Estate of Neth CA1/4
A159314
| Cal. Ct. App. | Jun 30, 2021Background
- Dorene and her husband Clifford created the Neth Living Trust (NLT) in 1992; after Clifford died, Dorene was to allocate assets into subtrusts (Family Trust, Marital Trust Share One, Marital Trust Share Two).
- On August 13, 2013 Dorene executed a subtrust allocation, withdrew assets from Share One, created the Dorene Neth Trust (DNT) (naming Finch successor trustee), and changed beneficiary designations to favor animal charities; Dorene retained power as initial DNT trustee and the power for the trustee to pick charities.
- Petitioner (stepdaughter Laurel Neth), an income beneficiary of the NLT who later became NLT trustee after Dorene’s death, sued to invalidate the Share One withdrawal, beneficiary changes, and the DNT on grounds of incapacity, undue influence (primarily by Finch, Dorene’s friend/tenant/bookkeeper), and fraud.
- The bench trial lasted 14 days; evidence included conflicting expert medical opinions on Dorene’s cognitive capacity in 2013, testimony from the drafting attorney Heather Reynolds (who found Dorene capable), and evidence of severe house deterioration discovered after Dorene’s 2015 death.
- The trial court found Dorene had capacity to withdraw and transfer Share One assets and to create/fund the DNT, declined to apply the presumption of undue influence, and found petitioner failed to prove undue influence by clear and convincing evidence; judgment for respondent trustee was entered.
- On appeal petitioner raised (1) erroneous legal standard for capacity, (2) failure to trigger the undue-influence presumption and failure to prove undue influence, (3) invalid method of withdrawing Share One assets, and (4) erroneous exclusion of undisclosed witnesses; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Capacity standard and finding | Trial court applied testamentary-capacity (§6100.5) rather than the higher sliding-scale contractual standard (§§810–812); reversal required | Court applied sliding-scale analysis (and considered higher standards) and weighed competing expert opinions | Affirmed — court adequately used sliding-scale reasoning and substantial evidence supports finding of capacity in Aug 2013 |
| Presumption of undue influence | Finch had confidential relationship, actively participated in document preparation, and would unduly benefit — so burden should shift | Finch did not receive undue profit; DNT assets were earmarked for charities and trustee power to pick charities was temporary and consistent with Dorene’s wishes | Affirmed — presumption not triggered; substantial evidence supports trial court’s finding that Finch did not unduly profit |
| Undue influence (absent presumption) | Clear-and-convincing evidence (isolation, vulnerability, document preparation, post-death squalor) shows Dorene’s free will was subverted | Actions were consistent with Dorene’s long-expressed charitable intent for animals, not secretive, petitioner was promptly notified, and professional witnesses saw capacity | Affirmed — petitioner failed to prove undue influence by clear and convincing evidence |
| Validity of withdrawal procedure & standing | Dorene did not properly exercise written withdrawal rights and Article 17 limited self‑benefitting distributions; Share One assets should be returned | Dorene executed a written withdrawal (Aug 13, 2013) per NLT terms; petitioner had standing only to attack the Share One withdrawal | Affirmed — implied finding that withdrawal complied with NLT supported by evidence; Article 17 argument forfeited |
| Exclusion of undisclosed witnesses | Trial court abused discretion by excluding witnesses referenced in a 2017 settlement letter and by procedural defects in in‑limine practice | The settlement letter did not satisfy discovery obligations; the exclusion was a proper discovery sanction and no prejudice shown | Affirmed — no abuse of discretion in exclusion; procedural objections unavailing |
Key Cases Cited
- Andersen v. Hunt, 196 Cal.App.4th 722 (Cal. Ct. App. 2011) (applies sliding-scale contractual-capacity analysis to trust amendments analogous to wills)
- Lintz v. Lintz, 222 Cal.App.4th 1346 (Cal. Ct. App. 2014) (distinguishes simple testamentary-like trust acts from more complex trust instruments requiring greater capacity)
- Estate of Sarabia, 221 Cal.App.3d 599 (Cal. Ct. App. 1990) (explains undue-influence presumption and what constitutes undue benefit)
- Rice v. Clark, 28 Cal.4th 89 (Cal. 2002) (defines elements triggering the presumption of undue influence)
- Doolittle v. Exchange Bank, 241 Cal.App.4th 529 (Cal. Ct. App. 2015) (burden and difficulty of proving undue influence in trust/will contests)
- David v. Hermann, 129 Cal.App.4th 672 (Cal. Ct. App. 2005) (circumstantial framework for proving undue influence)
- Estate of Fritschi, 60 Cal.2d 367 (Cal. 1963) (classic articulation of undue influence as substitution of another’s will for the testator’s)
- Dreyer’s Grand Ice Cream, Inc. v. County of Kern, 218 Cal.App.4th 828 (Cal. Ct. App. 2013) (standard for appellate review where appellant bore the burden at trial)