Probate Court Litigation

Does a letter from a lawyer work to resolve disputes?  Not usually.  And having opposing lawyers write letters back and forth is a great way to incur legal fees, but not so great in getting anything resolved.

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The inherent problem with letters is that there is no penalty for ignoring them.  A lawyer can threaten that something is going to happen if the letter is ignored, but that’s an empty threat.  At times I have seen lawyers engaged in letter-writing campaigns that last for years—incurring tens of thousands of dollars worth of fees, but accomplishing nothing.  Simply put, a letter will never force anyone to do anything.

Filing in Court, however, is a different matter altogether.  Once an action is filed in Court, now you no longer are making empty threats.  And a resolution will be obtained one way or the other once a legal action is filed because ultimately the Court will make a decision on the case at time of trial.  Once your legal action is filed, you can talk compromise (if you want to) because if you are ignored, then you have the Court process to fall back on.  In the words of Teddy Roosevelt: you should talk softly and carry a big stick!

Personally, I have a one-letter rule on pre-litigation matters (unless, of course, a client instructs me to do otherwise).  I strongly caution against getting into a letter-writing war.  They usually last too long, accomplish too little, and cost way too much.  

In our first Tools of War post we set out three general categories of information you need to know to be successful in trust and will litigation.  They were:

  • Civil procedure—things like motions and demurrers
  • Civil discovery—written discovery, depositions, and expert designations
  • Rules of evidence—including foundation, hearsay, and relevance.

Civil procedure and civil discovery we have discussed.  Now let’s tackle evidence.

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The rules of evidence apply in probate Court the same as in any other civil trial.  And a majority of judges hearing probate cases will enforce the rules of evidence, although some are more strict than others.

Evidence rules are meant to limit the information that comes before the trier of fact (either Judge or Jury).  The Judge or jury is only allowed to consider information that is “accepted” into evidence once it passes through the gauntlet of rules set down in the Evidence Code. 

You can’t just walk into Court with a box of documents and a slew of witnesses and expect all that information will be accepted into evidence.  The primary purpose of the evidence rules is to ensure the information presented is genuine (nothing made up by a party). 

To navigate the rules of evidence you need to know 3 broad concepts: (1) Foundation, (2) Hearsay, and (3) Relevance.  If you know these three concepts, then you have most of what you need to understand the rules of evidence.

1.   Foundation. 

Foundation, when referring to documents, just means “authentic”—all documents brought into Court must be authentic.  You have the burden of proving your documents are authentic before the Court will admit them into evidence.  Further, all witnesses must have personal knowledge of the facts on which they will testify, but that’s much easier to determine (either they do or they don’t).  So let’s focus on foundation for documents.

Documents can be authenticated by the person who created them.  So letters and emails can be authenticated by the person who drafted them.  But what about bank records, medical records, and police reports?  They have to be authenticated by the “custodian” of records for the institution who created the documents.  That means you either have to (1) subpoena the bank (or medical provider or whatever) asking that their custodian of records appear and testify to the authenticity of the documents, or (2) issue a subpoena duces tecum (called a trial subpoena) asking the bank to send the documents directly to the Court in a sealed envelope with a signed declaration from the custodian of records stating the documents are authentic.

Either option takes some advanced planning—subpoenas must be issued at least 20 days before trial (better if it’s 30 days).  You should never expect to simply walk into Court with a box full of bank records and have them admitted into evidence, that won’t work. 

Remember nothing comes in without foundation.  It is the critical first step that should never be overlooked—plan ahead!

A quick sidebar: typically, you prepare an exhibit binder where you compile all the documents you want to use at trial.  The Court then marks the exhibits.  But exhibits are NOT evidence until the Court admits them into evidence.  Don’t make the mistake of thinking your exhibits are evidence, they aren’t until the Court says they are.

2.   Hearsay. 

Everybody has heard the word “hearsay,” but what does it mean?  Hearsay is any (and I mean ANY) out of Court statement asserted as true in Court.  Hearsay applies not only to what people say, but to what they write as well.  Therefore, all (and I mean ALL) documents are hearsay if they are used as being true because all documents are prepared outside of Court. 

