Opinion
D047985
12-13-2006
SHAWN OLAUGHLIN, Plaintiff and Respondent, v. CATHERINE OLAUGHLIN, as Successor Trustee, etc., Defendant and Appellant.
Appellant Catherine OLaughlin appeals from an order granting respondent Shawn OLaughlins application for a determination under Probate Code section 21320 that certain requested relief regarding the OLaughlin 1991 Trust (the trust), including removal of the trustee and appointment of a new successor trustee, did not violate the trusts no contest clause. Appellant contends the proposed petition is a contest to the trust because it challenges the validity of an amendment expressly appointing her as successor trustee, and that section 21305, which exempts certain proceedings from violating a no contest clause as a matter of public policy, does not apply. We conclude that the exemption of section 21305, subdivision (b)(7) applies and respondents requested relief does not constitute a contest. We therefore affirm the probate courts order.
All statutory references are to the Probate Code unless otherwise indicated.
FACTUAL AND PROCEDURAL BACKGROUND
In November 1991, Paul and Sally OLaughlin, husband and wife, executed the OLaughlin 1991 Trust, naming themselves as trustees and beneficiaries. After Pauls death, Sally OLaughlin executed three amendments to the trust. In July 1999, she executed an addendum designating her four children, Paul OLaughlin, Jr., Catherine OLaughlin, Michael OLaughlin and Shawn OLaughlin as successor co-trustees after Sallys death, resignation or inability to serve as trustee. In April 2000, Sally executed another addendum to modify the distribution of the residual trust res and add a no contest clause to the trust providing: "A contestant shall be considered to have predeceased the settlor and not be in existence at the time of the settlors death. For purposes of this instrument, `contestant means any person other than the settlors who, directly or indirectly, voluntarily participates in any proceeding or action in which such person seeks to void, nullify or set aside (1) any provision of this instrument; (2) any provision of settlors will that gives property to the trustee of any trust under this instrument; or (3) any amendment/addendum of this instrument or codicil of the settlors will."
We refer to the parties and other members of the OLaughlin family by their first names to avoid confusion and intend no disrespect. (Zwirn v. Schwiezer (2006) 134 Cal.App.4th 1153, 1155, fn. 2.)
In February 2005, Sally and Catherine as Sallys co-trustee executed a second amendment designating Catherine as the sole successor trustee and Michael as first successor trustee, and prohibiting Shawn and Paul from serving as alternate successor trustees. Sally died in April 2005.
The Second Amendment provides: "Upon the death of Sally M. OLaughlin . . . Catherine F. OLaughlin shall continue to serve as sole Trustee; if Catherine is unable or unwilling to serve, then I hereby appoint my son Michael OLaughlin to serve as First Successor Trustee . . . I direct that neither my daughter Shawn OLaughlin or my son Paul OLaughlin, Jr., shall serve as Alternate Successor Trustee of my Trust or in any other capacity in administering my Estate.
In May 2005, Shawn filed an application under section 21320 seeking a judicial declaration that an accompanying petition would not violate the trusts no contest clause. In her proposed petition, Shawn alleged an ambiguity in the trust arose from the second amendment; that the original trust authorized the surviving trustor to remove an acting trustee, but did not authorize the trustor to change the identity of the persons nominated by Paul and Sally to serve as successor trustees, and thus the second amendment was ineffective and failed as a trust amendment. She also alleged good cause existed to remove Catherine as trustee in part because Catherine procured the second amendment by undue influence, duress and fraud. Shawn sought a court order removing Catherine as trustee, appointing a neutral successor trustee and among other things seeking an inventory, accounting and return of trust assets to the trust.
Catherine opposed Shawns application on grounds the petitions allegations that Sally lacked capacity and was unduly influenced by Catherine to sign the second trust amendment constituted a direct contest, and Shawns allegation as to the second amendments ineffectiveness and failure as a trust amendment was an indirect contest to the trust. The probate court ruled the proposed petition, to the extent it alleged breach of fiduciary duty and requested removal of trustee and an accounting, did not violate the no contest clause. However, it ruled Shawns claims regarding incapacity and undue influence, and her allegation that the second amendment was ineffective were direct contests. Neither party appealed that ruling.
