Tunstall v. Wells

• Decision Date: 31 October 2006
• Docket Number: No. B188711.,B188711.
• Citation: 144 Cal.App.4th 554,50 Cal.Rptr.3d 468
• Court: California Court of Appeals Court of Appeals
• Parties: Robyn R. TUNSTALL, Plaintiff and Respondent, v. Elizabeth H. WELLS, individually and as Trustee, etc., Defendant and Appellant.

50 Cal.Rptr.3d 468

144 Cal.App.4th 554

Robyn R. TUNSTALL, Plaintiff and Respondent, v. Elizabeth H. WELLS, individually and as Trustee, etc., Defendant and Appellant.

No. B188711.

Court of Appeal, Second District, Division 1.

October 31, 2006.

Blumberg Law Corporation and Ave Buchwald, Long Beach, for Defendant and Appellant.

Magee & Adler, Eric R. Adler; and Robert D. Feighner for Plaintiff and Respondent.

ROTHSCHILD, J.

In this case, we hold that a testamentary trust's no contest clause providing that one beneficiary's contest voids other non-contesting beneficiaries' bequests along with the contestant's does not, in itself, violate public policy.

Elizabeth H. Wells (Elizabeth)¹ appeals from an order following the trial court's finding that the no contest clause in a trust established by her father was void as against public policy. She contends that the provision in question does not violate public policy and is not otherwise void. Following our review of California and foreign authorities in this case of first impression, we agree with Elizabeth and reverse.

FACTS

Robert and Hazel Wells, parents of the parties in this case, created a living trust in November 1986.² When Hazel died in 1994, the trust assets were divided into a survivor's trust, a bypass trust, and an exemption trust pursuant to the living trust's terms. Robert Wells (Wells), trustee of the survivor trust, distributed all of that trust's assets to himself, then in January 2004 created the Robert Sheaff Wells Family Trust (Trust) and transferred the survivor trust assets into it. The Trust named his five children as beneficiaries: Robert Wells, Jr. (Robert, Jr.), Elizabeth, Robyn Rae Tunstall (Robyn), Judith Ann Conner (Judith), and Dianne Jean Morton (Dianne). The Trust provided that upon Wells' death, Robyn, Judith, and Dianne would each receive $50,000, and all other assets would be distributed to Robert, Jr. and Elizabeth. Elizabeth was designated trustee after Wells' death.

The Trust originally included a standard no contest clause stating that if any Trust beneficiary contested the Trust, then that beneficiary would be specifically disinherited. In February 2004, Wells amended the Trust's no contest clause to read, "For the purpose of this paragraph [the no contest clause], if any one of the Trustor's daughters, ROBYN, JUDITH and/or DIANNE, should be the contesting person as described above, then in that event the gift [sic] to all three daughters are hereby revoked." Wells died in March 2005, survived by all five children.

In July 2005, Robyn filed a "safe harbor" application pursuant to Probate Code section 21320³ to determine whether the February 2004 amended no contest clause violated public policy and was void.⁴ Robyn did not challenge the validity of the Trust's original, unamended no contest clause, and she acknowledged that she would lose her $50,000 gift from the Trust if she contested it. In response, Elizabeth denied that the amended no contest clause violated public policy. In September 2005, Judith and Dianne joined Robyn's petition solely to determine whether the no contest clause applied to them if Robyn contested the Trust.

On October 27, 2005, the trial court heard the parties' arguments. Robyn's counsel maintained that the amended no contest clause was punitive and against public policy in that it was designed to keep an entire class of beneficiaries from going to court to challenge the Trust. Elizabeth's counsel countered that the clause was favored by public policy. Noting concerns that the clause allowed one of Elizabeth's sisters to revoke unilaterally the other two sisters' gifts, whether out of spite, collusion with Elizabeth, or other ill motives, the trial court struck the February 2004 amendment as "contrary to public policy." Elizabeth timely appealed.⁵

DISCUSSION

A.

Elizabeth contends that the Trust's no contest clause is neither overbroad nor against public policy, and that a provision conditioning a testamentary gift to a beneficiary on there being no contest by another beneficiary is valid under California law. Although she finds no California authority that directly addresses this particular issue, she cites authorities in California that have upheld no contest clauses disinheriting the contestant and cases from other states that have upheld provisions similar to the one in this case.

Because this is a question of first impression in California, we review both California law and the law of other states in determining that a provision such as the Trust's no contest clause, which conditions testamentary gifts to various beneficiaries on the absence of a contest of the testamentary document by any one of them, is valid under California law.

B.

