Rice v. Clark

• Citation: 120 Cal.Rptr.2d 522,47 P.3d 300,28 Cal.4th 89
• Decision Date: 10 June 2002
• Docket Number: No. S097456.,S097456.
• Court: United States State Supreme Court (California)
• Parties: Owen S. RICE, Plaintiff and Appellant, v. Richard L. CLARK et al., Defendants and Respondents.

120 Cal.Rptr.2d 522

28 Cal.4th 89

47 P.3d 300

Owen S. RICE, Plaintiff and Appellant, v. Richard L. CLARK et al., Defendants and Respondents.

No. S097456.

Supreme Court of California.

June 10, 2002.

Law Offices of Herb Fox, Herb Fox, Santa Barbara; Mullen & Henzell, Lawrence T. Sorensen, Santa Barbara, and Bret A. Stone, for Plaintiff and Appellant.

Price, Postel & Parma and David K. Hughes, Newport Beach, for Defendants and Respondents.

WERDEGAR, J.

Probate Code section 21350 presumptively disqualifies, as the recipient of a donative transfer by instrument, a person who drafts the instrument (id., subd. (a)(1)) or who, having a fiduciary relationship with the transferor, "transcribes the instrument or causes it to be transcribed" (id., subd. (a)(4)).¹ The issue presented in this case is whether the class of persons disqualified because they cause an instrument to be transcribed is broad enough to include a person who provides information needed in the instrument's preparation and who encourages the donor to execute it, but who does not direct or otherwise participate in the instrument's transcription to final written form. Like the trial and appellate courts below, we conclude the category of persons disqualified under section 21350, subdivision (a)(4) is not so broad.

Factual and Procedural Background

Petitioner Owen S. Rice seeks to invalidate gifts decedent Cecilia M. Clare made by will, trust and other instruments that left Clare's entire estate to respondent Richard L. Clark (Clark) and his wife, respondent Janet A. Clark. Because the trust instrument names Rice as the contingent beneficiary if the Clarks predecease Clare, and because a person disqualified under section 21350 is treated as having predeceased the transferor (§ 21353), Rice would take under the trust if the Clarks were disqualified.

Clare, 76 years old when her husband died in 1988, owned several pieces of income-producing real property, as well as her Santa Maria home. She had no children or other close relatives. Clark, 42 years old in 1988, was working as a building inspector for the City of Santa Maria and as a handyman, and was managing his own investment properties. Clark first met Clare in 1988, after her husband's death, when he repaired the garage door at her home. Over the next few months, he performed numerous repairs on her properties, receiving $200 per day in pay. In the summer of 1988, Clark quit his job with the City of Santa Maria, began attending a local college, and continued doing maintenance and small repair work for Clare. In 1989, having finished his course work, he worked increased hours on the Clare properties, taking on more extensive projects. From 1989 through 1993, Clare paid Clark $1,200 per week to take care of her properties.

Toward the end of 1994, Clark's weekly compensation was raised to $1,400 and he took on additional duties. He began helping Clare with her bill paying, bookkeeping, and tax information, and sometimes spoke with tenants on Clare's behalf. He began accompanying Clare to the grocery store and to the bank, which she visited several times each week. Clare also gave Clark a key to her safety deposit box. Beginning in December 1994, Clare wrote checks to cash and gave Clark cash gifts of about $250 to $350 per day.

In 1992, Clare executed a will prepared by Maurice Twitchell, an attorney who had previously done real estate work for her. That instrument bequeathed a farm property and personal property from Clare's home to Richard and Janet Clark, but gave the residue of the estate to Allan Hancock College in Santa Maria, to establish and endow a school of music.

In January 1995, at a meeting between Clark, Clare and Twitchell, Clark said, and Clare appeared to agree, that Clare wished to change her will so as to leave everything to the Clarks with the exception of one ranch, which she wanted to give to Rice, the longtime tenant. However, Clare, acting through Clark, fired Twitchell in March 1995 without executing a new will; Clark told Twitchell that Clare found him too "pushy."

Clare and Clark met with a new attorney, Michael Hardy, on May 4, 1995. Clark had made the appointment at the request of Clare, who had known Hardy's former partner. Hardy had heard of Clare's late husband, but did not know Clare or Clark before the meeting. Clark told Hardy that Clare wanted him to prepare a new will or a trust. During or after the meeting, Clark also gave Hardy lists of Clare's assets, including real property holdings, stocks and bank accounts.

