Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County, No. 37-2009-00150081-PR-TR-NC, Harry L. Powazek, Judge.
IRION, J.
Denise Gail Shanley appeals from an order of the probate court ruling that a petition she proposed to file claiming an ownership interest in real property held by the trust created by her late mother, E.M. Kelly Shanley (Shanley), would constitute a contest within the meaning of the testamentary instruments executed by Shanley.
We conclude that the probate court erred in concluding that the proposed petition would constitute a contest, and accordingly we reverse the order.
I
FACTUAL AND PROCEDURAL BACKGROUND
On January 28, 1998, Shanley executed an amendment to a revocable living trust of which she was the sole settlor (the Trust). The Trust provided that upon Shanley's death the Trust's interest in a particular piece of real property in Vista, California, would be distributed to Shanley's son, Kirk Lee Shanley. According to the Trust, the "remaining trust estate" would be distributed in equal shares to Kirk and his sister Denise Gail Shanley. As provided in the declaration of trust, the Trust estate included, among other things, Shanley's "real property" and "any other property which may become subject to this trust, including assets which require formal documents of transfer."
The January 28, 1998 amendment to the Trust amended in its entirety the version of the Trust dated April 30, 1985.
According to a statement made by counsel during a hearing in the probate court, the real property in Vista was "sold years ago."
For the sake of clarity, we will refer to Kirk and Denise by their first names, and we intend no disrespect by doing so.
The Trust contained the following no contest clause:
"In the event any beneficiary under this trust shall singly, or in conjunction with any person or persons, contest in any court the validity of this trust or of a deceased Settlor's last will or shall seek to obtain an adjudication in any proceeding in any court that this trust or any of its provisions are void, or seek otherwise to void, nullify or set aside this trust or any of its provisions, then the right of that person to take any interest given to him or her by this trust shall be determined as if the person had predeceased the Settlor, with no surviving issue."
Shanley executed a pour-over will on January 28, 1998 (the Will), which directed that Shanley's probate estate be administered and distributed according to the terms of the Trust. The Will's no contest clause provided: "If any beneficiary under this Will in any manner, directly or indirectly, contests this Will or any of its provisions, any share or interest in my estate given to that contesting beneficiary under this Will is revoked and shall be disposed of in the same manner provided herein as if that contesting beneficiary had predeceased me without issue."
Shanley died on August 30, 2007. Denise and Kirk are cotrustees of the estate. One of the assets owned by the Trust at the time of Shanley's death was a property in Carlsbad, California (the Carlsbad Property), which was conveyed in an August 30, 2004 quitclaim deed from Shanley to the Trust.
Denise contends that she holds a one-half interest in the Carlsbad Property. According to Denise, although her name does not appear on the title, in 2004 she and Shanley purchased the Carlsbad Property as a joint investment, with Denise contributing significant funds to the purchase and upkeep of the property. Denise therefore proposed to file a petition under Probate Code section 850, subdivision (a)(3)(A) to obtain a ruling that she "owns an undivided one-half interest in [the Carlsbad Property]" (the proposed petition). However, on February 12, 2009, Denise first filed an application for declaratory relief under former section 21320, subdivision (a) - which Kirk opposed - to obtain a ruling on whether the proposed petition would constitute a contest to the Will or the Trust (the section 21320 application).
All further statutory references are to the Probate Code.
Section 850, subdivision (a)(3)(A) provides that "[t]he trustee or any interested person" may file a petition requesting that the court make an order "[w]here the trustee is in possession of, or holds title to, real or personal property, and the property, or some interest, is claimed to belong to another." The legal theory under which Denise claims to hold an ownership interest in the Carlsbad Property was not specified in the proposed petition, and we express no opinion on the potential merit of her claim.
All statutory references in our discussion are to the statutes in effect at the time of the probate court's order in July 2009.
The probate court denied the relief that Denise sought in the section 21320 application. Specifically, it held that filing the proposed petition would trigger the Trust's no contest clause. As the probate court explained: "[T]he proposed petition seeks to argue that property which the trust characterizes as belonging to it does not in fact belong to it but to [Denise]. By so arguing, Denise seeks to alter the trust's distribution scheme, thereby garnering a greater share than that contemplated by... the trust. The proposed action thus seeks to 'void, nullify, or set aside this trust or any of its provisions, ' and, as such, constitutes a contest."
Denise appealed the probate court's ruling on the section 21320 application, as permitted by section 1304, subdivision (d).
II
DISCUSSION
A. Applicable Legal Framework
The sole issue presented is whether filing the proposed petition would constitute a contest under the no contest clause of the Trust or the Will.
