Self dealing, breach of fiduciary duty

[sfosmith]

What is the name of your state (only U.S. law)? California

In a family AB Bypass Trust there were 3 beneficiaries. One beneficiary secretly obtained position of sole Trustee while both parents were alive with a Trust amendment that this position could not be changed. After the first Trustor died one year later, the beneficiary/Trustee began to use his position to negotiate an early inheritance disbursement for himself including a 50% compensatory change for decades of perceived family inequities. When his efforts failed, he hired lawyers at Trust expense to represent both himself and the surviving Trustor to disinherit one of the beneficiaries. When Trustor finally obtained her own lawyer, the attorney representing both Trustor and Trustee was forced out due to the alleged conflict. The Trustee negotiated his resignation in court via a stipulation signed by all parties giving court jurisdiction over the Trust Agreement.

A few months later, The Trustor disinherited the former Trustee from her Survivors Trust.

This Trustee did not abscond with cash, but clearly used his position for self dealing, sought a powerful position to settle the score with his brothers, and ran up a large legal bill paid for from Trust assets. The Trustee even outlined the reasons why he was due additional compensation in hand written, signed letters.

These actions were between 2001-2003. The surviving Trustoe died Feb 2011, and the court designated Trustee is in a position to settle the remaining assets of the estate.

What are the prospects for prevailing in a complaint for Breach of Fiduciary Duty and Self Dealing? Beneficiaries recently became aware of his actions, and the Trust became irrevocable 6 months ago.

 

[OHRoadwarrior]

The court will probably look at any action as frivolous and redundant. The 2nd Trust holder, by inaction over the years, clearly sanctioned the final status of the former Trustee.

 

[tranquility]

You have a complex situation with many issues. Without viewing the trust itself, no one can help you much in specifics. In general, there are a lot of facts which would make a big difference especially when many of the issues probably need be resolved by state-specific cases.

Also, the issues are different related to both trusts and the timing issues. You don't really have much of an argument at all until the B trust becomes irrevocable with the death of one of the parents. You would get standing to sue in the then living parent's (TLP) stead if you were his executor/administrator, but we also need to deal with the co-problem of the statute of limitations.

That SOL will probably prevent TLP's representative from successfully suing for any act or occurrence giving rise to potential liability that far back (B trust creation.) absent some argument as to why the statute should be tolled. Nothing in the facts shows a reason for tolling.

The SOL on any fiduciary breaches after B is irrevocable but before A is irrevocable will have the OP have different timing and standing issues for suits of what the trustee's duties are. One issue will be is when the OP knew or should have known and the other will be if there would be a statute of repose involved. The argument would be he got no accounting on trust A until TLP's death making it irrevocable.

See an attorney. Bring the trust and accounting with you. I don't see anything being easy here even without getting into if there was or was not (and proving it) a fiduciary breach(es).

 

[sfosmith]

Thanks for the responses. I may rewrite this later including more facts. With the Probate Code's statutes on the duties of the Trustee to be fair, impartial, and of service to the beneficiaries, how can an heir occupy this powerful position and control its cash resources to "get even"?

Is the statute of limitations in California 3 or 4 years? Do we have a tolling argument based on the February death of last Trustor?

We are looking for an attorney to work a draft complaint so that it can survive a motion to dismiss.

 

[anteater]

I am a bit lost. What is it you are after? The legal fees paid by the trust?

Other than that, all I see is "efforts failed"... "did not abscond"...

 

[sfosmith]

I made it clear that Trustee did not succeed in enriching himself with cash. If one tries to rob a bank, does prosecution depend on whether the robber left in the gettaway vehicle with bags of money?

What is extortion? It is,

Law: The crime of obtaining money or some other thing of value by the abuse of one's office or authority.

Here, the Trustee used his office and authority to bind the other beneficiaries in order to obtain a favorable "settlement", or to negotiate his resignation. This settlement would to compensate Trustee for perceived inequities. And the compensation would be in the form of a larger share of the trust property to be granted BEFORE the death of the surviving Trustor.

Isn't that illegal? Or does it depend on whether he succeeded? If so, a well pleaded complaint ought to have a chance at success.

 

[anteater]

Sorry, but I am still lost. What I got from your first post was:

1) The trustee tried to do a bunch of stuff because he felt that he got the short end somewhere along the line.

2) The trustee failed.

3) The trustee resigned in return for placing the trust under court supervision.

4) The trustee incurred legal fees in all this that were paid from trust funds.


You want the trustee prosecuted criminally for attempted extortion?

 

[sfosmith]

You want the trustee prosecuted criminally for attempted extortion?

No. Extortion was used an example of similar actions, for holding perpetrators responsible whether they succeed or not.

I want to pursue this in a civil action alleging the other beneficiaries were harmed by the Trustees actions. There has to be liability here that does necessarily have to be undertaken in a criminal action by the DA.

 

[anteater]

What are the other beneficiaries' damages? (Putting aside the question of whether an action for something that happened 8 to 10 years ago can be pursued.)

I asked if you meant the legal fees incurred by the trustee due to his attempts, but you did not give an actual response to the question.

 

[sfosmith]

Approximately $80K in unnecessary litigation most from Trust cash assets to pursue the Trustee's objective. Then fees to stop him and remove him from the position.

 

[tranquility]

The fees to stop and remove him should have been dealt with in the prior lawsuit and should have been handled long ago by those with standing. The trust's fees paid for legal action in conflict with the trust's terms should also have been handled there or long ago.

I don't see anything here, but stay with my suggestion.