Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. BP113332, Aviva K. Bobb, Judge.
The Law Office of Alan Goldberg and Alan M. Goldberg for Defendant and Appellant.
Oldman, Cooley, Sallus, Gold, Birnberg & Coleman, Susan J. Cooley and Justin B. Gold for Plaintiff and Respondent.
KITCHING, J.
INTRODUCTION
A beneficiary of a trust petitioned for declaratory relief pursuant to Probate Code section 21320, subdivision (a) seeking a determination whether a proposed petition seeking removal of the Trustee and an accounting was a contest within the terms of the no contest clause in the trust. The trial court found the proposed petition did not violate the no contest clause and granted the declaratory relief petition. The Trustee appeals. Section 21305 defines certain proceedings as not violating a no contest clause. The proposed petition was a pleading regarding the removal of a fiduciary and a pleading regarding an accounting of a fiduciary, which were not violations of a no contest clause. Because three subtrusts were established by an amendment to the trust, which did not contain a no contest clause, the proposed petition seeking an accounting did not violate a no contest clause. We affirm the order granting the petition for declaratory relief.
Unless otherwise specified, statutes in this opinion will refer to the Probate Code.
FACTUAL AND PROCEDURAL HISTORY
George Seltzer and Shirley Seltzer, husband and wife, were creators and Settlors of The Seltzer Family Trust and executed a Declaration of Trust on September 28, 2001. George Seltzer died on December 27, 2001. Pursuant to the terms of the trust, Shirley Seltzer as remaining Settlor became the Trustee with full power to continue Trust administration. The Trust provided that upon the death of a spouse, the Trustees were to divide assets comprising the Trust Estate into a Survivor’s Trust, an Exemption Trust, and a Residual Trust. On August 15, 2002, Shirley Seltzer executed a First Amendment to the Declaration of Trust, which allocated assets to the Survivor’s Trust, Exemption Trust, and Residual Trust. Otherwise the terms of the September 28, 2001, remained unchanged.
The trust named Roslyn Cohen as Successor Trustee if both Settlors should cease to act or fail to qualify as Trustee. Roslyn Cohen was also a beneficiary of the Exemption Trust. The Trust provided that upon the Surviving Settlor’s death, the Residual Trust was to be distributed to then-acting trustees of the Exemption Trust, and the Trustee was to distribute assets of the Exemption Trust and any assets added to it from the Survivors Trust and Residual Trust as follows:
40 percent to Roslyn Cohen;
40 percent to Sandra Shapiro;
10 percent to Scott Shapiro;
10 percent to Robyn Ford.
The Trust has a no contest clause: “If any person singly or in conjunction with any other person or persons, contests in any court the validity of this Trust or of a deceased Settlor’s last will or seeks to obtain an adjudication in any proceeding in any court that this trust or any of its provisions or that such will or any of its provisions is void, or seeks otherwise to void, nullify, or set aside this trust or any of its provisions, then that person’s right to take any interest given to him or her by this trust shall be determined as it would have been determined if the person had predeceased the execution of this declaration of trust without surviving issue. The provisions of this paragraph shall not apply to any disclaimer by any person of any benefit under this trust or under any will.”
Shirley Seltzer died on June 11, 2008. Roslyn Cohen became Successor Trustee. Petitioner Scott Shapiro, in a petition for declaratory relief to determine whether proposed actions violate the no contest clause of the Trust, alleged that because of her advanced declining mental health Shirley Seltzer was not able to act as Trustee after George Seltzer’s death, and therefore Cohen functioned as de facto trustee and managed and did the work of the Trust until Shirley’s death.
In a July 8, 2008, letter to Cohen, Shapiro’s attorney alleged that while Cohen served as co-trustee and sole trustee, no accounting of Trust assets was rendered. Shapiro’s counsel requested that pursuant to section 17200, Cohen produce an accounting of trust assets since its execution in 2001. The letter stated that if he did not receive such an accounting, Shapiro would begin court proceedings for an order for an accounting by Cohen, for Cohen’s removal as trustee, and to surcharge Cohen for assets the court determined were improperly administered, commingled, or wasted.
In a July 16, 2008, letter, Cohen’s attorney stated that Cohen did not act as co-trustee with Shirley Seltzer during her lifetime and did not become successor trustee until Shirley Seltzer died on June 11, 2008, and therefore any accounting of Trust assets would be from June 11, 2008.
