Judge: Thomas Falls, Case: BC649021, Date: 2022-09-01 Tentative Ruling

Case Number: BC649021    Hearing Date: September 1, 2022    Dept: R

GUADALUPE M LOPEZ VS EL MONTE CITY SCHOOL DISTICT ET AL            (BC649021)

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Hearing re Minor’s Compromise and Approval of Special Needs Trust

Tentative Ruling

Hearing re Minor’s Compromise and Approval of Special Needs Trust is DENIED without prejudice.

Background

This civil action arises from allegations of injury while in the care of a school.  Plaintiff, Guadalupe Lopez, is 14 years old.  Petitioner, Patricia Diaz, now brings a Petition to Approve Compromise as parent of plaintiff.  The parties tentatively have settled the action for a gross $3.5 million, with a net of $1,720,026.26 payable to plaintiff after deduction for fees, costs, etc.  (Calculations of the net proceeds are in the Petition to Approve Compromise.  The December 13, 2021 order on the prior compromise petition indicated $1,735,909.51 in net settlement funds.)   Petitioner now proposes to distribute the net settlement proceeds into a special need trust (SNT) for the benefit of plaintiff.  Specifically, petitioner seeks to fund $1,370,026.26 cash to the SNT and use the remaining $350,000 to buy an annuity that would pay into the SNT at $1,778.05 per month for 20 years guaranteed. 

Discussion

The following defects have been noted by the Probate Department:

i.                    The newly proposed SNT instrument is not attached to the current petition, which is improper.  Technically the SNT instrument is not before the court because it is not presented with the petition.

ii.                  The signatures lines for counsel and petitioner in the current petition filed on 5/17/22 state “8/13/21” signature dates, which are the dates for the signatures on the prior petition that was granted by the court in December 2021.  A comparison of the signatures at p. 10 of the Judicial Council petitions filed on 8/31/21 and 5/17/22 show that they are exactly the same signatures, including the same overwriting of the “8” in the date next to petitioner’s signature line.  This is a new petition, however, purportedly seeking the approval of an entirely different SNT, and therefore it is improper for counsel to resubmit a copy of the same petition with old signatures. 

iii.                There is confusion about the funding amounts for the cash and annuity portions of the settlement because the figures above as stated in the petition do not match those stated in Schedule A to the proposed order (order pdf at p. 28).  Schedule A states that the net settlement is $1,370,026.26 (not 1,720,026.26 as stated at Section 16f of the petition), with $250,000 (not $350,000 as stated in Section 18b(3) of the petition) to be used to purchase an annuity and $1,140,909.51 cash (not $1,370,026.26 as stated in Section 18b(4) of the petition) to be funded into the SNT. 

iv.                Petitioner proposes LeeAnn Hitchman, a private professional fiduciary (PPF), shall act as initial SNT trustee.  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 should be required.  There is no briefing regarding SNT issues and therefore no discussion or calculation of bond.  In the current proposed order, however, a $1,333,000 bond requirement is stated.  (Order pdf at p. 9, paragraph 7.)  It is unclear how that amount is calculated because there is no SNT briefing and there is uncertainty about the amount funded into the SNT as described in a prior section of this memo.  Moreover, bond was calculated as $1.7 million in the prior petition and it is unclear why the amount would have decreased (it appears that the $1.7 million figure would have been correct based upon the higher of the two proposed funding amounts plus annuity payments and an additional statutory amount for any costs of recovery on the bond).  Clarification of the bond amount or require $1.7 million bond.  

v.                  When seeking approval of a 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).)  There is no proof of service to these agencies for the current petition and proposed SNT and therefore notice is deficient.