Hofmann v. Hofmann

SHARON HOFMANN, Individually and as Trustee, etc., et al., Plaintiffs, Cross-defendants and Respondents, v. MICHAEL HOFMANN, Individually and as Trustee, etc., Defendant, Cross-complainant, and Appellant

JOHN P. BRICHETTO, Individually and as Trustee, etc., et al., Cross-defendants, Cross-complainants and Respondents.

F079977

California Court of Appeals, Fifth District

July 15, 2021

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Stanislaus County No. 2200623. John D. Freeland, Judge.

Crabtree Schmidt and Robert W. Crabtree for Defendant Cross-complainant, and Appellant.

Downey Brand LLP and Meghan M. Baker for Plaintiffs Cross-defendants and Respondents.

Rodarakis & Sousa, Eric J. Sousa and Brandy L. Barnes for Cross-defendants, Cross-complainants and Respondents.

OPINION

DE SANTOS, J.

In 1994, Michael Hofmann approved a real estate transaction that resulted in his mother, Lois Hofmann, receiving a 50 percent individual interest in property consisting of a residence and a little over 41 acres of farmland. When added to the 25 percent interest Lois already held in the property, Lois's interest increased to 75 percent, with the other 25 percent interest held in a trust established by Lois's deceased husband, Erich Hofmann (the Erich Hofmann Testamentary Trust or EH Trust), whose beneficiaries are Michael and his siblings, Sharon Hofmann and Gary Hofmann. Lois transferred her interest in the property into her trust (the Hofmann Revocable Trust or LH Trust), which she amended in 2013 to forgive a debt Michael owed her; she left the remaining assets to Sharon and Gary.

In 2013, Lois obtained approval for a lot line adjustment that separated the property into two parcels-the residence and the farmland. The following year, she, Sharon and Gary entered into agreements with a local farmer, John P. Brichetto, and his family (the Brichettos)^[1] to sell their interests in the farmland portion of the property. The adjustment was not perfected, however, because Michael refused to sign the conforming deeds as trustee of the EH Trust. Although the EH Trust's terms required the estate to be divided in equal shares between the three children on Lois's death, Michael refused to distribute the estate after she passed away in 2015.

Sharon and Gary, as beneficiaries of the EH Trust, filed a petition to determine the ownership interests in the property and require Michael, as trustee of the EH Trust, to distribute the EH Trust's assets. Michael cross-complained against Sharon and Gary, and the Brichettos, ^[2] which led the Brichettos to file a cross-complaint to partition the property against Michael, Sharon and Gary.^[3] Throughout the case, Michael claimed the EH Trust owned a 50 percent interest in the property.

After a court trial, the trial court determined the Brichettos owned a 75 percent interest in the farmland portion of the property, with the remaining 25 percent interest held by the siblings, while the siblings owned the residence portion of the property. The trial court issued an interlocutory judgment which ordered Michael to distribute the assets of the EH Trust and sign the documents necessary to perfect the lot line adjustment, and ordered the property partitioned by sale. Thereafter, Sharon and Gary, and the Brichettos (collectively, respondents) filed motions for attorney fees. The trial court granted the motions in part and apportioned approximately 50 percent of respondents' attorney fees to Michael.

On appeal from the interlocutory judgment, Michael contends the trial court: (1) erred in denying him leave to amend his cross-complaint; (2) finding the statute of limitations barred his claim for breach of fiduciary duty; (3) erroneously treated a verified petition he filed in a prior action as a judicial admission; (4) wrongfully charged him inflated back rent for his occupancy of the residence; (5) improperly assessed credits for improvements he and the Brichettos made to the property; (6) abused its discretion in forcing him to sign the documents necessary to perfect the lot line adjustment; and (7) erred in its apportionment of attorney fees to respondents and in determining the fees were reasonably incurred. While we conclude the trial court abused its discretion in awarding the Brichettos credit for improvements they made to the Farmland that exceeded the increase in the Farmland's fair market value, we find no merit to Michael's other contentions. Consequently, we affirm in part and reverse in part.

FACTUAL AND PROCEDURAL BACKGROUND

The Property

At issue is a 43.07-acre piece of property located at 13330 Valley Home Road, Oakdale (the Property), which is comprised of approximately 41 acres of farmland (the Farmland) and 1.9 acres on which sits a residence (the Residence). The Property consisted of five parcels; all five parcels contained Farmland and three of them also contained portions of the Residence. Parcel five was a 100-foot strip of land running the length of the Property's southwestern border.

