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>California Trust Law Developments

>Rudnick v. Rudnick (California Courts of Appeal, December 2, 2009).

If a trust beneficiary brings an unfounded suit against a trustee in bad faith, in the Court’s discretion attorneys’ fees can be awarded to the trustee in defending the action, and those fees can be charged against the beneficiary’s trust interest. In dicta the Court also noted that it has been similarly held for beneficiaries who have incurred attorneys’ fees to vindicate their position as a beneficiary.

The trial Court’s ruling on these issues will be reversed only in circumstances where the Court manifestly abused its discretion. In this case attorneys’ fees were awarded to the trustee because the Court noted that the objecting minority beneficiaries had not only lost on their objections but that the objections were disingenuous and a demonstration of bad faith as the objecting beneficiaries intended to delay and derail the trustee’s sale of property (which had been approved by the majority beneficiaries) even with arguments that lacked sufficient merit or that contradicted prior positions taken by the objecting beneficiaries. The Court also noted with regard to one action that was taken by the beneficiaries that their bad faith was further evidenced when they could have stipulated to a record for appeal and proceeded by declaration but instead insisted on an evidentiary hearing that lasted eight days.

The trial Court’s determination of what constitutes reasonable attorneys’ fees also will not be overturned unless the award appears to be clearly out of proportion to the services performed so as to be an abuse of discretion. See the facts of the case for the discussion justifying the out-of-town attorneys’ fees and costs awarded ($226,000).

Dave Tate, Esq. (San Francisco and Beyond)

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