Judge: Michelle C. Kim, Case: 22STCV28810, Date: 2024-05-06 Tentative Ruling

Case Number: 22STCV28810    Hearing Date: May 6, 2024    Dept: 31

DEPT:  

31 

HEARING DATE: 

5/6/24 

CASE NAME/NUMBER: 

22STCV28810 JENNY VARLEY, et al. vs CITY OF LONG BEACH, et al. 

PETITION TO APPROVE COMPROMISE OF PENDING ACTION OF A MINOR 

Mystic Varley, Age 8 

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 agreed to settle their claims against Defendants for the total amount of $1,400,000, with $280,000 being apportioned to Mystic Varley (“Claimant”). If the settlement is approved, $4,634.95 will be used for medical expenses, and $126,000 will be used for attorneys’ fees. The net balance of $149,365.05 will transferred into a trust for the benefit of Claimant. 

 

The Court reviews the settlement and finds it fair and reasonable.¿The Court also finds the attorney’s fees fair and reasonable, in that Counsel justifies 45% of Claimant’s settlement.  

 

  1. PROPOSED TRUST INSTRUMENT 

 

 

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

 

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 lists the allowable recipients of settlement proceeds for minors or incapacitated adults.  See subsection (g) of that section which provides for the use of a minor’s settlement trust that is revocable at age 18 (emphasis added): 

 

(g) That the remaining balance of the money and other property be paid or delivered to the trustee of a trust which is created by, or approved of, in the order or judgment referred to in¿Section 3600. This trust shall be revocable by the minor upon attaining the age of 18 years, and shall contain other terms and conditions, including, but not limited to, terms and conditions concerning trustee's accounts and trustee's bond, as the court determines to be necessary to protect the minor's interests. 

Here, the trust instrument specifies that the trust becomes revocable at age 18, but only for 30 days, then the trust becomes irrevocable until plaintiff turns age 27.  (Article III, court’s pdf at p. 126.). This term does not comply with subsection (g) of Probate Code section 3611 and the court will require a revised proposed trust instrument.   

 

BRIEFING REGARDING TRUST ISSUES: 

 

Petitioner provides briefing regarding trust issue at Attachment 18b(7), court’s pdf at p. 119.  Oddly, that briefing is drafted in terms that state that the petition was granted on April 19, 2024 (the date on which the hearing initially was set before the hearing was continued for review of the trust issues).  It states that the petition was granted and the order is attached thereto.  Then the order provided as an attachment provides the terms of the proposed trust instrument.  This arrangement is highly unusual and does not make sense in light of the procedural history of this petition.  Nonetheless, the analysis of the proposed trust instrument is based upon the terms set forth in that order.   

 

A separate Judicial form proposed order was submitted on 5/1/24 but it does not attach the trust instrument or make trust orders other than to state that the settlement funds will be transferred to the trust.  Petitioner will need to provide a revised proposed Judicial Council order that attaches the trust instrument that is eventually approved and text making trust orders (e.g., for approval of the trust instrument and funding, appointment of trustee, and a bond ruling).   

 

PROPOSED TRUST INSTRUMENT: 

 

Petitioner provides the text of the proposed trust instrument at court’s pdf, p. 122.   

 

The text of the trust instrument makes statements that the court granted the petition and approved the trust on April 19, 2024, which was the initial hearing date for this petition that was continued.  This improper date should be removed from the text.  Traditionally, if petitioner desires the date of granting of the petition to be stated in the trust instrument then a blank is inserted that can be completed later.   

 

There are typo signature blocks that appear at various places in the proposed trust instrument text (see, e.g., court’s pdf at p. 124:3, 128:3.)  Need correction. 

 

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).  While the trust instrument meets the¿CRC 7.903(c) requirements, it does not meet the requirements of Probate Code section 3611(g)¿because the trust instrument is not completely revocable after age 18. 

 

 

 

TRUSTEE AND BOND: 

 

The proposed initial trustee is petitioner/father, Peter Varley.  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.). The proposed trustee does not meet the definition of a corporate fiduciary and bond will be required.   

 

Petitioner does not calculate bond but $156,833.30 bond is stated in the proposed order portion of the briefing.   

 

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 $173,000.  If the petition is approved, the court will require $173,000 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:  5/1/24 

Petitioner provides a proposed order as part of the briefing on the petition, which is where the proposed trust instrument text is provided (Attachment 18b(7), court’s pdf at p. 121).  That order, however, incorrectly states the date of approval of the trust.  The Court will require a Judicial Council form proposed order for the compromise petition which attaches a trust instrument and makes the remaining trust orders as discussed above.   

SUMMARY: 

 

  • Settlement and fees approved. 

  • Need revised proposed trust instrument that complies with Probate Code Section 3611(g).   

  • When petition is granted, trustee bond of $173,000 will be required.   

  • Order should include requirement of first trust accounting in one year and set calendar due date for filing in 14 months. 

  • Order should 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: Need JC form proposed order and attachment of trust instrument and trust orders.    

 

 

Petitioner must reserve a new date and file a new petition curing the above-noted defects at least 9 court days before the continued hearing date. 

 

Moving party is ordered to give notice.