When attorneys advise errant trustees, how vulnerable are they to breach of trust claims by injured beneficiaries?  A case published last week by the California Court of Appeal provides a defensive roadmap to attorneys who are sued for such claims, along with an occasion for golf metaphors.

In Cortese v. Sherwood (2018) ___ Cal.App.5th ___, the appellate court ruled that attorney John Sherwood was protected by California Civil Code section 1714.10, which was enacted in 1988 to combat the use of frivolous conspiracy claims brought as a tactical ploy against attorneys and their clients.  Since the plaintiff failed to obtain the court’s approval before suing the attorney, as the statute required, she could not bring her claim against him.  She could not get off the first tee.

Stepfather’s Promised Golf Course Amounts to a Sand Trap

Christina Cortese is the biological daughter of Francesca Naify and the stepdaughter of Robert Naify.  Francesca and Robert were married for 23 years and acquired “an enormous amount of wealth” before Francesca died in 1997.

Attorney Sherwood prepared the estate plans for Francesca and Robert and continued to represent Robert after Francesca passed.

Robert allegedly promised Christina that he would treat her the same as his other children in his estate plan, and that her inheritance would include a 250-acre golf course in Spain, which would make her a wealthy woman.

Following Francesca’s passing, Sherwood allegedly assured Christina that despite the modest valuation of Francesca’s estate, Christina would become wealthy upon Robert’s passing.  Christina claims she went along with the early termination of Francesca’s trust, despite an adverse capital gains tax impact, because Sherwood told her she would receive a much larger inheritance from Robert’s estate.

Yet, when Robert died in 2016, Francesca was surprised to learn that she was not a beneficiary of his estate.  There would be no golf course after all.

Court Slices Claim as One for Conspiracy

Christina filed a petition in San Francisco County Superior Court.  One of her claims ran against attorney Sherwood for Robert’s alleged breaches of trust.  She claimed that Sherwood assisted Robert in effectuating a plan of “withholding community property from Francesca’s estate, devaluing Francesca’s estate, mismanaging her trust, and terminating it in a manner that benefited Robert.”

Although Christina did not specifically allege that Sherwood “conspired” with Robert to harm her, the appellate court looked at the factual allegations to determine whether she had alleged a conspiracy within the meaning of Civil Code section 1714.10.  The court could not “conceive how Sherwood could have participated in Robert’s alleged breaches of fiduciary duty without an implied agreement to do so.”

The court recognized, but brushed aside, a line of cases recognizing that an attorney can be liable for participating in a trustee’s breach of fiduciary duty to a beneficiary, focusing instead on the application of section 1714.10.

The court found that Sherwood’s alleged misconduct arose from an attempt to contest or compromise a claim in dispute, so as to bring Christina’s claim within section 1714.10.  She claimed that he induced her into foregoing any protest of Robert’s actions by stating that she should not worry because she would be wealthy when Robert died.  The fact that litigation was not pending when the inducement occurred was immaterial.

The court next considered two exceptions to the applicability of Civil Code section 1714.10.

Christine had to allege facts showing that Sherwood, who represented Robert, owed an independent legal duty to her.  Many beneficiaries wrongly assume that the attorney for the trustee also represents “the trust” and its beneficiaries.  In fact, Sherwood only owed legal duties to his client, Robert, not to Christine.  Accordingly, Sherwood had no duty to protect Christine’s interests or to advocate for her, nor any duty to ensure that Robert kept his alleged promises to Christine.

The second statutory exception applies where the attorney acts in furtherance of his or her own financial gain.  If construed broadly, this exception would apply whenever the trustee pays the attorney for assistance in administering the trust, as is the case in anything other than pro bono representation.  However, courts have interpreted the exception as requiring the attorney to obtain a “personal advantage or gain that is over and above ordinary professional fees earned as compensation.”   Hence, even though Christine alleged that Robert was Sherwood’s sole source of income as an attorney, which might detract from his professional independence, the statutory exception was inapplicable.

Section 1714.10 does not preclude suits against attorneys who conspire with clients, but instead creates a barrier to pursuing such claims by requiring the would-be plaintiff to prove to the satisfaction of a judge that he or she has a reasonable probability of prevailing on the merits.  Since Christine did not seek the judge’s permission to file the claim, the appellate court found her claim legally insufficient.

Is Cortese v. Sherwood a Game-Changer?

While the court in Cortese did not discuss the ramifications of its analysis, the published opinion is likely to become a go-to iron in the golf bag of counsel defending breach of trust claims brought against attorneys who represent trustees.  If a trustee works in tandem with an attorney when administering the trust, and a beneficiary later cries foul, the attorney may use Civil Code section 1714.10, as applied in Cortese, to seek and obtain an early dismissal of the claim.  If the attorney is unsuccessful at the trial court level (as in Cortese), he or she has a right to bring the issue directly to the appellate court rather than waiting for case to play out (to the 18th hole).

For beneficiaries, the lesson is clear: you cannot assume that the trustee’s attorney is playing for you.  Instead, you should retain your own lawyer to advise you.