Court Objections in Conservatorship and Trust Matters

On January 8, 2019, Yasha Bronshteyn, Ginzburg & Bronshteyn, APC partner and litigator attended the SFVBA Probate & Estate Planning Section: Hot Topics in Bad Faith Objections presented by the San Fernando Valley Bar Association.

Accounting issues and disputes are common in Conservatorship and Trust matters.  A recent case on point is discussed below.

Probate Code Section 2100:

“Guardianships and conservatorships are governed by Division 3 (commencing with Section 1000), except to the extent otherwise expressly provided by statute, and by this division. If no specific provision of this division is applicable, the provisions applicable to administration of estates of decedents govern so far as they are applicable to like situations.”

Powell v. Tagami

The Tagami Living Trust (the “Trust”) was established on November 10, 1997 and restated on January 3, 2012. The grantors had three children, Kenneth Tagami, Barbara Tagami, and Charles Tagami. A family dispute arose when the grantors suspected the prior trustee, who was Barbara’s son, of embezzling funds from the Trust. The grantors removed the prior trustee and appointed professional fiduciary Powell as Trustee on September 12, 2011.

The Court settled the First and Second Accountings filed by Powell which covered September 12, 2011 through September 30, 2012 and October 1, 2012 through September 30, 2014 respectively. Powell gave notice to Charles and Charles did not object. In settling the accounts, the Court determined the fees paid to Powell’s attorney were reasonable, necessary, and for the benefit of the Trust. The Court also found Powell performed all duties required of her during the accounting period and had been paid reasonable compensation.

In approximately June of 2016, Charles’ attorney requested a third accounting “with supporting documentation” and stated Charles would not approve the accounting “until supporting documentation is received and reviewed.” Powell’s attorney provided the Third Account with explanation of the accounts where the Trust assets were held. Powell’s attorney stated that neither statute nor Local Rules (San Diego) required delivery of bank statements or supporting documentation for an accounting.

Charles’ attorney demanded bills, statements, and engagement letters with respect to expenses listed in the accounting, including fees for Powell’s attorney’s firm, fees for Powell, and mediation fees. Charles’ attorney stated a failure to comply with the demands would be interpreted as bad faith and gave notice of his objections and intent to request attorney fees and surcharges against Powell.

Powell filed her Third Account on September 19, 2016 which showed all assets and distribution during the accounting period and included a itemized list of administrative expenses incurred. Charles filed his objection to the Third Account on February 2, 2017 stating he had insufficient information to judge Powell’s compliance with the Probate Code because she had not provided financial records, objected to attorney fees, and payment to a mediation firm as excessive and inappropriate. He claimed Local Rule 4.16.2(C)(4) required Powell to submit a declaration in support of fees and complained about her conduct as Trustee.

Powell submitted a supplement to the Third Account stating the fees were necessary, beneficial to the Trust, and reasonable. Thereafter her attorney submitted a declaration responding to Charles’ requests for documents, lodging his engagement letter, bank statements, and redacted billing statements from his firm and the mediation firm. Charles filed a supplemental objection consisting of 200 pages accusing Powell of abusive billing practices, “double dipping” and various failures to perform her fiduciary duties as Trustee.

The lower court overruled each of Charles’ objections. With respect to the attorney’s fees, the lower court determined it was wise for the trustee to rely on her attorney in such a disputed case. As to the trustee fees, the lower court overruled Charles’ objections, concluding the fees were reasonable. Pursuant to Probate Code Section 17211 subdivision (a), the lower court found Charles’ contest was without reasonable cause and brought in bad faith and ordered Charles to pay Powell’s fees and attorney’s costs incurred to defend the Third Account from Charles’ share of the Trust or from personal funds. Charles appealed, claiming the court erred in approving the Third Account without a declaration he contends is required by Local Rule 4.16.2(C)(4). Second, Charles contended there was not substantial evidence to support the court’s conclusion that the attorney fees were reasonable and appropriate.

The Appellate Court found on merit in Charles’ contentions. The Appellate Court agreed with the lower court in that Local Rule 4.16.2(C)(4) did not apply in this case because a declaration is not required by statute and fee approval was not specifically sought in the Third Account. The Appellate court held that even if Local Rule 4.16.2 applied, locale rules may not narrow or conflict with statutory requirements, and when they do, the local rules may be viewed as optional. The Third Account complied with the statutory requirements by including a financial statement and report of administration, consisting of the summary and supporting schedules with evidence of disbursements and their nature.

As to the attorney fees, the Appellate Court held that the lower court’s factual findings regarding the fees is supported by the evidence and that it did not abuse its discretion in determining the payment of the fees were reasonable and appropriate.

Probate Code Section 17211, subdivision (a) provides: “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.” The lower court found Charles’ contest was without reasonable cause and in bad faith. The lower court found all the objections lacked merit, with some dealing with matters that had already been settled by the court while others were based on factually inaccurate assertions. The lower court also found the contest was taken in bad faith, believing that the only reasonable explanation for the unreasonable objections is that Charles intended to perpetuate family disputes or attempted to gain a personal advantage in distributions from the trust, or both. The Appellate Court concluded that the lower court did not err in making these findings. The Appellate Court pointed to Powell’s attorney’s compliance with Charles’ demands for an accounting and transparent communications. Even after receiving all his requested documents, Charles still filed a supplemental objection totaling more than 200 pages, still requesting more documents. All of the objections and complaints were found to be unfounded inflammatory attacks on Powell and her attorney’s. The nature of Charles’ pleadings and correspondence supported the lower court’s inferred finding of bad faith.

-Update from Los Angels Superior Court-Probate Division:

Commencing February 14, 2019, the Honorable Robert Wada will be going on leave for approximately 90 days. In his absence, the Honorable Deborah L. Christian will be assigned to Department 99.  Currently Judge Christian is on assignment in the Civil Department of the Los Angeles Superior Court.

Given the e-filing system effective February 1, 2019, fax filings will no longer be permitted in any Probate case.

Our experienced Los Angeles conservatorship attorneys are here to help clients in Santa Monica, Orange County and throughout Southern California defend their rights under the law.  With a presence in Northern California and Southern California the Law Office of Ginzburg & Bronshteyn, APC is dedicated to providing efficient, effective, strategic,  and affordable solutions to clients involved in conservatorship cases, trust and estate disputes, as well as other types of family law issues.  We strive for a very pragmatic, thorough and detailed approach in litigated matters.  We are here to help you and your loved ones. To discuss your needs and discover your options, consult the Los Angeles incapacity and estate planning attorneys at Ginzburg & Bronshteyn, APC. We serve clients in Los Angeles, Orange County, Ventura County, and throughout Southern and Northern California including Agoura Hills, Berkeley, Beverly Hills, Calabasas, Camarillo, Encino, Hermosa Beach, Hidden Hills, Irvine, Lake Sherwood, Malibu, Marin County, Oxnard, Pasadena, San Francisco, Santa Barbara, Santa Monica, Simi Valley, Tarzana, Thousand Oaks, Torrance, West Los Angeles,Westlake Village, and Woodland Hills. Our attorneys are renowned for producing high quality work and working diligently to achieve our client’s goals. If you or someone you know is dealing with a dispute over the administration or execution of trust or estate in California, you should contact an experienced trusts and estates litigation attorney to ensure your interests are represented. We have developed a reputation for effective representation in complex and sophisticated matters as we guide you through the complex legal process. We are experienced in obtaining and defending against conservatorships.  If you have questions about a loved one’s mental capacity, call the law firm of Ginzburg & Bronshteyn, APC at (310) 914-3222, (415) 465-6555, or (818) 787-1011, or reach us by using our online contact form.