On October 24, 2008, Shapiro filed a petition for declaratory relief to determine whether proposed actions violate the Trust’s no contest clause. The declaratory relief petition attached a Proposed Petition to Compel Defacto and Successor Trustee Roslyn Cohen to Account for Trust Assets (the proposed petition).
The declaratory relief petition alleged that Cohen breached her duty as Trustee by refusing to provide an accounting, by not complying with terms of the Trust, and by spending Trust assets for her own benefit. The declaratory relief petition alleged that the proposed petition requested an accounting, removal of Cohen as successor trustee, and appointment of the other named successor trustee, Sandra Shapiro, as the new successor trustee. The declaratory relief petition alleged that it did not seek a determination on the merits of the proposed petition, but sought a determination under section 21320 that filing the proposed petition would not violate the no contest clause of the Trust.
The declaratory relief petition sought an order authorizing Shapiro to file and serve the proposed petition and to proceed with a judicial determination of the issues it raised, and a determination that proceeding with the proposed petition did not violate the no contest clause of the Trust.
The proposed petition sought an accounting. It alleged that Shirley and George Seltzer, and Cohen as de facto trustee, never provided a Trust accounting, that Trustees have a statutory and common law duty to account to beneficiaries and to provide them with information about the Trustees’ administrative decisions and acts, and must supply information about Trust assets, liabilities, receipts, and disbursements if a beneficiary requests that information. The proposed petition alleged that Cohen refused Shapiro’s request to provide an accounting for the Trust since 2001. Thus the proposed petition requested that Cohen be ordered to prepare and file with the court an account of the Seltzer Family Trust, and all subtrusts, since its inception on September 28, 2001. The proposed petition also alleged that Cohen sold and misappropriated for her own benefit the Settlors’ bank accounts and other assets that were not in the trust, such as silver bars and automobiles, and requested an order that Cohen account for all non-Trust assets owned by Settlors since 2001.
The proposed petition also sought removal of the Trustee. It alleged that Cohen breached her fiduciary duties as Trustee and violated the terms of the Trust by not providing an accounting to Shapiro as he requested. It alleged that the Trustee’s refusal to provide an accounting violated section 15642(1) and the terms of the Trust. The proposed petition sought removal of Cohen as Trustee and appointment of Sandra Shapiro as Successor Trustee.
In a December 8, 2008, hearing, the trial court found that the proposed petition did not violate the no contest clause of the Trust. In an order filed on January 20, 2008, the trial court ruled that allegations in the declaratory relief petition were true, found that the proposed petition did not violate the no contest clause of the Trust, and granted the declaratory relief petition.
Cohen filed a notice of appeal on December 16, 2008.
The trial court’s order granting the declaratory relief petition was an appealable order. (Section 1304, subdivision (d); Hermanson v. Hermanson (2003) 108 Cal.App.4th 441, 442, fn. 1.) Although the notice of appeal was filed before entry of the January 20, 2008, formal order, we construe the notice of appeal to have been taken from the after-filed appealable order. (Bravo v. Ismaj (2002) 99 Cal.App.4th 211, 219, fn. 6; Cal. Rules of Court, rule 8.104(e), (f).)
ISSUES
Cohen claims that:
1. The trial court erroneously granted the declaratory relief petition, because the proposed petition for an accounting and the removal of Cohen is a contest under the no contest clause of the Trust.
2. Alternatively, that the petition for removal is not within the no contest clause of the Trust, which means that the declaratory relief petition was unnecessary and frivolous, entitling Cohen to move for sanctions fees, and costs;
3. The doctrine of laches bars Shapiro’s declaratory relief petition; and
4. Shapiro has forfeited his claim under the Trust.
DISCUSSION
1. Standard of Review of an Order Granting a Declaratory Relief Petition Brought Pursuant to section 21320
Section 21320 states, in relevant part: “(a) If an instrument containing a no contest clause is or has become irrevocable, a beneficiary may apply to the court for a determination of whether a particular motion, petition, or other act by the beneficiary, including, but not limited to... an action pursuant to Section 21305...would be a contest within the terms of the no contest clause.
Section 21300, subdivision (a) states: “ ‘Contest’ means any action identified in a ‘no contest clause’ as a violation of the clause. The term includes both direct and indirect contests.”
