Filed: 7/13/2016
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
EDWARD BENNETT GREGGE, H040663
(Santa Clara County Super. Ct.
Plaintiff and Appellant, No. 1-12-PR-170606)
v.
MICHAEL HUGILL, as Trustee, etc.,
Defendant and Respondent.
Edward Bennett Gregge (Bennett) challenges the dismissal of his Probate Code
section 17200 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.
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
1
Because this case involves several family members, many sharing the same
surname, we will use first names to avoid confusion, intending no familiarity or
disrespect.
2
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 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.
II. TRIAL COURT PROCEEDING
Following Michael’s first accounting, Holly’s son Bennett filed a petition under
Probate Code section 172002 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
2
Unspecified statutory references are to the Probate Code. Unspecified
subdivisions are to section 17200.
3
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 William contracted
pneumonia. The petition sought a determination that the 2008 amendment was void due
to lack of testamentary capacity and undue influence.
In preparation for trial, Michael moved in limine to exclude all evidence
supporting a challenge to the residue of the survivor’s trust estate. Michael argued that
Bennett, as a grandchild, was not a beneficiary to the trust residue, and thus had no
standing to challenge the residue. Bennett argued that as a beneficiary of the trust, he
was entitled to challenge the validity of the 2008 amendment in its entirety under
section 17200.
At argument held on the first day of trial, Michael identified Bennett’s interest in
the 2008 amendment as $10,700. He argued that Bennett’s interest was not an interest in
the residuary estate so it did not provide him with standing to challenge the residue, and
that if $10,000 “is what would be holding up the Court in terms of a full dismissal,” he
was certain the residuary beneficiaries who had formally objected to Bennett’s petition3
would pay the difference to Bennett to end the litigation, subject to the right to recover
their attorney’s fees. Citing section 17202, which authorizes a court to dismiss a
section 17200 petition “if it appears that the proceeding is not reasonably necessary for
the protection of the interests of the trustee or beneficiary,” Michael argued that Bennett
should not be allowed to burden the residue with litigation.
The court expressed its view that Bennett could contest the 2008 amendment
because that instrument reduced his interest in the grandchildren’s subtrust. The court
was uncertain whether, if Bennett were to prevail, the remedy would be to invalidate only
3
Patrick and Marjorie filed an objection to the petition, denying that William
lacked testamentary capacity or was unduly influenced when he executed the
2008 amendment.
4
the grandchildren’s subtrust in which Bennett held an interest (resulting in Cameron
losing his one-seventh interest in that subtrust) or the entire instrument. At that point
Michael told the court that “Cameron will waive his one-seventh interest in the
grandchildren’s trust” to dispose of the case in its entirety. Bennett rejoined that Michael
should not be able to manipulate standing at the time of trial, and that the challenge to the
2008 amendment affected not only Bennett’s own pecuniary interest in the
grandchildren’s trust, but the validity of the entire instrument.
Emphasizing that the law disfavors will contests, the trial court stated its intention
to dismiss the petition under section 17202 if Cameron would agree to relinquish his
interest in the grandchildren’s trust, because that relinquishment would eliminate
Bennett’s standing by restoring his interest to what it was before the 2008 amendment.
The court explained: “[I]f Cameron gave up his share because he wants to save his
family not just the expense but so everybody can get along because that’s the most
important thing in a family – and I think that’s why will contests are disfavored, correct,
in probate? [¶]…[¶] Then there is no harm to vet it and everybody can live in
harmony [¶]…[¶] So isn’t that what the policy of the law is, if will contests are
disfavored?”
Bennett disagreed, arguing “When there’s undue influence and when there’s lack
of testamentary capacity, when there is elder abuse, will contests, trust contests and elder
abuse complaints are very much favored by the courts and the [L]egislature.” The court
countered: “Except that none of the other beneficiaries believe that that is what
happened, if they didn’t themselves raise the issue in a petition.” To which Bennett
responded: “And you don’t need more than one beneficiary to raise an issue. If you have
four beneficiaries … [y]ou don’t need two, three or four of four. You don’t need a
majority to do a trust or will contest. You need one beneficiary. Bennett is the one
beneficiary … and he is attacking the instrument that impacted his beneficial interest
5
because he believes it was procured against a 90-plus-year-old man in violation of
applicable law.”
The court further described its reasoning: “I just think that the courts should want
to do what’s in everybody’s best interest. And we’re an equitable court. And so I think if
the family wanted to get this over and done with and defeat standing, that’s their
prerogative. [¶]…[¶] And if a family can live in harmony and a person doesn’t lose
whatever they thought they were going to lose and nobody else in the family objects to
the issue, then that should be the end of it. That should be what happens.” The court
continued, “You know where I stand in terms of standing”—that “[i]f Cameron’s going
[to] come in here and say that he’s given up his interest so that Bennett’s not affected in
any negative way, then I would find that there’s no standing because his pecuniary
interest is not affected.” The court nonetheless invited briefing on the issue and on
whether, if Cameron would not disclaim, Bennett’s challenge would extend to the entire
trust, or only to the grandchildren’s trust.
