Does the California Probate Court Have Broad Equitable Powers?

The recent case of Bruno v. Hopkins clarified that the California Probate Court is required to decide cases by the statutes in the Probate Code, but the Court also has broad equitable powers.

Appellant Lynne Francis Bruno filed suit against her mother, Mildred Francis, individually and as trustee of a family trust,as well as two of her sisters, respondents Jane Francis Hopkins and Gwen Francis (collectively Respondents), alleging that they forged trust instruments purporting to divide her parents’ estate upon the death of her father.

Following a court trial, the trial court entered judgment in favor of Respondents after determining the trust instruments were not forgeries.

On Respondents’ motion for attorneys’ fees, the trial court ordered Lynne to pay over $829,000, finding there was no merit to the position Lynne pursued at the trial, and that Lynne acted without basis in filing any of her claims. In addition, the court ordered Lynne to pay over $96,000 in costs.

On appeal, Lynne contended the trial court issued the attorneys’ fees order in error, alleging the trial court lacked jurisdiction to grant a fee award against her because she did not own any actual interest in the trust assets.

She further contended that because she had a reasonable and good faith belief in the merits of her claim, there was insufficient evidence to support the issuance of the fee award. Asserting that the record did not support a finding that she pursued her claims in bad faith, Lynne also claimed that the trial court erred when it granted an award of costs to Respondents.

Finding no error, the appellate court affirmed the judgment.

The trial court held a 13-day court trial on the bifurcated issue of whether the trust instrument at issue was invalid as a forgery. After the trial court found that the trust instrument had not been forged, it heard Respondents’ motion for attorneys’ fees, and considered the memorandum of costs offered by Respondents, as well as Lynne’s motion to strike or tax costs.

In ordering Lynne to pay fees and costs, the trial court indicated it considered the evidence from the trial proceedings in addition to the parties’ pleadings.

While staying at her parents’ home, Lynne alleged that she found one of her father’s estate planning documents in an unlocked metal box in the kitchen. She “perused” the document, but did not recall the title of the document, the number of pages, or whether she saw James’s signature on the document. Lynne testified that she saw her mother’s and sisters’ names, and noted that the document indicated the four children would receive equal shares of their father’s estate.

James passed away in 2006. Following the funeral, the family returned to Mildred’s home and gathered on the patio. At some point, Lynne retreated to a bedroom. When Gail went to check on her, Lynne was angry, and stated that her husband would hire an attorney if Lynne did not get her fair share.

Upon James’s death in 2006, Mildred became the sole trustee of the Trust. Mildred waited until 2015 to authorize Jane to prepare the notification required when a revocable trust becomes irrevocable by the death of one or more settlors of the trust under Probate Code section 16061.7.

When a revocable trust becomes irrevocable by the death of one or more settlors of the trust, the trustee is required to serve notice of the settlor’s death on each heir of the deceased settlor not later than 60 days after the settlor’s death.

Asserting that the provision of the Trust limiting Lynne’s potential receipt of assets to $200,000 was inconsistent with her relationship with James and the estate planning instrument Lynne alleged she saw shortly before James’s death, she contended that the copies of the Trust and James’s will provided to her were forgeries.

In seeking to remove Mildred as trustee, Lynne alleged Mildred breached numerous fiduciary duties by failing to timely serve the section 16061.7 notification, failing to provide a complete copy of the Trust upon Lynne’s request, and by forging and producing forged copies of the Trust instrument and James’s Will.

The court issued a statement of decision finding that Lynne did not meet her burden of proof and that she should take nothing by way of her petition.

The trial court indicated that it did not find Lynne to be credible or her contentions to be true, noting that Lynne could not recall details about the document she allegedly saw dividing her parents’ assets equally amongst the children.

The fact that James had gifted stock to Jane and Gwen during his lifetime without making similar gifts to his other children undermined Lynne’s claim that James would have equally divided his estate amongst his four daughters.

The court determined Mildred was the most credible and honest witness, who provided a reasonable and credible explanation of why she and James planned their estate as they did, and whose testimony that the Trust documents were the true original documents that James drafted was honest.

