March 22, 2017

Unpublished Appellate Opinions - Don't Use Them

A hallmark of our legal system is the establishment of precedent, or case holding, from appellate courts that bind future cases. That is, the prior case can be cited in a subsequent case to argue for a similar outcome, provided the facts are analogous. For example, probably the most well-known probate case of recent years is Estate of Heggstad (1993) 16 CA4th 943, 950. This decision was rendered by the First District of the California Court of Appeal and stemmed from a case in San Mateo County Superior Court. Heggstad established the holding that a formal transfer of real estate into a trust, i.e. through a deed, was not required for the trust to control the real estate if it was identified on the trust's schedule of assets. This holding has probably been cited thousands of times in probate courts throughout California involving unfunded trusts. 

Still, many appellate opinions rendered by the California Court of Appeal are not published. In effect, these cases are non-binding on subsequent cases. For instance, if Heggstad was an unpublished opinion, it would be improper to cite it.

The beginning of the unpublished appellate opinion will state something like the following "California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.115." Hence the determination of whether an appellate opinion can serve as precedent or not is quite clear.

The logical inference is that an attorney should not cite to an unpublished opinion to support a legal argument. 

A recent appellate opinion, unpublished ironically, discussed how an attorney cited to an unpublished opinion initially in a demand letter and then in a petition to compel a trust accounting. The respondent naturally objected to the petition's reliance on an unpublished opinion, inter alia, and sought sanctions against the petitioner for violating the California Rules of Court. Conversely, petitioner's attorney declared that he was unaware of the rule governing citation to an unpublished opinion and regretted any confusion or inconvenience over it. Still, the trial court awarded the respondent "$4,000 in sanctions under California Rules of Court, rules 2.30 and 8.1115, for Rudolph's reliance on and citation to the unpublished decision."

Koppl v. Zimmerman, San Francisco County Superior Court, Case  PTR15298735

March 9, 2017

Settlement Agreements

When given the opportunity to be certain in a litigated matter, it is typically prudent to opt for such a route. This can eliminate future uncertainty. In a recent unpublished appellate opinion, the parties unfortunately decided against such a route and further litigation ensued.

Lough v. Lough, Orange County Superior Court Case #

The central issue stemmed from the interpretation of a settlement agreement.

"In May 2008, on the eve of the trial of the underlying action, Vinetta, Rodger, and Richard reached a settlement (the settlement agreement) after discussions in the chambers of Judge Di Loreto, the trial judge assigned to the case. The terms of the settlement agreement were put on the record in court with all parties present."

"Judge Di Loreto emphasized that the settlement agreement that was being put on the record was a binding agreement, stating that "basically what we're doing today is, in fact, a settlement, we're going to put it on the record. Even though nobody signed anything, it's just as good. [¶] [The court reporter] is taking down everything that I say, so it's going to be part of a settlement that's going to be enforceable. Do you understand?" Vinetta responded, "Yes." Judge Di Loreto asked Vinetta, "Do you understand everything Ms. Lough?" Vinetta responded, "I should." Judge Di Loreto said, "Well, not you should, do you understand it?" Vinetta responded, "I do." Judge Di Loreto then asked, "Do you agree to it?" Vinetta responded, "Yeah."

"The court ordered that copies of the transcript of the hearing be provided to counsel for both sides "so they can draft the stipulation, even though at this point in time we have it on the record so it's binding, even though it's not reduced to writing but it should be reduced to writing." Vinetta's counsel told the court that he would reduce the settlement agreement to writing within two weeks. The court responded, "So if I continue this matter until, say, May 16th, you'll be able to come in here with something to have formally in writing so I won't have to look to the court reporter every time?" Vinetta's counsel replied, "That would certainly be my client's desire, Your Honor. I will do everything to make that happen." In a declaration prepared in September 2013 in support of a motion by Rodger for summary adjudication in the present case, Vinetta's former counsel stated: "Ultimately, it was agreed between me and counsel for Richard that as between Vinetta, on the one hand, and Richard and Rodger, on the other hand, the May 5, 2008, transcript would stand on its own and we would not draft a separate settlement agreement. However, we did agree that a judgment would be entered to effectuate the terms of the settlement with respect to the four properties that Vinetta was going to retain and to confirm that Vinetta held title to those properties free and clear of any claims or interests of Richard (or Rodger)." (emphasis added).  

Following Vinetta's death, Richard filed suit against Rodger to enforce the settlement agreement. 