Thereafter, Shawn filed a "First Supplemented Request For Declaratory Relief" with another proposed petition under section 21320. In that petition, Shawn again sought Catherines removal as trustee for cause, appointment of a neutral successor trustee and an accounting, and other requests identical to those in the first proposed petition. However, Shawn deleted the allegations of incapacity and undue influence, and the allegation that the second amendment was ineffective. Shawn continued to maintain that the second amendment created an ambiguity in the trust relating to the surviving trustees power to change persons nominated as successor trustees, alleging the trust was silent on the matter. She requested instruction from the probate court regarding the mechanics for appointing a successor trustee. In her request for declaratory relief, Shawn disclaimed any intent to invalidate any document or instrument.
In opposition, Catherine argued Shawns second proposed petition still constituted a contest because Shawns allegations implied invalidity of the trust amendments and raised questions regarding the circumstances and events surrounding execution of the trust documents. She further argued Shawns challenge to the successor trustees appointment and her claim of ambiguity directly attacked the validity of the second amendment. In reply, Shawn argued the portion of her petition seeking to remove Catherine as trustee did not violate the no contest clause as a matter of public policy under section 21305, subdivision (b)(7), and that her claim as to ambiguity was merely a request for interpretation exempt under subdivision (b)(9) of section 21305.
The probate court granted Shawns request. Citing Graham v. Lenzi (1995) 37 Cal.App.4th 248, 258-259, it found Shawns request for a determination of the identity of the successor trustee was merely a request to interpret an arguable ambiguity in the trust document, and did not seek to set aside or annul the trust or any amendment. Reasoning that the petition only sought to ascertain the trustors intent and enforce their desires, the court ruled it was not a contest. Catherine filed the present appeal.
DISCUSSION
I. Applicable Legal Principles/Standard of Review
This court recently summarized some of the legal principles relevant to Catherines appeal in McIndoe v. Olivos (2005) 132 Cal.App.4th 483: "A `contest is `any action identified in a "no contest clause" as a violation of the clause. (§ 21300, subd. (a).) A `no contest clause is `a provision in an otherwise valid instrument that, if enforced, would penalize a beneficiary if the beneficiary files a contest with the court. (§ 21300, subd. (d).) Such clauses are valid in California and are favored by the public policies of discouraging litigation and giving effect to the testators expressed purposes. [Citation.] However, because a no contest clause may result in a forfeiture, `a court is required to strictly construe it and may not extend it beyond what was plainly the testators intent. [Citation.] [Citation.] [¶] "Under section 21320, a beneficiary may, without violating a no contest clause, apply to the court for a determination whether a particular act would be a contest provided that no determination of the merits of the petition is required. Where, as here, a trial court rules on a section 21320 application without referring to extrinsic evidence, the appeal presents a question of law and requires us to independently construe the trust to determine whether the proposed petition violates the no contest clause. [Citation.] `In construing a trust instrument, the intent of the trustor prevails and it must be ascertained from the whole of the trust instrument, not just separate parts of it." (McIndoe v. Olivos, 132 Cal.App.4th at p. 487.)
