Litigation Alert

• Jurisdiction: California,United States
• Author: By Mary Gillick, Esq.*
• Publication year: 2014
• Citation: Vol. 20 No. 4

LITIGATION ALERT

By Mary Gillick, Esq.*

I. CURRENT LAW APPLIED TO NO CONTEST CLAUSE CONTAINED IN A TRUST THAT BECAME IRREVOCABLE PRIOR TO AMENDMENT OF THE NO CONTEST LAW; BENEFICIARIES' CLAIMS DID NOT CONSTITUTE A CONTEST UNDER THE NEW LAW

In Donkin v. Donkin (2013) 58 Cal.4th 412, the California Supreme Court held that the current no contest law applied to a safe harbor petition filed before the law was changed on January 1, 2010, and the beneficiaries' claims did not constitute a contest under the new law.

Two trustors executed a revocable trust that distributed their assets to their children following their deaths. The trust contained a no contest clause that disinherited any beneficiary who contested the trust. The trustors died in 2002 and 2005. Two of the beneficiaries filed an application under the safe harbor provisions then in effect under Probate Code, section 21320, to determine if their petition concerning the interpretation of the trust and claims for breach of fiduciary duties by the trustees, violated the no contest clause. The petition concerned an amendment made by the surviving trustor that was unclear regarding its applicability to trusts that became irrevocable when the first trustor died. On January 1, 2010, while the safe harbor application was pending, the Probate Code was amended to remove the safe harbor provisions, and changed the requirements for the enforceability of no contest clauses. The trial court held that the beneficiaries' challenge would not constitute a contest that violated the no contest clause. The trial court did not make a specific finding of whether the former or the current no contest law applied. The trustees appealed.

The Court of Appeal affirmed in part and reversed in part. The Court of Appeal affirmed the trial court's order to the extent it impliedly determined that the former no contest law applied. However, the Court of Appeal determined that the petition was a contest. The beneficiaries appealed.

The California Supreme Court reversed. Regarding whether the no contest clause is enforceable against the beneficiaries' proposed claims, the current law is presumptively applicable because under Probate Code, section 21315, subdivision (a), the trust became irrevocable after January 1, 2001. Current Probate Code, section 21311, provides that a no contest clause may only be enforced against (1) a direct contest brought without probable cause; (2) a challenge to a transfer of property on the ground that it was not the transferor's property at the time of the transfer; and (3) a creditor's claim. For a no contest clause to be enforceable under either of the last two scenarios, the clause must expressly state that it provides for that application. The trustees did not contend that the beneficiaries' petition was a direct contest, nor did they argue it was a creditor's claim. Because the no contest clause did not expressly state that it applied to a challenge to the transfer of property on the ground that it was not the transferor's property at the time of the transfer, the no contest clause could not be enforced. Further, the old law could not be applied under the fairness exception set forth in Probate Code section 3. The mere fact that a trust was drafted in reliance on the former law is not sufficient to invoke the fairness doctrine. Unless a party can show that it would obtain a different result under the former law, the current law applies retroactively to January 1, 2001. The beneficiaries' claims sought an interpretation of the trust, so there would be no different result. Additionally, their claims fell within the public policy exception for challenges to fiduciary misconduct, because they alleged that the trustees' accountings were inadequate, among other claims.

II. LAW FIRM THAT DRAFTED HUSBAND'S AND WIFE'S WILLS IS DISQUALIFIED FROM REPRESENTING TRUSTEES OF HUSBAND'S MARITAL TRUST

In Fiduciary Trust International of California v. Superior Court (2013) 218 Cal.App.4th 465, the Second District Court of Appeal held that a law firm that drafted a husband's and wife's wills was disqualified from representing the trustees of the husband's marital trust in litigation against the wife's personal representative.

