Judge: Steven A. Ellis, Case: 22STCV33224, Date: 2024-11-19 Tentative Ruling

Case Number: 22STCV33224    Hearing Date: November 19, 2024    Dept: 29

Torrez v. County of Los Angeles
22STCV33224
Petitions for Approval of Minor’s Compromise for Amado Ruiz (Age 11), Annaleia Huertas (Age 4), and Annarae Huertas (Age 4)

Tentative:  

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

The petitions are granted.

Background

This case arises out of a tragic incident in which a three-year old child, Avanna Huertas (“Avanna”), died of drowning in a swimming pool on July 21, 2021, while under the care and custody of the defendants.

On October 11, 2022, Plaintiffs Brianna Torrez, Joseph Huertas, Amado Ruiz (a minor), Annaleia Huertas (a minor), and Annarae Huertas (a minor) (“Plaintiffs”) filed this lawsuit.  The Plaintiffs are Avanna’s parents and siblings.  The Defendants identified in the complaint are County of Los Angeles (“County”), McKinley Children’s Center, Maria Cabral, Alfonso Cabral (collectively, “Defendants”), and Does 1 through 25.  Plaintiffs filed a First Amended Complaint (“FAC”) against the same defendants on December 2, 2022.

On March 27 and April 3, 2023, Defendants Maria Cabral, Alfonso Cabral, and McKinley Children’s Center, Inc. (erroneously sued as McKinley Children’s Center) filed their answers to the FAC.  County appeared and stipulated to a continuance of the deadline to respond to the FAC and then to a stay.

On March 13, 2024, Plaintiffs filed a Notice of Settlement of Entire Case.

On March 18, 2024, Petitioner Brianna Torrez filed petitions for approval of minor’s compromises for each of the three Plaintiffs who are children.  On April 30, 2024, Petitioner filed the first supplement to the petitions.  On June 5, 2024, Petitioner filed second supplements to each of the petitions. 

On June 13, August 12, September 16, and October 14, 2024, the Court issued a series of minute orders identifying certain issues in the petitions.  On each occasion, Petitioner submitted further information or supplements. 

On October 25, 2024, Petitioner filed second amended petitions.  Petitioner also submitted proposed orders.

Discussion

The proposed settlement involves a total payment of $1.3 million by or on behalf of all Defendants.  Plaintiffs’ counsel seeks payment of $432,900 in fees (33.3 percent of the gross settlement amount) and $3,447.15 in costs.  Plaintiff Brianna Torrez seeks to receive $100,000 as her share of the settlement, and Plaintiff Joseph Huertas is waiving any claim to any share of the settlement. 

That leaves net settlement proceeds of $763,652.85, which will be shared equally by the three minor Plaintiffs.  Each minor plaintiff will therefore receive net settlement proceeds of $254,550.95. 

For Plaintiff Annaleia, there is a Medi-Cal lien in the amount of $5,196.92 for services provided to Annaleia.  Petitioner proposes that the balance of the settlement proceeds, or $249,354.03, be used to purchase an annuity for Annaleia. 

For Plaintiff Annarae, there is a Medi-Cal lien in the amount of $5,057.87 for services provided to Annarae.  Petitioner proposes that the balance of the settlement proceeds, or $249,493.08, be used to purchase an annuity for Annarae. 

For Plaintiff Amado, there is a Medi-Cal lien in the amount of $10,470.03 for services provided to Amado.  Petitioner proposes that the balance of the settlement proceeds, or $244,080.92, be used to purchase an annuity for Amado. 

For each of the three children, Petitioner proposes that the distributions from each annuity be paid into a Special Needs Trust established for each child.

The Court will address separately (1) the petitions for approval of the terms of the compromises and (2) the unique issues that arise in connection with the establishment of special needs trusts.

Petitions for Approval of Minor’s Compromises

The Court has reviewed each of the Petitions and proposed orders. 

All substantive and procedural requirements are now satisfied.  The Court finds that the proposed settlements and fees are fair and reasonable.

Accordingly, the petitions are granted.

Request for Approval of Special Needs Trust

When seeking approval of a special needs trust (SNT), notice of the hearing and service of the petition must be made upon three state agencies including the Dept. of Mental Health, Dept. of Developmental Services, and Dept. of Health Care Services.  (Probate Code sections 3602(f), 3611(c).). A proof of service indicates that service and notice is complete. 

Petitioner proposes to create a SNT for each minor plaintiff but use the entire net settlement proceeds for each to purchase an annuity that would start paying into the SNT of each plaintiff at age 18.  There would be no funding of the SNTs until annuity payments begin.

The annuity for Annaleia would pay at:

·       $30,000.00 payable annually, guaranteed for 4 year(s), starting on 8/13/2037, increasing by 3.00% compounded annually, with the last guaranteed payment on 8/13/2040.

