Opinion
B202088 Consolidated with B202092
4-17-2008
MICHAEL WESTFALL, Plaintiff and Respondent, v. PATRICK WESTFALL, Defendant and Appellant.
Law Offices of Brian C. Ostler, Sr., Brian Charles Ostler, Sr. and William L. Smith, Jr. for Defendant and Appellant. Loeb & Loeb, Adam F. Streisand and Gabrielle Vidal for Plaintiff and Respondent.
NOT TO BE PUBLISHED
I. INTRODUCTION
Two no contest clauses in two trust instruments were unintelligible due to a drafting error. The probate court, in the face of uncontroverted evidence from the attorney who drafted the two trust instruments, amended the documents to provide for an enforceable no contest clause. Defendant, Patrick Westfall, contends that the filing of two Probate Code section 21320 applications which alleged that the purported no contest clauses were unenforceable constituted contests. We conclude that plaintiff, Michael Westfall, did not violate the no contest clauses when: he filed the two applications which correctly noted the no contest clauses were unintelligible; the probate court amended the two instruments to correct a drafting error and comply with the trustors clear intentions; and the proposed petitions would not otherwise violate the no contest clauses.
II. BACKGROUND
A. The Janzen Trust
On May 31, 2007, plaintiff, Michael Westfall, filed an application for order determining that the filing of a proposed retaliation petition would not violate a purported no contest clause in the Janzen Trust which was created by Edna H. Janzen, on September 15, 1993. The application alleged the following. Ms. Janzen, who is the grandmother of plaintiff and defendant, had two children, Patricia Elizabeth McGrath and Denis E. McGrath. Ms. McGrath was the mother of Patrick and Michael. The Janzen trust was irrevocable upon creation. The primary asset of the Janzen trust was real property located at 155 La Verne Avenue in Los Angeles. The Janzen trust provided that Ms. Janzen was its beneficiary during her lifetime and its net income would be utilized for her support. Pursuant to paragraph 4.1, upon Ms. Janzens death, the trustee was directed to distribute the trust assets. The trust assets were to be distributed to Ms. Janzens two children, Ms. McGrath and Denis. Paragraph 8.1(a) of the trust provided that Ms. Janzen was sole trustee during her lifetime. But, upon Ms. Janzens death, Denis was to become the sole successor trustee. Ms. Janzen died on July 6, 1995. Ms. McGrath, who is a beneficiary of the Janzen Trust, died on October 25, 2006. Plaintiff is the duly appointed and acting administrator of Ms. McGraths estate.
The application argued that paragraph 7.7 of the Janzen Trust contained a drafting error. According to plaintiffs petition, the language in paragraph 7.7 was nonsensical in that it provided: "7.7 Choice of Law Clause: [¶] The validity of this trust and construction of its beneficiary under this Declaration of Trust shall contest it or any of its parts or provisions, or the exercise of the sole discretion of the Trustee, then any share of interest given to or provided for that beneficiary shall thereupon be revoked and such share or interest shall be distributed as if that beneficiary had died leaving no issue surviving." The application sought a determination that due to the confusing nature of language of the clause paragraph 7.7 could not be enforced as a no contest provision. In the alternative, the application sought an order that a proposed petition would not violate the no contest clause. Plaintiff proposed to file a petition which: attacked a first amendment to the Janzen trust (but not the trust instrument itself); sought a determination of the beneficiaries of the trust; sought confirmation of the trustee; and requested a distribution of trust assets.
The first amendment to the Janzen trust, dated December 27, 1993, provides: "5.1 Distribution of Trust: Upon the death of Edna H. Janzen, this Trust shall cease and terminate, and shall finally distribute to Patrick Arthur Westfall, the Trust estate hereof, free and clear of trust, including all accumulated income, principal, and any addition made to the Trust estate during the lifetime of the Trustor. In the event of the death of the above-named beneficiary, the Trust Estate, free and clear of trust, shall be equally distributed to Patricia Elizabeth McGrath and Denis E. McGrath." Thus, the December 27, 1993 first amendment left the Janzen trust assets to defendant. Paragraph 8.1(a) was amended to provide that upon Ms. Janzens resignation, death, or incompetency, defendant was appointed as successor trustee. And defendant, rather than Denis, was appointed as successor trustee after the amendment to the irrevocable trust.
