Probate: Court Of Appeal Interprets Fee-Shifting Provision As Remedial, Reversing Denial Of Fees To Beneficiaries Under Probate Code Section 17211(b)

 

Appellate Court Faces First Impression Issue of Construing “Contests the Trustee’s Account” Language in Statute.

     Probate Code section 17211(b) gives discretion to award attorney’s fees to a trust beneficiary who “contests the trustee’s account,” if the court determines the trustee’s opposition to the contest was “without reasonable cause and in bad faith.” The Probate Court does not define “contests the trustee’s account,” and no prior published decision interpreted the phrase. That is, until the Fourth District, Division 1 yesterday issued Leader v. Cords, Case No. D055202 (4^th Dist., Div. 1 Mar. 23, 2010) (certified for publication).

     Leader involved a situation where a probate court denied fees to beneficiaries who successfully challenged a trustee’s failure to distribute remaining trust assets due to a collateral dispute over jewelry that was not a trust asset. Beneficiaries had requested reimbursement of $19,227.00 in fees and costs. The fee denial was reversed on appeal.

     Trustee initially argued that the denial order was not an appealable order. However, that argument was dismissed because Probate Code section 1300(e) states that an appeal lies from an order refusing to authorize or allow “payment of compensation or expenses of an attorney.”

     That brought the Court of Appeal to determine if “contests the trustee’s account” covered breach of trust theories (which the trustee claimed it didn’t) or if the statute was more remedial so that it could encompass a petition for trust distributions (the argument of the beneficiaries). The latter interpretation won out, with the appellate panel finding that language in Probate Code section 11001 (reaching “all maters relating to an account may be contested for cause shown”) supported a liberal interpretation of section 17211(b) because the latter provision was patterned after the liberally-oriented section 11003.

     However, the matter was remanded for the probate court to determine if trustee acted in bad faith, a factual finding that needed to be made despite an earlier finding that trustee’s conduct was unreasonable.

     BLOG UNDERVIEW—Although this was a 3-0 decision authored by Presiding Justice McConnell, it is interesting to note that while Justice Aaron concurred in the opinion, Justice Huffman only concurred in the result.