Probate: Trust Income Beneficiary Losing Fiduciary Breach Petition Against Trustees Properly Had To Bear Trustees’ Costs Under Probate Code Section 1002

Costs Award Was Not Under General Equitable Powers, But Section 1002—Which Has No Bad Faith Requirement.

            In McClatchy v. Pruitt, Case No. A160367 (1^st Dist., Div. 5 May 4, 2021) (unpublished), trust income beneficiary lost a fiduciary duty petition against certain current and former trustees, with the lower court awarding trustees some litigation costs under Probate Code section 1002.  Beneficiary, on appeal, argued that the costs award was infirm because there was no determination that he acted in bad faith. 

            That argument was rejected on appeal.  Beneficiary’s personal liability for costs arose from section 1002, which provides: “Unless it is otherwise provided by this code or by rules adopted by the Judicial Council, either the superior court or the court on appeal may, in its discretion, order costs to be paid by any party to the proceedings, or out of the assets of the estate, as justice may require.” (Emphasis added.)  The probate court had discretion “to decide not only whether costs should be paid, but also, if they are awarded, who will pay and who recover them.” (Hollaway v. Edwards, 68 Cal.App.4th 94, 99 (1998) emphasis omitted.)

            Probate courts also have equitable powers “to charge attorney fees and costs against a beneficiary’s share of the trust if that beneficiary, in bad faith, brings an unfounded proceeding against the trust.” (Pizarro v. Reynoso, 10 Cal.App.5th 172, 183 (2017), emphasis added; accord, Rudnick v. Rudnick, 179 Cal.App.4th 1328, 1335 (2009).) However, such equitable powers do not support an award of fees and costs against a beneficiary personally. (Pizarro, supra, at pp. 187-189.)  Here, the problem was that beneficiary faced costs under section 1002, which carried no bad faith requirement such that the postjudgment order was affirmed.