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self-study / Will/Trusts

Jan. 10, 2023

Top 5 trusts and estates cases of 2022

Ciarán O’Sullivan

Ciarán has litigated trusts and estates disputes in trial and appellate courts since 1998. He is a member of the executive committee of the California Lawyers Association's Trusts and Estates section.

2022 saw an uptick from 2021 levels in published Trusts and Estates appellate opinions. Although none had earth shattering implications for the practice, quite a few were nevertheless very interesting decisions. What follows is a discussion of five of them, which are indicative only of this author's particular predilections. A brief summary of every 2022 case issued in this practice area can be found on the California Lawyers Association's website, under the Trusts and Estates section's New Case Alerts.

Meiri v. Shamtoubi (2022) 81 Cal.App.5th 606 (Second Dist., July 29, 2022).

A direct trust contest filed outside the 120-day period following a notice under PC 16061.7 lacks probable cause, and therefore violates a trust's no-contest clause.

In 1994, Tale and Iraj Shamtoubi executed the Shamtoubi Trust, and in 2014 amended and restated the trust. The restated trust contained a fairly typical no-contest clause that would disinherit any beneficiary who filed a direct contest of the trust. Iraj died in 2016, and Tale provided her daughter Meiri and the other beneficiaries with a "Notification by Trustee Pursuant to Probate Code Section 16061.7," reminding them that the recipient had 120 days within which to contest the trust. 230 days after receipt of the notification, Meiri filed a petition seeking, among other things, to invalidate the amended and restated trust on various grounds. The trial court sustained Tale's demurrer, made on the basis that the petition was untimely. Tale then sought instructions that Meiri's petition had violated the trust's no-contest clause. Despite acknowledging that she had filed the petition outside the 120-day window, Meiri nevertheless argued that the mere fact that her contest was untimely was not sufficient to establish the requisite lack of probable cause needed to enforce a no contest clause under section 21311. The trial court disagreed.

As relevant to this case, section 21311(a) provides that a no-contest clause will be enforced against a "direct contest that is brought without probable cause." Section 21311(b) states that probable cause exists "if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery." On appeal, Meiri argued that the language of section 21311(b) required the court to look at the substance of the matter before determining that her contest lacked probable cause. The Court of Appeal disagreed, countering that "any legally sufficient bar to relief - whether procedural (e.g., a statute of limitations defect) or substantive - appears to satisfy section 21311, subdivision (b)'s test." Because the relief sought in a time-barred petition had no possibility of being granted under any circumstances, it automatically lacked probable cause, and thereby violated the no-contest clause.

Since the 2010 enactment of the current no-contest statutory regime some commentators have been of the view that no-contest clauses are disfavored, and that Trusts and Estates litigators need not lose sleep thinking about them. Some others have equated the probable cause necessary for a direct contest under the statute with that required in the malicious prosecution context, which is a very low standard. The Meiri opinion, in reviewing the competing public policies underlying the new statutory scheme, which policies included "preventing forfeitures and encouraging access to courts on the one hand, to respecting a transferor's right to prompt disposition of property, avoiding litigation and resulting harms to the donor's intent, preserving family privacy, and avoiding forced settlements, nuisance suits, and ownership disputes on the other," explicitly disagreed with the comparison to malicious prosecution cases. The opinion noted that the Law Revision Commission had concluded that the malicious prosecution standard is "too forgiving," because "a no-contest clause should deter more than just a frivolous contest. General law already provides sanctions for frivolous sanctions." Whatever probable cause is, it is surely absent where the petition is time-barred.

The opinion reminds us that no-contest clauses have continued vitality in California, and will be enforced where appropriate. Certainly, if the challenged instrument contains a no-contest clause, any contest that is obviously defective on a procedural level should not be brought.

Autonomous Region of Narcotics Anonymous v. Narcotics Anonymous World Services, Inc. (2022) 77 Cal.App.5th 950 (Second Dist., May 2, 2022).