The court determined Jane, her husband, and Gwen, were also credible witnesses. Based on their testimony, the trial court found it unrealistic to think Mildred would betray James’s wishes, and noted Lynne had not produced credible evidence of nefarious intent on Jane or Gwen’s part.

Following the entry of judgment, Respondents filed a motion for attorneys’ fees in which Mildred asked for $331,274, and Jane and Gwen asked for $497,762.50. Asserting that Lynne had filed her petition to remove Mildred as trustee in bad faith, Respondents brought the motion under the court’s broad equitable powers, as well as Probate Code.

Following a hearing at which the attorneys presented argument, the trial court granted Respondents’ request for attorneys’ fees. and found that there was no merit in the position that Petitioner pursued throughout the trial. She acted without basis in filing any of her claims, and there was no support for her claims that the trust declarations had been forged, aged or substituted.

Rather, the court determined Lynne’s litigation was a personal attack on her mother and her sisters by filing her lawsuit because she thought she should receive more of her parents’ estate upon her mother’s passing.

While the trial court did not specifically address Probate Code section 15642(d) or Code of Civil Procedure, section 2033.420, the court stated it found merit to the position stated in the moving papers, and therefore granted Respondents’ attorneys’ fees motion.

Lynne argued the trial court erred when it ordered her to pay attorneys’ fees in excess of the value of her potential share in the Trust assets. She contended the trial court’s jurisdiction was limited to the property of the Trust estate, such that she could not be personally liable for any amount of attorneys’ fees over and above her interest in the Trust.

Lynne further asserted the trial court erred when it found that she instigated the litigation in bad faith, or that she otherwise lacked reasonable grounds to believe she would prevail on her claim that respondents forged the Trust documents.

Respondents set forth three grounds for their request for attorneys’ fees, specifically, the court’s “broad” equitable powers, Probate Code section 15642(d), and Code of Civil Procedure, section 2033.420.

While the court based its fee award on its equitable powers, it also indicated that it finds merit to the position stated in Respondents’ moving papers and, therefore, granted the request.

As Respondents briefed all three theories authorizing the attorneys’ fees request and Lynne addressed all three in her response, if any of these support the court’s jurisdiction to make the award, the order will be affirmed, assuming it met any other legal requirements imposed by the statute or as prerequisites to the exercise of equitable power.

The trial court’s equitable powers could not justify the attorneys’ fees award.

As a general matter, probate proceedings are statutory in nature, such that the trial court has no other powers than those given by statute and such incidental powers as pertain to it and enabling the court to exercise the jurisdiction conferred upon it, and can only determine those questions or matters arising in the estate which it is authorized to do.

However, the court has broad equitable powers to protect the trust estate. Courts having jurisdiction over trust administration have the power to allocate the burden of certain trust expenses to the income or principal account.

Sometimes this authority is stated in statutory form, but it exists as part of the inherent jurisdiction of equity to enforce trusts, secure impartial treatment among the beneficiaries, and to carry out the express or implied intent of the settlor.

Where the expense of litigation is caused by the unsuccessful attempt of one of the beneficiaries to obtain a greater share of the trust property, the expense may properly be chargeable to that beneficiary’s share.

The trial court’s equitable power over trusts gives the court authority to charge attorney fees and costs against a beneficiary’s share of the trust estate if the beneficiary instigated an unfounded proceeding against the trust in bad faith.

However, the trial court exceeded its equitable powers when it imposed personal liability for attorneys’ fees and costs on a beneficiary over and above the funds available from the beneficiaries share of the trust proceeds.

Therefore, the trial court had no equitable jurisdiction to award attorneys’ fees in excess of Lynne’s share of the trust assets.

The trial court lacked authority under equity to impose attorneys’ fees and costs. Section 15642 authorizes the removal of a trustee upon the petition of a settlor, cotrustee, or beneficiary, where the trustee has committed a breach of a trust, among other specified grounds.

