Washington v. IMT Associates CA1/4
A158448
| Cal. Ct. App. | Jul 27, 2021Background
- Estelle Washington established a revocable trust in 2009; Robin (one of five children) became trustee (posted $370,000 Liberty Mutual bond) and served from June 2009 to April 2017; trust held cash and five rental/house properties.
- Winston (beneficiary) petitioned in 2017 to surcharge Robin for alleged breaches: mismanaging rental properties (lost rents), hiring private caregivers with trust funds (instead of CalPERS), filing bankruptcy for the trust, taking loans, providing a defective accounting, and failing to file trust tax returns; he sought ~$1.5M and bond recovery.
- Robin submitted a first and final accounting that contained gaps, many unclear disbursements (~$227,857.82), and a charges/credits discrepancy (~$39,747.60); court appointed a special master and held an evidentiary hearing (no court reporter transcript).
- Special master found (1) most mismanagement claims unproven or excused by good faith; (2) Robin breached accounting duties and failed to file tax returns; (3) proposed surcharge for accounting defects (~$267,605.42) but recommended offsetting that liability by trustee/caregiver compensation (~$340,270.83), resulting in no net accounting surcharge; and (4) recommended Robin be surcharged for tax penalties (trial evidence showed $8,896).
- Trial court adopted the special master’s report in full, applied laches to bar many property-mismanagement claims, accepted Robin’s accounting subject to surcharge only for tax penalties ($8,896), denied most other relief and attorney fees; Winston appealed and the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the trial court abuse discretion by accepting an admittedly incomplete accounting instead of requiring supplementation? | Winston: accounting was incomplete and insufficient; court should have rejected it or required supplemental accounting. | Robin/Liberty Mutual: court has wide discretion; special master applied burden rules and imposed appropriate surcharge for accounting defects. | Court: no abuse of discretion; trial court may accept an imperfect accounting and impose equitable surcharge; special master properly resolved deficiencies against trustee. |
| Were the trial court’s findings inconsistent with the special master’s report (accepting accounting despite finding it defective)? | Winston: adoption of the special master’s findings but acceptance of the accounting is contradictory and requires reversal. | Robin/Liberty Mutual: findings are reconcilable—court accepted accounting subject to surcharge and offset by compensation; special master did not recommend outright rejection. | Court: no inconsistency; separate issues (breach of accounting duty and compensation offset) are lawful and were properly reconciled. |
| Did laches bar Winston’s claims of property mismanagement and lost rents? | Winston: laches does not apply as a matter of law; his claims are timely and substantive. | Robin/Liberty Mutual/GAL: Winston waited years to object, acquiesced or interfered with administration, and delay prejudiced defense. | Court: laches applies to many of Winston’s property-management claims; alternatively, special master’s independent findings that Robin acted reasonably also reject the claims. |
| Is Robin liable for failing to file tax returns? | Winston: trustee must file trust returns; failure is breach and surchargeable. | Robin/Liberty Mutual: other breaches excused or not proven but acknowledge some tax filing issues. | Court: upheld special master—Robin breached duty to file tax returns and was surcharged for recorded penalties ($8,896). |
Key Cases Cited
- Van de Kamp v. Bank of Am., 204 Cal.App.3d 819 (1988) (beneficiary bears burden to prove trustee failed fiduciary duty)
- Orange Catholic Found. v. Arvizu, 28 Cal.App.5th 283 (2018) (court may excuse trustee liability under Prob. Code § 16440 for reasonable, good-faith conduct)
- Estate of McCabe, 98 Cal.App.2d 503 (1950) (trustee bears burden to support accounting items; doubts resolved against trustee)
- Plut v. Fireman’s Fund Ins. Co., 85 Cal.App.4th 98 (2000) (equity allows offset/set-off between trustee liability and compensation owed)
- Purdy v. Johnson, 174 Cal. 521 (1917) (trial court error where burden was improperly shifted to beneficiary to disprove trustee’s account)
- Neel v. Barnard, 24 Cal.2d 406 (1944) (trustee must establish correctness of accounts as to items, but plaintiff bears burden on separate malfeasance claims)
- Conservatorship of Coffey, 186 Cal.App.3d 1431 (1986) (conservator’s statutory duty to conserve estate assets; limited applicability where equitable defenses asserted)
- Christie v. Kimball, 202 Cal.App.4th 1407 (2012) (trial court has broad discretion to decide need for accounting)