Cameron signed a declaration disclaiming his interest in the grandchildren’s trust
conditioned on the entry of a final order dismissing the petition, and Michael filed that
declaration with a memorandum arguing that the petition should be dismissed in its
entirety under section 17202 because Cameron’s disclaimer eliminated Bennett’s
standing to challenge the 2008 amendment. Bennett’s memorandum argued that his
beneficiary status conferred standing to challenge the 2008 amendment in its entirety, and
that section 17202 should not be used to defeat his challenge in light of public policy
against undue influence and elder abuse.
When the court reconvened, Bennett pressed that public policy favored a trial on
the merits of his undue influence and lack of capacity claims. But the court viewed
Cameron’s disclaimer as a settlement of the estate resulting in the elimination of
Bennett’s pecuniary interest in a challenge to the 2008 amendment: “Cameron wants
peace in his family. He is even offering to give up his portion so that Bennett’s portion
6
of his interest is not in any way impaired. There’s a settlement of this matter in that
instance.” The court found “that Cameron has agreed to give up his portion of whatever
he might inherit, so that Bennett’s interest in the grandchildren’s trust is not negatively
affected; therefore 17202 applies[.]” The judgment reflected a dismissal under
section 17202.
III. DISCUSSION
A. STANDARD OF REVIEW
Section 17202 provides that “[t]he court may dismiss a petition if it appears that
the proceeding is not reasonably necessary for the protection of the interests of the trustee
or beneficiary.” No court has addressed the proper standard of review of a dismissal
under section 17202, although one court has applied the abuse of discretion standard to a
dismissal under section 17202’s predecessor statute, former section 1138.5. (Copley v.
Copley (1978) 80 Cal.App.3d 97, 106.) Being permissive and not mandatory, a dismissal
under section 17202 invokes the discretion of the trial court. (Cf. Schwartz v. Labow
(2008) 164 Cal.App.4th 417, 427 [“[T]he probate court has wide, express powers to
‘make any orders and take any other action necessary or proper to dispose of the matters
presented’ by the section 17200 petition. (§ 17206.)”].) Accordingly, we will apply the
abuse of discretion standard to the trial court’s assessment of the interests of the trustee or
beneficiary under section 17202. However the interpretation and application of that
statute is a matter for our independent review. (International Alliance of Theatrical Stage
Employees, etc. v. Laughon (2004) 118 Cal.App.4th 1380, 1387.)
“The discretion of a trial judge is not a whimsical, uncontrolled power, but a legal
discretion, which is subject to the limitations of legal principles governing the subject of
its action, and to reversal on appeal where no reasonable basis for the action is shown.”
(Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348, 355.)
“The scope of discretion always resides in the particular law being applied, i.e., in the
‘legal principles governing the subject of [the] action ... .’ Action that transgresses the
7
confines of the applicable principles of law is outside the scope of discretion and we call
such action an ‘abuse’ of discretion.” (City of Sacramento v. Drew (1989)
207 Cal.App.3d 1287, 1297.)
B. STANDING
Bennett argues that he has standing to contest the 2008 amendment both as a
vested beneficiary of the grandchildren’s trust and as a contingent beneficiary and
successor-in-interest to his mother Holly’s portion of the trust residue. He argues that as
a beneficiary section 17200, subdivision (a) (providing that a trust beneficiary may
petition the court “concerning the internal affairs of the trust”), subdivision (b)(1)
(proceedings to address construction of the trust instrument), subdivision (b)(3)
(proceedings to determine the validity of a trust provision), subdivision (b)(10)
(proceedings to appoint or remove a trustee), and subdivision (b)(12) (proceedings to
redress a breach of trust) give him a statutory right to test the validity of the
2008 amendment.
Subdivision (a) provides that “a trustee or beneficiary of a trust may petition the
court under this chapter concerning the internal affairs of the trust or to determine the
existence of the trust.” Subdivision (b) identifies several types of proceedings
“concerning the internal affairs of the trust.” On its face, section 17200 allows Bennett,
as a vested beneficiary of the grandchildren’s trust,4 to file a petition challenging the
validity of the 2008 amendment. (§ 24, subd. (c); see In re Estate of Bowles (2008)
169 Cal.App.4th 684, 699.) In our view, the petition falls under subdivision (a)
concerning the existence of the trust, and under subdivisions (b)(1), (b)(3), and (b)(13)
(approving or directing the modification or termination of the trust).
