Sitting Pretty in Probate: What Sandstead Means for Probate Jurisdiction
| Publication year | 2019 |
| Pages | 50 |
TRUST AND ESTATE LAW
By JAMES R. WALKER
This article looks at subject matter jurisdiction in probate court. It focuses on the impact the Colorado Supreme Court's recent decision in Sandstead-Corona v. Sandstead.
Probate litigation often involves vexing disputes regarding jurisdiction,[1]standing,[2] and the scope and exercise of equitable powers and judicial discretion.[3] Unfortunately, certainty and predictability have not always been the hallmarks of such disputes.
Issues involving jurisdiction are crucial because, unlike district courts with plenary powers, courts "sitting in probate" are constrained by limited subject matter jurisdiction.[4] Notably, litigants must understand that a probate court judgment exceeding the court's jurisdiction remains subject to attack.
This article considers subject matter jurisdiction in probate court, with an emphasis on the Colorado Supreme Court's recent decision in Sandstead-Corona v. Sandstead, which clarifies subject matter jurisdiction.[5]
Sandstead-Corona v. Sandstead
In spring 2018, the Colorado Supreme Court threw its shoulder into the probate arena with an important decision. In Sandstead,[6] the Court extended probate jurisdiction by upholding the use of an implied trust for a multiparty bank account that held farm sales proceeds.
By recognizing the "logical relationship" between the accounts and the proper and orderly administration of the probate estate, the Sandstead Court concluded that the trial court sitting in probate had the requisite subject matter jurisdiction.[7] The Court brushed aside the assertion that the probate court lacked jurisdiction because the accounts were "not part of the probate estate."[8]
The Sandstead Nexus
Sandstead rests on the fundamental conclusion that there is a necessary nexus or connection between nonprobate bank accounts and probate administration. Sandsteads conclusion was based on competent evidence that the decedent intended for farm sales proceeds to be handled as part of her dispositive plan.[9] This evidence allowed the Court to find that the action satisfied CRS § 13-9-103(3), which provides that a probate court "has jurisdiction to determine every legal and equitable question arising in connection with decedents' . . . estates."[10]
The phrase "in connection with" "contemplates a logical and contextual relationship or association exhibiting 'coherence' or 'continuity.'"[11] Applying this definition in the context of a probate court's jurisdiction, prior decisions of the Colorado Court of Appeals had interpreted the phrase "in connection with" to authorize the court to resolve disputes logically related to an estate, even when the disputes involved nonprobate assets.[12] Before Sandstead, only divisions of the Colorado Court of Appeals had addressed the scope of this jurisdictional provision, and thus whether the probate court possessed the necessary power to impose equitable remedies.[13] Sandstead provides much needed guidance on this important jurisdictional concept.
Statutory Displacement
Under its Title 13 jurisdictional grant, a court sitting in probate may "impose or raise a trust with respect to any of the property of the decedent or any property in the name of the decedent, individually or in any other capacity, in any case in which the demand for such relief arises in connection with the administration of the estate of a decedent."[14] (Emphasis added.) But this Title 13 "in connection with" jurisdictional award must be applied through the lens of CRS Title 15: CRS § 15-10-103 instructs that "[u]nless displaced by the particular provisions of this code, the principles of law and equity supplement its provisions."