No contest clauses in wills or trusts, sometimes called "in terrorem" or forfeiture clauses, provide that for beneficiaries to take gifts under a testamentary instrument, they must acquiesce to the terms of that instrument. (§ 21300, subd. (d); Burch v. George (1994) 7 Cal.4th 246, 254, 27 Cal.Rptr.2d 165, 866 P.2d 92, abrogation on a different point by later legislative enactment recognized by In re Estate of Rossi (2006) 138 Cal.App.4th 1325, 1339, 42 Cal.Rptr.3d 244; Estate of Davies, supra, 127 Cal.App.4th at pp. 1172-1173, 26 Cal. Rptr.3d 239; Estate of Kaila (2001) 94 Cal.App.4th 1122, 1128, 114 Cal.Rptr.2d 865.) Such clauses seek to prevent contests of wills or trusts by threatening disinheritance of beneficiaries who might otherwise challenge the instruments: hence the label "in terrorem." (See Estate of Kaila, supra, 94 Cal.App.4th at p. 1128, 114 Cal.Rptr.2d 865 ["The purpose of no contest clauses `is to discourage will contests by imposing a penalty of forfeiture against beneficiaries who challenge the will.'"].) The operation and applicability of testamentary no contest clauses is partly, but not entirely, controlled by statute. (§ 21301 ["This part is not intended as a complete codification of the law governing enforcement of a no contest clause. The common law governs enforcement of a no contest clause to the extent this part does not apply."]; see also Estate of Ferber (1998) 66 Cal.App.4th 244, 252, 77 Cal. Rptr.2d 774.)

C.

Extensive California authority spanning more than a century supports the general validity of no contest clauses that disinherit a contesting heir. (See, e.g., §§ 21300-21320 et seq.; Estate of Davies, supra, 127 Cal.App.4th at pp. 1172-1173, 26 Cal.Rptr.3d 239; Estate of Kaila, supra, 94 Cal.App.4th at pp. 1128-1129, 114 Cal.Rptr.2d 865; Burch v. George, supra, 7 Cal.4th at p. 254, 27 Cal.Rptr.2d 165, 866 P.2d 92; Estate of Black (1984) 160 Cal. App.3d 582, 586-587, 206 Cal.Rptr. 663; Estate of Friedman (1979) 100 Cal.App.3d 810, 814, 161 Cal.Rptr. 311; Estate of Goyette (1968) 258 Cal.App.2d 768, 772, 66 Cal.Rptr. 103; Estate of Markham (1941) 46 Cal.App.2d 307, 314-315, 115 P.2d 866; In re Kitchen (1923) 192 Cal. 384, 388-390, 220 P. 301; Estate of Miller (1909) 156 Cal. 119, 121-122, 103 P. 842; Estate of Hite (1909) 155 Cal. 436, 439-441, 101 P. 443.) "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.]" (Burch v. George, supra, 7 Cal.4th at p. 254, 27 Cal.Rptr.2d 165, 866 P.2d 92; see also Estate of Hite, supra, 155 Cal. at pp. 440-441, 101 P. 443.)

The Legislature, however, has limited the reach of no contest clauses. The Probate Code provides that certain challenges to testamentary instruments, such as those involving allegations of forgery, later revocation, or provisions involving self-interested drafters or witnesses, or those statutorily declared to be protected by public policy, will never trigger a no contest clause. (§§ 21305-21307.) Because the threat of forfeiture for contesting a will or trust is so dire, section 21320 also provides that after such an instrument has become irrevocable, a beneficiary may apply to the probate court for a determination whether a particular petition, motion, or other act by that beneficiary would constitute a contest to the testamentary instrument under the no contest clause. (§ 21320; see also Estate of Davies, supra, 127 Cal.App.4th at p. 1173, 26 Cal.Rptr.3d 239.) Included among the issues that may be determined by such a "safe harbor" petition under section 21320 is whether a provision in a testamentary instrument violates public policy, because "any other rule would make a no-contest clause virtually impenetrable to public policy attacks" and could not be countenanced by the courts. (Estate of Davies, supra, 127 Cal.App.4th at p. 1173, fn. 9, 26 Cal.Rptr.3d 239; see also Estate of Ferber, supra, 66 Cal.App.4th at p. 251, 77 Cal.Rptr.2d 774.) "Beneficiaries must be free to raise public policy issues so the court may address them." (Estate of Ferber, supra, 66 Cal.App.4th at p. 252, 77 Cal.Rptr.2d 774.)

D.

"The interpretation of a will or trust instrument presents a question of law unless interpretation turns on the credibility of extrinsic evidence or a conflict therein." (Burch v. George, supra, 7 Cal.4th at p. 254, 27 Cal.Rptr.2d 165, 866 P.2d 92.) If the parties do not dispute the facts, as in this case, "it is our duty to independently construe the trust instrument." (Ibid. at 254, 27 Cal.Rptr.2d 165 866 P.2d 92; see also Estate of Ferber, supra, 66 Cal.App.4th at p. 251, 77 Cal. Rptr.2d 774.) Thus we review de novo whether the Trust's no contest clause violates public policy. (Estate of Davies, supra, 127 Cal.App.4th at p. 1173, 26 Cal. Rptr.3d 239; see also Florio v. Lau (1998) 68 Cal.App.4th 637, 641, 80 Cal.Rptr.2d 409.)

Authorities consistently emphasize and reaffirm that "even though a no contest clause is strictly construed to avoid forfeiture, it is the testator's intentions that control, and a court `must hot rewrite the [testator's] will in such a way as to immunize legal proceedings plainly intended to frustrate ...