On The Beach (House)

A published opinion of the California State Bar Court Review Department recommends disbarment of an attorney for misconduct in connection with a family trust

This disciplinary proceeding arises from Jane L. Schooler’s actions as trustee and executor of her parents’ multi-million dollar estate and trusts. The Office of the Chief Trial Counsel of the State Bar (OCTC) charged her with violating her fiduciary duties, making misrepresentations to the probate court, refusing to follow court orders and pay sanctions, and maintaining an unjust action by filing frivolous appeals. The hearing judge found Schooler culpable and recommended discipline including a two-year actual suspension continuing until she demonstrates her rehabilitation…

we affirm the hearing judge’s factual and culpability findings, as supported by the record. Though we do not assign additional aggravation, we recommend disbarment given Schooler’s egregious misconduct and the substantial harm she caused the beneficiaries, as detailed in the Factual Background. We do not recommend Schooler be ordered to pay sanctions in light of our disbarment recommendation and because the state courts have already ordered such payments.

In the case

The parties filed stipulations to admit documents and facts, and a 10-day trial commenced in April 2015. Schooler testified for five days. The hearing judge issued his decision in October 2015, and amended it on November 4, 2015.

The allegations involve misconduct a family trust

When Schooler’s parents originally created a family trust in 1989, it contained language designating the Beach House as a unique and special asset. It directed that the house should not be liquidated unless absolutely necessary, and should be made available for Schooler, Katherine, and Andrew to live in if they desired. The family trust also provided that any children living in the Beach House should pay the property taxes and a monthly rent not to exceed $2,500. When [mother] Rowena died, however, the special asset provision no longer applied because the Beach House was moved from the Rowena Trust to the Rowena Estate, which did not contain this specific provision.  Nevertheless, Schooler testified that she did not plan to sell the Beach House, and thus could comply with the restriction in the original family trust.

In 2004, when Rowena died, Schooler and her brother Andrew were living in the Beach House, and the lower level of the home was rented to tenants who were paying $2,200 per month. In early 2005, Schooler told Andrew he had to move out, and ordered the tenants to vacate the property. She told her brothers that she intended to paint and make repairs in order to sell the house by the end of 2005. But after Andrew and the tenants moved, Schooler did not put the Beach House on the market, re-rent it, or distribute it to her siblings by other means.  Instead, she continued to live in it and use income from the Rowena Trust and Trust B to repair and maintain it, spending a total of $106,779 on the Beach House from October 2005 to April 2007. She also changed the locks and installed a security gate, preventing the Schooler Brothers from accessing the property.

Schooler did not pay rent while she lived in the Beach House, although she represented in accountings that she paid $2,000 per month. Ultimately, she defaulted on the mortgage payments on the house, and Washington Mutual Bank recorded two notices of default and an election to sell against the property.

Schooler also did not pay taxes on the real property parcels in Las Vegas. As a result, the Office of the Clark County Treasurer issued three notices of intent to sell real property in December 2010. The notices stated that overdue taxes, penalties, and interest of $19,993, $20,004, and $19,900 were owed on the respective parcels, and the county had scheduled them to be sold at a public foreclosure auction.

Around April 25, 2011, Schooler filed a Chapter 11 bankruptcy petition on behalf of an entity called the “Schooler Trust” to avoid the sale of the parcels. On June 23, 2011, the petition was dismissed because the trust was ineligible to file for bankruptcy.

She failed to distribute assets, was removed as trustee and filed frivolous appeals.

To begin, Schooler committed multiple acts of moral turpitude, in violation of section 6106, and failed to comply with the law, in violation of section 6068, subdivision (a), as follows. She misused her authority and discretion, and violated numerous fiduciary duties set forth in the Probate Code by intentional means that were frequently infused with dishonesty and/or concealment. She made repeated misrepresentations to the court and third parties by filing documents falsely stating that she was a trustee and personal representative in an attempt to circumvent court orders. And she misrepresented her status when she executed a grant deed giving the Beach House to herself and Katherine, even though she knew that the court had ordered Trumble to evict her and sell the property. Finally, she intentionally violated court orders by failing to pay sanctions…

Schooler had a fiduciary duty under the terms of the trusts to equitably distribute the Rowena Estate to the named beneficiaries. Unfortunately for them, she failed in performing these duties for seven years after her mother’s death. In particular, she distributed almost none of the assets of the sizeable estate, and continued living in a major asset, the Beach House, after evicting her brother and rent-paying tenants. During the same time, she allowed the mortgage on the Beach House to go into default, failed to pay taxes on the Nevada properties, refused to accept offers to buy certain properties, and did not collect or pay any rent on the Beach House while she lived there. Her conduct contributed to a substantial loss in the value of the trust corpuses, which financially harmed her siblings who still have not received their full distribution of the estate. Moreover, after Schooler was removed as trustee, she filed a series of frivolous appeals and made misrepresentations to courts and others to try to retain control of the assets.

In sum, we find that Schooler’s blatant disregard for her ethical duties and for the court’s processes calls for discipline at the highest end of the range provided in standard 2.11— disbarment.

(Mike Frisch)