Second District, Division 3 Finds Trustee Had Reasonable Cause to Contest Beneficiary Claims.
In our category “Probate,” we previously have examined Probate Code section 17211(b), which allows attorney’s fees to be awarded to a beneficiary contesting a trustee’s account if the lower court determines that the trustee’s opposition was made without “reasonable cause” and in bad faith. Here is a dozzy of a POOF! under this section.
Uzyel v. Kadisha, Case No. B196045 et al. (2d Dist., Div. 3 Sept. 22, 2010) (certified for publication) involved a $13,364,530 attorney’s fees award against trustee that was granted under section 17211(b). The Second District, Division 3, in a detailed analysis of the Probate Code provision, reversed the fee award.
It found that “reasonable cause” under section 17211(b) was synonymous with the “probable cause” element of malicious prosecution claims—meaning an objective standard is used to determine if the actions were legally tenable. The appellate panel rejected the trial court’s test that “reasonable cause” required an objectively reasonable belief that the trustee would be completely exonerated by taking opposing actions. The correct test was expressed this way by the Court of Appeal: “We believe that reasonable cause to oppose a contest of an account requires an objectively reasonable belief, based on the facts then known to the trustee, either that the [adverse] claims are legally or factually unfounded or that petitioner is not entitled to the requested remedies.” (Slip Op., pp. 81-82.)
Because trustee did successfully challenge several claims and the appellate court found other findings were suspect, absence of reasonable cause was not shown, resulting in (you guessed it) a POOF!—a reversal of the $13.364 million fee award.