to the estate
would exceed her share of the estate, resulting in a situation in which she pays more to
the estate in damages and costs than she receives as an omitted spouse under
section 21610. However, the mere fact that application of section 259 might reduce or
even effectively eliminate [the widow’s] inheritance does not mean that it concerns the



                                              17
same primary right as a claim she is an omitted spouse with an entitlement to a share of
the estate.” (Dito, supra, 198 Cal.App.4th at p. 804.)
              In the case before us, there is no evidence of elder abuse, bad faith, fraud,
or deceit. The civil judgment awarded only compensatory damages. As explained in the
Dito case, Denholm’s primary right to his share of the Trust would not be exempt if the
civil judgment exceeded his share of the Trust. And of course, it is too early to determine
the amount of Denholm’s share, if any, of the Trust.
              In its statement of decision, the probate court calculated (and the Holts do
not dispute) the civil damages likely do not exceed one-half of the Trust’s estate. If
Denholm’s expected inheritance exceeds the $5.3 million judgment, there is no basis to
hold the Holts are entitled to the entire civil judgment plus the windfall of the rest of
Denholm’s share of the Trust.
              We find it very telling the Holts do not attempt to refute the probate court’s
interpretation of the limited nature of the civil judgment against Denholm, or the
established case law regarding when forfeiture is appropriate. The Holts’ failure to
support their contention with meaningful legal analysis waives the issue on appeal. (See
Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.)
D. As Held in San Pasqual I—Denholm is a Trust Beneficiary
              In their objections to the petition, the Holts again argued Denholm was no
longer a beneficiary. The probate court chastised the Holts for persisting with this
argument despite the probate court’s prior ruling rejecting it. The probate court reiterated
Denholm remains a beneficiary until his share is completely distributed to him or
otherwise disposed of. It reasoned, Denholm’s interest is “present, unconditional and
vested . . . [and] necessarily includes the civil judgment, the Sawtelle property, and the
other [assets of the Trust]. The Sawtelle property has a value that is greater than the debt.
The other assets of the Trust, including case and notes, all exceed ‘zero.’ Thus, the value
of [Denholm’s] interest in the Trust is greater than ‘zero.’”

                                              18
               We affirmed the probate court’s prior ruling in San Pasqual I, and we
incorporate by reference our discussion and holding Denholm’s interest in the Trust was
not forfeited or otherwise extinguished by the Trustee’s delay in distributing Denholm’s
vested interest in one-half of the Trust’s principal. We caution the Holts that to raise this
issue again would be deemed a frivolous act subject to sanctions.
E. Surcharge
               The Holts maintain that if this court determines Denholm is entitled to one-
half of the judgment, his interest should be surcharged by that amount. We need not
decide this issue because it was not properly raised or decided by the probate court. In
other words, we found no court order denying a request for surcharge for us to review.
               The record shows that in response to Denholm’s request that the Trust
property be sold to help pay his debt, the probate court noted San Pasqual had a duty
under section 16006 “to preserve [T]rust property and under section 16010 to enforce
claims that are part of the [T]rust property. Such claims include the civil judgment, and
any surcharges against [Denholm] in connection with the pending accounting.
[San Pasqual] asserts the trustee’s right to claim an offset, which is an equitable principle.
[Citations.] There has been no surcharge to date.”
               Consequently, the Holts’ assertions regarding the right to a surcharge are
premature. The civil judgment is not final and a hearing challenging Denholm’s
accounting has not yet taken place. The trustee’s petition and the court’s statement of
decision both reflect the understanding the amount of Denholm’s inheritance will depend
on how much money he owes the Trust. The probate court properly recognized it had
“insufficient evidence to set a dollar amount.”
               We note the Holts do not dispute the probate court’s determination
regarding the timing of Denholm’s distribution. The court determined Denholm’s share
of the “assets shall be made upon filing of the remittitur in the appeal of the Civil
Action.” We anticipate San Pasqual will file a petition when the remittitur has issued,

                                             19
seeking instructions on the amount to be distributed. Issues regarding offsets and
surcharges can properly be addressed at that time.
F. Benefitting From One’s Own Wrong
              The Holts repeatedly complain the probate court’s ruling permits Denholm
to benefit from his own wrongdoing. We disagree. Due to Denholm’s breach of
fiduciary duty, he is obligated to pay the Trust $5.3 million in compensatory damages.
Denholm’s distribution will take into account what he owes the Trust, and for this reason
he will not benefit from his wrongdoing.
              For example, if we assume for the sake of argument the value of the Trust
without the Civil Action judgment is $9 million, the total value of the Trust will increase
to approximately $14 million with the judgment added. Pursuant to the express Trust
terms, Denholm and the Holt Beneficiaries have an interest in one-half of the Trust estate
($7 million each). We fail to see how Denholm benefits from his wrongdoing if he pays
the judgment before receiving his distribution of the estate, or if his distribution is offset
by what he owes the Trust. In either scenario, the judgment will force Denholm to
remedy his wrongdoing. On the other hand, we find it would be highly inequitable to
distribute to the Holt Beneficiaries half of the current value of the estate $4.5 million in
addition to the entire $5 million judgment (giving them $9.5 million), or as they suggest,
the entire estate ($9 million) plus the judgment for a total of $14 million. The latter
calculations would mean Denholm would receive no inheritance, forfeiting millions (in
addition to the civil judgment) to the Holt Beneficiaries for no apparent reason. This
windfall puts the Holts in a better position than if they had never sued Denholm. If this
had been a case involving elder abuse the outcome may have been different, and the court
could have held Denholm forfeited some portion of his inheritance. But Denholm
prevailed on the elder abuse claim, and we find no legal basis to hold Denholm’s vested
interest in the Trust was entirely forfeited due to mistakes he made while acting as
trustee.

                                              20
                                         III
           The order is affirmed. Respondents shall recover their costs on this appeal.



                                               ___________________________
                                               O’LEARY, P. J.

WE CONCUR:


___________________________
BEDSWORTH, J.


___________________________
ARONSON, J.




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