Judge: Michelle C. Kim, Case: 19STCV22667, Date: 2023-12-21 Tentative Ruling

Case Number: 19STCV22667    Hearing Date: December 21, 2023    Dept: 31

DEPT:  

31 

HEARING DATE: 

12/21/2023 

CASE NAME/NUMBER: 

19STCV22667 WESLEE DAVIS, JR., et al. vs SINGER VEHICLE DESIGN, et al. 

PETITION TO APPROVE COMPROMISE OF PENDING ACTION OF A MINOR 

WESLEE DAVIS JR., Age 9 

RECOMMENDATION: 

DENY 

 

TENTATIVE¿ 

¿ 

The Court excuses the personal appearance of Claimant and the guardian ad litem. Counsel may appear by telephone or video conference call.¿ 

 

Plaintiffs have agreed to settle their claims against Defendants for the total amount of $3,760,000, with the entirety being apportioned to Weslee Davis Jr. (“Claimant”). If the settlement is approved, $1,692,000 will be used for attorneys’ fees, and $161,895.44 will be used for costs.  The net balance of $1,906,104.56 will divided, with $1,366,104.56 to be invested in a single-premium deferred annuity and the remaining $540,000 to be transferred into a trust. 

 

The petition filed on September 6, 2023 is denied for the following reasons: 

 

Counsel requests 45% of Claimant’s settlement proceeds be used for attorney fees.  Counsel failed to submit any declaration to justify such a high fee. Counsel must submit, as Attachment 13a, a declaration explaining the basis for the request and include a discussion of all applicable factors listed in Cal. Rules of Court, rule 7.955(b). The Court is generally not inclined to award attorney fees here in excess of 30% absent actual evidence of extraordinary efforts on the part of counsel.  

 

  1. PROPOSED TRUST INSTRUMENT 

 

PLAINTIFF:   

 

Weslee Davis, Jr., age 11 

 

PETITIONER:   

 

Shannon Escott, parent and GAL 

 

GROSS AND NET SETTLEMENT (Petition, p. 6, sections 15 and 16f):   

 

Gross $3,760,000, Net $1,906,104.56 

 

PROPOSED RECIPIENT OF SETTLEMENT PROCEEDS (Petition, pp. 8-9, sec. 18): 

 

Petitioner proposes to distribute $540,000 cash from the settlement proceeds into a minor’s settlement trust and use the remaining $1,366,104,56 that would pay into the trust at: 

 

  • Commencing 10/06/2030(age 18), $2,500.00per month for the lifetime of Weslee Davis, Jr. with the first 40 years guaranteed; (final guaranteed payment on 09/06/2070).  

  • $150,000.00 paid on 10/06/2035 (age 23), guaranteed.  

  • $250,000.00 paid on 10/06/2037 (age 25), guaranteed.  

  • $300,000.00 paid on 10/06/2039 (age 27), guaranteed.  

  • $350,000.00 paid on 10/06/2042 (age 30), guaranteed.  

  • $450,000.00 paid on 10/06/2044 (age 32), guaranteed.  

  • $737,605.11 paid on 10/06/2047 (age 35), guaranteed. 

(Details regarding the annuity and annuity company are provided at Attachment 18b(3), court’s pdf at p. 21.) 

 

Petitioner proposes to fund the proceeds into a minor’s trust (not a special needs trust (SNT)) that would become revocable at plaintiff’s election when plaintiff/beneficiary reaches 18 years old.  Minor’s trusts must become revocable at the 18th birthday, and in fact the settlement funds should not be encumbered past plaintiff’s 18th birthday.  Probate Code section 3611(g).)  In the proposed minor’s settlement trust, at various places, the trust would become revocable for only 30 days when plaintiff turns 18, then if not revoked by plaintiff the trust would become irrevocable until plaintiff reaches age 26.  (See, e.g., Article One, Section 5, court’s pdf at p. 44.). This provision is improper as it encumbers the minor plaintiff’s assets past age 18.  Moreover, there are many portions of trust instrument that provide terms that would apply until plaintiff reaches age 18, then other terms that apply after age 18.  (See, e.g., Article Three, Section 3, court’s pdf at p. 47.)  The overall structure of the trust therefore is improper for a minor’s settlement trust and the court will continue the hearing to require a completely revised proposed trust instrument that simply becomes revocable at plaintiff’s 18th birthday.   

 

Moreover, the annuity contract provides that it will pay into the trust starting at age 18 and continuing well into plaintiff’s life.  (Court’s pdf at p. 21.)  The annuity contract should specify that the payments will be made into the trust if it exists and to plaintiff if the trust has been revoked.   

 

 

BRIEFING REGARDING TRUST ISSUES: 

 

Petitioner provides briefing regarding trust issue at Attachment 18b(7), court’s pdf at p. 36. 

 

PROPOSED TRUST INSTRUMENT: 

 

Petitioner provides the proposed trust instrument at Exhibit 1 to Attachment 18b(7), court’s pdf at p. 39. 