Despite their validity in California, the Legislature has limited the reach of no contest clauses in certain provisions of the Probate Code. (See § 21305; Tunstall v. Wells (2006) 144 Cal.App.4th 554, 560; Estate of Rossi (2006) 138 Cal.App.4th 1325, 1331-1332.) Effective January 1, 2001, section 21305, subdivision (b) declares specified challenges to testamentary instruments to be protected by public policy, so they will never constitute a contest. (Tunstall, at p. 560; stats. 2000, ch. 17, §§ 5, 6, 7; Hermanson v. Hermanson (2003) 108 Cal.App.4th 441, 444-445.) In part, section 21305, subdivision (b) provides: "Except as provided in subdivision (d), notwithstanding anything to the contrary in any instrument, the following proceedings do not violate a no contest clause as a matter of public policy: [¶] . . . [¶] . . . (7) A pleading regarding the appointment of a fiduciary or the removal of a fiduciary. . . . [¶] . . . [¶] (9) A pleading regarding the interpretation of the instrument containing the no contest clause or an instrument or other document expressly identified in the no contest clause." Subdivision (d) limits application of subdivision (b) to "instruments of decedents dying on or after January 1, 2001, and to documents that become irrevocable on or after January 1, 2001." (§ 21305, subd. (d).)
As to subdivision (b)(7) of section 21305 exempting pleadings regarding the appointment or removal of a fiduciary, "the Legislature has determined that in furtherance of the public policy of eliminating errant fiduciaries, a beneficiary who believes a fiduciary is engaged in misconduct should be able to bring the alleged misconduct to the courts attention without fear of being disinherited." (Estate of Hoffman (2002) 97 Cal.App.4th 1436, 1444, superseded by statute on other grounds, as recognized in Hermanson v. Hermanson, supra, 108 Cal.App.4th at p. 445 and Zwirn v. Schweizer, supra, 134 Cal.App.4th at p. 1156, fn. 5.)
In determining whether Shawns petition contravenes the no contest clause of the trust, "[w]e review the trust de novo, considering the circumstances under which the document was made in order to place ourselves in the position of the trustor to interpret the document. [Citation.] Each case depends upon its own peculiar facts and thus case precedents have little value when interpreting a trust." (McIndoe v. Olivos, supra, 132 Cal.App.4th at p. 487.) Likewise, interpretation of section 21305 and its application to Shawns petition are questions we decide as a matter of law. (Estate of Rossi, supra, 138 Cal.App.4th at p. 1336; McKee v. Orange Unified School Dist. (2003) 110 Cal.App.4th 1310, 1316 [application of a statute to undisputed facts is subject to reviewing courts independent determination].)
II. Shawns Petition Seeking Catherines Removal as Trustee Is Not a Contest under Section 21305, Subdivision (b) As a Matter of Public Policy
In this appeal, Catherines only meaningful challenge to the petition is directed to Shawns request that the court remove Catherine as trustee and confirm Paul, Michael and Shawn as successor trustees. Accordingly, we limit our analysis to that claim. Further, we only address issues stemming from the December 5, 2005 order identified in Catherines appeal, in which the probate court ruled on Shawns First Supplemental Request and corresponding petition. Our sole focus is on the language and effect of Shawns second petition.
Catherine contends Shawns second petition constitutes a contest because Shawn effectively continues to assert a claim of undue influence as a basis for removing Catherine as successor trustee, a claim that was found by the probate court in its first ruling to constitute a contest. She maintains Shawns request for her removal as successor trustee thwarts Sallys express wishes and is an effort to set aside the second amendment falling under the express language of the no contest clause. In making these arguments, Catherine concedes that a petition seeking a trustees removal is not a contest under section 21305, subdivision (b)(7). She then asserts: "Nevertheless, as pointed out by the trial court in its June 17, 2005 ruling, a challenge to the validity of a trust instrument is an act specifically prohibited under the no-contest clause executed by Sally OLaughlin." Apart from her reference to the courts ruling, Catherine cites no authority in support of the latter proposition.
To the extent Catherine asks us to adopt or defer to the probate courts reasoning, we decline to do so. Exercising our independent review of the matter, we conclude the challenged relief in Shawns petition falls within the exemption of section 21305 subdivision (b)(7). Under these provisions, pleadings requesting the removal of a fiduciary will not violate a no contest clause in a testamentary instrument as a matter of public policy. Catherines reliance on the prohibition contained within the no contest clause ignores the express language of section 21305, subdivision (b), which protects pleadings falling within its enumerated subcategories "notwithstanding anything to the contrary in any instrument. . . ." (Emphasis added.) Thus, while the no contest clause at issue specifically defines a contestant as one who seeks to void, nullify or set aside any amendment or addendum to the trust, that clause does not prevent section 21305, subdivision (b)s application.