Generally, hearsay statements are not allowed in Court, except for the 20 or so exceptions to hearsay.  Yes, there are over 20 exceptions to the hearsay rule—it’s the Swiss cheese of rules. 

For example, bank records are hearsay because they were created outside of Court and we typically use them to prove the numbers listed on the statements.  But they also fall into the business-records exception to hearsay.  So they can come into evidence if you follow the rules for the business-records exception to hearsay.

Another exception is anything said or written by the opposing party.  We call that party admission. 

There’s too many exceptions to list here, but be aware that there are many exceptions to look at when preparing for trial.  The best approach is to look at each witness and each document you want admitted into evidence and find the corresponding hearsay exception for each one.  If you can’t find an exception, then you won’t be using that witness or document at trial.

3.   Relevance. 

Even if you overcome foundation and hearsay, no evidence is admitted that is not directly relevant to the issue at hand.  And the Court has discretion to exclude any evidence it determines is irrelevant or unduly prejudicial.  Of course, all evidence is somewhat prejudicial, that’s the whole point.  But where information is being used just to put the opposing party in a bad light, without having any relevant use at trial, the Court has the choice to keep it out. 

So you must be able to articulate to the Court how your particular document or witness is relevant and useful at trial.  Don’t take it for granted, plan it out ahead of time.  If you can’t figure out the relevance of a particular witness or document, then don’t use that evidence.  Besides, going into irrelevant areas is a great way to bore the socks off the judge or jury.  Better to be on the mark and keep things interesting.

That’s the basics of evidence.  There’s more to it of course, but once you know foundation, hearsay and relevance you are well on your way to getting your evidence admitted at trial…OR blocking the opposing party from admitting their evidence at trial if they fail to follow the rules.  You can use your knowledge of evidentiary rules as both shield and sword.

 

The tangled web of litigation can cause some pretty funny alliances at times.  Emily Green of the Daily Journal reported on February 28, 2013 that the estate of Mark R. Hughes, founder of Hebalife, Ltd., who died in 2000, is still being litigated in the appellate court.  The latest turn of events comes from a claim for $3 million in attorneys’ fees made by the law firm of Mitchell Silberberg & Knupp LLP and attorney Hillel Chodos (Mitchell Silberberg & Knupp LLP and Hillel Chodos vs. Suzan Hughes, et. al., A130802).

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The $3 million fee is for services provided to the guardian (Suzan Hughes) of Mr. Hughes’ minor son, Alex.  At the time of the litigation, Alex was a minor and Suzan Hughes was fighting to remove the Trustees of Mr. Hughes’ Trust, which had an estimated value of $300 million.  The Guardian’s attorneys (Mr. Chodos and company) were allegedly paid $3 million for their services, but they had outstanding fees due of another $3 million.  Apparently, the lawsuit to remove the Trustees was unsuccessful.

Once the $3 million bill was asserted, both the guardian (Suzan Hughes) and the Trustees objected to payment of the fees—bringing these former enemies into alliance.  At the trial court level, the $3 million fee was denied because the Judge reasoned that the litigation was unsuccessful and was carried out primarily for the personal gratification of the guardian and NOT for the benefit of the minor.  Mr. Chodos and company disagreed, saying that during their representation they were following the instructions of the guardian and fighting a lawsuit that they honestly believed was in the best interests of the minor.

The First District Court of Appeal in San Francisco heard arguments and is expected to rule later this year.

Just goes to show that fee issues are a universal truth, the only difference being the amounts.  Most people don’t have to argue over $3 million in fees because not everyone has a Trust worth $300 million.  While the amounts may be large, the underlying arguments are no different.  Fiduciaries of all types, be they Trustees, guardians, executors, or agents under a power of attorney, owe a duty to act reasonably and only take action that is in the best interest of their beneficiaries and wards.  Violate that universal truth, and fees may be denied—not just attorney’s fees, but Trustees’ fees too (and executor fees, guardian fees, agent fees, etc).

