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Cook v. Cook

September 29, 2009


(Super. Ct. No. P080429) (Ventura County) Kent Kellegrew, Judge.

The opinion of the court was delivered by: Gilbert, P.J.


In an amendment to their testamentary trust, testators state that a beneficiary's debt owed them be offset against that beneficiary's distribution. Here we conclude the beneficiary's assertion that the debt is unenforceable violates the trust's no-contest provision.

Trust beneficiary Daniel W. Cook appeals an order determining that his pleading regarding the distribution of his deceased parents' trust violates the no-contest provision of the trust. We affirm.


On October 23, 1997, Donald and Nancy Cook settled a revocable trust ("Trust") and executed pour-over wills drafted by their attorney as an integrated estate plan. The beneficiaries of the Trust are their four children, Donald Jr., Daniel, Dennis, and Diane.*fn1

The Trust provides for equal distribution of Trust property among the four children, but requires the Trustee to "take into account and allocate any debts owed to the settlors to the share created for the beneficiary owing said obligation." (Trust, ¶ 6.3(a).)

The Trust also contains this no-contest provision: "If any beneficiary under this instrument . . . directly or indirectly contests this instrument, any amendment to this instrument, . . . or opposes, objects to, or seeks to invalidate any of the provisions of this instrument . . . or seeks to succeed to any part of the estate of the settlors other than in the manner specified in this instrument . . . , then the right of that person to take any interest given to him or her by this instrument or any amendment to this instrument shall be void, and any gift or other interest in the trust property to which the beneficiary would otherwise have been entitled shall pass if he or she had predeceased the settlors without issue." (Trust, ¶ 8.4.)

On October 23, 1997, the settlors also executed a two-page document ("Writing") prepared by Donald Jr. at their request.*fn2 The Writing states: "It is the desire of Donald and Nancy Cook that all children are treated equal with regard to the distribution of assets upon our demise. We would like for there to be no misunderstanding regarding certain debts owed by children who are beneficiaries. We would like for any and all debts to be offset against any and all assets, which is bequeathed, prior to distribution of the assets to the beneficiaries." The settlors' attorney interlineated upon the Writing, stating that it intended to "reflect the loans (debts) owed to the settlors as of the date of execution of said Trust." The attorney later testified that he drafted the interlineations as "a personal preference." He stated that he struck "verbiage" in the Writing that stated that the document was intended to "be an integral part of the [Trust]."

The Writing refers to an attachment setting forth the sums lent to Daniel since 1986, the amounts repaid, and the principal and interest owed. The Writing describes the loans as money lent "to help [Daniel] during a difficult time with his business." At the time the settlors executed the Writing, Daniel owed them nearly $900,000, and was repaying the loans with $1,500 monthly payments. The Writing also sets forth the sums lent to Dennis since 1991, the amounts repaid (none), and the principal and interest owed.

Donald and Nancy died in 2006. On April 19, 2007, successor Trustee Donald Jr. filed a petition requesting instructions whether the unpaid loans described in the attachment to the Writing, as well as a later loan to Daniel, should be offset or deducted from the Trust distributions. (Prob. Code, § 17200, subd. (b)(6).)*fn3 The Trustee asserted that the matter was in dispute among the beneficiaries. Daniel responded to the petition, in propria persona, and asserted that the "loans which were long ago barred by the statute of limitations may not now be deducted from the distributive share interest of a beneficiary, especially when the loan agreements in question were oral and were not memorialized or documented by any type of legally adequate writing, and the indebtedness in question was satisfied." Among other things, Daniel contended that the two- and four-year statutes of limitations precluded offset against his Trust interest, the loans were not memorialized in writing, and the Trustee failed to pursue collection of the loans in his bankruptcy proceeding. Daniel concluded: "[The] Court should instruct the Trustee in this matter that any loan or indebtedness which is outlawed and/or barred by the statute of limitations, verbal or written, may not be deducted from any Trust beneficiary's interest in the Trust, according to well established principles of California law."

Trust beneficiaries Dennis and Diane responded that Daniel's assertions and his request for ruling violated the Trust's no-contest provision. After a hearing and presentation of evidence, the probate judge stated: "I'm looking at the four corners of this pleading, and I don't see anywhere in this pleading a request for the interpretation of an instrument containing a no-contest clause. What I see argued in this pleading is that the trustee should be given instruction to distribute the assets of this trust in a way which is in conflict with the plain language of the trust instrument." The court noted that Daniel's pleading was not framed pursuant to the safe-harbor provisions of section 21320, and that he did not provide evidence that he had repaid any debt. The court then ruled that Daniel's pleading violated the no-contest provision of the Trust, thereby causing his disinheritance pursuant to Trust terms.

Daniel appeals and contends that: 1) his pleading merely requested an interpretation of the Trust pursuant to section 21305, subdivision (b), and was not a contest, and 2) time-barred loans may not be offset against his ...

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