February 22, 2017

A California Estate Tax?

There is a federal estate tax, for now. The current president and both houses of Congress have indicated a desire to repeal the federal estate tax. Although the details of such a repeal have not been clearly defined. In response, CA state Sen. Scott Wiener (D-San Francisco) has pledged to seek a ballot initiative that would impose a California estate tax if the federal estate tax is repealed.

As of right now, there is no California estate tax.

The reason why a ballot initiative would be needed to impose a California estate tax is because voters in 1982 abolished it via initiative. See California Propositions 5 and 6, Repeal of Inheritance and Gift Tax Laws (June 1982). Thus to revive the California estate tax, another ballot initiative is needed.   


This blog offers no opinion on state Senator Wiener's proposal. This post is strictly for informational purposes. Please do not contact me with your viewpoints on the matter, there is reddit for that. Thank you. 

February 9, 2017

Probate Code § 850 Petition

1969 Shelby GT350
The probate code permits an interested party to seek a judicial determination, i.e. an order, that property is owned by the decedent's estate or that the decedent's estate owns property that is really the property of another. See Probate Code § 850. The typical reason for filing a Probate Code § 850 petition is a dispute over the ownership of land. For example, the decedent held title to property that another party believes is rightfully theirs. Or title to property is held by another that is rightfully the decedent's. However, a recent unpublished appellate decision revolved around ownership of a rather unique item, a 1969 Shelby GT500.

Fredrickson v. Gersh, Case # BP125612, Los Angeles County Superior Court 

"Decedent (Gersh) and Frederickson became high school friends in the 1970's. In 1980, decedent was involve in a motorcycle accident that rendered him a quadriplegic. Despite his disability, decedent achieved success as an investment manager, until his physical condition precluded him from continuing to work. Decedent was able to sign his name to important documents by using a mouth pen. As for Frederickson, he worked in various automobile businesses, although not as a mechanic, and he had some experience in motorcycle repair.

In 1991, Frederickson purchased the subject vehicle, an inoperable 1969 Shelby GT500, a classic "muscle" car. The purchase price was $2,000, according to the application for title. Frederickson did nothing with the car for 13 years.

In 2004, Frederickson and decedent entered into a joint venture with respect to the car. Prior to that, they had not spoken in three years. They orally agreed that decedent would pay for what it would take to restore the car to showroom condition, with Frederickson to perform the physical labor needed to do so. There was no specific deadline for completion of the project. Thereafter, Frederickson brought the car to decedent's home and parked it in the garage where the work could be done.

In June 2004, Frederickson submitted a title application to the Department of Motor Vehicles (DMV) for registration of Frederickson and decedent as the owners of the car. The title application was purportedly signed on decedent's behalf by one of his then caregivers, "Otto Gonzalez P.O.A.," but there was no evidence that Gonzalez had a power of attorney.

On June 25, 2004, the DMV issued a title certificate showing Frederickson "or" decedent as the registered owners of the car. Notwithstanding the use of the word "or," neither the title application nor the certificate of title specifically stated that Frederickson and decedent were owners as joint tenants.
Thereafter, Frederickson disassembled the car and took voluminous notes and photographs of the parts for purposes of later reassembly. Decedent, in turn, spent about $40,000 for parts. The project dragged on for years, the work on the car was sporadic and it was never completed.

In 2007, decedent amended the living trust he created in 2002 (before decedent acquired an interest in the car), leaving his estate to his brother, Gersh, and their sister, Wilson. At the same time, decedent signed a pour-over will which left his assets to the Trust. In connection therewith, decedent specified in writing that the car was part of his personal property to be assigned to the Trust.

On January 9, 2010, decedent died."

Ultimately the trial court found that there was no joint tenancy between decedent and Frederickson. Since title was tenants in common, ownership of the car went as follows: (1) 50% to decedent's estate and (2) 50% to Frederickson. This decision was upheld on appeal.

Frederickson argued that title to the 1969 Shelby GT500 was held in joint tenancy. If so, Frederickson would automatically inherit decedent's 50% interest in the 1969 Shelby GT500 upon his death. Alas for Frederickson, neither the trial court nor the appellate court ruled his way. 