Notice I said “may” be denied.  Why not “must” be denied?  Because so much is left to the discretion of the trial court.  If you can convince a Judge that your actions were reasonable, even if unsuccessful, then you have a chance of getting those fees approved.  Not so black and white after all. 

 

Joint accounts—the most confusing asset in the estate planning word.  Especially joint bank accounts.  They start off relatively harmless with a parent naming one of their children as a joint account holder to help pay bills and manage finances.  But rather than add a child only as an agent over the account (which would expire at death), people invariably add a child as a joint account owner with the right of survivorship—meaning that one child gets all the assets left in that account after the parent dies.

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The confusion about joint accounts comes from misinformation on how a Will or Trust controls joint accounts.  That is to say, they don’t.  Nothing contained in a Will or a Trust affects the distribution of a joint account.  That’s because joint accounts answer to a higher authority—the joint account agreement.  The same is true for life insurance benefits, which pass according to the beneficiary designation regardless of what the Will or Trust says.  Same is true of joint accounts, which pass to the surviving account holder regardless of the Will or Trust.

There are times when a parent wants to leave a joint account to only one child.  And there are times when they do not intend to do that.  The problem is that those intentions are very rarely voiced or written down.  Just what did mom and dad intend by naming only one child on a joint account?  Opinions differ.  The child with the money claims it was meant to pass to him only, and the other children disagree. 

But the law assumes that a parent knows precisely what they are doing when they name a child as a joint account holder—not always true.  The presumption is that the account was titled intentionally to include only one child to the exclusion of any other provisions in a Will or Trust.  And it is up to the excluded children to prove otherwise.

What’s more, to prove a contrary intent (i.e., that mom and dad did NOT intend to leave the account to only one child), the law requires “clear and convincing evidence.”  See Probate Code Section 5302(a).  This is a higher evidentiary standard than we typically use in civil cases.  Usually we employ a “preponderance of the evidence” test in civil cases, which means a certainty of 50% plus a little bit more.  In criminal cases we use the well known “beyond a reasonable doubt” standard.  Clear and convincing evidence requires more certainty than preponderence of the evidence, but less than beyond a reasonable doubt. 

The best “clear and convincing” evidence would be writing from the parent who created the account saying “I am doing this only for convenience, not because I intend to leave everything to one child.”  That type of writing rarely occurs.  Instead, there is usually a mix of claims, allegations, and supposed statements from the parent.  That leaves the stiffed children scrambling to find the evidence necessary to overturn the joint account.  And that evidence isn’t searched out until the one person who can clarify the situation is deceased—the parent. 

If you are going to undo a joint account after death, be prepared to find evidence that is both clear and convincing.  It’s not impossible, but it takes a bit more digging than normal.

Every party to a lawsuit would like to have their attorneys’ fees paid by the other side, especially if the other side loses.  That rarely happens in the U.S. because we have the “American System” of attorneys’ fees—that is each party pays their own.

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There are a few exceptions, such as when parties enter into a contract that says the prevailing party is to be paid their attorneys fees.  There are a few other statutory exceptions, but overall Court’s are very reluctant to shift attorneys’ fees from one side to the other even where it is authorized by statute.

In cases that operate under the Probate Code (Trust cases, Will matters, and Conservatorships/Guardianships) there are a few areas where attorneys’ fees can be awarded, but rarely are.

Consider this: Trustees have a duty to render accountings at least annually.  Let’s say you’re a Trust beneficiary and after a year goes by the Trustee refuses to provide an accounting.  You send a written request to account and the Trustee either ignores you, or refuses to provide an accounting.  As a beneficiary, you have rights and you can assert those rights in Court, so you bring a petition in Probate Court asking the Court to order the Trustee to account.  The Trustee finally complies and provides you with a Trust accounting.  Can the Trustee be forced to pay your attorneys’ fees for the petition to compel an accounting?  No.  There is no provision that allows the Court to shift your fees to the Trustee. 

It would seem like this type of action should carry with it an AUTOMATIC requirement that the Trustee pay your fees—especially if the Trustee refused to account.  But it does not.

