Trial Court: Santa Clara County Superior Court Superior Court No. 1-09-PR162201 Trial Judge: Hon. Franklin E. Bondonno
The opinion of the court was delivered by: Premo, Acting P.J.
CERTIFIED FOR PUBLICATION
(Santa Clara County Super. Ct. No. PR162201)
Plaintiff Thomas Thorpe succeeded the Public Guardian as temporary trustee of a special needs trust. The trust specified that a successor trustee was not entitled to compensation. Plaintiff served for four and one-half months and billed the estate $108,771.07 for trustee and trustee attorney fees. On his petition, the trial court awarded him $51,285.63 over objection that the trust instrument prohibited compensation. Defendants Audelith Jenivee Reed (the trustee) and Danny Reed (the beneficiary) appeal from the order and reiterate their objection. We agree with defendants. We therefore reverse the order and direct the trial court to deny plaintiff's petition.*fn1
Danny was 21 years old in 1996 when he attended the Burning Man festival in Nevada.*fn2 He was asleep in his tent when a drunken driver drove through the tent and caused him permanent brain damage and orthopedic injury. The probate department of the Santa Clara County Superior Court (probate court) appointed his mother, Jolaine Allen, as his conservator in 1997. Jolaine filed a personal injury suit on Danny's behalf for the Burning Man accident. In 1999, Danny was again injured by a car--this time in a cross-walk accident--and Jolaine filed another personal injury suit on Danny's behalf. Jolaine settled the Burning Man suit for $815,000 in 1999. Within the conservatorship proceeding, the probate court established a "special needs trust"*fn3 for Danny and ordered the net settlement proceeds conveyed to the trust. The trust appointed Jolaine as Special Trustee and Trustee.*fn4
The trust provides as follows: "Trustee shall be entitled to receive reasonable compensation for services in the administration of this Trust. A Special Trustee and any successor Trustee shall not be entitled to receive reasonable compensation for services in the administration of this Trust."
Jolaine settled the cross-walk suit in 2002 for $900,000, and the probate court ordered the net settlement proceeds conveyed to the trust.
Jolaine did not take any compensation for her services as trustee. She lived with Danny and Danny's two sisters in a townhouse she had purchased for the trust with $270,000 and a $150,000 mortgage. She and the sisters paid part of the mortgage obligation, and Danny paid part via his government disability income.
In 2008, Jolaine was overseeing approximately $650,000 in cash deposited for the trust in a Washington Mutual Bank account when the country's financial crisis occurred. She became concerned about Washington Mutual's stability. She therefore obtained a probate court order permitting her to withdraw the money and redeposit it in seven different banks so that each account would be below the $100,000 threshold for FDIC insurance.
In 2009, a probate court investigator discovered that his office had never given Danny's trust a required biannual review. He telephoned Jolaine to no avail. He went to the townhouse but no one ever answered the door. He reviewed the court order for withdrawal and redeposit of the money but could not determine the whereabouts of the money. The probate court therefore issued an order to show cause on its own motion directing Jolaine to appear and show cause why she should not be removed as conservator. At the hearing on March 23, 2010, the probate court removed Jolaine as conservator and trustee and appointed the Public Guardian as temporary conservator and temporary trustee. It appointed the Public Defender to represent conservatee Danny, authorized the Public Defender to review the trust, and provided that "the estate of the conservatee" will bear the costs of representation. It set a status review hearing for the conservatorship matter and trust matter for May 4.*fn5
At the hearing on May 4, 2010, County Counsel, the Public Guardian's attorney, informed the probate court that Jolaine had been unable to deposit all seven Washington Mutual cashier's checks and possessed two for about $92,000 each. He added that one check had been mistakenly deposited in Danny's name, which placed Danny's government benefits at risk. He opined: "I think she got a little overwhelmed. Part of the reason is she doesn't have an identification card. So the banks were unwilling to accept her status as the trustee of the trust. There's--there's a house in the special needs trust as well, and so to sum everything up, the finances right now are a mess. [¶] We think this case is probably best suited for a private fiduciary given the amount of liquid assets, approximately $675,000 plus a house. I would ask the Court consider appointing a private fiduciary for the conservatorship and the trust. And then Ms. Allen can have an opportunity to get her counsel to perhaps explain all the decisions that she made with respect to the special needs trust."
The Public Defender asked "that the matter simply be continued without the Public Guardian's office acting as the trustee. Because my client may want to challenge the need for the trust and/or--the conservatorship and may also want to have a family member appointed [as conservator], perhaps other than his mother."
Jolaine agreed and detailed: "What we're requesting today is a continuance. And I would like to--Danny Reed has a desire and intention to present a petition to the Court for the dissolution of the conservatorship as he no longer needs the conservatorship of his person or of his estate. I would like to meet with the Public Guardian and bring the paperwork, the financial paperwork I should have. I have acted in good faith. I have never done anything inappropriate with the funds or the assets in the trust. And we would like to have a continuance so I can meet with [my lawyer] or another special needs attorney before an action like this is taken. So I would ask that you postpone any request that the Public Guardian attorney is making right now for a fiduciary and let it be family member as--when we're able to find out if this is going to be dissolved, the conservatorship. [¶] Danny should be able to choose somebody. And I can show where whatever monies have gone. I have never personally taken any monies out of his trust. So I think this is excessive. I don't believe it's needed at this time. But we're requesting a continuance so we can get everything straightened out and I'm agreeable to having an accounting in 60 days and showing where everything is."
County Counsel objected: "The issue before the Court is not whether the temporary trustee of the trust should be appointed. It's whether it should be the Public Guardian over a private fiduciary, because the issue before the Court is then--Ms. Allen can correct me if I'm wrong--she placed $92,000 in the name of Daniel Reed in his own name which resulted under the special needs rules as income and so now his SSI is at risk. [¶] She acted in good faith but the problem is she didn't have an identification so banks weren't willing to work with her as they would a regular private fiduciary with an identification. I don't think we can wait for a temporary trustee to be appointed when Mr. Reed's SSI benefits are at serious risk."
Jolaine added: "Your Honor, I have a paper which we've drafted and I understand as trustee of the special needs trust states that I would have the powers of choosing a successor trustee. And I had wanted to choose my daughter, my 30-year old daughter, Tristan, to be a co-trustee, successor trustee, in that she has picture ID, and she could go to the bank and they would accept her picture ID and allow the paperwork to proceed. I have the paperwork, but I haven't submitted it to the Court yet. She would assist me in handling the basic paperwork with the bank."
The probate court stated that "I don't have anything like that before me." It then extended the Public Guardian's temporary conservatorship until July 13, 2010, and ordered Jolaine to produce an accounting at that time. It indicated that "I'm also going to appoint a temporary fiduciary with regard to the trust" subject to further review on ...