(Los Angeles County Super. Ct. No. BP109463) APPEAL from an order of the Superior Court of Los Angeles County, Reva G. Goetz, Judge. Affirmed in part and reversed in part.
The opinion of the court was delivered by: Johnson, J.
CERTIFIED FOR PUBLICATION
Appellants Rodney E. Donkin, Jr. and Vicki Donkin are successor trustees of the Donkin Family Trust dated August 15, 1988 (Trust), which was created by Rodney Donkin, Sr. and Mary Donkin. The Trust contains a "no contest" clause disinheriting any beneficiary who challenges the Trust, its provisions, or its asset distribution. In 2009, two of the beneficiaries, Annemarie Donkin and Lisa Donkin Kim, filed a "safe harbor" petition pursuant to Probate Code section 21320*fn1 to determine if their challenge the Trustee's administration of the Trust would constitute a contest under the Trust's no contest provisions. While the beneficiaries' petition was pending, the Probate Code was amended to eliminate the safe harbor mechanism, and the trustees filed a petition for instructions concerning the applicability of the new law. The trial court--apparently applying the former law regarding will contests--ruled on the beneficiaries' safe harbor petition, found the beneficiaries' challenge would not constitute a will contest, and denied the trustee's petition for instructions.
The trustees contend the trial court erred in (1) failing to rule on their petition for instructions prior to the granting of the safe harbor petition; (2) failing to determine whether the new law applied to the Trust; and (3) concluding the beneficiaries' proposed challenge to the trustees did not violate the Trust's no contest provisions. As a consequence, the trustees request that we find as a matter of law the former law applies and the proposed challenges violate the Trust's no contest provisions. We find that the old law applies, and under the old law's safe harbor provisions, certain of the beneficiaries' challenges to a trust amendment would constitute a prohibited contest if they were pursued by the beneficiaries.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Decedents Mary E. Donkin and Rodney E. Donkin, Sr. (Settlors), husband and wife, as settlors created a revocable Trust on August 15, 1988, which by its terms became irrevocable upon the death of both spouses. Mary and Rodney, Sr.*fn2 were the original trustees of the Trust. The primary beneficiaries of the Trust under its first amendment dated May 10, 2002, were the Settlors' children Rodney E. Donkin, Jr., Lisa B. Kim, and Annemarie N. Donkin. After the death of Rodney, Sr., on August 26, 2002, Mary amended the Trust on December 17, 2004 (Second Amendment). After Rodney, Sr. died, Mary served as sole Trustee of the Trust, and Mary died on February 5, 2005.
The Trust specified that with respect to "Resolution of Conflict," any controversy between the trustees and any beneficiary "involving the construction or application of any of the terms, provisions, or conditions of this trust shall, on the written request of either or any disagreeing party served on the other or others, be submitted to arbitration." (Arbitration Clause).
The Trust further specified with respect to "Litigation" that the Settlors desired that "this Trust, the Trust Estate and the Trust administrators and beneficiaries shall not be involved in time consuming and costly litigation concerning the function of this Trust and disbursement of the assets. Furthermore, the Settlors have taken great care to designate, through the provisions of this Trust, how they want the Trust Estate distributed. Therefore, if a beneficiary, or a representative of a beneficiary, or one claiming a beneficial interest in the Trust Estate, should legally challenge this Trust, its provisions, or asset distributions, then all asset distributions to said challenging beneficiary shall be retained in Trust and distributed to the remaining beneficiaries herein named, as if said challenging beneficiary and his or her issue had predeceased the distribution of the Trust Estate." (No Contest Clause).
The Second Amendment deleted the "'Allocation of Trust Assets'" from the original Trust and replaced it with the following, after Rodney, Sr.'s death:
"Allocation of Trust Assets [¶] When the above conditions are satisfied, the debts and obligations of the Trust Estate have been paid, and any special bequests have been distributed, the Trustee shall have the complete discretion whether to keep the assets of the trust estate intact and continue to manage them for the equal benefit of the designated Primary Beneficiaries. When the trustee determines it is appropriate to liquidate any or all of the assets in the trust, the Trustee shall allocate and divide those liquidated assets into separate trust shares so as to provide one share in trust for each of the designated Primary Beneficiaries living at the death of the Surviving Settlor, and one share in trust for each deceased Primary Beneficiary with issue surviving. The trustee may, within its sole discretion continue to manage and invest the liquidated assets as it deems appropriate. The trustee may, within its sole discretion, distribute income and/or principal from the trust share to the individual beneficiaries."
The Second Amendment also added to the provision for asset distribution, a clause entitled "No Contest--Contestant Disinherited," which provided that, "If any beneficiary, in any manner, directly or indirectly, contests or attacks this instrument or any of its provisions, any share or interest in the trust given to that contesting beneficiary under this instrument is revoked and shall be disposed of in the same manner provided herein as if that contesting beneficiary had predeceased the settlor."
The Trust confers discretionary powers on the trustee and gives specific directions concerning distribution of Trust assets to the beneficiaries. The Trust gave the trustees power to hold, improve, invest, lease, manage and make distributions of Trust assets. The Second Amendment to the Trust gave the trustees, after the payment of the Trust's debts and obligations, "complete discretion whether to keep the assets of the trust estate intact and continue to manage them for the equal benefit of the designated Primary Beneficiaries."
Under the Trust, the successor trustees had a duty to render an annual accounting to the beneficiaries not more than 120 days after the close of the fiscal year of the Trust.
The Trust provided that upon the death of either Settlor, the trustee would divide the estate into two separate trusts, the Survivor's Trust A and the Decedent's Marital Share (consisting of one-half of the community property of the estate) which would be divided into two trusts, Decedent's Trust B and Decedent's Trust C. Upon the creation of Trust B and Trust C, such trusts became irrevocable.
Upon Mary's death, Rodney, Jr. and his wife Vicki became successor trustees of the Trust (Trustees).
On March 5, 2008, Annemarie Donkin and Lisa Kim, two of the three beneficiaries of the Trust (beneficiaries) filed a "safe harbor" petition under former section 21320*fn3 to determine whether the filing of their proposed petition to compel a proper accounting from the successor trustees, fix the compensation of the successor trustees, remove the successor trustees, and for distribution of a portion of the Trust assets would violate the No Contest Clause of the Trust. The Trustees responded that the beneficiaries ...