Case Name:   Sugarman, et al. v. Butterfield, et al.

Case No.:       1-13-CV-245823

 

Plaintiff Randy Sugarman, trustee of the John Oliver Marital Trust, John Oliver Charity Trust, John Oliver Family Trust, Michael A. Oliver Trust, Karen Oliver Trust, Judy Oliver Trust, and The David C. Oliver Trust (“Plaintiff”) moves for summary judgment and, in the alternative, summary adjudication of the second and third causes of action, and each of defendant Jeanne Butterfield’s (“Defendant”) affirmative defenses.

 

Defendant’s request for judicial notice is GRANTED.  (Evid. Code, § 452, subd. (d).)

 

Defendant’s objections to evidence are OVERRULED for failure to comply with Cal. Rules of Court, rule 3.1354(c).

 

As an initial matter, Plaintiff seeks prejudgment interest at a rate of 10% for each cause of action.  However, the rate of interest authorized for a tort claim is only 7%.  (See Michelson v. Hamada (1994) 29 Cal. App. 4th 1566, 1585.)  Plaintiff’s third cause of action, conversion, is a tort claim.  Therefore, Plaintiff cannot obtain the requested relief and the motion for summary judgment must be DENIED.  Likewise, Plaintiff’s alternative motion for summary adjudication of the third cause of action must be DENIED.  Since the second cause of action for unjust enrichment/restitution is quasi-contractual, however, 10% is the proper interest rate for that cause of action.  (See George v. Double-D Foods, Inc. (1984) 155 Cal.App.3d 36, 46-47.)  Plaintiff does not seek summary adjudication of the first cause of action.

 

With regard to the Defendant’s affirmative defenses, Plaintiff’s separate statement does not separately identify the affirmative defenses for which summary adjudication is sought as required by California Rules of Court, rule 3.1350(d) and Plaintiff does not sufficiently cite to the separate statement or to any evidence in the memorandum of points and authorities to meet the initial burden as to the affirmative defenses.  Consequently, the alternative motion for summary adjudication is DENIED as to the affirmative defenses.

 

The only remaining claim to be addressed is the second cause of action for unjust enrichment/restitution.  Plaintiff presents evidence that on July 29, 2011, there was an unauthorized transfer of $350,000 from the Oliver Trust Account to the Butterfield Trust Account.  (Plaintiff’s Separate Statement of Undisputed Facts in Support of Motion for Summary Adjudication Regarding Cause of Action for Unjust Enrichment (“UMF”), Nos. 21, 23.)  Defendant now attempts to dispute the fact that the $350,000 was deposited into the subject account; however, Defendant’s counsel previously stipulated to this fact.  (See Declaration of Marc Mazer in Support of Plaintiff’s Motion for Summary Judgment or in the Alternative for Summary Adjudication of Issues, Exhibit A, pp. 73:12-74:5.)

 

Defendant argues that it is a bona fide payee and therefore not liable to Plaintiff.  Probate Code section 16420, subdivision (a)(9) authorizes a proceeding to trace trust property that has been wrongfully disposed of and recover the property or its proceeds.  However, this code section is subject to the restrictions of Probate Code section 18100.   Defendant relies on Probate Code section 18100 to support its bona fide payee argument.  Probate Code section 18100 states:

 

With respect to a third person dealing with a trustee or assisting a trustee in the conduct of a transaction, if the third person acts in good faith and for a valuable consideration and without actual knowledge that the trustee is exceeding the trustee’s powers or improperly exercising them:

 

(a) The third person is not bound to inquire whether the trustee has power to act or is properly exercising a power and may assume without inquiry the existence of a trust power and its proper exercise.

 

(b) The third person is fully protected in dealing with or assisting the trustee just as if the trustee has and is properly exercising the power the trustee purports to exercise.

 

(Prob. Code, § 18100.)

 

As pointed out by Plaintiff, Christine Backhouse resigned as trustee of the Butterfield Trusts on June 13, 2011, and Jeanne and Corrine Butterfield became successor trustees.  (UMF, No. 5.)  The transfer of the $350,000 occurred on July 29, 2011.  (UMF, No. 21.)  Therefore, Backhouse was not the trustee at the time of the transfer and Probate Code section 18100, by its own language, is inapplicable.

 

Defendant cites to a case from Pennsylvania in which the court found that when a trustee stole money from certain estates and then later transferred a third-party’s money to those estates, he was satisfying a pre-existing debt.  (419 Pa. Super. (1992) 284, 289.)  The court stated that since the estates to which money was transferred gave consideration, i.e. the satisfaction of a pre-existing debt, this constituted a transfer for value and a cause of action could not be maintained against them because they were without notice of the trustee’s fraudulent activities.  (Ibid.)  The problem with this case is that it is an out-of-state case and is not binding on this Court.  Moreover, the court in that case relied on a portion of the Restatement of Trusts that had been adopted in Pennsylvania, stating that the cancellation of a valid pre-existing debt or other obligation constitutes value.  (Ibid.)  Defendant provides no authority showing that California has the same rule; there do not appear to be any cases that support this proposition.

 

In sum, Plaintiff has presented sufficient evidence to meet the initial burden of showing that $350,000 was transferred from the Oliver Trusts to the Butterfield Trusts and that it would be inequitable for the Butterfield Trusts to retain the funds.  Defendant has not raised a triable issue of material fact.  Accordingly, Plaintiff’s alternative motion for summary adjudication is GRANTED as to the second cause of action.