Special interest standing to enforce charitable trusts does not exist when the trust is revocable.

Created in 1953 by recovering drug addicts, the Fellowship of Narcotics Anonymous meets in local groups, which in turn form geographic regions. Every two years, each region sends a delegate to a gathering known as the World Service Conference. At that conference in 1993 the Fellowship established a trust called "The NA Fellowship Intellectual Property Trust" to manage its intellectual property assets consisting primarily of books and pamphlets to aid in recovery from substance abuse disorders. The settlor of the trust is defined as "The Fellowship of Narcotics Anonymous, as given voice by its groups through their regional delegates at the World Service Conference." The beneficiary of the trust is the Fellowship as a whole. The trustee of the trust is Narcotics Anonymous World Services, Inc.

Autonomous Region of Narcotics Anonymous described itself as a regional delegate group of the Fellowship with a voice at the World Service Conference. It petitioned for the right to distribute trust literature, and to review payments to the trustee. It also sought to remove the trustee and to obtain the disgorgement of its profits. World Services demurred to Autonomous Region's petition, asserting a lack of standing. The trial court sustained the demurrer.

The case is interesting because of its discussion of the concept of special interest standing in the charitable trust context. In order to reduce the risk of unwarranted litigation, only certain parties may bring suit against a trustee, usually a trustee or beneficiary. (see, section 17200.) With respect to private trusts, such as a garden variety family trust, limiting standing to beneficiaries generally works well because benefits from the trust and information about it are concentrated in a way that promotes effective oversight: the beneficiaries have an incentive to notice and investigate irregularities. On the other hand, beneficiaries of a charitable trust are often indefinite, may not know the trust exists, and are not well situated to enforce its terms. An example might be a charitable trust to provide medical care for needy residents of a certain small town, who lack realistic incentives to enforce the trust's terms. While the California Attorney General has oversight authority over charitable trusts, that office may be unaware of wrongful conduct by a trustee, or lack the resources to take action. For those reasons, the California Supreme Court in Holt v. College of Osteopathic Physicians and Surgeons (1964) 61 Cal.2d 750, adopted the common law rule of "special interest" standing to enforce charitable trusts, which recognized that in certain circumstances someone other than the beneficiaries should be granted standing to sue.

The novel question in Narcotics Anonymous was whether enlarged standing under the "special interest" doctrine should apply in the context of a revocable trust. The Court of Appeal answered this question in the negative. While an irrevocable charitable trust deserves the extra protection afforded by a broader approach to standing, a revocable trust, such as the NA Trust, by definition has a functioning settlor who can oversee the management of the trust. In the court's words, "the problem of lapsed supervision and attendant mismanagement does not exist when the trust is revocable."

Revocability matters when it comes to charitable trusts. If such a trust is revocable, as was the NA Trust, an interested party such as Autonomous Region will be unable to bring an action against the trustee. Unless it can persuade the settlor or the Attorney General to act, there may be nobody else with standing to rein in an errant trustee.

Royals v. Lu (2022) 81 Cal.App.5th 328 (First Dist., July 22, 2022).

A right to attach order is available in a financial elder abuse action, but strict compliance with the Attachment Law is required, and the amount attached cannot be calculated based on potentially awardable punitive damages or statutory penalties.

Financial elder abuse litigation is a burgeoning field, and elder abuse claims are nowadays routinely added to the more traditional types of Trusts and Estates lawsuits. Royals v. Lu is instructive on the scope and limits of the pre-trial remedies offered by the Elder Abuse Act.