4
We reject Bennett’s argument that he is a contingent beneficiary to Holly’s
interest in the trust residue. Holly’s interest in the trust passed to her in its entirety upon
William’s death and is now vested. Whatever interest Bennett may or may not have in
Holly’s property at the time of her death is not yet known and not governed by the trust.
8
Bennett’s petition, however, is subject to dismissal under section 17202, “if it
appears that the proceeding is not reasonably necessary for the protection of the interests
of the trustee or beneficiary.” (§ 17202.) Bennett had a pecuniary interest in the
grandchildren’s trust that would have been protected by a successful undue influence or
lack of capacity challenge to the 2008 amendment (cf. Lickter v. Lickter (2010)
189 Cal.App.4th 712, 728 (Lickter) [beneficiary challenging testamentary instrument
must have an interest “that may be impaired, defeated, or benefited by the proceeding at
issue.”]; Jay v. Superior Court (1970) 10 Cal.App.3d 754, 758 [a beneficiary under a will
may contest a later will or codicil “if his pecuniary interest in the devolution of the
property would [] be affected or impaired by the later will or codicil.”]) until Cameron’s
disclaimer eliminated any potential financial impact on Bennett’s share of the subtrust.
Thus, to determine whether the trial court’s dismissal was appropriate, we turn to whether
Cameron’s disclaimer was properly accepted by the trial court.
C. THE DISCLAIMER AND DISMISSAL
Bennett argues that the trial court’s dismissal of his petition was contrary to public
policy. According to Bennett, the trial court’s deprivation of his standing has shielded
Michael from any accountability and essentially sanctioned an estate plan executed by
unlawful means. Bennett argues that public policy favors testamentary contests involving
credible allegations of undue influence and lack of capacity, compelling courts to
adjudicate, not dismiss, those contests. In support of his position that this policy holds
true even when a majority of the beneficiaries do not support the contest, Bennett cites
Estate of Lowrie (2004) 118 Cal.App.4th 220 (Lowrie). The Lowrie court noted that
standing under the Elder Abuse Act (Welf. & Inst. Code, § 15600 et seq.) must be
analyzed in a manner that induces protection of the victimized, and must be interpreted to
deter, not encourage, such abuse, so that abusers who gain control of an estate cannot use
a restrictive interpretation of standing to avoid accountability. (Lowrie, at pp. 230–231.)
Michael counters Bennett’s public policy argument by noting that Bennett had not filed
9
an elder abuse claim, and he lacks standing to do so. Michael refers us to the Lickter
court’s conclusion that a court does not have discretion “to find standing in order to
further the public policy in favor of encouraging people to report elder abuse and file
elder abuse lawsuits.” (Lickter, supra, 189 Cal.App.4th at p. 730.)
As we will explain, the trial court’s acceptance of Cameron’s conditional
disclaimer, and the resulting dismissal under section 17202, was contrary to public policy
and an abuse of discretion. The trial court was of the view that it could invite Cameron’s
disclaimer because will contests are disfavored, and that Cameron’s disclaimer would
amount to a settlement. Neither is correct.
The notion that will contests are disfavored is grounded in the same public policies
supporting no contest provisions—“the public policies of discouraging litigation and
giving effect to the purposes expressed by the testator.” (Estate v. Black (1984)
160 Cal.App.3d 582, 586–587; see also Estate of Kaila (2001) 94 Cal.App.4th 1122,
1128.) But the public policy disfavoring litigation does not give the trial court the
authority or discretion to dismiss a beneficiary’s petition. Our Supreme Court has long
recognized that any policy disfavoring will contests is countered by “ ‘the right of a
citizen to have his claim determined by law.’ ” (Lobb v. Brown (1929) 208 Cal. 476,
490–491 (Lobb); see also In re Estate of Hite (1909) 155 Cal. 436, 439 [“Public policy
dictates that the courts of the land should be open, upon even terms, to all suitors.”].) In
strictly construing a forfeiture clause in an undue influence will contest, the Supreme
Court in Lobb recognized that “public policy demands that full and complete opportunity
should be given to all interested parties to test the validity of such a testamentary
document, not only to protect that which may be rightfully and legally theirs, but also to
preserve the wishes and desires of the testatrix against designing persons seeking to take
advantage of her age and infirmities which are the usual result of advanced years.”
(Lobb, at pp. 491–492.)
