Estate of Goulet, S042636

• Decision Date: 31 July 1995
• Docket Number: No. S042636,S042636
• Citation: 10 Cal.4th 1074,898 P.2d 425,43 Cal.Rptr.2d 111
• Court: California Supreme Court
• Parties: , 898 P.2d 425, 95 Cal. Daily Op. Serv. 6014, 95 Daily Journal D.A.R. 10,251 ESTATE OF Donald R. Scott GOULET, Deceased. John J. FERRY, as Executor, etc., et al., Petitioners and Appellants, v. Esther Montello GOULET, Claimant and Respondent.

Page 111

43 Cal.Rptr.2d 111

10 Cal.4th 1074, 898 P.2d 425, 95 Cal. Daily Op. Serv. 6014,

95 Daily Journal D.A.R. 10,251

ESTATE OF Donald R. Scott GOULET, Deceased.

John J. FERRY, as Executor, etc., et al., Petitioners and Appellants, v. Esther Montello GOULET, Claimant and Respondent.

No. S042636.

Supreme Court of California,

In Bank.

July 31, 1995.

Kay & Merhle, San Francisco, Alan J. Silver, Los Angeles, Gibson, Dunn & Crutcher, John A. Ruskey, Gary M. Joye and Geraldine A. Wyle, Los Angeles, for appellants.

Gross, Gross & Simon, Marvin Gross, Los Angeles, Allan B. Cutrow, Mitchell, Silberberg & Knupp, Los Angeles, for respondent.

WERDEGAR, Justice.

Has a trustee the right to appeal an order determining that a trust beneficiary's proposed claim would not violate the trust's no contest clause? For the following reasons, we conclude the trustee does. Accordingly, we reverse the Court of Appeal, which held to the contrary.

Background ¹

On August 23, 1992, Donald R. Scott Goulet (Goulet) and Esther Montello (Montello), acquaintances for many years, married in Las Vegas, Nevada. They separated the next day. At the time, Goulet was terminally ill with Acquired Immune Deficiency Syndrome.

The same day as the marriage, Goulet and Montello executed a document entitled "Premarital Agreement." The agreement provided, among other things, that the parties had separate property interests in premarital and postmarital assets and acquisitions. In addenda to the agreement executed the same day, Goulet promised to pay Montello $2,500 per month until she reached age 75, subject to cost-of-living increases. He also promised to buy her a home worth at least $500,000, lease her a new automobile, pay her and her children's health and life insurance premiums, and pay her living expenses until the home was purchased.

Six weeks after the marriage, Goulet filed a petition for nullity of marriage in Los Angeles Superior Court, alleging he had been of unsound mind. Montello defaulted, and the court rendered a judgment of nullity on the ground alleged.

While the nullity proceedings were pending, Goulet executed a will and declaration of trust. The will declared all of Goulet's property was his separate property pursuant to the provisions of the premarital agreement and transferred the entire estate to the trust. The will also stated Montello was disinherited, with Goulet "having made adequate provision for her and her children" in the trust. The will included a no contest clause, which revoked the share or interest of any beneficiary or heir who "contests this will or any of its provisions...."

The trust instrument included general and charitable dispositions of real and personal property to numerous beneficiaries. It stated Montello would receive "$75,000 provided that she does not contest the validity of this trust or Settlor's will...." The trust instrument also contained a no contest clause revoking the interest of any beneficiary who "contests in any court the validity of this trust or of the Settlor's Last Will or seeks to obtain an adjudication in any proceeding in any court that this trust or any of its provisions or that such will or any of its provisions is void, or seeks otherwise to void, nullify, or set aside this trust or any of its provisions...."

After rendition of the judgment of nullity, Goulet executed a codicil to the will and an amendment to the declaration of trust. The codicil recited that the marriage had been annulled. The codicil nominated Goulet's friends, Clint Burke (Burke) and John J. Ferry (Ferry), to be co-executors of the will. The trust amendment restated (with some modifications) the $75,000 disposition to Montello. It described Montello as Goulet's "former spouse." The trust amendment also named Burke and Ferry as successor trustees and added a $50,000 gift to Ferry.

Goulet died on March 28, 1993. According to counsel, in November 1993, Goulet's estate had a value of $3,500,000 to $4,000,000. When future payments to be received under a series of contracts were included, the estate had a value of $5,000,000 to $5,500,000.

The probate of Goulet's will is in San Francisco Superior Court. In the probate proceeding, Montello filed a petition, pursuant to Probate Code section 21320, ² for an order determining whether her proposed filing of a creditor's claim against the estate, to enforce her purported rights under the premarital agreement, would constitute a contest within the meaning of the no contest clauses of the will and trust. Ferry filed a response in opposition. The probate court issued an order declaring the proposed filing would not constitute a contest of the will or trust instrument.