Lu married Adams in 2015, when she was 59 and he was 95. He died in 2019. Royals, Adams' daughter, became successor trustee and sole beneficiary of the Adams Trust, and she sued her stepmother for financial elder abuse based on certain end of life transactions whereby Adams encumbered or sold properties, the proceeds of which ended up in Lu's accounts, outside of the Trust. Royals sought return of trust property in the amount of $1,095,000 under section 850. She also sought punitive damages, trebled under Civil Code section 3345, plus attorneys' fees and costs, and double damages under section 859. She also sought a pre-trial right to attach order or writ of attachment in the amount of $3,440,000, the evidence for which was in her verified complaint, she said. Royals offered no details of how she calculated the amount she sought to attach. Lu opposed the application with evidence of Adam's strong cognitive abilities, and his intent to benefit her financially. Without ruling on the competency or admissibility of the evidence offered by Royals or Lu, the court granted the writ of attachment in the amount sought by Royals, and Lu appealed.

On appeal, the court addressed the interplay of the Elder Abuse Act and the Attachment Law, and specifically whether the prospect of augmented recovery on a financial elder abuse claim - in the form of exemplary damages or statutory penalties - may be secured by the extraordinary remedy of pretrial attachment. In reversing and vacating the right to attach order, the court concluded that it did not.

The Attachment Law requires a plaintiff to establish that her claim has probable validity, and there is a requirement that the total amount of the underlying claim be in a fixed or readily ascertainable amount. Generally, attachment claims arise from actions based on a contract, but they are available by statute in the financial elder abuse context, in order to preserve wrongfully taken assets of an elder pending judgment. But compliance with the procedural requirements of the Attachment Law is still necessary.

Royals' claimed basis for an attachment in the amount of $3,440,000 was unsupportable for four reasons: (1) it was not supported by competent evidence, such as an affidavit or verified complaint containing specific facts; (2) it did not contain a statement of the amount sought to be attached, as a matter of notice and due process; (3) it was not based only on a claim for damages, because statutory penalties are not damages; and (4) it was not based only on a claim of indebtedness, because punitive damages claims are not claims of indebtedness. The court considered and rejected Royals' argument that under the Elder Abuse Act, which is a remedial statute, punitive damages are simply another form of damages for which attachment should be available, in part because of the due process risks associated with attachment proceedings, which are summary in nature.

Royals v. Lu reminds us that pretrial attachment orders are available in financial elder abuse actions. Arguably, they are a favored remedy, as they promote the purpose of encouraging private enforcement of the Elder Abuse Act. Nevertheless, as with any attachment proceeding, procedural requirements must be strictly adhered to. Finally, the calculation of the amount to be attached must be made without reference to any potential recovery of punitive damages or statutory penalties.

Estate of El Wardani (2022) 82 Cal.App.5th 870 (Fourth Dist., September 20, 2022).

Residency in California, for the purposes of appointment as administrator under section 8402, requires that one actually live in the state, regardless of any intent to move there later.

Section 8402 requires that an appointed administrator be a California resident. Ramsey El Wardani and his wife Janine retired to Mexico in 2014, where he died intestate in 2016. They had both retained properties in California. In 2017 she petitioned for appointment as personal representative of his estate in San Diego, checking a box stating that she was a resident of the United States. In a declaration supporting a creditor's claim, she stated that she lived in Mexico "full time." When her letters expired by local rule in 2019, her application for new letters was opposed by Ramsey's daughter Ali, on the grounds that Janine was not a resident of the United States. Janine urged, citing to tax law cases, that she was most closely connected to California, not Mexico, and was thus a California resident within the meaning of section 8402. She had been raised in California; all her friends and both her children lived there; she had a California driver's license; she voted and paid taxes there; she had bank accounts in San Diego and none in Mexico; her doctors, accountant and attorney were in California; she received no mail in Mexico, but only at a post office box in California; the only reason she stayed in Mexico is because she owned a house free and clear there; and she intended to return to the United States as soon as the probate case ended. Ali urged that Janine had acknowledged her residency in Mexico when she stated in her creditor's claim that she lived there full time, and had only changed her position when her residency was challenged. The trial court found that Janine was not a resident of California, and not entitled to serve as the administrator.

