People ex rel. Harris v. Shine

224 Cal. Rptr. 3d 380, 16 Cal. App. 5th 524, 2017 WL 4768865, 2017 Cal. App. LEXIS 925
CourtCalifornia Court of Appeal, 5th District
DecidedOctober 23, 2017
DocketA148505
StatusPublished
Cited by22 cases

This text of 224 Cal. Rptr. 3d 380 (People ex rel. Harris v. Shine) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
People ex rel. Harris v. Shine, 224 Cal. Rptr. 3d 380, 16 Cal. App. 5th 524, 2017 WL 4768865, 2017 Cal. App. LEXIS 925 (Cal. Ct. App. 2017).

Opinion

BRUINIERS, J.

*527William B. Shine was the trustee of a family trust. Pursuant to statutory authority for supervision of charitable trusts ( *528Gov. Code, §§ 12591, 12598 ), the Attorney General petitioned for Shine's removal and for surcharge based on his mismanagement of the trust, and an interim substitute trustee was appointed. Shine successfully petitioned the trial court for advanced fees from the trust for defense of the petition, subject to repayment if he was ultimately found not entitled to indemnification. The People appeal. Because the probate court applied an incorrect legal standard, failing to weigh all relevant factors, in making the pendente lite fee award, we reverse and remand for reconsideration.

I. BACKGROUND

The 1995 Trust

Robert A. and Eva M. Lindskog (Robert and Eva) established a revocable trust in 1995 (Trust) as an estate planning vehicle. As later amended, the Trust provided that on Eva's death all but $1 million of her share of trust property "shall be irrevocably set aside for charitable purposes and held as the LIVEWIRE LINDSKOG FOUNDATION" (Foundation).1 Robert *383and Eva designated themselves original cotrustees and Shine successor trustee. Robert resigned in 2001 due to dementia, and Shine became the sole trustee after Eva's death in early 2004. Trust assets were worth about $40 million on Eva's death, consisting mostly of real property holdings.

2005 Petition and 2008 Settlement

In 2005, Robert's conservator objected to Shine's accounting, petitioned to remove Shine as trustee and surcharge him for mismanagement, and charged him with financial elder abuse. The probate court ordered an accounting, a valuation of Trust assets, and a division of assets between Robert's and Eva's estates. Eva's estate was valued at about $20 million. A 2008 settlement, approved by the court, ratified prior distributions to Robert, distributed an additional $1 million to Robert, and confirmed the remainder of the Trust *529estate as Eva's share.2 The settlement required Shine to "form the Foundation and allocate and distribute to it the remaining assets pursuant to the provisions of the Trust."

In June 2009, Shine filed articles of incorporation for the Foundation. However, he failed to appoint officers or directors, apply for tax-exempt status, or transfer Eva's estate to the Foundation. In 2011, after the Attorney General initiated an audit of the Trust, Shine appointed two long-time friends, Marty Mancebo and Thomas Harrington, as cotrustees.

2013 Petition by Attorney General

In December 2013, the Attorney General petitioned on behalf of the People of the State of California for removal of the trustees, appointment of a receiver, and an accounting.3 The People argued that Shine failed to fulfill his duties as trustee following Eva's death in 2004 and the settlement in 2008 to obtain a valuation of Trust assets for the purpose of dividing them between the Foundation and Trust, create the Foundation, fund the Foundation from Eva's share of the assets, and transfer title to real property assets to the Foundation. The People also alleged Shine engaged in prohibited self-dealing by employing his own firm as a tax consultant for the Trust; improperly prepared tax returns and falsely reported a $7 million donation to the Foundation on the 2005 return for Eva's estate; failed to accurately account for expenses and income in the Trust or maintain written records of his actions as trustee; and improperly used Trust assets to make loans to business associates and friends, failed to exercise due diligence in doing so, and on some occasions had to foreclose on property securing those loans. The People brought causes of action for breach of fiduciary duty and removal of trustees (§§ 15642, 16049, 16420, 17200), an accounting (§§ 16420, 17200), and removal *384of trustees and appointment of a receiver (§§ 16420, 17200).

