With a few exceptions, the prevailing party in trust litigation generally cannot recover attorney’s fees. Because parties usually must bear their own attorney’s fees in trust litigation, they should consider whether the likely outcome will be worth the estimated attorney’s fees needed to achieve that outcome.
One exception to the general rule was at issue in Pizarro v. Reynoso (January 18, 2017) ____ Cal. App. 5th ____ [____ Cal. Rptr. 3d ____]. In that case, the sale of trust property by the trustee (Reynoso) to one beneficiary (Bartholomew) was challenged by another person (Pizarro). During the litigation, Bartholomew gave false testimony to support Pizarro’s meritless claim against Reynoso which, “From the start, Pizarro had no basis in fact, law, or reason to litigate.” The trial court awarded attorney’s fees against both of them.
The Court of Appeal confirmed the rule that a probate court’s “broad equitable powers over trust assets are sufficient to justify an award of attorney fees and costs against any trust beneficiary who takes an unfounded position and litigates in bad faith, causing the trust to incur fees and costs.”
However, the Court of Appeal also held that this broad power over trust assets only allows an award of fees and costs against the offending party’s share of the applicable trust. In this case, the result meant that Pizarro had no interest in the applicable trust. Because he had no trust share, and because the probate court based its award solely on its equitable power over trust assets, the award of fees against him personally could not stand. (There are statutes that allow an award of fees against a bad faith litigant personally, and the Court of Appeal ruled that, on remand, the probate court could consider whether to award fees under those statutes.)
As for Bartholomew, she did have an interest in the trust, so the fee award against her could be enforced to the extent of that interest. She argued that, because she had not filed the action (unlike Pizarro) and had not litigated as a party in the case but only gave testimony, fees could not be awarded against her. But the Court of Appeal held that the equitable power to award attorney’s fees against a beneficiary’s trust share applies to anyone “who takes an unfounded position and litigates in bad faith.” By giving false testimony in support of Pizarro’s claim, Bartholomew took an unfounded position in bad faith.
Although any finding of bad faith probably will not be made until the end of the case, if it appears at the outset that a party is bringing a claim or defense without a legal and factual basis, the analysis of whether trust litigation is cost-justified might include a consideration of whether attorney’s fees will be awarded against that party’s share of the trust. Also, at the end of the case, attorney’s fees for bad faith litigation can be requested from the trust share of not only a beneficiary who pursued a claim or defense without a legal or factual basis but also against any beneficiary who engaged in any other bad faith litigation tactics, including knowingly giving false testimony as a mere witness.