If you are the beneficiary of a trust and feel the trustee is not doing a good job, you have the right to seek help from the court. But if your complaints are unreasonable, or made in bad faith, don’t be surprised if a judge makes you pay a penalty for your fit of pique.
That was the costly lesson learned by Charles Tagami in Powell v. Tagami, a case recently decided by the California Court of Appeal.
Matazo and Kazu Tagami, a San Diego-area couple, set up a trust in 1997 for their three children, Kenneth, Barbara and Charles. Matazo and Kazu initially appointed a grandson as trustee. After concerns were raised about the grandson’s performance, the couple replaced him in 2011 with Claudia Powell, a professional fiduciary. The trust was redrafted in 2012, by Attorney Nancy Ewin. Matazo died in 2012, and Kazu died in 2015.
Powell hired attorney Kent Thompson to represent her in her fiduciary capacity as trustee. She later hired a mediator to try to address disputes within the family about a demand by Charles that the trust pay his dental expenses, and other issues.
Powell provided an accounting of the trust for September of 2011 through September of 2012, and another for the period from October of 2012 through September of 2014. Both were approved by the court. None of the beneficiaries, including Charles, objected to the two accountings.
In 2016, an attorney for Charles requested a third accounting “with supporting documentation,” stating that Charles would not approve the accounting “until supporting documentation is received and reviewed.”
Attorney Thompson provided a third accounting. He said neither statutes nor local probate court rules required bank statements or detailed supporting documentation, and noted that the prior two accountings had been accepted by the beneficiaries without this information.
Generating such detailed reports, Thompson said, was beyond the scope of Powell’s responsibility “as well as an unnecessary expenditure of time and money” for the trust.
Charles’ attorney then demanded copies of bills and statements, along with engagement letters, expenses and fees for Thompson, Powell, Ewin (whose work redrafting the trust had been done four years earlier), and the mediator. Failure to comply with the demands, he said, could be interpreted as bad faith.
He also said Charles intended to object to the third accounting, and would ask for attorney fees and surcharges against Powell.
Thompson denied that Powell had acted in bad faith, and explained that the third accounting was presented in conformity with the Probate Code. He said there were no engagement letters for Powell, attorney Ewin, or the mediation firm. Powell would provide billing statements if the court instructed her to do so, he said.
Charles filed an objection to the third accounting in February 2017. He said Powell had miscounted the number of days between Oct. 1, 2014 and June 20, 2015, and had not produced adequate financial records. He again objected to the fees charged by Powell, the attorneys and the mediation firm, and submitted 26 exhibits.
Powell and Thompson then provided additional detail to the court on fees and expenses, bank statements and other documents.
Charles responded with another objection 200 pages long, with 38 additional exhibits. He claimed Thompson had overbilled the trust by $45,000 in the first two accounting periods, accused Powell and Ewin of “cronyism,” and said the trustee had encouraged abusive billing.
He said Powell’s administration of the trust was a “failure,” that she had been disloyal to his parents, and had breached her duties as trustee. He again complained that the trust was not paying his dental expenses.
His brother, Kenneth, told the court the accusations by Charles were “so baseless and reckless, they amounted to willful and wanton harmful conduct.”
The probate court ruled against Charles. It said his allegations had no reasonable cause and had been brought in bad faith, and ordered him to pay more than $42,000 to Thompson and Powell.
Charles appealed, but the appellate court was no more sympathetic. In a dozen pages of legal analysis, it supported the lower court’s ruling that his objections were “devoid of merit” and had imposed needless burdens and expenses on the trust. In addition to ordering him to pay the amounts awarded by the probate court, it awarded Powell her costs of appeal.
The lesson here is for beneficiaries to think twice before objecting to a trustee’s performance. Making meritless complaints to the probate court can be both pointless and expensive.
By Lynda I. Chung