- Delay In Bringing Action Challenging Competence Of A Trustee Until After Trustee’s Death Is Unreasonable
- July 5, 2013
- Law Firm: Kronick Moskovitz Tiedemann Girard A Law Corporation - Sacramento Office
In Drake v. Pinkham (--- Cal.Rptr.3d ----, Cal.App. 3 Dist., May 28, 2013), a California court of appeal considered whether a challenge to a trust was barred by an unreasonable delay. Plaintiff had alleged a trustee's incompetence and wrongful conduct several years earlier but failed to bring action until after the death of the trustee. The court ruled that because the Probate Code expressly allows for challenges to trusts based on the competence of the trustee, the delay in bringing action until the trustee had died several years later was unreasonable and the defense of laches applied.
In 1988, Theodore ("Theodore") and Josephine ("Josephine") Citta established the Revocable Trust Agreement of Theodore Citta and Josephine Citta. It provided that upon the deaths of both Theodore and Josephine, or in the event neither was willing or able to serve as trustee, their daughters, Gina Drake ("Gina") and Janice Pinkham ("Janice") were to serve as co-trustees. Theodore died in 1999 and the trust estate was divided into two separate trusts - the irrevocable Theodore Citta and Josephine Citta Family Trust ("Family Trust") and the revocable Josephine Citta Trust ("Survivor's Trust."). The Survivor's Trust was established for Josephine's sole benefit. Upon Josephine's death, all remaining assets of the Survivor's Trust were to be distributed equally to Gina and Janice. Josephine later executed amendments to the Survivor's Trust eliminating Gina as beneficiary and designating Janice as her acting co-trustee and sole successor trustee.
In 2005, Gina filed a petition asking the court to confirm her appointment as an acting co-trustee of the Living Trust, based on Josephine's alleged inability to care for herself. Gina also alleged undue influence by Janice for taking complete control of Josephine's finances and isolating Josephine to the point where she no longer had any contact with Gina. Gina entered into a settlement with Josephine, in which Josephine agreed to act as sole trustee and to not sell or take any action affecting property of the Family Trust without prior notice to both Janice and Gina.
Josephine died in October 2009. In March 2010, Gina filed suit against Janice seeking to invalidate Josephine's amendments to the Survivor's Trust based on lack of capacity, alleged undue influence by Janice over Josephine, and alleged misrepresentations to Josephine by Janice. The trial court granted Janice's motion for summary judgment. Gina appealed.
The court analyzed Janice's argument that Gina's action is barred by the defense of laches, which requires either unreasonable delay plus, either acquiescence in the act about which the plaintiff complains, or prejudice to the defendant resulting from the delay. It is undisputed that Gina was aware of the alleged wrongdoing she complained about when she filed her original petition in 2005, that Josephine died in 2009, and Gina filed her lawsuit in 2010. Gina argued that she did not unreasonably delay in taking action because she lacked standing prior to Josephine's death in 2009.
Probate Code Section 15800 states that "during the time that a trust is revocable and the person holding the power to revoke the trust is competent, the person holding the power to revoke, and not the beneficiary, has the rights afforded beneficiaries under this division." Here, Gina alleged in 2005 that the person holding the power to revoke, Josephine, was not competent. That language specifying competency would be wholly superfluous, the court said, if, as Gina argued, a beneficiary could not challenge competence until after the settlor's death. Therefore, the court found that Gina had standing to take action as early as 2005, but delayed until 2010. Further, Gina's delay was necessarily prejudicial to Janice because each of Gina's cause of actions centered on Josephine; her mental capacity and the extent of Janice's influence over her.
The court found the requirements of the defense of laches were satisfied and the summary judgment in favor of Janice was affirmed.