If the court finds that the petition for removal of the trustee was filed in bad faith and that removal would be contrary to the settlor’s intent, the court may order that the person or persons seeking the removal of the trustee bear all or any part of the costs of the proceeding, including reasonable attorney’s fees.

On its face, the ordinary meaning of the phrase all or any part of the costs of the proceeding, including reasonable attorney’s fees suggests that the Legislature intended to authorize attorneys’ fees without limiting the amount to the moving party’s interest in the trust at issue. The only limitation expressly set forth in section 15642(d) is that the attorneys’ fees be reasonable.

For the reasons stated above, under section 15642(d), the trial court had jurisdiction to impose personal liability on Lynne for attorneys’ fees and costs incurred by Respondents, such that it was authorized to order Lynne to pay an amount in excess of her potential interest in the Trust, assuming the other requirements of the statute were met.

To award attorneys’ fees to Respondents under section 15642(d), the trial court was required to determine that Lynne filed the petition for removal of Mildred in bad faith, and that Mildred’s removal as trustee would be contrary to James’s intent.

Lynne did not argue on appeal that the trial court lacked substantial evidence to find that removal of Mildred as trustee would be contrary to James’s intent. Therefore, the appellate court's evaluation rested on whether there was substantial evidence to support a finding of bad faith.

Although the trial court based its analysis of Lynne’s intent on her claims of forgery, Lynne alleged the trial court could have granted the petition based on her other contentions, specifically, that Mildred failed to serve notice as required by section 16061.7 and failed to provide information about the Trust on Lynne’s request.

Lynne argued that substantial evidence supported these claims, which she set forth in her request to remove Mildred as the trustee of the Trust. She thus contended that she brought her petition in good faith and the trial court erred in awarding fees and costs under section 15642(d).

The sole issue heard at the court trial was whether the Trust instruments had been forged, which is one of the grounds Lynne set forth as a breach of fiduciary duty justifying the removal of Mildred as trustee. There is no indication in the record that the trial court considered Lynne’s remaining challenges when it entered judgment in Respondents’ favor, or that Lynne objected to the entry of judgment on the grounds that the trial court had not considered all of the causes of action raised in her amended complaint.

Section 15642(d) does not define bad faith. In a different case, the court offered the following definition: Bad faith involves a subjective determination of the contesting party’s state of mind—specifically, whether he or she acted with an improper purpose. A subjective state of mind will rarely be susceptible of direct proof; usually the trial court will be required to infer it from circumstantial evidence.

While the trial court did not explicitly find that Lynne brought the forgery claim in bad faith, an implied finding can be inferred from the trial court’s statement of decision following the trial, as well as its statements made on the record at the hearing on the attorneys’ fees motion in which it determined Respondents were more credible than Lynne.

The trial court sits as trier of fact, and it is called upon to determine that a witness is to be believed or not believed. This is the nature of fact finding. The trier of fact is the sole judge of the credibility and weight of the evidence.

In that role, the judge may reject any evidence as unworthy of credence, even uncontradicted testimony.

The trier of fact may disregard all of the testimony of a party, whether contradicted or uncontradicted, if it determines that he testified falsely as to some matters covered by his testimony.

Lynne argued that the trial court abused its discretion by ordering her to pay Respondents’ costs based on its finding that she prosecuted an unmeritorious action. Lynne contends the record on appeal compelled the conclusion that she brought and maintained a well-founded forgery action in good faith because she was entitled, as a matter of law, to rely upon her experts’ opinions.

As explained above, those contentions were without merit.

LESSONS:

1.         Credibility of witnesses is often key to prevailing in a lawsuit.

2.         The trier of fact may disregard all of the testimony of a party, whether contradicted or uncontradicted, if it determines that he/she testified falsely as to some matters covered by the testimony.

3.         As a general matter, probate proceedings are statutory in nature, such that the trial court has no other powers than those given by statute.

4.         However, the court has broad equitable powers to protect the trust estate, and courts having jurisdiction over trust administration have the power to allocate the burden of certain trust expenses to the income or principal account.

5.         Family relationships can be irrelevant when money is in dispute.