A contentious family dispute over a trust fund has culminated in a significant legal decision, shedding light on the complexities of trust management and familial obligations. On June 24, 2024, Theresa Stephenson-Cocke filed a complaint in the Court of Appeal of the State of California against Hugh J. Cocke, who served as trustee for their late father's revocable trust.
The case revolves around the Hugh D. Cocke 2005 Revocable Trust, which was intended to distribute property equally among Hugh D.'s seven children. However, complications arose when Hugh J., acting as trustee, suggested amendments that significantly altered the distribution plan to his sister Theresa's detriment. The amended terms required Theresa to perform specific acts to receive her share, but she was unaware of these conditions due to Hugh J.'s failure to inform her. Subsequently, Hugh J. sold key properties and distributed assets contrary to both the original and amended terms of the Trust.
Theresa's lawsuit alleged multiple breaches of fiduciary duty by Hugh J., including failure to provide necessary documentation and accountings, mismanagement of Trust assets, and unauthorized use of Trust funds for personal benefit. She sought an accounting, damages, surcharges against Hugh J., and nullification of portions of the First Amendment that had unfairly restricted her inheritance.
In 2005, Hugh D. established the Trust with equal shares for each child: Hugh J., John, Mark, Paul, Theresa, Catherine, and Mary. Key assets included a 140-acre parcel in Paso Robles and two unimproved parcels in Cambria. A year later, at Hugh J.'s suggestion, an amendment was made requiring Theresa to split part of her own property with her sisters before receiving her share from the Trust—a condition she was never informed about.
Hugh J.'s tenure as trustee saw further questionable actions: he sold properties without consulting beneficiaries or providing them with proceeds equitably; he used Trust funds for personal expenses such as living rent-free on Trust property and purchasing real estate for his daughter’s use; he also failed to maintain proper records or provide accountings.
Theresa's acquiescence to certain uses of her property—such as constructing a shop building without permits—was manipulated by Hugh J., who later used Trust funds to bring it up to code standards for his own benefit. Additionally, he installed a water well on her property without her knowledge or consent.
The trial court found substantial evidence supporting Theresa's claims that Hugh J.’s actions constituted willful misconduct and gross negligence. Consequently, it nullified portions of the First Amendment that imposed impossible conditions on Theresa’s inheritance due to actions taken by Hugh J., removed him as trustee, and ordered surcharges against him for mismanagement.
Hugh J.’s appeal argued that the trial court exceeded its authority by nullifying parts of the First Amendment and failed to account for benefits received by Theresa from improvements made using Trust funds. However, the appellate court upheld the lower court’s decisions citing Probate Code section 15409 which allows modification or termination of trust provisions under unforeseen circumstances that impair its purpose.
The judgment reaffirmed that trustees must act transparently and equitably in managing trust assets while holding them accountable for breaches through appropriate legal remedies.
Attorneys involved include Christian E. Iversen representing defendant-appellant Hugh J., and Clay A. Schroeder representing plaintiff-respondent Theresa Stephenson-Cocke. The case was presided over by Judge Tana L. Coates with appellate judges Gilbert P.J., Yegan J., and Cody J concurring under Case ID No B3828830 (Super Ct No 17PR-0378).