Erich and Lois Hofmann were married and had three children Michael, Gary, and Sharon. When Erich and Lois were both alive, they each owned a one-quarter interest (collectively, 50 percent) in the Property, and Erich's brother, Eugene Hofmann, and Eugene's wife, Phyllis, each owned a one-quarter interest (collectively, 50 percent). As to parcel five only, Erich and Lois owned their interests as joint tenants, as did Eugene and Phyllis.

The Erich Hofmann Trust

Erich died on December 9, 1987, leaving a will that created a testamentary trust (the EH Trust). Lois and Michael served as co-trustees of the EH Trust; Michael became the sole trustee after Lois's death on August 16, 2015. On Erich's death, Lois became a 50 percent owner of parcel five, while the EH Trust held a 25 percent interest in parcels one through four. Per the terms of the EH Trust, Lois received the trust's entire net income during her lifetime, with the remaining estate to be distributed in equal shares to Michael, Sharon, and Gary on Lois's death.

With respect to Eugene and Phyllis's ownership, Eugene came to own a 50 percent interest in parcel five on Phyllis's death in November 1991, while Phyllis's 25 percent interest in parcels one through four was placed in the Phyllis Jean Hofmann Testamentary Trust (the PH Trust). In October 1992, Eugene quitclaimed his entire interest in the Property, including parcel five, to the PH Trust, which became a 50 percent owner of the Property.

The 1994 Transaction

In the spring of 1994, Lois and the trustees and beneficiaries of the EH Trust entered into a transaction with Eugene and the trustees and beneficiaries of the PH Trust for the exchange of real property (the 1994 Transaction). A contract was drafted to memorialize the 1994 Transaction, which Michael approved as both a trustee and beneficiary of the EH Trust. The contract obligated Lois and the EH Trust to transfer a 50 percent interest in property located on E. Lone Tree Road in Oakdale, to Eugene individually, and in exchange, Eugene and the PH Trust were obligated to transfer their 50 percent interest in the Property to Lois individually.

Eugene, individually and as a trustee of the PH Trust, subsequently executed a quitclaim deed transferring all his right, title and interest in the Property to Lois as her sole and separate property, which was recorded in August 1994. Thereafter, Lois owned a three-quarter interest in parcels one through four and the entire interest in parcel five, and the EH Trust held the remaining one-quarter interest in parcels one through four. The parties also executed a grant deed transferring the Lone Tree Road property out of the EH Trust to Eugene's family, which Michael executed as trustee and beneficiary of the EH Trust.

The Lois Hofmann Trust

On September 14, 1994, Lois established the LH Trust as settlor and trustor; the following month she quitclaimed her entire interest in the Property to her trust. Thereafter, the LH Trust owned three-quarters of parcels one through four and all of parcel five, and the EH Trust owned one-quarter of parcels one through four.

Before her death, Lois had restated and amended the LH Trust. The August 2013 trust amendment forgave a $50, 000 debt Michael owed, bequeathed $25, 000 to Sharon, and left the residue of the trust estate in equal shares to Sharon and Gary. Earlier versions of the LH Trust included Michael as a residual beneficiary.

The Lot Line Adjustment

In 2013, Lois applied to Stanislaus County (County) for a lot line adjustment that would allow for separate ownership of the Farmland and the Residence. The purpose of the lot line adjustment was to increase the Property's value and provide the Residence for Michael, if he were to negotiate that with her. For years, Michael and his mother had discussed the possibility of him purchasing the Residence or the entire Property, but they were unable to reach an agreement.

The County approved the lot line adjustment on November 15, 2013. One parcel, which consisted solely of Farmland, was unaffected by the adjustment. The other four parcels were combined into two: one parcel for the Residence and another for the remaining Farmland. A certificate of lot line adjustment signed by Lois was recorded on May 16, 2014, but the adjustment was not perfected because Michael, as trustee of the EH Trust, refused to sign the conforming deeds.^[4] When attempting to explain at trial the basis for his refusal, Michael testified he was concerned the lot line adjustment could result in more residents in the area, even though the adjustment did not change the number of homes. In addition, he did not “see any reason” for the lot line adjustment, even though he acknowledged it would probably...