Plaintiffs proposed petition alleged that: the Janzen trust property was previously owned by Ms. Janzen, Ms. McGrath, and Denis; they each conveyed the property to the Janzen trust, which was recorded on March 25, 1994; and at the time they executed the deed transferring the property to the Janzen Trust, Ms. McGrath and Denis had no knowledge of the December 27, 1993 first amendment. The proposed petition sought determinations that: the Janzen Trust was irrevocable and as such was not subject to amendment; the beneficiaries of the Janzen trust were Ms. McGraths estate and Denis; Denis is successor trustee of the Janzen Trust; and the Janzen Trust assets should be distributed in equal shares. Plaintiff argued that the no contest clause would not be violated because: the Janzen Trust was not being challenged; rather the proposed petition was challenging the trustees first amendment to the irrevocable Janzen Trust; in the event paragraph 7.7 can be deciphered to be a no contest provision, the clause does not prohibit contests of amendments to the Janzen Trust; and requests for determination of beneficiaries, confirmation of trustee, and distribution of assets are not contests of the Janzen trust.
In opposition to the application concerning the Janzen Trust, defendant declared that he took possession of the property upon Ms. Janzens death in 1995 and had paid taxes on the property since that time. Denis was aware that defendant took possession of the property. Defendant believed that, when Ms. Janzen executed the Janzen Trust, she had the belief that she was signing a revocable trust. Ronald Appel, the lawyer who drafted the Janzen Trust, explained that it was meant to be revocable. Defendant further declared that Ms. McGrath knew about the Janzen Trust and helped arrange for the first amendment. Defendant declared that a handwritten date on the first amendment was written by Ms. McGrath.
Mr. Appel declared that he prepared the Janzen Trust and discussed Ms. Janzens desires and intent regarding her estate plan. Although Article 3 of the Janzen Trust states it is irrevocable, Ms. Janzen indicated that she did not intend to revoke the trust, but wanted to retain the right to amend the trust at any time. According to Mr. Appel, he drafted the instrument to be an irrevocable trust. But Mr. Appel intended to draft the trust to be an instrument which could be amended.
Mr. Appel stated that language in paragraph 7.7 resulted from an unspecified error. The "Choice of Law" heading should have reflected that the instrument was governed by California law. In addition, language was omitted from the Janzen trust which would have added a paragraph 7.8 to read: "7.8 No Contest Clause: [¶] In the event a beneficiary under this Declaration of Trust shall contest it or any of its parts of provisions, or the exercise of the sole discretion of the Trustee, then any share of or interest given to or provided for that beneficiary shall thereupon be revoked and such share or interest shall be distributed as if that beneficiary had died leaving no issue surviving." Mr. Appel declared that in preliminary drafts a full no contest provision was included to comply with Ms. Janzens request. The deleted language was inadvertently omitted from the final draft.
In opposition to plaintiffs application, defendant argued that, in construing the no contest clause, the probate court should consider extrinsic evidence to discern Ms. Janzens intent. Defendant also asserted: Mr. Appels declaration provided unrebutted evidence of an intent to include a no contest clause in the document; the no contest clause had been violated because plaintiff did not simply seek a determination as to whether a proposed motion, petition, or other act violated the no contest clause; plaintiffs argument that the no contest clause was unenforceable is a prohibited request for a determination of the merits of the proposed petition; and the application showed that defendant is entitled to possession and title of the Janzen Trust property under the provisions of the trust instruments and the doctrine of adverse possession. Defendant supported his adverse possession theory by declaring that he had taken possession of the property under color of title in 1995, paid the property taxes, and generally held himself out to be owner. Defendant argued that Mr. Appels declaration established that the trust was meant to be revocable.
The probate court conducted a hearing on plaintiffs application on July 10, 2007. At a July 12, 2007 hearing, the probate court explained that extrinsic evidence would be admitted and the trust documents would be amended in accordance with Mr. Appels declaration. In other words, the trust instruments were amended to insert the contemplated no contest clause. On September 18, 2007, the probate court filed an order determining that filing and prosecuting the proposed petition would not fall within the scope of the Janzen trusts no contest clause. The probate court found other issues as to whether plaintiff was violating the no contest clause were moot: whether the no contest clause was hopelessly so vague, ambiguous, and unintelligible and was thus unenforceable; whether the first amendment to the trust was void ab initio; whether seeking to ascertain the identity of the beneficiaries and confirming the appointment of the trustee violated the no contest clause; and whether compelling distribution of trust assets violated the no contest clause. The probate court found each of these issues was moot because plaintiff was seeking by his actions to affirm Ms. Janzens intent.
