Liability of Trustees to Third Persons

Probate Code Division 9, Part 6, Chapter 1 deals with liability of trustees to third persons. Section 18000 provides that a trustee is generally not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administration of the trust unless the trustee fails to reveal the trustee’s representative capacity or identify the trust in the contract.

Section 18001 explains that a trustee is personally liable for obligations arising from ownership or control of trust property only if the trustee is personally at fault.

Section 18002 states that a trustee is personally liable for torts committed in the course of administration of the trust only if the trustee is personally at fault.

Section 18003 says that a cotrustee who does not join in exercising a power held by three or more cotrustees is not liable to third persons for the consequences of the exercise of the power. A dissenting cotrustee who joins in an action at the direction of the majority cotrustees is not liable to third persons for the action if the dissenting cotrustee expresses the dissent in writing to any other cotrustee at or before the time the action is taken.

Section 18004 notes that a claim based on a contract entered into by a trustee in the trustee’s representative capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administration of the trust may be asserted against the trust by proceeding against the trustee in the trustee’s representative capacity, whether or not the trustee is personally liable on the claim.

Section 18005 explains that the question of liability as between the trust estate and the trustee personally may be determined in a proceeding under law.

Chapter 2 deals with the protection of third persons. Section 18100 provides, 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, then there are specified rules applicable to the third person.

Section 18100.5 allows the trustee to present a certification of trust to any person in lieu of providing a copy of the trust instrument to establish the existence or terms of the trust. A certification of trust may be executed by the trustee voluntarily or at the request of the person with whom the trustee is dealing. The certification of trust may confirm the specified facts or contain the eight specified items of information.

Section 18101 states that a third person who acts in good faith is not bound to ensure the proper application of trust property paid or delivered to the trustee.

Section 18102 provides that, if a third person acting in good faith and for a valuable consideration enters into a transaction with a former trustee without knowledge that the person is no longer a trustee, the third person is fully protected just as if the former trustee were still a trustee.

Section 18103 provides that, if an express trust relating to real property is not contained or declared in the grant to the trustee, or in an instrument signed by the trustee and recorded in the same office with the grant to the trustee, the grant is deemed absolute in favor of a person dealing with the trustee in good faith and for a valuable consideration.

Section 18104 specifies that, if an interest in or lien or encumbrance on real property is conveyed, created, or affected by an instrument in favor of a person in trust but no beneficiary is indicated in the instrument, it is presumed that the person holds the interest, lien, or encumbrance absolutely and free of the trust.

Section 18105 provides that, if title to an interest in real property is affected by a change of trustee, the successor trustee may execute and record in the county in which the property is located an affidavit of change of trustee. The county recorder imposes any fee prescribed by law for recording that document in an amount sufficient to cover all costs incurred by the county in recording the document.

Section 18106 states that a document establishing the fact of change of trustee recorded pursuant to this chapter is subject to all statutory requirements for recorded documents. The county recorder must index a document establishing the fact of change of a trustee recorded pursuant to this section in the index of grantors and grantees.

Section 18107 states that a document establishing the change of a trustee recorded pursuant to this chapter is prima facie evidence of the change of trustee insofar as the document identifies an interest in real property located in the county, title to which is affected by the change of trustee.

Section 18108 explains that any person whose interest is, or may be, affected by the recordation of an affidavit of change of trustee pursuant to this chapter may require that the successor trustee provide copies of those excerpts from the original trust documents, any amendments thereto, and any other documents which evidence or pertain to the succession of the successor trustee or trustees.