"A no contest clause 'essentially acts as a disinheritance device, i.e., if a beneficiary contests or seeks to impair or invalidate the trust instrument or its provisions, the beneficiary will be disinherited and thus may not take the gift or devise provided under the instrument.' [Citation.] 'The purpose of no contest clauses "is to discourage will contests by imposing a penalty of forfeiture against beneficiaries who challenge the will." ' " (Betts v. City National Bank (2007) 156 Cal.App.4th 222, 231 (Betts).) "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.' " (Betts, at p. 232.) "Because a no contest clause results in a forfeiture, ... a court is required to strictly construe it and may not extend it beyond what was plainly the testator's intent." (Burch v. George (1994) 7 Cal.4th 246, 254 (Burch).)
By statute, the term " '[c]ontest' " covers both "direct and indirect contests." (§ 21300, subd. (a).) According to section 21300, subdivision (b), a " '[d]irect contest' " is a pleading "alleging the invalidity of an instrument or one or more of its terms" based on any of several specific grounds - i.e., revocation, lack of capacity, fraud, misrepresentation, menace, duress, undue influence, mistake, lack of due execution and forgery. (§ 21300, subd. (b).) No such allegations exist here. Thus, the only issue is whether the proposed petition constitutes an indirect contest. An " '[i]ndirect contest' " is defined as a pleading that "indirectly challenges the validity of an instrument or one or more of its terms based on any other ground not contained in [section 21300, ] subdivision (b), and that does not contain any of those grounds." (§ 21300, subd. (c).)
The Legislature has provided that, as a matter of law, certain proceedings described in section 21305, subdivision (b) do not violate an instrument's no contest clause, but Denise does not contend that any such proceedings are at issue here. Further, section 21305, subdivision (a) sets forth several types of action that do not constitute a contest unless expressly identified in the no contest clause. However, that provision is inapplicable here, as it applies only to instruments that were executed on or after January 1, 2001, and Shanley's Trust and the Will were executed in 1998.
"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.'... ' "[S]ection 21320 provides... a 'safe harbor' for beneficiaries who seek an advance judicial determination of whether a proposed legal challenge would be a contest [under a particular no contest clause]."... If a court determines that a particular proposed action would constitute a contest, the beneficiary will then be able to make an informed decision whether to pursue the contest and forfeit his or her rights under a will or to forgo that contest and accede to the will's provisions.' " (Betts, supra, 156 Cal.App.4th at p. 232, citations and fn. omitted.)
"When interpreting a no contest clause, ' "[t]he answer cannot be sought in a vacuum, but must be gleaned from a consideration of the purposes that the [testator] sought to attain by the provisions of [his] will...." ' [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." ' [Citation.]" (Betts, supra, 156 Cal.App.4th at p. 232.) " 'Each case depends upon its own peculiar facts and thus case precedents have little value when interpreting a trust.' " (Id. at p. 233.)
In reviewing the probate court's ruling on an application pursuant to section 21320 to determine whether a proposed filing constitutes a contest, we apply a de novo standard of review, when, as here, the ruling does not turn on the credibility of extrinsic evidence. (Betts, supra, 156 Cal.App.4th at p. 231; Burch, supra, 7 Cal.4th at p. 254.)
B. The Proposed Petition Does Not Constitute a Contest of the Trust or Will
Based on the language of the Trust's and the Will's no contest clauses, our inquiry is whether the proposed petition seeks "to void, nullify or set aside [the Trust] or any of its provisions" or in "any manner, directly or indirectly, contests [the] Will or any of its provisions."
We begin our analysis by focusing on the content of the proposed petition. As alleged in the proposed petition, in 2004 Denise and Shanley "purchased the Carlsbad Property together, as a joint investment, with the specific intention that each would be an owner of an undivided fifty-percent interest in the Carlsbad Property." Denise accordingly contributed in excess of $367,364 to the purchase of the Carlsbad Property and its maintenance. However, because of a potential judgment against Denise in litigation involving her chiropractic practice, Denise and Shanley agreed that Shanley would hold title to the Carlsbad Property, and after the litigation against Denise was resolved the vesting of title on the Carlsbad Property would be changed to reflect Denise and Shanley as tenants in common with an undivided one-half interest for each of them. Denise's prayer for relief in the proposed petition was for an order "determining that title to [the Carlsbad Property] should be vested one-half in Denise... and one-half in the then acting Trustee of [the Trust]."
As we will explain, we conclude that in seeking an order that she is a one-half owner of the Carlsbad Property, Denise is not seeking to void, nullify or set aside any provision of the Trust, or to contest the Will. Instead, without controverting any provision of the Trust or Will, Denise seeks to establish the extent of the assets that wereheld by the Trust and that were available to distribute to the named beneficiaries according to the Trust's plan of distribution.
