Cavalli v. Cavalli

MOSK, J., Concurring.

I concur.

In the first amended petition pursuant to Probate Code section 17200, which petition was before the court in the separate civil action, Kevin Cavalli alleges that the successor trustee of the QTIP Trust, First Regional Bank, “has taken the position in this proceeding that it is a ‘neutral shareholder’ with no duty to investigate the actions of MARY J. BOWLES, the predecessor trustee, or to bring the claims alleged in this petition. Petitioner is further informed and believes, and on that basis alleges, any demand made by Petitioner on First Regional Bank to bring the claims set forth in this petition would have been rejected and would have been futile.” It is alleged there is no acting trustee for the grandchildrens’ trust. It does appear, however, that thereafter First Regional Bank requested instructions whether it should pursue litigation against the trust beneficiary. Nevertheless, we deal with the sufficiency of the first amended petition in the probate proceeding and the complaint in the civil action.

The text authorities provide that a beneficiary of a trust cannot bring an action against a third person unless the successor trustee refuses to sue or is not available. (Scott & Ascher on Trusts (5th ed. 2008) 29.1.11.4, p. 1999; Bogert, The Law of Trusts and Trustees (2d rev. ed. 1995) § 869, pp. 119-121; see 13 Witkin, Summary of Cal. Law (10th ed. 2005) Trusts, § 149, pp. 711-712.) The court in Wolf v. Mitchell, Silberberg & Knupp (1999) 76 Cal.App.4th 1030, 1041 [90 Cal.Rptr.2d 792] states, “In [City of] Atascadero[ v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 485 [80 Cal.Rptr.2d 329]] the Court of Appeal considered a passage of Scott on Trusts which notes that a beneficiary should not be allowed to maintain an action against a third party that actively participates in a breach of trust if the offending trustee has been removed and a successor appointed. (Atascadero, supra, 68 Cal.App.4th at p. 467, citing 4 Scott on *701Trusts[ (4th ed. 1989)] § 294.4, pp. 104-105.) The court had no occasion to apply this rule in Atascadero because the county remained the trustee of the Pool both during and after the breaches of fiduciary duty, even though the occupant of the county treasurer position had changed. (68 Cal.App.4th at pp. 468-470.) We also have no occasion to consider whether the rule suggested by this passage of Scott on Trusts should be applied in an appropriate case. Here a current cotrustee (Fred) is alleged to have actively participated with the prior trustee (David) in the breaches of trust alleged in the complaint. Indeed, he is alleged to have been the primary recipient of the funds dissipated from the trust. Under these circumstances, ‘. . . it is unnecessary for the beneficiar[y] to call on [the current trustee] to undo what he has done.’ (4 Scott on Trusts, supra, § 294.1 at p. 100.)” Neither Wolf nor Atascadero suggest that the law enunciated in the treatises is not applicable in California. Witkin has stated, “Where the trustee acts in breach of trust, as by transferring trust property to a third person, the beneficiary’s right of action against either the trustee or the transferee is well established. If the trustee fails or refuses to act, the beneficiary is allowed to sue the third party.” (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 138, p. 206.) Witkin does not consider the situation of a trustee who succeeds the offending trustee.

With respect to the petition in the probate case, I do not believe that we should reach issue of whether Probate Code section 17200 gives the beneficiary the right to sue third parties even if a successor trustee has not refused to do so. (Cf. Patton v. Sherwood (2007) 152 Cal.App.4th 339 [61 Cal.Rptr.3d 289].) The petitioner has pleaded that the successor trustee was unwilling to pursue the claims. That is sufficient for purposes of standing under the authorities. With respect to the grandchildrens’ trust, it appears there is no trustee at this time. Thus, the beneficiary of the trust has standing.

In the civil action, the trial court sustained the demurrer without leave to amend “because there’s a new trustee and there’s no allegation that this new trustee can’t act. You must plead that the new trustee is incapable—is not ready and willing to act. You don’t have that.” The court sustained the demurrer without leave to amend so that the case would be heard solely in the probate court, notwithstanding plaintiff’s request to amend the complaint. The trial court did not appear to consider the possibility of plaintiff amending the complaint because the trial court believed that no action could be maintained except in the probate proceeding. In a motion for reconsideration, plaintiff sought to file an amended complaint that attempted to deal with the standing issue, but the trial court denied the motion. This court has held that the trial court’s determination that the probate department must resolve the merits of the civil action was not a proper basis for sustaining the demurrer to the complaint.

*702Under these circumstances, I believe we should reverse and allow plaintiff the opportunity to amend the complaint. If there are allegations, as there were in the amended petition in the probate court, that the successor trustee would not proceed as plaintiff requested, then there would be no need to resolve the issue of whether a beneficiary has standing if the successor trustee had not refused to act.

I would reverse the judgment in the civil action to give plaintiff an opportunity to amend, and reverse as to the probate petition on the ground that petitioner has sufficiently pleaded facts to establish standing. As there may be further developments in connection with the successor trustee’s request for instructions, the issue of standing might be revisited in future proceedings.

Respondents’ petition for review by the Supreme Court was denied March 11, 2009, S170128.