Section 21300, subdivision (d) states: “ ‘No contest clause’ means a provision in an otherwise valid instrument that, if enforced, would penalize a beneficiary if the beneficiary files a contest with the court.”
“(b) A no contest clause is not enforceable against a beneficiary to the extent an application under subdivision (a) is limited to the procedure and purpose described in subdivision (a).
“(c) A determination under this section of whether a proposed motion, petition, or other act by the beneficiary violates a no contest clause may not be made if a determination of the merits of the motion, petition, or other act by the beneficiary is required.”
“Section 21320 authorizes a declaratory relief proceeding whereby the beneficiary of a trust that either is or has become irrevocable may obtain an advance ruling on whether a particular legal challenge would be a contest.” (Cory v. Toscano (2009) 174 Cal.App.4th 1039, 1043.) “Where... 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.’ [Citation.] We review the trust de novo[.]” (McIndoe v. Olivos (2005) 132 Cal.App.4th 483, 487.)
No contest clauses are valid. Although the public policies of discouraging litigation and giving effect to the trustor’s intent favor no contest clauses, the policy against forfeitures disfavors such clauses. Thus the courts strictly construe no contest clauses and do not extend their scope beyond what was plainly the trustor’s intent, as stated in section 21304: “ ‘ “ ‘In determining the intent of the transferor, a no contest clause shall be strictly construed.’ ” ’ ” (Perrin v. Lee (2008) 164 Cal.App.4th 1239, 1248-1249.)
2. The Trial Court Correctly Found That the Proposed Petition Did Not Violate the No Contest Clause of the Trust and Correctly Granted the Declaratory Relief Petition
Section 21305 states in relevant part:
“(b) 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:
“ ‘Instrument’ means a will, trust, deed, or other writing that designates a beneficiary or makes a donative transfer of property.” (§ 45.)
“[¶]... [¶]
“(7) A pleading regarding the appointment of a fiduciary or the removal of a fiduciary.
“(8) A pleading regarding an accounting or report of a fiduciary.
“[¶]... [¶]
“(12) A petition to compel an accounting or report of a fiduciary, if that accounting or report is not waived by the instrument. If the instrument waives an accounting or report of a fiduciary, a petition to determine if subdivision (a) of Section 16064 applies does not constitute a violation of a no contest clause.
“[¶]... [¶]
“(d) Subdivision (b) shall apply only to instruments of decedents dying on or after January 1, 2001, and to documents that become irrevocable on or after January 1, 2001. However, paragraphs (9), (11), and (12) of subdivision (b) shall only apply to instruments of decedents dying on or after January 1, 2003, and to documents that become irrevocable on or after January 1, 2003.
“[¶]... [¶]
“(f) The term ‘pleading’ in subdivision (b) includes a petition, complaint, response, objection, or other document filed with the court that expresses the position of a party to the proceedings.”
Article 2.5 of the Trust identifies the first spouse to die as the “Deceased Settlor” and the Surviving Spouse as the “Surviving Settlor.” Upon the death of the Deceased Spouse, Article 4.1 of the Trust requires division of assets comprising the remainder of the Trust Estate into the Exemption Trust, the Residual Trust, and the Survivor’s Trust. Article 2.5 further states: “Following the death of the Deceased Settlor, the Surviving Settlor may at any time amend, revoke, or terminate, in whole or in part, the Survivor’s Trust. All other Trusts shall become irrevocable and shall not be subject to amendment after the death of the Deceased Settlor.” Thus upon the death of George Seltzer on December 12, 2001, the Exemption Trust and the Residual Trust became irrevocable.
As stated in section 21320, subdivision (d), subdivision (b) applies only to instruments of decedents dying on or after January 1, 2001. George Seltzer and Shirley Seltzer both died after that date. The proposed petition sought removal of a fiduciary and an accounting or report of a fiduciary. Therefore section 21305, subdivision (b)(7) applied, and the proposed petition seeking removal of Cohen as Trustee and appointment of a Successor Trustee did not violate the no contest clause of the Trust. Section 21305, subdivision (b)(8) also applied, and the proposed petition, a pleading regarding an accounting or report of a fiduciary, did not violate the no contest clause of the Trust.
The definitions of a “fiduciary” in section 39 include a trustee.
