Summary – Portico Management Group LLC v. Harrison
Portico Management Group LLC v. Harrison, 202 Cal. App. 4th 464; 136 Cal. Rptr. 3d 151 (2011) – Judgment rendered against a trust, and not its trustee, is unenforceable
An arbitrator’s judgment against a trust, which was confirmed into a civil judgment, was held unenforceable because of the nature of a trust. The court ruled that a trust a fiduciary relationship with specific property, and not an entity subject to levy under because it is not included in the definition of a person under CCP § 680.280.
Plaintiff Portico Management entered into a contract to purchase an apartment from Defendants Harrison. The apartment was titled in a trust and limited partnership which was ultimately conveyed to another trust. One of trustees, Alan Harrison refused to sign over the building, and Portico sued the sellers for specific performance and damages, and pursuant to the contract, entered into arbitration which awarded Portico $1.6 million. Although Portico properly named defendants as trustees of the trusts, the arbitration award was not against them by instead only in the name of the trust. Portico did nothing to correct the error.
Several years later Portico attempted to collect on the damages portion of the judgment by levying on the funds generated by the apartment building. The trustees of the debtor trusts asserted a third party claim against the levied funds.
The key dispute was whether a judgment entered in the name of the trust was enforceable, as distinguished from one entered against a trustee in a representative capacity.
The court cited CCP § 680.250 which describes a judgment debtor as a person or entity against which a judgment may be rendered. A trust is not a person as defined in CCP § 680.280.
A trust, by contrast to a corporation, is not a person under the law. It cannot sue in its own name and cannot be sued. A trust is a “fiduciary relationship with respect to property.” Legal title to property is held not by the trust, but by trustees of the trust in their representative capacities.” A trust “is simply a collection of assets and liabilities”, and is not a separate entity from its trustees. The trustee is the real party in interest with standing to sue or be sued on behalf of the trust.
Therefore, the judgment against only the trust was meaningless and unenforceable.
What is instructive about this case is its description of a trust, the function of a trustee in its representative capacity, and how to mark the capacity notice on a summons. When a plaintiff sues only a trust, the defendant’s name is entered in the “on behalf of:” line on the capacity notice. In the blank “Other:” line, the term “trust” is inscribed. On the proof of service, the individual trustee is served in their representative capacity of the named trust defendant. However, the plaintiff’s judgment against the trust will not be enforceable unless the trustee is brought into the suit in it’s representative capacity.
If the trustee is named only in a representative capacity, e.g. “Billy Bones, as Trustee of the 1998 Revocable Trust”, that entire defendant would be entered in the “on behalf of:” line on the capacity notice. The blank “Other” line the defendant would be described as a “trustee”.
The “Individual” box would be checked only if the person is also sued in an individual capacity.
Furthermore, a careful reading of this decision and its discussion of CCP §§ 680.250 and 680.280 reveals why some county sheriffs, notably Los Angeles, refuse to execute on a business entity of unknown form. Similar to the court’s decision on why a trust cannot be subject to levy, a business entity of unknown form is likewise not defined as a person.
Read full opinion here.
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