New California case expands shifting trust/trustee attorneys’ fees and costs to a beneficiary’s share of the trust

New California trust dispute decision expands shifting trust/trustee attorneys’ fees and costs to a beneficiary’s share of the trust – Pizarro v. Reynoso, California Court of Appeal, Third Appellate District, Case No. C077594, (March 28, 2017)

Summary. The decision in Pizarro v. Reynoso expands the shifting of trust/trustee attorneys’ fees and costs to a beneficiary’s trust share, and in relevant part reminds us that all trust and estate litigation cases vary and are determined in significant part by the facts and circumstances of that case, the relevant case law, and the discretion of the trial court judge. In Pizarro v. Reynoso, on appeal the Court of Appeal held as follows:

  1. The terms and intent of the trustor prevail in substance – refusing to elevate form over substance the court upheld a sale of the trust real property to a specific beneficiary which the trust authorized in the trustee’s discretion if the beneficiary could afford to purchase the house. The trustee in fact in part assisted the beneficiary in that purchase so that the beneficiary could purchase the property – never the less the court upheld the sale based on substance over form and the intent and terms of the trust.
  2. Under the court’s equitable powers, the attorneys’ fees and costs incurred by the trust/trustee are chargeable against the trust share of a beneficiary who brings an unfounded proceeding against the trust, but those attorneys’ fees and costs cannot be awarded against the beneficiaries other personal non-trust assets, citing Rudnick v. Rudnick (2009) 179 Cal. App. 4th 1328, 1332-1333, 1335, and Estate of Ivey (1994) 22 Cal. App. 4th 873, 877-878, 882-886.
  3. Important – in an expansion of #2 above and charging fees and costs to a beneficiary’s trust share, under those same equitable powers, the court also can award the trust/trustee attorneys’ fees and costs against the trust share of a beneficiary who has not filed or brought a proceed, but who takes an unfounded position and litigates in bad faith causing the trust to incur fees and costs (the beneficiary changed her position to being against the trustee, and in the trial court’s opinion then offered false testimony by declaration, deposition and at trial – offering false evidence in litigation is a bad faith litigation tactic).
  4. The court’s decision also cites or makes reference to California Probate Code §17211(a) and §15642(d), which state as follows (and I have also provided below §17211(b):

17211(a)

(a) If a beneficiary contests the trustee’s account and the court determines that the contest was without reasonable cause and in bad faith, the court may award against the contestant the compensation and costs of the trustee and other expenses and costs of litigation, including attorney’s fees, incurred to defend the account. The amount awarded shall be a charge against any interest of the beneficiary in the trust. The contestant shall be personally liable for any amount that remains unsatisfied.

(b) If a beneficiary contests the trustee’s account and the court determines that the trustee’s opposition to the contest was without reasonable cause and in bad faith, the court may award the contestant the costs of the contestant and other expenses and costs of litigation, including attorney’s fees, incurred to contest the account. The amount awarded shall be a charge against the compensation or other interest of the trustee in the trust. The trustee shall be personally liable and on the bond, if any, for any amount that remains unsatisfied.

15642(d)

(d) If the court finds that the petition for removal of the trustee was filed in bad faith and that removal would be contrary to the settlor’s intent, the court may order that the person or persons seeking the removal of the trustee bear all or any part of the costs of the proceeding, including reasonable attorney’s fees.

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Request for evidentiary hearing and trial in a probate department proceeding?

There are additional procedural requests or demands that I sometimes, perhaps often, make in probate department proceedings. Every case is different, of course, so you do need to evaluate procedural and strategic options for your particular situation. However, whereas in a civil action the court will eventually set the dispute for a trial, in probate the judge can in some circumstances rule from the bench without a hearing where witnesses are presented. So you do want to consider whether you want to protect or reserve your evidentiary hearing or trial entitlement. And there are also additional requests or demands that might be considered relating to the presentation or admissibility of evidence. Nevertheless, the following is possible wording requesting an evidentiary hearing, which you can add to your court-filed and served pleadings prior to the hearing:

REQUEST FOR EVIDENTIARY HEARING AND TRIAL

__. __________ incorporates by reference herein paras. 1-__ stated above as if fully restated in this para. __.

__. __________ further requests an evidentiary hearing and trial for all disputed matters in this case, and a jury trial to the extent that a jury trial is allowable.