 

The main requirements for court created or funded trusts are set forth at California Rules of Court (CRC) rule 7.903(c) and LASC rule 4.116(b).  The proposed trust instrument meets those requirements. 

 

The trust instrument contains many terms that are inappropriate for a minor’s settlement trust, including the majority of Article Eight which provides powers at Section 3 for trustee to invest in agriculture, businesses, environmental powers, common fund powers (by which trustee could comingle trust assets into a common fund with other trusts), oil/gas/coal investments, enter into powers of attorney, to merge similar trusts, to operate as an interested trustee, to settle or compromise claims for plaintiff, to obtain additional trust assets, to act without disclosing trustee’s fiduciary capacity, etc.  (court’s pdf at pp. 57-65.). These terms, and the powers granted to trustee, are wholly inappropriate for a minor’s settlement trust and a revised trust instrument will be required.   

 

ADDITIONAL REQUESTS FOR RELIEF: 

 

Petitioner makes the following additional requests for relief that are beyond those fundamental to the approval and funding of a settlement trust: 

 

  1. Petitioner requests authority for trustee to invest in a common trust fund, bonds with maturity dates greater than five years, and mutual funds to provide for diversification and a higher rate of investment return.  (Attachment 18b(7), court’s pdf at p. 36.)  The request would provide for a broader investment authority than the statutory baseline but is common when the trust assets will be large and the investment horizon is long (where plaintiff is fairly young).  An exception is the request to invest in a common trust fund, which does not appear to be proper because these funds should be held separate from other trust funds and invested/disbursed accordingly.  The court will grant this request in part as to bonds with maturity dates greater than five years, and mutual funds and deny as to the request to hold plaintiff’s assets in a common trust fund. 

 

  1. Petitioner requests authority to pay $5,500 fees to trust specialist counsel, Cooper & Huber, LLC, for tasks relating to the minor’s settlement trust including drafting of the trust instrument and related portions of this petition.  (Attachment 20, court’s pdf at p. 75.)  The court will approve this request.    

 

TRUSTE AND BOND: 

 

The proposed initial trustee(s) is/are Shoushan Movsesian, a private professional fiduciary (PPF) in Glendale, California. 

 

Normally, bond must be required of a trustee unless the trustee is a corporate fiduciary.  (California Rules of Court, Rule 7.903(c)(5), Probate Code section 2320.)  Petitioner states that bond should not be required because the proposed trustee is a PPF.  (Attachment 20, court’s pdf at p. 74.). A PPF, however, is not a corporate fiduciary and bond should be required.   

 

A proper bond calculation based upon the assets to be funded into the trust, plus anticipated annual income from investments and any annuity, plus an additional amount required for the costs of any recovery on the bond, would be $626,000.  If the petition is approved, the court will require $626,000 bond submitted by trustee to this department (which will later be resubmitted to the Probate court in any trust supervision action).      

 

ORDERS/PROPOSED ORDER: 

 

Proposed Order received stamp date:  9/6/23 

General trust orders at Attachment 13, order pdf, p. 7. 

Trust terms included in order as required (Probate Code section 3604(a):  Yes 

Order provides for court jurisdiction over trust: Yes 

Order requires first trust accounting in one year and sets 14 month calendar due date:  The order states that an accounting is required after one year.  (Attachment 13, order pdf at p. 7, para. 5.  Need to add an actual 14 month calendar due date that will be picked up by the probate division when a trust supervision action is filed there.   

Order requires filing of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 within 60 days:  No.  The order states generally that “the matter will be filed with the probate department.  (Attachment 13, order pdf at p. 8, para.  8.  Need correction to state that the filing of a PRO 044 must be filed by trustee within 60 days.   

Order sets OSC in this civil department in approximately 60 days to ensure funding of settlement, submission of bond if required, purchase of annuity if relevant, and filing of LASC Form PRO 044 to open trust supervision action in probate:  No.  Need correction.   

Proposed order contains rulings granting all Additional Requests for Relief as set forth in that section of this memorandum above.  (Order pdf at p. 7.)  Since the court will only grant in part request #1 under “additional requests for relief” (above) the language granting those requests will need to be stricken or modified.   

The order states that no bond is required (Attachment 13, order pdf at p. 7, para. 4) which is incorrect for the reasons stated in the Bond section of this text above.  Need correction.   

 

ORDERS: 

 

  • Court requires more information justifying the amount requested for attorney’s fees, or reduce amount requested. 

  • Court will not approve creation and funding of proposed trust at this time. 

  • Court will require trustee bond: $626,000 when petition is approved.   

  • Court will require first trust accounting in one year and set calendar due date for filing in 14 months once petition is approved. 

  • Once petition is approved, set OSC in civil department in approximately 60 days to ensure funding of settlement, submission of bond if required, purchase of annuity if relevant, and filing of LASC Form PRO 044 to open trust supervision action in probate. 

  • Proposed Order: Corrections Needed  

 

 

Moving party is ordered to give notice.