10
The public policy recognized by the Supreme Court in Lobb has resonated more
recently in a 2007 California Law Revision Commission report examining the
enforceability of no contest clauses. The Commission reported that no contest clauses
can be used to shield fraud or undue influence from judicial review, and it recognized that
“the policy of effectuating the transferor’s intentions” would be undercut if a challenge to
a testator’s capacity could be thwarted by a no contest clause. (37 Cal. Law Revision
Comm. Rep. (2007) at pp. 362, 370–371.) It recommended enacting a probable cause
exception to a no contest clause’s enforceability for undue influence type challenges.
(Id. at p. 362.)
Here, trial commenced with Bennett, a vested beneficiary having a pecuniary
interest in the proceedings, ready to prosecute his undue influence and lack of capacity
claims. As the petitioner, Bennett had weighed the risk of a loss (including, as Michael
had made clear in his settlement conference statement, a forfeiture challenge to Bennett’s
and Holly’s interests in William’s estate) against his right to have a court determine
whether his grandfather’s testamentary intent was reflected in the 2008 amendment. In
light of long-held policies of effectuating a testator’s intent and dissuading elder abuse,
we conclude that the trial court abused its discretion by inviting a dismissal of the action
and accepting Cameron’s conditional disclaimer with the stated objective of terminating
the litigation.
Further, Cameron’s disclaimer was necessarily limited to Cameron’s interest in the
2008 amendment. Thus, the trial court’s dismissal had the incongruous result of
implementing the 2008 amendment with respect to Michael and his siblings but the
2005 amendment with respect to Cameron and William’s other grandchildren.5
5
The trust, as it existed after the 2005 amendment, excluded Michael and
Cameron as beneficiaries, and had Marjorie serving as first successor trustee. The
2008 amendment, at issue here, added Michael and Cameron as beneficiaries by reducing
the interests of the grandchildren’s trust and residuary beneficiaries, and named Michael
instead of Marjorie as first successor trustee.
11
We acknowledge the competing policy supporting will contest settlements “in the
interest of the preservation of family ties, the adjustment of equities, and avoiding
nonproductive waste of the assets of the estate.” (Estate of Schuster (1984)
163 Cal.App.3d 337, 342.) However, the trial court’s interpretation of Cameron’s
disclaimer as a settlement was incorrect. A settlement is an agreement among adverse
parties, and Bennett did not agree to settle the case. The court’s acceptance of Cameron’s
conditional disclaimer did not preserve Bennett’s family ties or promote equities vis-à-vis
Bennett. By thwarting Bennett’s petition, Cameron’s $64,286 disclaimer protected his
father’s one-quarter interest in the residue, an interest that approximated $825,000 as of
William’s death. The disclaimer also shielded Michael from having to defend against
allegations affecting his interest in and management of William’s estate.6
Under the facts of this case, the court abused its discretion by dismissing the
petition under section 17202 as not reasonably necessary for the protection of Bennett’s
interest. Setting aside Cameron’s disclaimer, Bennett, a vested beneficiary with a
pecuniary interest in the proceeding, was deprived of the right to challenge the
2008 amendment on undue influence and lack of capacity grounds. (See Jay v. Superior
Court, supra, 10 Cal.App.3d 754 at p. 758.) We conclude that Bennett was entitled to a
trial on his petition, and that the court abused its discretion by promoting a dismissal
which deprived him of his interest in a trial. We will remand the matter for the trial court
to strike Cameron’s disclaimer and resume proceedings on Bennett’s claims.
6
The parties disagree as to whether Michael would be required to resign as trustee
should Bennett prevail on his petition. In post argument letters, Michael argues that his
appointment as successor trustee would not be affected by Bennett’s petition because he
has been serving as trustee under a 2009 Successor Trustee Acceptance executed after
William resigned as trustee, and Bennett’s petition had not alleged that William’s
resignation or Michael’s acceptance were invalid. Bennett argues that William’s
resignation did not amend the trust, and that the 2001 amendment would govern the
succession of trustees.
12
In light of that disposition, we do not address Bennett’s other grounds for reversal,
including the alleged error flowing from the court’s interlineation on the judgment
prepared by Michael’s counsel.
IV. DISPOSITION
The judgment is reversed, and the matter is remanded for further proceedings
consistent with this opinion.
Appellant is entitled to costs on appeal.
____________________________________
Grover, J.
WE CONCUR:
____________________________
Rushing, P.J.
____________________________
Márquez, J.
13
Trial Court: Santa Clara County Superior Court
Superior Court No. 1-12-PR-170606
Trial Judge: Carrie A. Zepeda-Madrid
Counsel for Plaintiff/Appellant Kenneth W. Kossoff
Edward Bennett Gregge Donna M. Klugman
Panitz & Kossoff, LLP
Counsel for Defendant/Respondent Paul D. Fogel
Michael Hugill, as Trustee Dennis Peter Maio
Reed Smith LLP
Sheri Lynn Sudweeks
Sugai & Sudweeks, LLP