Doolittle v. Exchange Bank
241 Cal. App. 4th 529
| Cal. Ct. App. | 2015Background
- Constance Doolittle created a revocable inter vivos trust (1999) and executed substantial amendments in 2004 and a final restatement in 2005 that shifted large remainder interests to friends and caregivers (including Juan).
- The 2005 trust named Exchange Bank as successor trustee and included (a) a "No Contest" section that both (i) directed forfeiture/reduction of gifts for contestants and (ii) expressly authorized the trustee to "defend, at the expense of any trust estate," any contest or attack on the trust; a related 2005 instruction document directed payment to witnesses/representatives at their usual rates.
- After Connie’s death (2014), Susan sued Juan (Marin County) for elder abuse and petitioned in probate (Sonoma County) to invalidate the 2004/2005 instruments and to treat the defense/fee provisions as unenforceable no-contest terms.
- Exchange Bank petitioned the probate court for instruction and authority to use trust funds to retain counsel and pay witnesses to defend the contested amendments; the probate court granted the trustee’s petition and denied Susan’s petition.
- On appeal, Susan argued (1) the trustee’s defense directive is effectively a no-contest clause and cannot be enforced pre-litigation unless the contest is adjudicated and found brought without probable cause; (2) the trustee cannot enforce the defense directive before the validity of the amendment is determined; and (3) the 2005 instruction authorizing payment at "regular, usual and customary rate" is invalid post-mortem.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trustee's directive to defend at trust expense is a "no-contest" clause under §21310 | Doolittle: the defense authorization is part of the no-contest clause and "penalizes" contestants because it shifts litigation costs away from defending beneficiaries, disadvantaging the contestant | Trustee: the defense directive is distinct from forfeiture language and does not "penalize" by forfeiting or reducing a gift; it merely authorizes trustee to protect the trust's terms | The directive to defend is not a no-contest penalty under §21310(c); forfeiture/reduction provisions are the operative no-contest clauses |
| Whether the trustee may use trust funds to defend before adjudication of the amendment's validity | Doolittle: trustee shouldn't expend trust assets to defend the amendment until the amendment's validity is judicially determined (analogy to executor/will contests) | Trustee: trustee has authority under the trust and statutes to act on trust terms when serving as trustee; heavy burdens lie on contestant to prove incapacity/undue influence; equitable relief (injunction) is available if warranted | Court: trustee may enforce defense directive prior to adjudication; contestant may seek preliminary equitable relief but failed to show likelihood of success or equities favoring injunction |
| Enforceability of the 2005 separate "Instructions to Successor Trustee and to Agent" after trustor's death | Doolittle: the instructions were inter vivos directions (apply to agent) and expired at death; omission from §16061.7 attachments supports post-mortem termination | Trustee: instructions were signed contemporaneously, amplify the trust directive, and manifest intent to amend the trust to include compensation terms after death | Court: substantial evidence supported treating the instructions as part of the 2005 trust and enforceable after death |
| Scope of no-contest provisions in the trust (forfeiture clauses in sections 6.15.2/6.15.3) | Doolittle: the entire "No Contest" section (including defense authorization and forfeiture language) should be treated under §21311 procedural protections | Trustee: defense authorization separable; forfeiture clauses subject to the statute | Court: defense authorization separable and enforceable pre-merits; forfeiture/reduction language remains a classic no-contest clause and would be unenforceable unless contest brought without probable cause (issue not decided here) |
Key Cases Cited
- Whittlesey v. Aiello, 104 Cal.App.4th 1221 (Cal. Ct. App. 2002) (trustee may not use trust assets to defend a dispute that is essentially between competing beneficiaries absent authorization; fees should come from parties who benefit)
- Terry v. Conlan, 131 Cal.App.4th 1445 (Cal. Ct. App. 2005) (trustee acting to pursue beneficiaries' interests may not recover litigation costs from trust when not acting as neutral protector of trust assets)
- Donkin v. Donkin, 58 Cal.4th 412 (Cal. 2013) (survey of California no-contest clause law and statutory framework governing enforcement and probable-cause protections)
- Burch v. George, 7 Cal.4th 246 (Cal. 1994) (describes in terrorem/no-contest clause as conditioning gifts and causing forfeiture if beneficiary contests)
- Hunt v. Superior Court, 21 Cal.4th 984 (Cal. 1999) (standards for preliminary injunctions and balancing likelihood of success against interim harm)