Wednesday, June 16, 2010
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C.A.: Breach of Trust Action Not ‘Contest’ Allowing Attorney Fees
By STEVEN M. ELLIS, Staff Writer
Four siblings who obtained a verdict finding that their grandparents breached their duties as trustees and an order compelling them to turn over a house in a civil action could not obtain attorney fees, the Fourth District Court of Appeal has ruled.
Div. Three said Monday the action was not a “contest” to a trustee’s account for the purposes of Probate Code Sec. 17211(b), which authorizes recovery of attorney fees by a beneficiary when the trustee unreasonably opposes such a contest.
Writing for the court, Justice Richard D. Fybel said the trust’s very existence—not a contest—was in dispute, adding that a decision by the district’s Div. One earlier this year in Leader v. Cords 182 Cal.App.4th 1588 that the statute applied to beneficiaries’ petition to compel a final distribution of trust assets was distinguishable.
2005 Suit
Irene Sarinana and her four children filed suit in 2005 against Sarinana’s husband, Richard C. Soria Sr., and his parents, pointing to a 1993 agreement in which Sarinana and Soria conveyed their Santa Ana home to Soria’s parents for safekeeping in contemplation of a possible divorce.
Sarinana and her children claimed that the agreement was a trust, and that they were beneficiaries. They also alleged that the grandparents had refused demands beginning in 2003 to transfer legal title to the house to them and provide an accounting.
After the Fourth District ruled that the complaint was not time-barred, Orange Superior Court Judge Gregory H. Lewis dismissed the action against Soria, as well as Sarinana’s claims against her husband’s parents. A jury then found that the agreement constituted an express trust, that the grandparents breached the trust, and that the grandchildren were entitled to receive the property.
Judgment Entered
Lewis entered a judgment ordering the grandparents to convey the property on the conditions that the grandchildren pay approximately $56,000 and assume the existing mortgage or obtain new financing. He also, separately from the judgment, entered a restraining order requiring the grandparents to make all necessary payments and maintain the property until it was turned over.
Neither of the two required the grandparents to submit an accounting. The grandchildren later sought attorney fees under Sec. 17211(b) and Lewis awarded $263,000.
Fybel, however, wrote on appeal that the statute did not apply because it specifically refers to a contest of an account, something the grandchildren’s civil complaint did not make. Noting that the complaint sought to compel the grandparents to produce an account, and that an accountant did so on the grandparents’ behalf at trial, he pointed out that the accountant’s account served as the basis for calculating the amount owed under the judgment.
“Thus, if Grandchildren did anything at trial that could be construed as a contest to the account, the contest was unsuccessful,” he said.
Fybel rejected the grandchildren’s arguments that their request for injunctive relief was tantamount to a contest of the grandparents’ failure to account, and therefore within Sec. 17211(b).
He also said Leader was distinguishable because that case involved a procedure initiated under the Probate Code, rather than a civil action, and because the grandchildren’s case arose from a dispute over the trust’s existence, not out of an accounting.
He explained:
“Section 17211 is a remedial statute, but liberal construction can only go so far. We decline to expand the scope of section 17211(b) so far as to include Grandchildren’s civil action….To do so would in effect turn section 17211(b) into a statutory basis for recovery of attorney fees in virtually any case in which the existence of a trust is in dispute or any action of a trustee is challenged. We do not discern any intent by the Legislature to reach that result….”
Presiding Justice David G. Sills and Justice William F. Rylaarsdam joined Fybel in his opinion.
The case is Soria v. Soria, 10 S.O.S. 3245.
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