January 26, 2017

Allocating Attorney Fees in Trust Litigation

A beneficiary's share of the trust is like a pie. Just trust me on this.
Actions have consequences. In the trust litigation context, a beneficiary is not able to file any action he or she wants with absolute immunity. "[W]hen a trust beneficiary instigates an unfounded proceeding against the trust in bad faith, a probate court has the equitable power to charge the reasonable and necessary fees incurred by the trustee in opposing the proceeding against that beneficiary's share of the trust estate." Rudnick v Rudnick (2009) 179 CA4th 1328, 1335. However, a recently decided appellate case placed a limit on the awarding of attorney fees. 

Pizarro v. Reynoso (2017) ___ Cal.App.4th _____

The case revolved around the sale of real property between family members. One of the arguments on appeal was the awarding of attorney fees to the prevailing party from the losing parties' share of the trust.

"The trial court's award of attorney fees stated: JENSEN, BARTHOLOMEW, and PIZARRO are jointly and severally liable for REYNOSO['s] attorneys' fees and costs incurred herein. These fees shall first be charged against the estate shares of JENSEN and BARTHOLOMEW due to them from the Trust. To the extent that REYNOSO's fees and costs exceed such shares, JENSEN, PIZARRO, and BARTHOLOMEW, jointly and severally, shall be personally liable for the unpaid portion of the fees."   

The trial court relied on the case cited above, Rudnick, as the basis for the awarding fees of attorney from the contestants' share of the trust. The problem with this ruling, the appellate court found, was not the awarding of attorney fees but the extent to which the attorney fees applied.

"Neither Rudnick nor any other case supports the reach of the trial court's award of attorney fees and costs beyond a beneficiary's share of the trust. The effect of Rudnick and Ivey is to allow the trial court, in its equitable jurisdiction over trusts, to direct that the share of the trust assets that would be distributed to an offending beneficiary would instead be used to pay attorney fees and costs to the benefit of the trust, specifically to the benefit of those trust beneficiaries who did not improperly cause the trust to expend funds for attorney fees and costs. Ordering Pizarro and Bartholomew to potentially pay attorney fees and costs out of their own pockets is beyond the equitable power of the court over trusts because the court has no equitable jurisdiction over that money. We therefore strike the part of the award assessing personal liability for attorney fees and costs against Pizarro and Bartholomew."    

January 13, 2017

Spendthrift Clause and Creditors

A common, albeit erroneous, legal assumption is that a beneficiary's interest in a trust with a spendthrift clause is bullet-proof. That is, the beneficiary's interest cannot be attached by a third-party so as to prevent the beneficiary from enjoying the full benefits of the trust. In certain circumstances, however, a third-party can attach a beneficiary's interest in a trust and direct payments to be made to them and not the beneficiary. A recent unpublished appellate opinion highlighted this example.

Power v. Power, Sonoma County Superior Court, Case # SCV252844

Estranged husband was a 1/6 beneficiary of a trust established by his mother. The trust contained a spendthrift clause. It read in pertinent part that the beneficiary "cannot anticipate, assign or encumber the beneficiary's interest in income or principal. Similarly, a creditor of a beneficiary cannot subject the beneficiary's interest in income or principal to the creditor's claims or to legal process before the beneficiary actually receives a distribution." 

Estranged wife obtained a spousal support judgment against estranged husband. She then sought to attach estranged husband's interest in the trust to satisfy her judgment. The co-trustees balked and estranged wife sued to compel payment from them.

Since estranged wife had a support judgment, she could avail herself of Probate Code § 15305. The statute provides that a support judgment creditor may, under certain circumstances, attach a beneficiary's interest in a trust. The relevant section reads "whether or not the beneficiary has the right under the trust to compel the trustee to pay income or principal or both to or for the benefit of the beneficiary, the court may, to the extent that the court determines it is equitable and reasonable under the circumstances of the particular case, order the trustee to satisfy all or part of the support judgment out of all or part of future payments that the trustee, pursuant to the exercise of the trustee’s discretion, determines to make to or for the benefit of the beneficiary." Probate Code § 15305(c).

The trial court found that the "none of Mark's creditors that have been paid directly from the Trust are preferred or secured creditors. For the most part, these debts are owed to the limited partnership and the Trustees have scrupulously seen to it that Mark pays his debts to his birth family, while leaving Patricia with no funds." It should be noted that the trustees feared reprisal from the estranged husband who threatened to sue them if they paid even "one dollar" to his estranged wife. Hence, it was not as if the trustees refused to satisfy the support judgment whimsically.

On appeal, the trial court's decision to have the co-trustees pay the support judgment directly from estranged husband's share of the trust was upheld.