Trusts and Estates

Spears v. Spears  

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Cite as A164622
Filed December 19, 2023
First District, Div. Four

By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP

Headnote:  Litigation – Trust Creditors

Summary:  Where no probate estate is opened and the trustee does not elect the optional trust claims procedure, a creditor may file suit to recover on a settlor’s debt from the trust estate without first having to proceed against the settlor’s probate estate.

Brian Spears brought claims to remove the trustee of his father’s trust, for an accounting and to be added as a creditor of the trust.  Spears alleged that the trustee, his step-mother, owed him a total of $40,000 based on two alleged oral agreements, one of which was an alleged breach to pay him $30,000 of payments received by the State of California for the care of trustee’s granddaughter, and the other an alleged breach to pay him $10,000 after trustee bought a modular home from Brian.  Brian alleged that the debts were community property and should be included in the debts of his father’s trust.  The trial court sustained trustee’s demurrer with leave to amend as to Brian’s petition. Brian then filed a creditor’s claim in the same case number, which rested on the same two alleged oral agreements alleged in the original petition.  Trustee objected to Brian’s creditor’s claim on the basis that he needed to file his claim against the decedent’s estate, not the trust, and that his claims were barred by the statute of limitations.  The court dismissed the matter with prejudice after Brian declined to file an amended petition.  

The appellate court reversed.  The filing of Brian’s creditor’s claim constituted an amended pleading as it reasserted his claim to be named as a creditor of the trust.  As to trustee’s alternative rationales to support dismissal, the appellate court rejected all but one, finding that Brian’s claim concerning trustee’s failure to repay him $10,000 in connection with the sale of a modular home was time-barred.  Notably, the court reasoned that Brian was not required to bring an action against the decedent’s estate, and could bring his claim against the trustee to recover from the trust estate because here, no probate was opened and the trustee did not elect the optional trust claims procedure.

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