Hardy asked Clare how she wished to leave her estate. She said she wanted to leave her entire estate to Richard and Janet Clark, or to the survivor of them if one of them died before her. If both Clarks predeceased Clare, she wanted the next contingent beneficiary to be Owen Rice. Clare, having decided she wanted a living trust, stated in answer to Hardy's question that she wanted Richard Clark to succeed her as trustee, with Janet Clark as her second choice if Richard were unable to serve. Hardy did not ask Clare about her prior estate plan or why she wanted to change it. Clark was present throughout the meeting. According to Hardy, Clare appeared mentally competent and expressed her testamentary wishes clearly.

Sometime after the May 4 meeting, Clark telephoned Hardy's office and asked the secretary to ask Hardy to prepare the necessary documents promptly. Hardy and his secretary prepared the necessary documents for a will and trust and, through Clark, scheduled a signing appointment for Clare for June 14, 1995. That morning, Clare told Clark she did not like Hardy and did not want to see him. Clark phoned Hardy about an hour before the appointment and said, "I don't think that I can get her in," but Clark and Clare arrived at the appointed time. Hardy went through the documents he had prepared one by one. Clare did not ask any questions and seemed impatient, but appeared to understand Hardy's presentation. But when Hardy asked if she was ready to sign, she said she was not ready and left abruptly. Clark followed Clare, telling Hardy he would talk to her.

Clark and Clare picked up breakfast at a fast-food restaurant and ate it in the park, as was their custom. Clare seemed unhappy. Clark told her that any other attorney she hired would prepare the same type of documents and she would simply end up paying additional legal fees. Clare then agreed to return to Hardy's office and sign the documents. About an hour after they had left, Clark and Clare returned to Hardy's office, where Hardy briefly reviewed the documents again and Clare signed them.

The documents signed June 14, 1995, were an individual living trust instrument, a pour-over will, grant deeds transferring two of Clare's real properties into the trust, and durable powers of attorney for Clark to handle Clare's health care and financial affairs if she became incapacitated. Other deeds remained to be prepared in order to fully fund the trust. The trust instrument named Richard Clark as successor trustee. On Clare's death, the trust estate was to be distributed to Richard and Janet Clark in equal shares, to the survivor if either predeceased Clare, or to Owen Rice if both Clarks predeceased Clare.

Clare did not return to Hardy for further work in funding the trust, instead retaining attorneys Mark Henbury and, after Henbury's sudden death, Karen Mehl to prepare the necessary documents. Mehl prepared several grant deeds conveying property into the trust, which Clare signed in October 1995. Mehl believed Clare was fully competent when she executed the deeds.

Through Henbury, Clare and Clark had been referred to a stockbroker. Clark told the broker that Clare wanted to give all her stocks to him and his wife, and that the documentation should be done in such a way that Clare, who suffered from a muscular palsy in her hand, would not have to sign numerous documents. In August 1995, with the broker's assistance, Clark used his power of attorney to transfer the 68 stock certificates into the Clare trust, after which Clare signed a transfer moving them into a separate trust established by and for the benefit of the Clarks.

In late December 1995 and early 1996, Clare's physical and mental health deteriorated sharply. Clark contacted adult protective services for help, and, in March 1996, Clare entered a nursing home. On February 28, 1996, a physician examined Clare and found her unable to manage her personal, medical or financial affairs, a conclusion with which Clark agreed. Earlier that day, however, Clark had taken Clare to the stockbroker's office, where she signed a transfer into her trust of stock that had been missed in the earlier transactions. Also in February 1996, Clare cashed several large checks Clark had prepared and gave Clark much of the cash.

On March 28, 1996, Clark, represented by Michael Hardy, filed a petition to act as conservator of Clare's person and estate. Clare died on May 10, 1996, before the court acted on the conservatorship petition. The real property in her estate was valued at more than $4.5 million.

In an earlier proceeding, Allan Hancock College, the residuary beneficiary under Clare's 1992 will, sought to invalidate the 1995 will and trust, claiming that these instruments had been procured by Clark's undue influence. (§ 6104.) In August 1997, the superior court gave judgment for the Clarks, finding that Richard Clark had not unduly benefited from the 1995 will and trust. In light of Clare's lack of close family or other friends, the court found, Richard Clark, as Clare's "longtime employee and friend," was a natural recipient of her bounty. Rice, who was not a beneficiary of the 1992 will, was not a party to this earlier action.

In December 1997, Rice brought the present action, petitioning for a declaration that the donative transfers to the Clarks were invalid under section 21350, and to remove Richard Clark as trustee of the Clare trust, to...