On September 10, 2007, defendant filed a notice of appeal on from the July 10, 2007 minute order. We construe the premature notice of appeal to be from the September 18, 2007 written ruling that plaintiffs proposed petitions would not violate the no contest clause. (§1304, subd. (d); rule 8.104(e);Bravo v. Ismaj (2002) 99 Cal.App.4th 211, 219 fn. 6; Margolin v. Shemaria (2000) 85 Cal.App.4th 891, 893, fn. 1.)
B. The Hunter Family Trust
Also on May 31, 2007, plaintiff filed an application for order determining that certain proposed actions will not violate a no contest clause in the Hunter Family Trust, dated April 28, 1993. The application alleged that the Hunter Family Trust was created by Ms. McGrath and irrevocable upon its creation. The Hunter Family Trust provided that during her lifetime, the trustee could provide for the support of Ms. McGrath and her two sons, defendant and plaintiff at her discretion. Ms. McGrath was the sole trustee during her lifetime. Defendant was appointed as successor trustee. Paragraph 5.1 provides that upon Ms. McGraths death, the Hunter Family Trust shall cease and terminate and the assets distributed equally to defendant and plaintiff. As previously noted, Ms. McGrath died on October 25, 2006.
Plaintiff, in his capacity as a beneficiary, sought a determination that his actions in filing a proposed petition would not violate paragraph 7.7 of the Hunter Family Trust which contained the same ambiguous "Choice of Law" clause as the Janzen Trust. Plaintiff requested the probate court rule the purported no contest clause was unenforceable because it was unintelligible. In the alternative, plaintiff requested a determination that the no contest clause would not be violated if he filed a petition to: compel the trustee to report and account; remove the trustee; surcharge the trustee; establish title to property of the Hunter Family Trust; impose double damages for taking and concealing assets; appointing successor trustee; and immediately suspend trustee powers and appoint a temporary trustee. In any event, plaintiff argued that the no contest clause was inapplicable because he was asserting a breach of duty has occurred. Plaintiff reasoned that decisional authority and public policy allowed him to litigate the breach of duty issue without violating the no contest clause.
The proposed petition alleged, on information and belief, that the Hunter Family Trust owned three assets: Ms. McGraths personal residence (a main house with a rental unit); one-half interest in 600 Brea Mall, in Brea, California; and a checking account with a balance of under $100,000. The petition alleged that, Ms. McGrath had been dead for over six months. However, defendant had taken no other action other than making a partial distribution of a checking account. The petition further alleged that: defendant had not complied with his duties such as rendering an accounting; defendant had taken and concealed assets belonging to the Hunter Family Trust; defendant was living rent free in the main house and not using the rental unit to produce income; and defendant was receiving about $10,000 a month from the Brea property without turning over a portion of the rents to plaintiff. Plaintiff further alleged that defendant had a "volatile" personality making it difficult to obtain information.
In opposition to the application regarding the Hunter Family Trust, defendant filed a declaration, which painted a completely different scenario. According to defendant, Ms. McGrath had a number of physical conditions and injuries before her death. Her physical conditions due to a stroke, a double amputation, and a criminal assault required her to receive constant attention. Defendant, who provided for most of her needs, did not work during this time, although he operated the family business since 1976.
After their mother died, defendant and plaintiff became engaged in a dispute over the management of Ms. McGraths estate and the trust. Defendant wanted to coordinate administration of the trust and the estate with plaintiff. However, plaintiff would not communicate with defendant or provide needed information. Plaintiff insisted that he would handle everything because as administrator of Ms. McGraths estate, everything was under his control. Defendant further indicated that there had been a tenant in the rental units for seven years. Defendant moved in with Ms. McGrath to take care of her but maintained his own residence. At one point, defendant moved Ms. McGrath in with him. But later, they moved into her home because she wanted to live there. Defendant has placed all of the rental income from the Brea property in an account. Defendant hired an accountant to prepare an accounting.
Defendant indicated the accusation he was "volatile" was a fabrication. Defendant stated that plaintiffs baseless and false accusations were typical. Defendant cited a probate matter with concerning their paternal grandmother in which plaintiff allegedly "fabricated numerous false and baseless accusations against" a fiduciary.
Defendant had distributed approximately $40,000 in trust assets to plaintiff who thereafter cashed the check but falsely characterized it as repayment. Defendant accused plaintiff of taking over $50,000 out of their mothers account without her consent. The $50,000 misappropriation occurred while plaintiff was acting as her stock broker. Although plaintiff admitted taking the money, he promised he would repay the money and provide her with a note and trust deed. However, plaintiff defaulted on the loan and then called Ms. McGrath stupid for not enforcing the loan agreement.