There are some instances when Courts are given the discretion to award attorneys’ fees, but they rarely do.  One of those instances is when either a Trustee fights an objection to his or her accounting “in bad faith” or a beneficiary brings objections to an accounting “in bad faith.”  The problem is that fighting an accounting is not enough, by itself, to trigger the shifting of attorneys’ fees from one party to another.  The fight must be done “in bad faith”—a higher standard and one that is difficult to meet in most cases. 

Plus, since Courts most often apply the American System of fee payment (each party pays its own way), Judges seem reluctant to shift attorneys’ fees even when they are authorized to do so.

What does this mean for you and your case?  Don’t count on getting your attorneys’ fees reimbursed.  I usually advise every client to go into litigation on the assumption you will NOT receive reimbursement for your attorneys’ fees and costs.  If you are one of the lucky ones who are awarded attorneys’ fees, then take it as an unexpected bonus.

Not fair you say?  I agree.  But it’s just the American way of pay to play in our Court system.

Want to know why beneficiaries lose Trust and Will cases?  They fall prey to the “greedy heir” defense.  The greedy heir defense goes like this: a beneficiary challenges the wrongful acts of a Trustee and the Trustee responds by saying the beneficiary is just greedy.  Or an heir who has been disinherited challenges a Trust or Will (or an amendment to a Trust and Will), and they are described as greedy.

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Legally speaking, greed is not a proper defense to either a Trust accounting or a Trust or Will contest.  But these cases are heard and decided by Judges in California, and Judges are people too.  While Judges may be constrained by the law, they also have discretion to decide the facts of a case—who is right and who is wrong.  And it’s just human nature to want to decide against a “greedy” person. 

How do you counteract the greedy heir defense?  As a beneficiary or heir, you have to appear reasonable in what you are arguing and how you present your case in Court.  That means, at times, you can’t go after every little issue or every little argument.  You have to be strategic and decide what’s worth fighting over and (sometimes more importantly) what isn’t.  It’s not what’s important to you that matters, it’s the impact your arguments have on the Judge that counts.

For example, typically Trust and Will litigation involves various family members arguing over an estate.  They have a long history together and may have years’ worth of arguments, insults, and general bad acts that have built up over time.  Many times litigants want to focus on something the other side did many years ago because they think it shows some pattern of behavior or establishes that the other person is rotten.  But these past insults are rarely worth bringing into Court.  They take too much time to explain to the Judge and the Judge usually could care less about past disputes.  In litigation, you’re living in the here and now—so what you argue needs to be well crafted and to the point.  There may be one or two examples of past bad acts that are relevant, but probably not worth mentioning. 

Instead, a beneficiary or heir needs to focus on the relevant facts of the case.  If the Trustee has not properly managed the Trust, what did they do and why was it not proper?  That alone is enough to establish a breach of Trust and hold the Trustee liable.  The fact that the Trustee may have also been a jerk for many years is not so relevant.  This isn’t Family Feud, it’s trial.  Stay on task and be strategic about the arguments you make.  The more focused your arguments, the less “greedy” you appear in Court.

In our last post we set out three general categories of information you need to know to be successful in trust and will litigation.  They were:

  • Civil procedure—things like motions and demurrers
  • Civil discovery—written discovery, depositions, and expert designations
  • Rules of evidence—including foundation, hearsay, relevance, etc.

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Civil procedure we discussed.  Now let’s tackle civil discovery. 

The Discovery Act was instituted to (get this) make trials easier and more fair to all parties.  But so much of litigation has become bogged down in the use, and misuse, of discovery.  Rather than preparing a case for trial using discovery, many lawyers seem to be using discovery for the sake of harassing people and forcing settlements. 

But discovery is far more important than simply using it for harassment.  It is best used for its intended purpose—to prepare a case for trial.  And if you are serious about going to trial (which you should be), then discovery will help you get there, and make trial easier to conduct.

Discovery can be broken down into (1) written discovery, and (2) oral discovery (i.e., depositions). 

Here is a quick breakdown of the most commonly used discovery devices and a quick statement about what it is, when to use it, and some basic rules (not all the rules, just the basics you should know):

1.         Document demands

What are they?  Document demands are used to request relevant documents from the opposing party.  They are also called “Requests for Production of Documents.”