The term "resident" is not defined in the Probate Code. On appeal, Janine again urged that it impliedly refers to the location that the person is most closely connected to, highlighting her ties to California. Ali, by contrast, urged that "resident" within the meaning of the statute is synonymous with "domicile" - i.e. that residency involves a physical presence in a particular place as well as the intention to make that place one's home. Noting that "residence" connotes any factual place of abode of some permanency, whereas "domicile" is broader, including both the act of residency and the intention to remain, the Court of Appeal acknowledged that early cases did in fact consider residence as synonymous with domicile for the purpose of the predecessor statutes to section 8402, and that no later amendments had abrogated those cases. And domicile still mattered under certain other statutes, such as the probate venue statute. But the court declined to hold that section 8402 continues to require domicile in this case, because it was not necessary to do so. All versions of the relevant statute required actual residence, regardless of any intent to remain. Because Janine did not actually live in California, she could not establish residency.

This particular case, which was reviewed under the substantial evidence standard of review, turned on Janine's admission in a declaration filed before her residence became an issue that she lived in Mexico, and in that sense is sui generis. But the takeaway for everyone else is that domicile in California may not be a prerequisite for appointment as an administrator. A person could live in California during the probate administration, while intending to later leave the state, and thus not be domiciled here. But such a person would nevertheless be a resident, eligible to serve as an administrator while she lived here. On the other hand, one who, for example, owned property here, and had numerous family and other connections here, would not be eligible for appointment if she actually lived somewhere else.

Parker v. Schwarcz (2022) 84 Cal.App.5th 418 (First Dist., October 19, 2022).

Section 850 can be used to seek recovery only of property with intrinsic value, and not documents generated during the administration of an estate.

Cynthia Parker's daughters petitioned for appointment of a temporary conservator of their mother's estate, because she was unable to manage her financial resources and unable to resist fraud or undue influence. The court appointed Kim Schwarcz, a professional fiduciary, as temporary conservator of the estate, and appointed counsel for her. The daughters later sought appointment of Schwarcz as general conservator of both Parker's estate and person, alleging that she also lacked the capacity to give informed consent to medical treatment. Parker opposed the petition. Prior to trial the daughters, Parker and Schwarz settled the litigation in mediation, the result of which was the creation of an irrevocable trust to hold Parker's assets, with a third-party trustee. The court subsequently granted Parker's petition for approval of the settlement agreement, and terminated the temporary conservatorship. Two months later Parker asked Schwarcz for all communications between Schwarcz and anyone regarding Parker's estate, including third-parties and her attorneys. Schwarcz refused to comply. Parker then filed a Petition for Return of Property under section 850, demanding transfer of those communications, as well as other documents of the temporary conservatorship, to either her or the trustee. The trial court denied the petition, finding that section 850 did not authorize this request because the documents sought were not the type of personal property covered by the statute.

Section 850 is a broad statute that allows the filing of petitions to recover property when the competing claimants to that property are a fiduciary of an estate, a claimant, or other interested party on the one hand, and a third party on the other. It covers disputes over ownership of both real and personal property. Parker argued that under the plain language of the statute, the documents she sought are personal property. Interpreting this aspect of the statute de novo, the Court of Appeal acknowledged the ambiguity inherent in the phrase "personal property," but concluded that in the context of section 850 such property did not include the property sought by Parker. The legislative history of the statute makes clear that the phrase applies to property that arguably is or could be an asset of an estate, that has inherent value that could augment the value of the estate, or could be used to pay its debts, and is capable of being conveyed by the Court's order. By contrast, the documents at issue here were generated during Schwarcz's service as temporary conservator, and are thus distinct from assets that could be conveyed under section 850. The demand for the documents in question was a discovery request in another form, and section 850 was not the proper vehicle for such a request.

The takeaway from Parker is that section 850 has limits. As stated in section 663 of the Civil Code, property that is not real is personal, but it does not follow that all personal property is amenable to an 850 Petition. Only property that has intrinsic value is subject to the statute. Left open for another day is whether the statutory scheme can be used to recover property with no intrinsic value, but that nevertheless has sentimental value to one party or another.


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