April 21, 2017

Trust Accounting

A beneficiary is generally free to contest a trustee's accounting without fear of consequence. However, there is an exception to this rule.

Probate Code § 17211(a) provides that "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."

An example of a contest done without reasonable cause and in bad faith was recently illustrated in an unpublished case. The case originated in Orange County Superior Court, Case #  30-2011-00494819.

A source of scrutiny for the contestant was proof of the actual cashed checks. Of note, Morgan was the trustee and Winslow was the beneficiary.

"Morgan also explained that in attempting to obtain cancelled checks for trust expenses and distributions to beneficiaries, her inquiries with the bank showed the process would be "time consuming and tedious," so she instead provided Winslow with copies of invoices, check registers showing the payments, and bank statements showing the checks cleared. She noted that Winslow did not subpoena copies of the checks. Winslow did not claim or provide any evidence that trust beneficiaries did not receive or deposit distributions Morgan made to them. 

"Winslow returned to Morgan's use of a paid assistant in cleaning the trust property, noting, "I haven't seen a company check that she actually paid money to her." When the trial court asked, "Why would you need to see the check," Winslow responded, "Because, for some reason, she doesn't want to provide copies of the checks and I believe a copy of the checks [showing who they] were made out to [would] tell me, `Yes, that person was paid.'" The court observed, "How does it help you if she was paid. . . . [D]oesn't [it] help you if she wasn't paid. That means there's more money in the trust." (Italics added.) Winslow responded, "Well, I just want it." She added as a jumbled explanation, "I know if the accounting is correct and the items are legitimate — so if I sum them up, I could get the money that I need." At that point, the court asked rhetorically, "Or are you nitpicking everything in depth?"

"Following the conclusion of the parties' testimony and closing arguments, the trial court granted Morgan's petition to approve her accountings. Finding Winslow's accounting contest was unreasonable and in bad faith, the court awarded Morgan on the trust's behalf $60,059.33 in attorney fees and costs under section 17211. Winslow moved for a new trial, which the trial court denied in July 2014, further sanctioning Winslow $1,750 under section 17211. Winslow now appeals."

The trial court's decision was upheld on appeal in an unpublished appellate opinion.

April 3, 2017

Attorney fees in Probate

Los Angeles County Superior Court
Compensation for a personal representative and attorney in a probate is derived from a statutory scheme that provides for ordinary compensation, and in certain instances, extraordinary compensation. Ordinary compensation is based off of a percentage of the assets. As can be surmised, ordinary compensation is regularly granted. Still, the attorney must correctly value the estate in order to claim the appropriate fee. Otherwise the probate judge will not approve the requested fee.

A recent unpublished appellate opinion discussed this issue.

Estate of Shea-Robert Sheahan, Los Angeles County Superior Court, Case # BP145773

"A probate referee was appointed to appraise the assets of the estate, which, in December 2013, were estimated to have an approximate value of $800,000. According to Bock, the estate's sole asset was a membership interest in a limited liability company."

"The probate referee valued the LLC at $2,505,000, concluding that the LLC's only asset was a five-acre lot of undeveloped real property in Clark County, Nevada."

"In February 2014, Bock petitioned the probate court for authority to act as the manager of the LLC and execute an agreement for sale of the Nevada real property for $1,775,000. In March 2014, the court entered an order authorizing Bock to (i) act as manager of the LLC, (ii) sell the real property for $1,775,000, and (iii) pay a commission to the real estate broker who procured the sale."

"Following the sale, Bock proceeded to close the probate and, in the process, moved for compensation for herself and her attorney. Bock asserted the value of the estate was $4,169,768, consisting of (i) the membership interest in the LLC, valued at $2,505,000 and (ii) $1,664,768 in cash, $1,659,023 of which was received in connection with the sale of the Nevada real property. Applying sections 10800 and 10810, the $4,169,768 valuation resulted in ordinary services compensation requests of $54,698 for each of Bock and her attorney."

"After further proceedings, the probate court denied Bock's initial request for ordinary compensation. Bock then prepared a supplemental petition in accordance with the court's calculation of the estate's value. This calculation relied on the $2,505,000 appraised value of the LLC and recognized a loss on sale of the LLC's property of $845,976. Along with nominal receipts, the calculated estate value totaled $1,664,769. This estate value resulted in ordinary compensation awards of $29,648 to each of Bock and her attorney."  

March 22, 2017

Unpublished Appellate Opinions

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.