What’s their best use?  They are best used to determine what documents, if any, the opposing party has to support that party’s claims or defenses.  Used properly, they can help establish the universe of documents that will be used at trial.

What are the rules?  In requesting documents, you have to describe the category of documents you are looking for with reasonable specificity.  For example, “all documents relating to the Smith Trust” would be a proper description of trust documents, and any documents relating to the trust documents. 

The opposing party has 30 days in which to respond to document demands once they are served, plus an additional 5 days if the demands are served by mail, or 2 days if the demands are served by overnight delivery.  For more information take a look at Code of Civil Procedure (CCP) Section 2031.010 as so forth.

2.         Interrogatories

What are they?  Interrogatories simply ask questions of the opposing party, which must be answered in writing under penalty of perjury.  Interrogatories come in two forms: form interrogatories (which are pre-printed by the Judicial Council), and special interrogatories (which are drafted by a party or a party’s attorney).  Form interrogatories are basic questions provided on a pre-printed form.  Special interrogatories are drafted by a party or attorney and ask whatever relevant questions are necessary to determine the facts, witnesses or documents the opponent is using to support his claims or defenses.

What’s their best use?  Both form and special interrogatories are an important tool to gain knowledge about the other side’s case and position.  They are best used to determine the facts, witnesses and documents the other side intends to rely on at trial to support its claims and defenses.

What are the rules?  A party is limited to using only 35 special interrogatories, however, additional interrogatories can be used so long as they are accompanied by a declaration setting forth why the additional information is necessary.  And special interrogatories can only contain one question per interrogatory—no compound questions allowed.

The opposing party has 30 days in which to respond to interrogatories once they are served, plus an additional 5 days if the interrogatories are served by mail, or 2 days if the interrogatories are served by overnight delivery.  See CCP Section 2030.010 as the related provisions.

3.         Requests for Admissions

What are they?  Requests for Admissions ask the opposing party to admit certain facts as true.  If admitted, then the fact is conclusively presumed true for purposes of trial.  An opposing party does not have to admit a fact as true, they can deny it, but if that fact is later proven true at trial, then the party who denied it may have to pay the opposing party’s attorneys’ fees to prove the fact at trial.  

What’s their best use?  Admissions are best used to either (1) establish as true some basic, uncontested facts of the case, or (2) authenticate documents.  Once a document is admitted as authentic, then there is no need to lay foundation for that document at time of trial.  In other words, it makes trial easier to prepare for and conduct.  It’s rare for an opposing party to admit a damaging fact in a Request for Admission.

What are the rules?  Each party is limited to 35 requests for admission, unless accompanied by a declaration supporting the need for additional requests.  The requests are unlimited when asking an opposing party to authenticate documents.

The opposing party has 30 days in which to respond to a request for admission once they are served, plus an additional 5 days if the admissions are served by mail, or 2 days if served by overnight delivery.  See CCP 2033.710 as so forth.

4.         Subpoenas

What are they?  Subpoenas are used to obtain documents and the testimony of witnesses who are not a party to the lawsuit.  Subpoenas are most commonly used to obtain things like bank records, medical records, and other third-party documents. 

What’s their best use?  Subpoenas are best used to obtain independent information.  For example, in a trust accounting the only way to be sure that the information being reported by the trustee is accurate is to subpoena the bank records and double check the trustee’s work.  Once independently verified through the bank records, an accounting can be relied upon as being accurate.

What are the rules?  Subpoenas must be personally served on the party who has the documents or witnesses you need.  And there are special requirements you must follow whenever you are seeking records of a consumer.  See CCP 2020.010.

5.         Depositions

What are they?  A deposition is when a party gives live testimony under oath in front of a certified court reporter.  Even though the testimony is given outside of court, it has the same weight and use as if it were in court.

What’s their best use?  Depositions have two main functions: (1) to gather information that otherwise cannot be obtained through other discovery mechanisms (or to confirm information already obtained), and (2) to establish and lock-in the facts the opposing party intends to testify to at trial.  Since a deposition is given under oath, the testimony can be used at time of trial to impeach a witness.