In her reply brief, Catherine further challenges the applicability of section 21305, contending it only applies to "instruments that do not contain a no contest clause." Catherine provides no support for this proposition, and we find none. As stated above, section 21305, subdivision (b) applies to instruments of decedents dying on or after January 1, 2001, and to documents that become irrevocable on or after January 1, 2001. (§ 21305, subd. (d).) Catherine has not advanced any basis to conclude the trust documents in this case do not meet these standards.
Finally, citing McIndoe v. Olivos, supra, 132 Cal.App.4th at p. 488, Catherine argues "when an amendment or addendum is made to a [t]rust, that amendment or addendum is incorporated into the terms of the trust. So, regardless as to which part of the trust contains the actual no-contest language, the trust is read in its entirety, incorporating the terms in all addendums and amendments thereto." Presumably this argument is made in response to Shawns argument, raised for the first time on appeal, that the petition does not constitute a contest under section 21305, subdivision (a)(3). Shawn argues that as a matter of law, assuming her petition challenges the validity of the second amendment, it constitutes a "challenge to the validity of an instrument . . . or other document, other than the instrument containing the no contest clause" within the meaning of that subdivision.
Section 21305, subdivision (a) provides in part: "For instruments executed on or after January 1, 2001, the following actions do not constitute a contest unless expressly identified in the no contest clause as a violation of the clause: . . . [¶] . . . [¶] (3) A challenge to the validity of an instrument, contract, agreement, beneficiary designation or other document, other than the instrument containing the no contest clause." Subdivision (c) of that statute provides: "Subdivision (a) does not apply to a codicil or amendment to an instrument that was executed on or after January 1, 2001, unless the codicil or amendment adds a no contest clause or amends a no contest clause contained in an instrument executed before January 1, 2001." (§ 21305, subd. (c).)
We may consider this new theory because it raises a pure question of law on undisputed facts, and the parties have briefed it on appeal. (Estate of Rossi, supra, 138 Cal.App.4th at p. 1337.) However, we conclude the assertion is without merit. "[T]he plain language of subdivision (a) [of section 21305] places new requirements of specificity on the no contest clauses contained in instruments executed on or after January 1, 2001." (Estate of Rossi, at p. 1338.) Here, the trust was executed before January 1, 2001, and thus the claim is outside of section 21305, subdivision (a)s threshold condition, that being "[f]or instruments executed on or after January 1, 2001 . . . ." Further, while it is true that the second amendment does not itself contain a no contest clause and such a separate instrument or document may be the subject of a safe harbor challenge under section 21305, subdivision (a) (Estate of Rossi, 138 Cal.App.4th at p. 1338), the no contest clause here expressly defines a contestant as one who seeks to "void, nullify or set aside . . . any amendment/addendum of this instrument . . . " Subdivision (a) of section 21305 therefore does not apply because the challenge — assuming as Shawn asks us to do that it seeks to invalidate the second amendment — is "expressly identified in the no contest clause as a violation of the clause . . . . " (§ 21305, subd. (a).)
We interpret the word "instrument" in that statute as referring to the trust here, and not any of its amendments. The Legislature clearly distinguished between codicils and amendments, and the instrument to which the codicil or amendment pertains. (§ 21305, subd. (c).)
We will affirm the probate courts order if it is correct on any theory of the law applicable to the case, regardless of the correctness of the grounds on which the court reached its decision. (Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 610.) Having concluded Shawns petition seeking Catherines removal as trustee is exempt as a matter of public policy under section 21305, subdivision (b), we need not address the other theories addressed by Shawn in her respondents brief.
DISPOSITION
The order is affirmed.
We Concur:
NARES, Acting P. J.
HALLER, J.