Probate: Under Equitable Powers, Probate Court Could Impose Attorney’s Fees Against Beneficiaries In Trust Proceeding, Litigated In Bad Faith By Beneficiaries, Even If Beneficiaries Did Not Instigate It

 

However, Fees Can Only Be Imposed Against Beneficiaries’ Trust Shares, Not Imposed Personally Against Them.

     Driving nail in coffin.  May, 1918.  Library of Congress.

     Pizarro v. Reynoso, Case No. C077594 (3d Dist. Jan. 18, 2017) (published) is a situation where a probate court imposed attorney’s fees against beneficiaries after finding the litigants in bad faith participated in an unfounded proceeding against the trust (the trustee, of course) even though the proceeding was not instituted by the beneficiaries. The court did so based on Rudnick v. Rudnick, 179 Cal.App.4^th 1328, 13356 (2009). The probate court ordered the fees personally paid by the non-prevailing beneficiaries.

     The Third District, based on the equitable powers of probate courts, affirmed the fee recovery, but with one modification. Beneficiaries argued that Rudnick literally only applied to a proceeding instigated by the beneficiaries, and they did not instigate it so that the probate court lacked authority to impose fees under Rudnick. Nope; “[n]othing in [the Rudnick] analysis, with which we agree, requires instigation of an action against the trust by the offending beneficiary as a prerequisite to charging attorney fees and costs against the offending beneficiary’s share of the trust estate.” (Slip Op., at 16.) However, there in was the rub—the beneficiaries could not be held personally liable under general probate equitable principles, so the award was modified to reflect that the fees and costs could only be imposed against beneficiaries up to the amount of their trust shares.

Comments

[California Attorneys Fees]

Interesting issue. We would suggest readers look at Estate of McDonald, 128 Cal.App.2d 719 (1954), because the decedent/beneficiary has to attempt to show a common benefit for the entire estate, although the showing was minimal in nature. Also look at Estate of Bullock, 133 Cal.App.2d 542 (1955), which demonstrates how NOT to do it in this context.

[Walter Schmelter, Attorney at Law]

Great case, to discourage one beneficiary from depriving the other(s) (via forced spending on atty fees) of their inheritance with some expired or otherwise groundless claim. Is there parallel case law in a non-trust probate setting? The rationale seems the same in either context.