What are the rules?  Technically, you can only depose a given person once.  The deposition must be taken within either 75 or 150 miles of the witness’s residence depending on whether the place of deposition is in the same County as the lawsuit.  See CCP 2025.010 and related provisions.

Once you know what type of information you are looking for, you can choose the appropriate discovery method and start finding out the facts of your case.

You can take a look at our informal description of disocvery in our handouts on What to Expect in Your Written Discovery, and What to Expect At Your Deposition.

If you’re going to do battle in Probate Court do you need to know more about Trusts and Wills or more about litigation?  The obvious answer is you need to know about both.  And while knowing about Trusts and Wills is critical, knowing a thing or two about civil litigation is also a must.

For example, under California Probate Code section 1000, the rules of civil procedure apply to actions filed in probate court (meaning all Trust, Will, and estate lawsuits).  This includes general civil procedure, civil discovery and the rules of evidence.

That sounds important, but what does it mean?  Let’s break it down into three general categories:

  • Civil procedure—things like motions and demurrers
  • Civil discovery—written discovery, depositions, and expert designations
  • Rules of evidence—including foundation, hearsay, relevance, etc.

In this post, we’ll discuss the first category—civil procedure.  The next two posts will explore the use of civil discovery and the rules of evidence in probate court matters.

Civil Procedure.

While it’s true that the rules of civil procedure apply to probate court matters, there is an exception where a different rule is stated in the Probate Code.  For example, in a civil lawsuit the defendant has 30 days after being personally served with a complaint and summons to file an answer with the Court.  In Trust and Will matters, however, an interested party has the right to appear and object for the first time at the first hearing (see Probate Code section 1043).  And in civil lawsuits a complaint does not need to be “verified” (which means signed under penalty of perjury); whereas in probate court verification is required (see Probate Code section 1021).

Demurrers and Motions.

While some of the rules are different under the Probate Code, other rules are not. For example, demurrers.  A demurrer is a funny word to describe what essentially is a motion to determine if the Plaintiff (or “Petitioner” in the probate world) has stated enough in the initial petition to make a legal claim against the defendant (or “Respondent” in probate court).  Every lawsuit has some basic information that must be stated in order to continue with the suit.  When a suit fails to state the basics, the opposing party can ask the court to dismiss the suit.  The Court, if it agrees, will usually dismiss the suit with “leave to amend” meaning the lawsuit can be re-filed with the correct information stated.

A demurrer does not test the truthfulness of the claims made in the petition, it merely determines if the factual allegations are enough to form the basis of a claim.  Demurrers aren’t always that useful in litigation, but they serve a purpose in some cases and can be used in probate court where appropriate.

The same applies to other procedures such as Motions to Strike, Motions for Summary Judgment and Motions for Judgment on the Pleadings.  All are fair game in probate court matters, although their usefulness may or may not apply in probate. 

Motions for Summary Judgment.

Take motions for summary judgment (“MSJ”), they tend to be used a lot in civil actions.  An MSJ is designed to allow the Court to decide an issue, or sometimes an entire lawsuit, where there are no factual issues in dispute.  Most of the time, MSJ’s are not granted by the Court because there’s always at least some factual issue that must be decided in a lawsuit, which can only be resolved at trial before a judge or jury.  If two people are fighting over the existence of a contract, then the facts of whether a contract was created or not can only be decided at trial.  Whereas, if the contract creation is not in dispute (everyone agrees a contract exists), then interpretation of the contract terms may only involve legal issues—not factual determinations—allowing the Court to rule on a properly filed MSJ.

In most probate court actions, however, almost everything is a factual dispute.  For example, if a Trustee is being accused of mismanaging the Trust assets, that’s a factual dispute.  The Court must hold a trial and hear evidence to determine whether or not the Trustee acted appropriately.  For this reason, most of the time MSJ’s are not useful in probate court.  But they are available and can be used in the right situation.

The bottom line is that if you are going to battle in Probate Court you must arm yourself with knowledge of civil procedure if you hope to be victorious.