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Attorney’s Fees for Trust Cases

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By: Brian Ramsey, Esq.

Third in our series regarding attorney’s fees and “Do I really Have to Pay for This?!?!?

The general answer is “No!” The “American rule” is that each side has to bear their own attorney’s fees. (California Code of Civil Procedure §1021; In Re Bevelle’s Estate, (1947) 81 Cal.App.2d 720.)

However there are some exceptions. Here are some exceptions for trust cases include:

California Probate Code 859: Attorney’s fees “may” be awarded if a court finds that a person has in “bad faith” wrongfully taken, concealed, or disposed of property belonging to a conservatee, a minor, an elder, a dependent adult, a trust, or the estate of a decedent, or has taken, concealed, or disposed of the property by the use of undue influence.

“Bad faith” is not given a clear definition in the Probate Code, but it essentially means an  intentional dishonest act. Contrast this with “good faith” where folks are genuinely doing what they think is right, even if it later turns out to be wrong.

California Probate Code 18100.5(h): Anyone who makes a demand for trust documents in addition to a certification of trust shall be liable for attorney’s fees, if the request was made in “bad faith.”

California Probate Code 15642(d): If the court finds that a petition to remove a trustee has been made in “bad faith,” and that removal of the trustee would be contrary to the settlor’s intent, the court may award reasonable attorney’s fees.

California Probate Code 17211: A trustee of a trust may, in some instances, be required to prepare an accounting. If a person contests such an accounting without “reasonable cause” and in “bad faith,” the court “may” award attorney’s fees to the trustee. If awarded, those attorney’s fees will be deducted from the contestant’s share of the trust. If the person’s share is not large enough to satisfy the award, the person will be personally liable for the difference.

AND

If the person filing the accounting (the trustee) opposes a contest to the accounting without “reasonable cause” or in “bad faith,” the court “may” award attorney’s fees to the contestant. If awarded, the fees go against whatever compensation the trustee is entitled to for their role as trustee, and/or their share of the trust, if they are also a beneficiary. If that share is not large enough to satisfy the award of attorney’s fees, the trustee will be personally liable for the difference.

California Probate Code 16061.9(a): When a trust becomes irrevocable (and in certain other situations), a trustee must serve a “notification of trust,” which must contain certain information. (See Probate Code 16061.7) A trustee who fails to do so “shall” be responsible for attorney’s fees, unless the trustee makes a reasonably diligent effort to comply.

California Probate Code 19255(e): In cases where the decedent left a trust, folks who think the decedent owed them money (creditors) can file creditor’s claims. The trustee can either accept or reject these claims (the subject of creditor’s claims could be an entire article unto itself). If rejected, the creditor can file an action in court on that rejected claim. If the court determines that the prosecution or defense of such an action was “unreasonable,” the court “shall” award attorney’s fees to the prevailing party. The “prevailing party” is the trustee if the creditor recovers an amount equal to or less than the amount of the claim allowed by the trustee, and is the creditor if the creditor recovers an amount greater than the amount of the claim allowed by the trustee.

California Probate Code 15645: If the trustee of a trust that is irrevocable refuses to transfer administration of the trust to a successor trust company, after request of the beneficiaries, and the court makes an order removing the existing trustee and appointing a trust company as successor trustee, the court “may” award reasonable attorney’s fees to the petitioner. Those fees can be paid by the trustee or from the trust as ordered by the court.

California Probate Code 21380(d): Certain transfers in a will or trust are presumed to be the product of fraud or undue influence, including transfers to the person who drafted the instrument, and care custodians. If such a person is unsuccessful in rebutting that presumption, that person “shall” have to pay the petitioner’s attorney’s fees.

Leader v. Cords, (2010) 182 Cal.App.4th 1588: This case is a judicial interpretation of California Probate Code 17211 (mentioned above). The case holds, essentially, that if a beneficiary sues a trustee to compel a distribution, that beneficiary is entitled to attorney’s fees if the court finds that the withholding of the distribution was without “reasonable cause” and in “bad faith,” as set forth in California Probate Code 17211.

Estate of Ivey, (1994) 22 Cal.App.4th 873: This case presents a unique factual scenario. In the Ivey case, one beneficiary of a trust objected to the trustee’s accounting. The objections were found to be in frivolous and in bad faith. The court determined that it would be inequitable to the other income beneficiaries to have the expenses borne by the trust as a whole. The court awarded reasonable expenses and attorney’s fees to both the trustee and the other beneficiaries, and instructed the trustee to pay those amounts to the other beneficiaries and itself out of future distributions from the trust to which the beneficiary would otherwise be entitled.

These two cases, along with Rudnick v. Rudnick, (2009) 179 Cal.App.4th 1328, and Pizarro v. Reynoso, (2017) 10 Cal.App.5th 172, stand for the general proposition that the probate court, using its broad equitable powers, can order fee shifting to parties who have brought and maintained frivolous and/or bad faith actions that cost the trust unnecessary money at the expense of its beneficiaries. It must be noted that these cases are confined to fact situations in which the offending beneficiary has brought an action against the trustee or the trust itself.

General Ways to Obtain Attorney’s Fees

California Code of Civil Procedure 128.5: A court may order a party, the party’s attorney, or both, to pay reasonable attorney’s fees incurred as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.

“Actions or tactics” include, but are not limited to, the making or opposing of motions or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading. The mere filing of a complaint without service thereof on an opposing party does not constitute “actions or tactics” for purposes of this section.

“Frivolous” means totally and completely without merit or for the sole purpose of harassing an opposing party.

Malicious Prosecution: This is a separate lawsuit that is brought after the conclusion of an underlying lawsuit. To succeed in a malicious prosecution lawsuit, the plaintiff must show: (1) that the defendant was actively involved in bringing or continuing the lawsuit; (2) that the lawsuit ended in plaintiff’s favor; (3) that no reasonable person in defendant’s circumstances would have believed that there were reasonable grounds to bring the lawsuit against plaintiff; (4) that defendant acted primarily for a purpose other than succeeding on the merits of the claim; (5) that plaintiff was harmed; (6) and that defendant’s conduct was a substantial factor in causing plaintiff’s harm.

Most of these statutes contain words such as “may,” and “reasonable.” These equivocal words give judges wide discretion to decide whether to award such fees, and if so, in what amount. Judges can, and often do, award lower amounts than what was actually paid or incurred.  Judges have the luxury of examining what fees were incurred after the outcome is known – something the attorneys and parties cannot know for certain as they strategize and litigate the case. It is therefore important to have an attorney that not only knows that fee-shifting statutes are available but who can effectively and efficiently obtain the best overall outcome under the specific facts of your matter.

If you are wondering if you’re entitled to attorney’s fees or if someone has threatened to sue you and stated that you’ll have to pay for their attorney’s fees, we encourage you to contact us to see if we can help.

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