"Statutory displacement" traces back to the original 1969 Uniform Probate Code (UPC), but it was not until 2015 that the Colorado Supreme Court specifically analyzed how and when such displacement occurs. In Beren v. Beren,[15] the Court found that a trial court sitting in probate abused its discretion in formulating equitable relief for a surviving spouse. The Court concluded that the plain language of the statutory elective share provision disallows the probate court from basing an equitable remedy on how the augmented estate performs after the decedent's death, because the Colorado statutes comprehensively addressed how the augmented estate performs after the decedent's death.[16]
Twenty years earlier, in Lunsford v. Western States Life Insurance, the Colorado Supreme Court addressed the comparable question of when the Probate Code displaces the probate court's common law authority.[17] In Lunsford, the Court concluded that the Probate Code's "slayer statute" provision did not preempt common law principles barring payment of life insurance policy proceeds to the insured's murderer.[18]
In sifting through this displacement issue, Beren acknowledged and respected the General Assembly's authority to modify or abrogate common law but also insisted that the Court would only recognize such changes when they are clearly expressed.[19] Beren emphasizes that the Probate Code will displace common law powers when there has been explicit legislative direction.[20]
When applying the canons of statutory interpretation and sorting through conflicting provisions, Beren also directs that effect must be given to both specific and general provisions.[21] If the conflict between the two is irreconcilable, the special provision controls over the general one. In sum, Beren supports a finding that a particular statutory provision displaces a probate court's general equitable authority when an exercise of equity conflicts with the plain language of the specific provision and the two provisions cannot be reconciled.
Equitable Powers of Courts Sitting in Probate
Colorado's probate courts have long exercised equitable powers.[22] Equity plays a critical role in a probate court's authority to remedy unique circumstances by ensuring that parties are treated fairly and the decedent's intent is upheld.[23]
The Colorado General Assembly granted probate courts broad equitable jurisdiction in CRS § 13-9-103(3) to determine legal and equitable questions in connection with decedents' estates, and a district court sitting in probate "has jurisdiction over all subject matter vested by article VI of the [Colorado] constitution and by articles 1 to 10 of title 13, C.R.S."[24]
In probate litigation, a common use of equitable powers is a court-mandated implied trust. In addition to its jurisdictional guidance, Sandstead addressed when this equitable device is warranted.[25]
Colorado recognizes two kinds of implied trusts, resulting and constructive.[26] Resulting trusts have loosely been classified as "intent-enforcing"[27] and generally arise (1) when an express trust fails in whole or in part; (2) when an express trust is fully performed without exhausting the trust estate; and (3) when property is purchased and the purchase price is paid by one person and, at that person's direction, the vendor conveys the property to another person.[28] In each of these situations, the facts give rise to an inference that the person taking title to the property was not intended to have the beneficial interest.[29]
In contrast, a constructive trust is a "remedial device designed to prevent unjust enrichment."[30] Constructive trusts "are raised by equity in respect of property which has been acquired by fraud, or where, though acquired originally without fraud, it is against equity that it should be retained by him who holds it."[31]
Constructive Trusts and Confidential Relationships
Constructive trusts are frequently employed in cases involving confidential relationships. A confidential relationship may arise when one person occupies a position of superiority over another with the opportunity to use that superiority to the other's disadvantage.[32] Further, a confidential relationship may arise if (1) one party has taken steps to induce another to believe that he or she can safely rely on the first party's judgment or advice; (2) one person has gained the confidence of the other and purports to act or advise with the other's interest in mind; or (3) the parties' relationship is such that one is induced to relax the care and vigilance that one would ordinarily exercise in dealing with a stranger.[33] Generally, to establish the existence of a confidential relationship, the plaintiff must show that he or she reposed a special trust or confidence in the defendant, reposing such trust in the defendant was justified, and the defendant either invited or ostensibly accepted the plaintiff's trust.[34]
If a confidential relationship is shown to exist, the person in whom the special trust is placed must act in good faith and with due regard for the interests of the one reposing the confidence.[35]
There is no separate and distinct cause of action for a breach of a confidential relationship per se.[36] Rather, the existence of a confidential relationship is simply one of the elements to be considered in determining whether there is fraud, undue influence, overreaching, or other improper conduct.[37]
Examining the Confidential Relationship
In Page v. Clark, the Colorado Supreme Court observed that a constructive trust can arise when two parties have a "confidential relationship" that caused one party to act less vigilantly than he or she would have done had he or she been dealing with a stranger.[38] Colorado courts have recognized that confidential relationships often arise between close family members.[39] The Colorado Supreme Court has noted that a confidential relationship may arise when one party has justifiably reposed confidence in another, but for such a relationship to arise from a property transfer, the transferor must...
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