We premise our decision on case law which establishes that "if the testamentary instrument refers only to 'my estate' or 'property of which I have a right to dispose, ' then a challenge as to whether property is subject to a community property or other interest will not generally violate a no contest clause." (Nairne v. Jessop-Humblet (2002) 101 Cal.App.4th 1124, 1129 (Nairne), italics added.)
Thus, for example, in Estate of Richter (1993) 12 Cal.App.4th 1361 (Richter), where "the decedent's will provided... that the residue of the decedent's estate was to be given in certain percentages to specified people" but "did not specify what property was included in the residue of the estate, nor did it specify whether the property was separate or community" (ibid., italics added), a widow's petition to determine her community property interest in the estate residue did not violate the will's no contest clause. (Id. at p. 1369.) As Richter explained, "By referring to 'my estate' in general terms, [the testator] would appear to be referring to that property owned by him which he had a right to dispose of by will." (Id. at p. 1369, italics added.) Because the widow "sought a determination as to what property was part of [the decedent's] estate and what property was hers, " the widow's proposed petition did not constitute a contest to any provision of the will. (Ibid.)
Similarly, in Estate of Black (1984) 160 Cal.App.3d 582 (Black), where the decedent provided in his will for the residue of his estate to be divided among the will's beneficiaries, a proposed petition by his long-time cohabitant to obtain an interest in the decedent's property under an implied domestic partnership theory did not constitute a contest. (Id. at p. 592.) Black explained that because the decedent's will disclosed no more than an "expressed intent... to dispose of that property of the decedent which he had the right to dispose of by will, " a petition to determine which assets the decedent had the right to dispose of did not constitute a contest of any provision of the will. (Id. at p. 591.)
A similar situation exists here. Neither the Trust nor the Will specifically mentions the Carlsbad Property. Indeed, both instruments were executed in 1998, long before the purchase of the Carlsbad Property in 2004. Therefore, the Carlsbad Property - to the extent that it is properly included in the assets of the Trust - is included in the residue of the estate and will be distributed according to the Trust's plan of distribution. Because neither the Trust nor the Will specifically provides for the disposition of the Carlsbad Property, a petition challenging the Trust's ownership of the Carlsbad Property would not constitute an attempt to void, nullify or set aside any provision of those instruments. Instead, as was the case in Black and Richter, the Trust and Will disclose no more than Shanley's intent to dispose of what she had the right to dispose of, and thus Denise's proposed petition challenging whether Shanley had the right to dispose of the entirety of the Carlsbad Property does not constitute a contest.
In addition to unsuccessfully attempting to distinguish some of the authorities we have cited above, Kirk contends that three cases support the probate court's decision. We disagree. The first two authorities - Burch, supra, 7 Cal.4th 246, and Estate of Pittman (1998) 63 Cal.App.4th 290 - both concerned testamentary instruments stating that certain of the decedent's property had the character of separate property. (Burch, at p. 256; Pittman, at p. 293.) In both cases, a petition challenging that characterization was held to be a contest. (Burch, at p. 263; Pittman, at p. 303.) Here, the Trust and the Will do not specify that, for the purposes of accomplishing a distribution of the Trust assets, the Carlsbad Property is to be treated as if it is owned in fee simple by the Trust. Thus, a proposed petition claiming that Denise is a coowner of the Carlsbad Property does not constitute a contest. The last authority, Nairne, supra, 101 Cal.App.4th 1124, is not applicable because the trust document in that case identified and directed a specific disposition of a particular parcel of real property. (Id. at p. 1126.) A proposed challenge to the disposition of that real property was a contest because it sought to frustrate the trustors' intent. (Id. at p. 1130.) Here, in contrast, neither the Trust nor the Will specifically mentions the disposition of the Carlsbad Property or expresses an intent to dispose of it in a certain manner.
The probate court accordingly erred in concluding that the proposed petition would constitute a contest to the Trust.
DISPOSITION
The order is reversed.
WE CONCUR: BENKE, Acting P. J.HALLER, J.
"[I]n 2008, the Legislature enacted a thoroughgoing revision of the statutory scheme governing no contest clauses. Operative January 1, 2010, and applying to instruments that became irrevocable on or after January 1, 2001, the new scheme generally limits the enforceability of no contest clauses to (1) direct contests brought without probable cause; (2) challenges to the transferor's ownership of property at the time of the transfer, if expressly included in the no contest clause; and (3) creditor's claims and actions based on them, if expressly included in the no contest clause. The provisions of section 21320 are discontinued." (Johnson v. Greenelsh (2009) 47 Cal.4th 598, 600, fn. 2.) The revised statutory scheme does not apply to the order at issue in this appeal, as it was made before the January 1, 2010 operative date. (See § 3, subd. (e) ["If an order is made before the operative date... or any action on an order is taken before the operative date, the validity of the order or action is governed by the old law and not by the new law...."].)