Defendant argued: the application contained a number of frivolous attacks against him; the application went beyond asking for a determination of whether the proposed petition will violate the no contest clause and attacked the validity of the clause; extrinsic evidence should be admitted to show Ms. McGraths intent regarding the no contest provision; and unrebutted evidence showed that their mother intended to have a no contest clause and the words were inadvertently omitted from the document.
As previously explained, at a July 12, 2007 hearing, the probate court considered extrinsic evidence and amended the Hunter Trust in accordance with Mr. Appels declaration. The probate court ruled the two requests that the no contest language be found unenforceable were contests. Rather, the probate court stated: "I mean, I am not a practitioner. I dont draft this stuff, but I had no idea what had happened until I read Mr. Appels declaration. It wasnt clear to me. I mean, clearly somebody made a mistake. It is clear to me, but I couldnt tell you where the break in that language would be and what was left out. That was just my thinking. So I think to assume that [plaintiffs counsel] knew what that said, especially when we are dealing with a no contest clause, is assuming a lot."
On August 9, 2007, the probate court issued a written ruling that the proposed petition would not violate the no contest clause in the Hunter Family Trust. However, the probate court limited its order as follows: "Applicant will not violate the Trusts no contest clause by filing and prosecuting the Petition in the form and substance attached to the Application as Exhibit 3 (the `Petition), unless the Court later finds the filing and prosecution of the Petition to have been frivolous based on the information available to [Plaintiff] at the time he files the Petition." Defendants timely appeal followed.
III. DISCUSSION
Defendant does not argue that the proposed petitions would be contests. Rather, defendant argues plaintiff violated the no contest clauses in the applications. Defendant reasons plaintiff violated the no contest provisions by attacking the clauses by asserting they were too vague, unintelligible, and ambiguous to be enforceable. Defendant asserts, "The question presented by this appeal is whether a purported petition to determine a proposed action violates a no-contest clause is, itself, a violation of the no-contest clause where the petition goes beyond requesting a determination that the proposed action violates the no-contest clause, and requests a determination that the no-contest clause is void."
Section 21320 provides in part: "(a) If an instrument containing a no contest clause is or has become irrevocable, a beneficiary may apply to the court for a determination whether a particular motion, petition, or other act by the beneficiary, . . . would be a contest within the terms of the no contest clause. [¶] (b) A no contest clause is not enforceable against a beneficiary to the extent an application under subdivision (a) is limited to the procedure and purpose described in subdivision (a). [¶] (c) A determination under this section of whether a proposed motion, petition, or other act by the beneficiary violates a no contest clause may not be made if a determination of the merits of the motion, petition, or other act by the beneficiary is required. [¶] (d) A determination of whether Section 21306 or 21307 would apply in a particular case may not be made under this section." Thus, section 21320 establishes a "safe harbor" for beneficiaries to seek a judicial determination of whether a proposed petition would be a contest. (Estate of Rossi (2006) 138 Cal.App.4th 1325, 1328, fn. 1; Estate of Davies (2005) 127 Cal.App.4th 1164, 1173; Estate of Kaila (2001) 94 Cal.App.4th 1122, 1130.)
Section 23100, subdivision (a) defines a contest thusly: `"Contest means any action identified in a `no contest clause; as a violation of the clause. The term includes both direct and indirect contests. Section 21303 states, "Except to the extent otherwise provided in this part, a no contest clause is enforceable against a beneficiary who brings a contest within the terms of the no contest clause." In Burch v. George (1994) 7 Cal.4th 246, 254-255, our Supreme Court succinctly set forth the standards for determining the issue of whether an action violates a no contest clause as follows: "An in terrorem or no contest clause in a will or trust instrument creates a condition upon gifts and dispositions therein. [Citation.] In essence, a no contest clause conditions a beneficiarys right to take the share provided to that beneficiary under such an instrument upon the beneficiarys agreement to acquiesce to the terms of the instrument. [Citation.] [¶] No contest clauses are valid in California and are favored by the public policies of discouraging litigation and giving effect to the purposes expressed by the testator. [Citations.] Because a no contest clause results in a forfeiture, however, a court is required to strictly construe it and may not extend it beyond what was plainly the testators intent. [Citations.] [¶] `Whether there has been a "contest" within the meaning of a particular no-contest clause depends upon the circumstances of the particular case and the language used. [Citations.] `[T]he answer cannot be sought in a vacuum, but must be gleaned from a consideration of the purposes that the [testator] sought to attain by the provisions of [the] will. [Citation.] Therefore, even though a no contest clause is strictly construed to avoid forfeiture, it is the testators intentions that control, and a court `must not rewrite the [testators] will in such a way as to immunize legal proceedings plainly intended to frustrate [the testators] unequivocally expressed intent from the reach of the no-contest clause. [Citation.]" (See Estate of Hite (1909) 155 Cal. 436, 439-441.) There was no conflict in the extrinsic evidence presented in this case as it related to Mr. Appels description of the drafting error, hence, we must independently construe the instruments at issue. (Burch v. George, supra, 7 Cal.4th at p. 254; Scharlin v. Superior Court (1992) 9 Cal.App.4th 162, 168; Poaq v. Winston (1987) 195 Cal.App.3d 1161, 1173.)
