Judge: Michelle C. Kim, Case: 22STCV07858, Date: 2023-09-11 Tentative Ruling

Case Number: 22STCV07858    Hearing Date: October 25, 2023    Dept: 31

DEPT:  

31 

HEARING DATE: 

10/25/2023 

CASE NAME/NUMBER: 

22STCV07858 NALAYA MEZA, BY AND THROUGH GAL, et al. vs AVALON DAIRY FARMS, LLC 

PETITION TO APPROVE COMPROMISE OF PENDING ACTION OF A MINOR 

Nalaya Meza, Age 2 

RECOMMENDATION: 

GRANT 

 

TENTATIVE¿ 

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The Court has reviewed the Petition to Approve Compromise of Pending Action of a Minor Nalaya Meza (“Claimant” or “Plaintiff”), Age 2. 

 

Plaintiff has agreed to settle her claims against Defendant(s) for the total amount of $7,000,000, with $6,600,000 being apportioned to Nalaya Meza (“Claimant”). If the settlement is approved, $35,832.35 will be used for medical expenses, $2,640,000 for attorneys’ fees, and $190,088.78 will be used for costs.  The net balance of $3,734,078.87 will be divided, in which $3,000,000 will be invested into a single-premium deferred annuity and $734,078.87 into a trust. 

 

Petitioner Leticia Respicio (“Petitioner”) requests 40% of Claimant’s settlement for attorneys’ fees. The Court is generally not inclined to award attorney fees in excess of 25% absent actual evidence of extraordinary efforts on the part of counsel. However, Petitioner provides several declarations in support of the attorney fees sought. Based upon the declarations and contents submitted, the Court is satisfied with the efforts in this case to justify such a high fee.  

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  1. Proposed Trust Instrument 

 

Petitioner now proposes to distribute the net settlement proceeds into a minor’s settlement trust for the benefit of plaintiff.  More specifically, petitioner proposes to use $734,078.87 cash to fund the minor’s settlement trust and use the remaining $3 million to purchase annuities that would pay into the trust at: 

 

  • $1,000.00 payable monthly, guaranteed for 15 years, beginning on 01/15/2024, increasing at a rate of 3.00% compounded annually, with the last guaranteed payment to be made on 12/15/2038.  

  • $35,000.00 payable semi-annually, guaranteed for 4 years, beginning on 06/01/2039, with the last guaranteed payment to be made on 12/01/2042.  

  • $4,000.00 payable monthly, guaranteed for 4 years, beginning on 06/01/2039, with the last guaranteed payment to be made on 05/01/2043.  

  • $6,000.00 payable monthly, guaranteed for 7 years, beginning on 06/01/2043, with the last guaranteed payment to be made on 05/01/2050.  

  • $9,848.49 for life, payable monthly, guaranteed for 30 years, beginning on 06/01/2050, increasing at a rate of 3.00% compounded annually, with the last guaranteed payment to be made on 05/01/2080.    

  • $100,000.00 guaranteed lump sum payable on 10/30/2041 (age 21).  

  • $200,000.00 guaranteed lump sum payable on 10/30/2043 (age 23).  

  • $300,000.00 guaranteed lump sum payable on 10/30/2045 (age 25).  

  • $400,000.00 guaranteed lump sum payable on 10/30/2047 (age 27).  

  • $500,000.00 guaranteed lump sum payable on 10/30/2050 (age 30).  

  • $600,000.00 guaranteed lump sum payable on 10/30/2055 (age 35).  

  • $750,000.00 guaranteed lump sum payable on 10/30/2060 (age 40). 

Additional annuity details are provided at Attachment 18b(3) (court’s pdf at pp. 231-32).   

 

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.  Here, the trust instrument specifies that the trust becomes revocable at age 18.  (Article Four, Section 4.4, court’s pdf at p. 244.) 

 

 

THE PROPOSED TRUST INSTRUMENT 

 

Petitioner provides briefing regarding the trust issues at Attachment 18b(7) (court’s pdf at p. 234)  The proposed minor’s settlement trust is attached thereto as Exhibit A (court’s pdf at p. 240).  A minor’s trust does not invoke all the requirements of a special needs trust because there are no issues/requirements to maintain benefits eligibility.  An order funding a minor’s trust, however, still invokes the requirements of CRC rule 7.903(c) and LASC rule 4.116(b) because those rules govern virtually all trusts that are created or funded by court order.  The trust instrument meets the CRC rule 7.903(c) requirements. 

 

ADDITIONAL REQUESTS FOR RELIEF 

 

In the trust briefing, petitioner makes the following additional requests for relief that are beyond those fundamental to the creation and funding of a trust: 

 

  • Petitioner requests authority for trustee to invest in mutual funds and bonds with maturity dates greater than five years to provide for a higher rate of investment return.  (Court’s pdf at p. 238.)  This 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).  GRANTED.   

 

FINDINGS  

 

The usual three SNT findings are not relevant because this case involves a minor’s trust and not a SNT.    

 

TRUSTEE AND BOND 

 

Lee Ann Hitchman and Brett Hitchman, private professional fiduciaries (PPF), shall act as the initial trustee of the minor’s trust.  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.)  A PPF does not meet that requirement and bond will be required.   

 

In the briefing, petitioner calculates $859,032.66 bond (rounded up to $860,000 in the proposed order).  That bond calculation appears to be correct based upon the initial trust funding and an additional amount required for annual investment/annuity income and a statutory amount required for any additional costs for recovery on the bond.  The court will require $860,000 bond. 

 

NOTICE 

 

There is no requirement to notice the three state agencies for a minor’s settlement trust, as there is with a SNT. A proof of service for defense counsel is attached to the petition brief and notice appears to be complete.     

 

THE PROPOSED ORDER 

 

A proposed order was reviewed in eCourt. The following requirements apply to an order on the trust:   

 

  1. General Orders 

 

The order approving the trust properly must attach a copy of the proposed trust instrument to capture the text of the trust being approved.  Satisfied. 

 

The proposed order should also address other rulings related to the trust issues, including bond.  Satisfied.  Additional orders regarding trust issues are set forth at Attachment 8b(2) thereto (order pdf at p. 10).   

 

 

The Court sets an Order to Show Cause Re: Compliance: Proof of Purchase of Annuity(ies) on____________________ IN DEPARTMENT SS-31 AT 8:30 AM.¿¿¿¿ 

 

Moving party is ordered to give notice.