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C.A. Tosses Challenge by Hilton Hotel Heir to Family Trust
Opinion Says Claims Barred by Statute of Limitations, Rejecting Petitioner’s Argument That Provision of Family Code Eliminates All Time Limits in Actions Involving Breaches of Fiduciary Duties
By a MetNews Staff Writer
Div. Two of this district’s Court of Appeal on Friday affirmed the dismissal of a petition filed by Ronald Hilton—the youngest grandson of hotel tycoon Conrad Hilton—seeking to recover his mother’s alleged interest in hotel stock that he alleges his father wrongfully induced her to disavow as separate property through a series of agreements dating back to the 1990s.
If the shares were community property, Ronald Hilton and his siblings may have been entitled to inherit their mother’s interest in them following her death in 2004.
Ronald Hilton argued that his petition, filed in 2020 on behalf of himself and as special administrator of his mother’s estate, was not barred by the applicable statute of limitations because certain provisions in the Family Code extinguish timeliness constraints to his petition.
At issue is Family Code §1101(d) which provides that any action filed by one spouse against another for “breach of the fiduciary duty that results in impairment to the claimant spouse’s present undivided one-half interest in the community estate” must be “commenced within three years of the date a petitioning spouse had actual knowledge that the transaction for which the remedy being sought occurred.”
The petitioner points to subd. (2), which says that “[a]n action may be commenced under this section upon the death of a spouse…without regard to the time limitations set forth in paragraph (1).”
In an unpublished opinion authored by Acting Presiding Justice Judith Ashmann-Gerst, and joined in by Justices Victoria M. Chavez and Anne K. Richardson, the court disagreed with his interpretation and affirmed the dismissal that followed Los Angeles Superior Court Judge Gus May’s sustaining of a demurrer, without leave to amend.
Hilton Estate
When Conrad Hilton died in 1979, he designated The Conrad N. Hilton Foundation as the sole beneficiary of his estate, with one limitation—that his son Barron Hilton would have the option to purchase certain shares in the Hilton Hotels Corporation (“HHC”).
Years of litigation ensued over the 28% of HHC stock owned by Conrad Hilton and it was eventually divided under a settlement agreement between Barron Hilton and the foundation.
In 1991, Barron Hilton and his wife Marilyn Hilton, signed a postnuptial agreement providing that the HHC shares were his separate property. The spouses followed up in 1993 with a family trust under which the majority of Marilyn Hilton’s half of the community property was allocated to a sub-trust—referred to in the opinion as the “Marital Trust”—under which the couple’s eight children would not inherit until after Barron Hilton’s death. Following her death, Barron Hilton agreed to disclaim his interest in the marital trust so that the assets could be immediately distributed to the children in exchange for a waiver of any claims they may have relating to the administration of the trusts.
As part of the proposed release process, in 2005, Ronald Hilton received a package of documents detailing the marital trust’s $189 million in assets and noting that the classification of property “as separate or community” had been “based on tracing of separate property from Schedule A of Postnuptial Agreement.” He signed the waiver and release on March 15, 2006, clearing the way for him to receive approximately $24 million.
Petition Filed
Following an October 2019 phone call during which one of his sisters purportedly told him that their mother would have left their father and taken her half of the shares had she not been medically infirm, Ronald Hilton filed the petition in November 2020, arguing that the HHC shares were community property and that the postnuptial agreement should be voided because it was procured by fraud, coercion, and duress.
He filed the operative third amended petition in December 2022, asserting a host of claims against Pat Modugno, as trustee of the William Barron Hilton Trust, The Conrad N. Hilton Foundation, and Wells Fargo Bank, N.A., as co-trustee of the Marital Trust, for breaches of fiduciary duty, including under Family Code, § 1101, among other claims.
May sustained a demurrer to the petition, without leave to amend, saying that “Ronald has altered his description of…[his] discovery of the relevant facts in a way that is inconsistent with his previous pleadings” and that “[r]ather than allege sufficiently that” the 2005 “packet did not put Ronald on inquiry notice as to his claims,” Ronald simply “did not include the packet as an exhibit” to the pleading.
Family Code §1101
Ashmann-Gerst opined that if Ronald Hilton’s interpretation is correct, then “he could bring his claims on Marilyn’s behalf any time—even decades—after either spouse has died.”
Unpersuaded by his reading, she explained that statutory interpretation begins by examining the plain language of the statute, giving the words their ordinary meaning.
Applying this standard, she reasoned that the ordinary meaning of the word “upon” is “immediately” or “very soon after” and wrote:
“Marilyn died in 2004. Ronald did not bring this action as the special administrator of her estate until 2020. The action was not ‘commenced…upon’ Marilyn’s death…because it was not brought…‘immediately following on,’ or ‘very soon after[]’ her death.”
She continued:
“Nor can Ronald avoid the three-year statute of limitations by claiming that he brought the action upon Barron’s [2019] death. The purpose of Family Code section 1101, subdivision (d)(2), is to avoid pressuring a spouse to engage in litigation during a marriage….Marilyn and Barron’s marriage ended when she died in 2004….[W]e decline to read the statute as permitting one of Marilyn’s heirs to wait 15 years after the marriage concluded to bring a claim.”
Tolling of Statute
The opinion also rejects the petitioner’s assertion that the limitations period should be deemed tolled based on his allegations—raised for the first time in the third amended petition following successful demurrers on timeliness grounds to his first three pleadings—that he inquired of his sisters and an attorney about the validity of the agreements in 2005 and was assured of their legitimacy.
Citing jurisprudence declining to allow tolling based on third-party advice discouraging legal action as such a rule would allow for the possibility of open-ended liability, she declared that “[t]hese allegations…do not…toll the limitations period.”
The case is Hilton v. Modugno, B331241.
Hilton was represented by Gregory S. Dovel and Gabriel Z. Doble of the Santa Monica firm of Dovel & Luner and by Mark T. Drooks, of the Century City-based Bird Marella Rhow Lincenberg Drooks & Nessim LLP. Zachary Marc Faigen, Virginia Faye Milstead, and Peter Bradley Morrison, of the Century City office of Skadden Arps Slate Meagher & Flom LLP acted for The Conrad N. Hilton Foundation.
Robert Neil Sacks, Matthew Wayne McMurtrey and John Andrew Scheerer of Los Angeles-based Sacks, Glazier, Franklin & Lodise LLP represented Modugno. Wells Fargo’s attorneys were James Christopher Rutten and Sarah Weiner of the Los Angeles office of Munger Tolles & Olson LLP and Rachel G Miller Ziegler from the Washington D.C. office.
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