Section 21305, subdivision (d), however, states that paragraph (12) of subdivision (b) only applies to instruments of decedents dying on or after January 1, 2003, and to documents that become irrevocable on or after January 1, 2003. Thus subdivision (b)(12) does not apply to the Trust as an instrument of George Seltzer (who died before January 1, 2003) or to the Exemption Trust and the Residual Trust, which became irrevocable upon George Seltzer’s death, which occurred before January 1, 2003. Section 21305, subdivision (b)(12) did, however, apply to the Survivor’s Trust, and thus as to the Survivor’s trust, the proposed petition, a petition to compel an accounting or report of a fiduciary, did not violate the no contest clause of the Trust.
The First Amendment to the Declaration of Trust (the First Amendment) executed by Shirley Seltzer on August 15, 2002, containing the Exemption Trust and Residual Trust, however, did not have a no contest clause. Under section 45, the First Amendment and the Trust are separate instruments (Estate of Rossi (2006) 138 Cal.App.4th 1325, 1340) and an amendment to a trust is not a provision of the trust to which a no contest clause applies (Townsend v. Townsend (2009) 171 Cal.App.4th 389, 405, fn. 10.) Article 7.1 of the First Amendment says only: “In all other respects, THE SELTZER FAMILY TRUST DATED SEPTEMBER 28, 2001, remains unchanged.” “ ‘Incorporation by reference occurs when “one writing, which is a complete testamentary instrument in itself, must refer to another document in such a manner as to incorporate it.” ’ ” (Perrin v. Lee, supra, 164 Cal.App.4th at p. 1248.) Thus the First Amendment did not incorporate the no contest clause of the Trust. The language of the First Amendment was not “clearly designed” to accomplish the purpose of incorporating the no contest clause of the Trust into the First Amendment, and demonstrated no intent by the Trustor to accomplish incorporation of the no contest clause into the First Amendment. (Ibid.) Either the no contest clause must explicitly mention the amendment, or the amendment must itself contain a no contest clause. (Estate of Rossi, at p. 1335.) No contest clauses must be drafted with particularity and must specifically identify each instrument that is intended to be subject to the no contest clause. (Perrin, at p. 1249.) Therefore as to the Exemption Trust and Residual Trust, the proposed petition did not violate a no contest clause of those Trusts.
Case law, moreover, construes actions by beneficiaries to oust a trustee or to question the administration of the trust estate as not being subject to the restrictions and penalties of a no contest clause. (Bradley v. Gilbert (2009) 172 Cal.App.4th 1058, 1072.) A beneficiary who believes a fiduciary has committed misconduct should be able to bring the alleged misconduct to the attention of the court without fear of being disinherited. (Estate of Hoffman (2002) 97 Cal.App.4th 1436, 1444.) An action by the beneficiary to remove a trustee—or, we believe, to compel an accounting by the trustee—does not in itself constitute a contest to the validity of the trust or seek to void, nullify, or set aside the trust or its provisions. (Estate of Bullock (1968) 264 Cal.App.2d 197, 201.)
We conclude that the trial court correctly found that the proposed petition did not violate the no contest clause of the Trust, and we will affirm the order granting the declaratory relief petition.
3. Other Issues Raised by Cohen
Cohen claims that because Shapiro never asked for an accounting during Shirley Seltzer’s life, the doctrine of laches makes Shapiro’s declaratory relief petition unenforceable. Whether the defense of laches exists is a question of fact to be determined by the trial court. (Bono v. Clark (2002) 103 Cal.App.4th 1409, 1418.) Cohen did not raise this issue in her opposition in the trial court. She therefore cannot raise it for the first time on appeal. (City of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th 668, 685.)
Cohen also claims that Shapiro should have filed his contest directly, pursuant to Genger v. Delsol (1997) 56 Cal.App.4th 1410, 1428, and because he did not he forfeits his portion of the trust. Genger states that section 21320 excludes sections 21306 and 21307 from the declaratory relief procedure, that a determination whether sections 21306 or 21307 applies cannot be made in advance of a beneficiary’s contest, and that these two statutes come into play only when the beneficiary actually brings a contest. (Genger, at p. 1428.) Shapiro’s proposed petition was not made on grounds in sections 21306 or 21307, those statutes are not implicated in this appeal, and Genger has no application.
DISPOSITION
The order is affirmed. Costs on appeal are awarded to petitioner Scott S. Shapiro.
We concur: KLEIN, P. J., ALDRICH, J.