·       $40,000.00 is payable as a lump sum on 08/13/41.

·       $40,000.00 is payable as a lump sum on 08/13/2044.

·       $40,000.00 is payable as a lump sum on 08/13/2046.

·       $444,492.44 is payable as a lump sum on 08/13/2048.

The annuity for Annarae would pay at:

·       $30,000.00 payable annually, guaranteed for 4 year(s), starting on 9/10/2038, increasing by 3.00% compounded annually, with the last guaranteed payment on 9/10/2041.

·       $40,000.00 is payable as a lump sum on 09/10/2042.

·       $40,000.00 is payable as a lump sum on 09/10/2045.

·       $40,000.00 is payable as a lump sum on 09/10/2047.

·       $482,909.87 is payable as a lump sum on 09/10/2049.

The annuity for Amado would pay at:

·       $30,000.00 payable annually, guaranteed for 4 year(s), starting 05/15/2031, increasing by 3.00% compounded annually, with the last guaranteed payment on 05/15/2034.

·       $40,000.00 is payable as a lump sum on 05/15/2035.

·       $40,000.00 is payable as a lump sum on 05/15/2038.

·       $40,000.00 is payable as a lump sum on 05/15/2040.

·       $221,926.53 is payable as a lump sum on 05/15/2042.

An SNT is used to receive the settlement funds in these situations so that plaintiff does not lose benefits eligibility for Medi-Cal, SSI, and other benefits.  Historically, a person receiving Medi-Cal or SSI benefits could have only up to $2,000 in non-exempt assets, and any additional non-exempt assets over $2,000 would cause the loss of benefits eligibility under the relevant federal and state law.  Funds held in a valid SNT, however, are exempt assets that do not count toward the $2,000 asset limit for purposes of calculating benefits eligibility.  On January 1, 2024, the Medi-Cal asset qualification limit was eliminated and there is no longer a means test for Medi-Cal.  The asset qualification for other benefits, like SSI, did not change and therefore there might remain a reason for creation and funding of a SNT to maintain other benefits. 

Trust Instruments

Petitioner provides the proposed trust instrument as part of the proposed order attached to each petition at Exhibit 3 to Attachment 18b(4).

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 instruments meet those requirements and are ready for approval for creation and/or funding.

Findings

When approving the establishment or funding of a SNT from settlement proceeds, the court must make certain findings pursuant to Probate Code section 3604(b).  Based on the facts presented in the Petitions and the attachments, the Court finds:

• The SNT beneficiary has a disability which substantially impairs the individual’s ability to provide for her own care or custody and constitutes a substantial handicap;
• The SNT beneficiary is likely to have special needs that will not be met without the trust;
• The money to be paid to the trust does not exceed the amount that appears reasonably necessary to meet the SNT beneficiary’s special needs.

Bond

The proposed initial trustee is Petitioner Brianna Torrez. 

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 normally would be required.  The wrinkle here is that there is no initial funding of the SNT because all settlement funds would be used to purchase an annuity for each plaintiff that would not start paying into the SNT under years later.  Petitioner therefore requests that the requirements for bond and accountings do not start until the fund accumulates $20,000 assets. 

Having considered all of the facts in the record, the Court grants Petitioner’s request and requires that a bond and accountings will be due from trustee for each trust once it reaches $20,000 in assets.  Trustee is ordered to report this event to the trust supervision court and post a bond at that time.  The trustee and trusts will be subject to ongoing review hearings. 

Proposed Orders

Petitioner has submitted a total of six proposed orders: for each of the three petitions, Petitioner submitted the Proposed Order on Form MC-351 plus an attorney-drafted proposed order establishing each SNT (also filed as Exhibit 3 to Attachment 18b(4) to each petition).

The orders provide that accountings and bond for each trust are not due until each trust reaches assets of $20,000 (p. 2, para. 6).  Therefore, there is no need to state the usual 14 month due date for the first accounting. 

The orders require filing of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 within 60 days. 

Conclusion

The Court GRANTS the Petitions for approval of minors’ compromises for Amado Ruiz (Age 11), Annaleia Huertas (Age 4), and Annarae Huertas (Age 4).

The Court APPROVES a total of six orders.

The Court APPROVES the three Proposed Orders (Form MC-351) submitted in connection with each petition on October 25, 2024.  (Two proposed orders were submitted as to Annarae Huertas.  The Court approves the order with a received time stamp of 1:08 pm.)

The Court APPROVES the three Proposed Orders for the establishment of a Special Needs Trust on each petition, submitted on October 25, 2024.

The Court SETS an OSC in approximately 60 days for proof of funding of settlement, purchase of annuity, and filing of LASC Form PRO 044 to open trust supervision action in probate division.

Moving party to give notice.