In this case, the no contest issue was raised in the context of two documents which indisputably were missing pertinent and relevant language concerning the decedents intent as to contests of their respective trusts. To compound the confusion, the language was in a section entitled "Choice of Law." Under those circumstances, the probate court admitted extrinsic evidence as to what decedents meant by these clauses in their respective trusts. The parties did not object to the probate courts amendments. The probate court indicated that, without the aid of Mr. Appels declaration, the meaning of the documents was unclear and confusing. We agree that the language of the documents as drafted could not have been construed as no contest provisions. Given the missing language and the ambiguity of the language in the two choices of law provisions, the probate court did not err in granting the applications notwithstanding plaintiffs claim that the no contest provisions were unenforceable. This is because, until the applications were made and extrinsic evidence was admitted, there was no "unequivocally expressed" intent by the two decedents regarding contests. (Burch v. George, supra, 7 Cal.4th at p. 254; Estate of Davies, supra, 127 Cal.App.4th at p. 1175; Estate of Ferber (1998) 66 Cal.App.4th 244, 250.) Rather, there was highly ambiguous language sounding like no contest provisions but set forth under "Choice of Law" headings. Not only were the decedents intentions not clearly expressed in the documents, as drafted, the paragraphs at issue were incomprehensible. Also, plaintiff was seeking to enforce the intentions of the Ms. Janzen and Ms. McGrath as explained by Mr. Appel. According to Mr. Appel, both Ms. Janzen and Ms. McGrath desired to have no contest clauses in their trust instruments but his drafting error frustrated their intentions.
As noted, pursuant to section 21320, subdivision (b), a no contest clause is not violated if the procedure in section 23120, subdivision (a) is followed. Further, subdivision 21320, subdivision (b) requires that the use of the procedure in section 23120, subdivision (a) be consistent with its purpose. Defendant does not assert that the procedure used, the two applications, violated the procedure in section 21320, subdivision (a). And there is no merit to defendants argument that the presentation of the facts concerning the defective no contest clauses violated the purposes of section 21320, subdivision (a). Seeking a construction of an instrument under these circumstances is not a contest. (Estate of Kruse (1970) 7 Cal.App.3d 471, 476 ["An action brought to construe a will is not a contest within the meaning of the usual forfeiture clause, because it is obvious that the moving party does not by such means seek to set aside or annul the will, but rather to ascertain the true meaning of the testatrix and to enforce what she desired."]; see Graham v. Lenzi (1995) 37 Cal.App.4th 248, 258.)
IV. DISPOSITION
The orders are affirmed. Michael Westfall is to recover his costs on appeal from Patrick Westfall.
I Concur:
ARMSTRONG, J.
For purposes of clarity, Denis McGrath will be referred to by his first name.
MOSK, J., Concurring
I concur.
The sole issue in this case is whether a petition under Probate Code section 21320 that challenges the enforceability of the no contest clause violates the no contest clause. It is arguable that an attack on the no contest clause by asserting it is unenforceable is a contest as envisioned by the no contest clause. Yet, a more persuasive position is that one might be able, without his or her petition being deemed a contest, to determine whether the petition is a contest "within the terms of the no contest clause" (Prob. Code, § 21320(a)) by questioning the validity or interpretation of the clause itself. One may only be able to determine if a petition would be a contest within the terms of the no contest clause by ascertaining what the clause means or if it is enforceable.
In any event, petitioner did not challenge the no contest clause as it was reformed by the trial court. Petitioner was correct that the clause, before being reformed, was unintelligible. Prior to reformation, there was no way to determine if the petition constituted a contest within the terms of the clause. Thus, I would affirm.