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Gregge v. Hugill

California Court of Appeals, Sixth District

July 13, 2016

EDWARD BENNETT GREGGE, Plaintiff and Appellant,
v.
MICHAEL HUGILL, as Trustee, etc., Defendant and Respondent

          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 ...


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