Feb01
A Judgment against A Trust Is Unenforceable
The recent decision of Portico Management Group, LLC v. Harrison __ Cal.App.4th __ (2011) held that a trust is neither a person nor an entity. As such, a trust cannot sue or be sued. And a judgment against a trust is unenforceable because a judgment debtor is defined as a “person” against whom a judgment is entered. Therefore, when suing a trust, you must: (1) name the trustee in his or her representative capacity as a trustee; and (2) ensure that judgment is entered against the trustee; and not the trust itself.
The plaintiff in Portico, sued the trustees of a trust but unfortunately did nothing to correct an arbitration award and subsequent judgment entered against only the trust. Plaintiff later attempted to enforce the judgment against assets of the trust. However, the trustees of the trust claimed ownership of the trust assets and argued that no judgment had been entered against them or their predecessors. The court of appeal agreed and affirmed the trial court’s order to grant the trustees’ claim of ownership to the assets of the trust. Fortunately for the plaintiff, the court of appeal reversed (with instructions) the trial court’s orders denying leave to amend the judgment to include one of the original trustees.
The plaintiff in Portico, sued the trustees of a trust but unfortunately did nothing to correct an arbitration award and subsequent judgment entered against only the trust. Plaintiff later attempted to enforce the judgment against assets of the trust. However, the trustees of the trust claimed ownership of the trust assets and argued that no judgment had been entered against them or their predecessors. The court of appeal agreed and affirmed the trial court’s order to grant the trustees’ claim of ownership to the assets of the trust. Fortunately for the plaintiff, the court of appeal reversed (with instructions) the trial court’s orders denying leave to amend the judgment to include one of the original trustees.
Bottom line: If you have litigation involving a trust, don’t make the mistake of treating the trust as you would a person or an entity.
Jeffrey Huron is the founder of Huron law group, a litigation firm that handles business, real estate and entertainment disputes.