Superior Court of Santa Clara County, No. 1-12-PR-170606,
Carrie A. Zepeda.
Page 562
COUNSEL
Page 563
Panitz
& Kossoff, Kenneth W. Kossoff and Donna M. Klugman for
Plaintiff and Appellant.
Reed
Smith, Paul D. Fogel, Dennis Peter Maio; Sugai & Sudweeks and
Sheri Lynn Sudweeks for Defendant and Respondent.
Opinion
by Grover, J., with Rushing, P. J., and Má rquez, J.,
concurring.
OPINION
[204
Cal.Rptr.3d 843] GROVER, J.
Edward
Bennett Gregge (Bennett) challenges the dismissal of his
Probate Code section 17200 [204 Cal.Rptr.3d 844] petition to
determine the validity of a 2008 amendment to his
grandfather's inter vivos trust. The petition alleged
that Bennett's grandfather lacked testamentary capacity
and was subject to undue influence when he executed the
amendment. We conclude that the trial court abused its
discretion when it dismissed Bennett's petition under
Probate Code section 17202 based on a non-party disclaiming
his interest in the trust estate. The court's acceptance
of the disclaimer was contrary to public policies of
effectuating a testator's intent and dissuading elder
abuse, and was premised on the erroneous view that the
disclaimer effectuated a settlement of the lawsuit. A
settlement assumes the consent of the parties; it is not a
side deal between the court and a non-litigant. Bennett had
an interest in challenging the validity of the 2008
amendment, and the prosecution of his petition was necessary
to protect that interest. Accordingly, we will reverse the
judgment.
I.
BACKGROUND
William
B. Hugill died in 2011. His wife, Janice, had passed away in
1996.[1] In 1990, the couple created an inter
vivos trust appointing William as trustee. That instrument
provided for the establishment of two separate trusts as soon
as one spouse died--the decedent's irrevocable trust, and
the survivor's amendable and revocable trust. The trust
further provided that, upon the death of the surviving
spouse, both trusts would terminate. After disbursement of
certain personal property, 30 percent of the remainder of the
survivor's trust would be distributed in equal shares to
William's four children, Michael, Patrick, Marjorie, and
Holly. The other 70 percent would be set aside in a
grandchildren's trust for college educations, with the
remainder of that subtrust to be divided among William's
children (30 percent) and grandchildren (70 percent) after
the youngest grandchild turned 26. The document contained a
no contest provision.
Page 564
In
1997, William amended the survivor's trust, designating a
fixed $900,000 to fund the grandchildren's trust, to be
distributed as stated in the 1990 trust instrument. He
allocated the estate residue among his four children, with 30
percent to be disbursed to Patrick, 30 percent to be
disbursed to Marjorie, five percent to be disbursed to
Michael, and 35 percent to be disbursed to Holly.
In
2000, William amended the survivor's trust by eliminating
Michael's five percent residual share and increasing
Patrick's share to 35 percent. In 2001, William removed
Michael's children Kathleen and Cameron as beneficiaries
of the grandchildren's trust, but he restored their
status one year later. In 2005 William again removed Cameron
as a grandchildren's trust beneficiary. He also divided
the $900,000 grandchildren's trust into equal shares for
his six other grandchildren, to be distributed--half to the
grandchild and half to the grandchild's parent who is
William's child--when each grandchild turned 26. As a
result, under the 2005 amendment each named grandchild would
receive $75,000 (one half of $150,000). The trustee was
vested with discretion to disburse sums from each
grandchild's share to pay for that grandchild's
higher education before age 26.
William
designated Marjorie as first successor trustee in 1997, with
Michael, Holly, and Patrick (in that order) designated as
successor trustees in the event Marjorie was unable to serve.
William never changed Marjorie's designation as first
[204 Cal.Rptr.3d 845] successor trustee, but he removed
Michael from the list of successor trustees in 2001.
William
executed a final amendment to the survivor's trust on
June 5, 2008, two weeks after he underwent surgery to remove
a subdural hematoma. The 2008 amendment restored Michael as a
trust beneficiary on equal footing with his siblings, and it
restored Cameron as a grandchildren's trust beneficiary
on equal footing with his sister and cousins. Under the
amendment, Michael was designated to succeed William as
trustee, with Marjorie, Holly, and Patrick (in that order)
designated as successor trustees. By adding Cameron as a
grandchildren's trust beneficiary, the 2008 amendment
reduced each grandchild's fixed disbursement under the
2005 amendment from $75,000 to $64,286, a difference of
$10,714.
In late
2009, William resigned as trustee and Michael became
successor trustee. According to Michael's first account
and report filed May 1, 2012, when William died in 2011 the
survivor's trust held assets exceeding $4.2 million.
Page 565
II.
TRIAL COURT PROCEEDING
Following
Michael's first accounting, Holly's son Bennett filed
a petition under Probate Code section 17200[2] to determine
the validity of the June 5, 2008 amendment to the
survivor's trust. Bennett alleged that William lacked
testamentary capacity and was unduly influenced by Michael in
executing the 2008 amendment, and that Michael unduly
benefited from the disposition of the trust estate and from
his appointment as successor trustee. The petition alleged
further that Michael had deprived William of proper medical
care after William fell in 2009, and in 2010 when ...