Ferry purported to appeal the section 21320 order. Relying on Smith v. Esslinger (1994) 26 Cal.App.4th 579, 31 Cal.Rptr.2d 673, the Court of Appeal dismissed the appeal on the ground Ferry lacked standing. We granted review on the question whether a trustee has the right to appeal an order determining that a trust beneficiary's proposed claim would not violate the trust's no contest clause.

Discussion

In the only published California opinion directly addressing the issue before us, the Fourth District Court of Appeal held trustees of an inter vivos trust were not, within the meaning of Code of Civil Procedure section 902, "aggrieved" ³ by a probate court's determination under section 21320 that a beneficiary's petition for accounting and other remedies did not constitute a contest within the meaning of the trust's no contest clause, and therefore lacked standing to appeal that determination. (Smith v. Esslinger, supra, 26 Cal.App.4th at p. 583, 31 Cal.Rptr.2d 673; but see Poag v. Winston (1987) 195 Cal.App.3d 1161, 1165, 241 Cal.Rptr. 330.) The Court of Appeal in this case followed Smith v. Esslinger, supra, in concluding Ferry lacked standing to appeal the section 21320 determination on Montello's proposed claim.

The Court of Appeal in Smith acknowledged a trustee acting in a representative capacity has standing to appeal an order affecting the existence, modification or termination of the trust. (Smith v. Esslinger, supra, 26 Cal.App.4th at p. 583, 31 Cal.Rptr.2d 673, citing Estate of Bunn (1949) 33 Cal.2d 897, 899, 206 P.2d 635; and 9 Witkin, Cal.Procedure, supra, Appeal, § 146, pp. 154-155.) The court, however, further observed that "a trustee acting in a representative capacity does not have standing to appeal an order determining 'the conflicting claims of beneficiaries' or 'which beneficiaries are entitled to share in a particular fund' because a trustee has the duty to deal impartially with the beneficiaries." (26 Cal.App.4th at p. 583, 31 Cal.Rptr.2d 673, quoting Estate of Ferrall (1948) 33 Cal.2d 202, 204, 200 P.2d 1.) Following a 1992 decision by a Missouri intermediate appellate court, the Smith court concluded application of these principles leads to the conclusion a trustee lacks standing to appeal a section 21320 determination. (Smith v. Esslinger, supra, 26 Cal.App.4th at pp. 584-585, 31 Cal.Rptr.2d 673, citing Krause v. Tullo (Mo.Ct.App.1992) 835 S.W.2d 488, 491.)

We disagree. Considerations of law and policy lead us to conclude a trustee must be permitted to appeal an order determining a trust beneficiary's proposed claim would not violate a trust's no contest clause. ⁴ When a probate court erroneously determines under section 21320 that a proposed claim by a beneficiary of a trust would not violate the trust's no contest clause, there may be no other beneficiary who is both "aggrieved" within the meaning of Code of Civil Procedure section 902 and who is financially or otherwise motivated or situated to pursue an appeal. Because appealing an erroneous section 21320 determination may be risky or expensive or both, aggrieved beneficiaries may choose not to appeal, even though they have standing to do so.

Indeed, beneficiaries of the Donald R. Scott Goulet Trust who are aggrieved by the probate court's section 21320 determination, Goulet's friend Clint Burke and Goulet's first cousins Daniel A. Goulet, Raymond E. Goulet and Susan M. Roy, ⁵ have not appealed. Neither Burke nor Goulet's first cousins participated in the section 21320 proceedings below. Nevertheless, as they were legally "aggrieved" by the section 21320 order, they could have become parties of record and obtained the right to appeal by moving to vacate the judgment pursuant to Code of Civil Procedure section 663. (County of Alameda v. Carleson, supra, 5 Cal.3d at p. 736, 97 Cal.Rptr. 385, 488 P.2d 953.) The record does not disclose their reasons for not appealing.

Where there is no beneficiary who is both "aggrieved" within the meaning of Code of Civil Procedure section 902 and who is financially or otherwise motivated or situated to appeal an erroneous section 21320 determination, if the trustee is not permitted to appeal, the trustor's intent is left undefended. Montello argues that, even barring an appeal, Goulet's intent is adequately protected, despite an adverse section 21320 determination, because Ferry may reject Montello's claim when presented to the estate and oppose any subsequent action on it. This argument, although superficially persuasive, is flawed. The grounds on which a fiduciary may oppose an action on a rejected claim do not include all those he might, were he permitted, advance on appeal in the section 21320 context. Most importantly, a section 21320 determination that a proposed claim would not violate a no contest clause conclusively determines that issue. The doctrines of law of the case or collateral estoppel would, therefore, presumably bar Ferry from arguing in the same or subsequent litigation that the claim contravenes Goulet's intent. Thus, rejecting the claim and opposing it in subsequent litigation provides Ferry with at best an illusory substitute for the right to appeal the adverse section 21320 determination.

Montello also argues that, because the section 21320...