At a February 2014 hearing on the People's petition, the court stated its intention to deny the trustees' request for a continuance of the hearing unless the trustees agreed to relinquish control over the Trust in the interim. The *530trustees (hereafter former trustees) agreed, and the court appointed David A. Bradlow as temporary trustee.

Bradlow filed an initial status report in May 2014. He reported that "at a minimum ... the affairs of the trust have not been managed appropriately." The former trustees provided a list of key personnel involved in Trust affairs that was "replete with inaccuracies," including misidentification of the managers of real property assets. Tenants in a Berkeley property were paying $100 and $400 a month in rent; the property had a high vacancy rate and unreported landmark status that threatened insurance coverage; and the property, which was acquired after a 2012 foreclosure, was worth substantially less than the amount of outstanding debt to the Trust. A Mill Valley rental complex lost more than $115,000 in 2013, and records were inconsistent as to the Trust's ownership interest in the corporation that owned the property. An initial review of the Trust's cash flow disclosed a $120,000 payment to Shine, $225,000 in payments to attorneys, and $1 million in checks to payees identified as "Miscellaneous" in the accounting system. Bradlow's seventh status report in January 2016 reported: "[T]he condition of the records for the Trust was a problem for the Trustee. In many instances, to understand an asset and/or address that asset, an independent investigation had to be conducted .... [D]uring the [former trustees'] administration, important tax issues and deferred maintenance issues were not addressed."

2016 Petition for Fees

In March 2016, the former trustees petitioned the court to instruct Bradlow to use Trust assets to reimburse their past defense costs (personally paid by Shine) and pay their future attorney fees and costs, as the surcharge petition was expected to go to trial. They claimed that, despite extensive discovery, the Attorney General had not uncovered evidence of misappropriation, asset diversion, fraud or wrongdoing by the former trustees, and "the only remaining allegations to which there is any potential liability ... arise out of their acts (and omissions) taken (or not) during the course of their administration of the Trust," including their alleged failure to fund the Foundation, failure to operate the Trust as a charity, and failure to maintain accurate books and records. They argued that their "actions in administering the Trust have at all times been reasonable and prudent exercises of the broad discretion afforded to them by the Trust and under the Probate Code[, and] ...

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Corman v. Corman CA2/2
California Court of Appeal, 2025
Watson v. Diet Madison Avenue CA2/2
California Court of Appeal, 2025
Reynolds v. AHM Resicom CA2/4
California Court of Appeal, 2024
Jimenez v. Miceli CA4/2
California Court of Appeal, 2024
Colvis v. Binswanger CA1/5
California Court of Appeal, 2024
Farnocchia v. Harms CA1/1
California Court of Appeal, 2023
Salzwedel v. Friend CA2/6
California Court of Appeal, 2023
Jacobs v. Ritchie CA2/7
California Court of Appeal, 2023
Jewelry Theatre Building v. Yeo CA2/7
California Court of Appeal, 2023
Chen v. Valstock Ventures, LLC
California Court of Appeal, 2022
Sonntag v. Franz CA1/1
California Court of Appeal, 2021
Key v. Tyler CA2/2
California Court of Appeal, 2021
Dunlevie v. Valletta CA4/2
California Court of Appeal, 2021
Goodwin v. Goodwin CA1/5
California Court of Appeal, 2021
Strojan v. Strojan CA3
California Court of Appeal, 2020
Coyne v. De Leo
California Court of Appeal, 2018
Coyne v. De Leo
237 Cal. Rptr. 3d 359 (California Court of Appeals, 5th District, 2018)
Bel Air Internet, LLC v. Morales
California Court of Appeal, 2018
Bel Air Internet, LLC v. Morales
230 Cal. Rptr. 3d 71 (California Court of Appeals, 5th District, 2018)

Cite This Page — Counsel Stack

Bluebook (online)
224 Cal. Rptr. 3d 380, 16 Cal. App. 5th 524, 2017 WL 4768865, 2017 Cal. App. LEXIS 925, Counsel Stack Legal Research, https://law.counselstack.com/opinion/people-ex-rel-harris-v-shine-calctapp5d-2017.