Tuesday, October 24, 2017
Page 3
‘No-Contest’ Clause Can’t Be Incorporated by Reference—C.A.
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that although a third amendment to a trust incorporated by reference all terms in the second amendment that were not inconsistent with new terms, a no-contest clause was not incorporated.
Justice Kenneth Yegan of Div. Six wrote the opinion affirming the denial of a petition by Tracy J. Swearingen, a beneficiary under the third amendment, to disinherit the deceased trustor’s boyfriend, Jose Francisco Aviles, because he challenged that third amendment. Aviles contended that Swearingen exerted undue influence over the trustor, Margaret B. Chappell, because she was Chappell’s marijuana supplier.
For the no-contest clause to be applied to a challenge to the third amendment, Yegan declared, it would have to be contained in the third amendment or, under a 2010 statute, the third amendment would have to have been in existence at the time of the execution of the second amendment and be referenced in the no-contest clause.
‘First Impression’
Yegan wrote:
“In this case of first impression, we apply newly enacted Probate Code section 21310. If, in theory, this could lead to a debatable result, so be it. There is no ‘play in the joints’ in probate law, as Chief Justice Rehnquist would say. We ‘strictly’ follow probate law as given to us by the Legislature.”
Although the case has been settled, a request for dismissal was denied.
“It is untimely,” Yegan said. “In addition, we elect to reach the merits of the first impression issue which has statewide importance to the probate bar.”
Yegan noted that before enactment of §21310 and since, §21305(a) has provided that a no-contest clause that is not set forth in an amendment does not affect that amendment.
New Law
What §21310 adds, he said, is that a no-contest clause not contained in an amendment will be given effect if that amendment is “in existence on the date that the instrument containing the no contest is executed and is expressly identified in the no contest clause.”
Swearingen argued that the second amendment evinced the trustor’s intent that the no-contest clause be applied to any amendment because it says in the no-contest clause that a “protected instrument” shall include “any and all amendments” to the trust agreement.
Yegan declared:
“Simply stated, the no contest clause in the Second Amendment, does not apply to future trust amendments, such as the Third Amendment, unless the amendment specifically refers to the no contest clause.”
Public Policy
He added:
“Although no contest clauses are favored by the public policies of discouraging litigation and giving effect to the trustor’s intent, they are also disfavored by the policy against forfeitures and may not extend beyond what plainly was the settlor’s intent….
“We cannot say that [Chappell] unequivocally expressed her intent to apply the no contest clause to petitions contesting trust amendments that are the product of fraud or undue influence. Application of the clause here would defy common sense.”
The case is Avila v. Swearingen, 2017 S.O.S. 5190.
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