Buffington Law Firm’s trust litigation team won a significant courtroom victory in a 2017 case “Orange Catholic Foundation versus Rosario Arvizu.” In this case, Buffington Law Firm defended the trustee of a trust, Rosario Arvizu, against various breach of fiduciary duty claims by other beneficiaries of the trust, i.e. the Orange Catholic Foundation and the Diocese of Orange. The trial court rendered a verdict in favor of Mrs. Arvizu. The trial court found that as trustee she had been confronted with a very difficult situation, had acted in good faith, and the court had the power to exercise its discretion under Probate Code Section 16440(b) to excuse any of her errors as trustee as an exercise in equity. After the trial the Petitioners appealed to the California Court of Appeal, arguing that the trial court had abused its discretion and lacked the power under the Probate Code to excuse what it argued were violations of the trust terms by Mrs. Arvizu. Buffington Law Firm represented Mrs. Arvizu on appeal.
In a published opinion, the Court of Appeal found that the trial court indeed had discretion under Probate Code Section 16440(b) to exercise equity and had properly exercised its discretion. The Court state that “…[g]iven … [the trial court’s] findings of reasonableness and good faith [on the part of Mrs. Arvizu, the trustee], section 16440(b) afforded the trial court broad discretion to excuse Arvizu from liability, and we find no abuse of discretion in the trial court’s decision to do so.”
This decision ratifies and clarifies a trial court’s discretion and authority under California Probate Code Section 16440(b) to excuse technical breaches of trust by a trustee who acts equitably and in good faith. The decision also ratifies the trial court’s application of the Special Benefits Doctrine without specifically naming such doctrine. The Special Benefits doctrine essentially provides that if a trustee commits a breach of trust in a given transaction, the trustee may not be liable if the plaintiff/petitioner cannot demonstrate actual damages. In this case, the Petitioners had complained of a two year delay by the trustee in selling the principal trust asset, a private residence, and distributing the sales proceeds to the Petitioner as provided for by the trust. The trial court did find delay. However, at trial, Buffington Law Firm introduced expert appraisal testimony showing that during the two-year delay period the residence had appreciated in value by at least $136,000, which was more than the holding (rental) value of the real property during this same period. Accordingly the trial court found no actionable harm by the delay and the trial court specifically invoked the Special Benefits Doctrine in its Statement of Decision. Without specifically invoking the doctrine, the Court of Appeal essentially concurred with the trial court and noted in its decision that “… the Trust sustained no damages as a result of Arvizu’s delay in selling the Residence and her failure to rent it out; to the contrary, the Trust actually made money as a result of the Residence’s $136,000 appreciation during the period of Arvizu’s inaction.”
This published decision will essentially stand for the proposition that if a trustee commits alleged technical breaches of trust, if the trial court finds that he or she acted equitably and in good faith, the trial court may have authority to excuse such breaches if it finds this to be in the interests of justice.
Buffington Law Firm has broad experience in handling a broad array of trust and inheritance disputes. If you are confronted with such a problem we invite you to call us for a free legal consultation. All such calls are with an experienced attorney, are completely confidential, and there is never any obligation.