106 Cal.App.5th 765
Cal. Ct. App.2024Background
- Silvia Villarreal set up a living trust leaving her house to her three children (Leticia Linzner, Arturo Villarreal, and Sonia Godoy) in equal shares.
- The 2018 trust restatement (drafted by an attorney) stated the distribution would be outright as tenants in common, with precatory (not binding) wishes for the property to remain in the family for 5 years.
- In 2019, Silvia, without an attorney, amended the trust, purporting to restrict any sale of the property to among the siblings for only $100,000 each (below market value) and barring sales to outsiders.
- Upon Silvia's death, Leticia became trustee; the property was valued over $1 million.
- Arturo and Sonia filed in probate to invalidate the 2019 amendment, arguing it was an unreasonable restraint on alienation under Civil Code section 711.
- The probate court agreed, voided the 2019 amendment, and Leticia appealed.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Civil Code §711's bar on restraints on alienation apply to testamentary trusts? | Yes, applies to any conveyance, including by trust. | No, trusts/wills should allow restrictions. | Yes, §711 applies to interests conveyed by trust or will. |
| Was the 2019 amendment's resale requirement an unreasonable restraint? | Yes, price far below value & too limiting. | No, intent to keep property in family is reasonable. | Yes, the restriction was unreasonable and thus void. |
| Did the 2019 amendment create a new testamentary trust? | No evidence of intent to create new trust, only restrictions on fee simple. | Yes, the amendment constituted a new trust holding property. | No, there was intent for outright distribution, not a new trust. |
| Is the probate court order appealable before all issues are finally resolved? | Yes, order was final re: the 2019 amendment’s validity. | Not appealable until all petitions resolved. | Yes, order was a final appealable decision on trust interpretation. |
Key Cases Cited
- Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., 2 Cal.4th 342 (Cal. 1992) (discussing reasonableness of restraints on alienation)
- Wharton v. Mollinet, 103 Cal.App.2d 710 (Cal. Ct. App. 1951) (restraints on alienation can be void under section 711, including in wills)
- Burch v. George, 7 Cal.4th 246 (Cal. 1994) (de novo review standard for trust interpretation)