McCalla v. Nord

Background

Richard A. McCalla sued James Nord concerning Nord’s service as successor trustee of the McCalla Family Living Trust. The claims alleged breach of fiduciary duty, professional negligence, and a failure to provide an accounting after Nord resigned.

The trust instrument contained an exculpation provision, meaning a clause limiting the trustee’s liability for acts or omissions. The provision stated that a successor trustee generally had no duty to audit or review a predecessor’s actions and that the trustee would not be liable to the fullest extent allowed by law. During Nord’s service, the opinion states that Thomas McCalla continued to have access to the trust’s account and that Nord did not provide an accounting after his resignation.

McCalla identified several alleged failures, including failing to take control of and preserve trust property, failing to file certain tax returns on time, failing to maintain the Napa property, failing to ensure bills were paid, failing to address rental income and a cottage’s code violations, failing to resign promptly when requested, and failing to provide an accounting.

Legal standard

Summary judgment is a procedure used to decide a claim without a trial when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court must view the evidence in the light most favorable to the party opposing the motion. The party opposing the motion must provide specific evidence showing a real dispute for trial.

Analysis

The court applied California Probate Code section 16461. It held that the parties did not dispute the validity of the trust’s exculpation clause, but that the clause could not protect Nord from liability for a breach committed intentionally, with gross negligence, in bad faith, or with reckless indifference, or for profit derived from a breach. Because there was a factual dispute about whether Nord’s conduct involved gross negligence or reckless indifference, the clause did not justify summary judgment.

The court also rejected Nord’s argument that his statutory trustee duties did not apply while the trust was revocable. The court concluded that the duties arose when Nord accepted the trusteeship. It identified duties under California law to administer the trust as required, preserve and control trust property, make the property productive, and act with reasonable care, skill, and caution.

The court found evidence creating a factual dispute about whether Nord acted with the required care. The evidence included testimony that Nord knew about Thomas McCalla’s questionable financial decisions, that Thomas continued to have access to the trust account after Nord became trustee, that Nord did not know who received rental income, that he did not know whether Thomas’s bills were paid, and that he would not ordinarily wait a year and a half before placing himself on a trust bank account. The court also noted evidence concerning the practices of professional fiduciaries.

Finally, because the evidence raised a question about whether Nord’s conduct amounted to a breach involving gross negligence, the court found a related factual question about whether he acted in good faith. The court therefore declined to resolve those issues on summary judgment.

Disposition

The court DENIED Defendant’s motion for summary judgment. The opinion did not finally determine whether Nord breached his duties or is liable to McCalla.