In 1992, Attorney Sandler of Sandler & Rosen ("S&R") drafted wills for Willet and his wife, Betty. Willet's will provided that his estate was to be divided into two trusts. The first was an exemption trust to be divided equally among his three children from a previous marriage and his one child with Betty. The second was a marital trust, of which Betty was the lifetime income beneficiary, and of which Willet's four children were remainder beneficiaries. Upon Betty's death, Willet's will provided that the trustees were to pay "any estate or inheritance taxes payable by reason of her death" from the marital trust unless other adequate provisions shall have been made. Betty's will bequeathed the remainder of her estate to Willet's exemption trust. Willet died in 1993. Thereafter, Betty established a trust which effectively revoked her 1992 will, by giving most of her assets to her only daughter as opposed to the exemption trust, but pursuant to Willet's will, her trust provided that the marital trustees were to pay all estate taxes. After Willet's death, S&R represented the marital trustees in multiple adversarial proceedings against Betty, and Betty never objected to this representation. S&R never obtained a conflict waiver from Betty. Betty died in 2011. A dispute arose concerning who was responsible for the payment of estate taxes. Betty's personal representative filed a motion to disqualify S&R from representing the marital trustees. At this time, Attorney Sandler was deceased. The trial court denied the motion. Betty's personal representative filed a petition for writ of mandate.

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The Court of Appeal reversed. If a potential conflict arises from the successive representation of clients with potentially adverse interests, the law firm is disqualified if there is a substantial relationship between the subjects of the former and current representation. If the former representation was direct in that the lawyer was personally involved in providing legal services, disqualification is mandatory. S&R unquestionably had a direct relationship with Betty, and the representation involved the same subject matter. Thus, there was a substantial relationship between the former and current representation. S&R argued that the prohibition on successive adverse representation does not apply when the attorney jointly represents the parties in the former matter, because attorney-client communications made during the former representation are not privileged under Evidence Code section 962. Disqualification rules should not be predicated on the rules of evidence. An attorney cannot do anything that will injuriously affect his former client, or use knowledge or information against a former client acquired due to the prior representation. S&R violated this prohibition by taking the position that the documents it prepared should be interpreted to reduce the size of Betty's estate. A primary concern is to preserve the public's interest in the integrity of the Bar. S&R failed to comply with Rule of Professional Conduct 3-310 because it did not obtain Betty's consent. It was of no consequence that the current version of Rule 3-310 was enacted after Betty signed her will, because the prior version of the statute also required the client's written consent. Finally, S&R argued that Betty waived any right to disqualification. A former client may waive disqualification in the very narrow situation where the present client offers evidence of unreasonable delay by the former client and resulting severe prejudice, but the marital trustees failed to offer evidence of prejudice. Accordingly, S&R was disqualified.

III. PROBATE CODE, SECTION 2357, APPLIES WHERE STERILIZATION IS A MEDICAL PROCEDURE'S SECONDARY EFFECT; THE CLEAR AND CONVINCING EVIDENCE STANDARD APPLIES UNDER SECTION 2357 WHEN THE CONSERVATEE'S FUNDAMENTAL RIGHTS ARE AT ISSUE

In Conservatorship of the Person and Estate of Maria B. (2013) 218 Cal.App.4th 514, the Fourth District Court of Appeal held that Probate Code, section 2357, not Probate Code, section 1950, provides the governing authority in a petition for authorization to consent to medical treatment where the conservatee's sterilization is a secondary effect, and the applicable standard of proof is clear and convincing evidence where the conservatee's fundamental rights are at issue.

Maria was a developmentally disabled adult suffering from cerebral palsy, mild retardation, and hydrocephalus. Her mother was limited conservator of her person and estate with the power to give and withhold medical consent. Maria experienced irregular menstrual cycles with excessive bleeding. She suffered from migraines that coincided with her menstrual cycles. After a number of treatments failed to alleviate her menstrual migraines, doctors recommended that she undergo a hysterectomy and oophorectomy, which would permanently prevent her from having children. Her mother petitioned the court for an order authorizing consent for the procedures. She filed the petition under Probate Code, section 2357, which governs medically necessary treatment when the conservatee cannot give informed consent and the conservator lacks authority to consent. Section 2357 provides that the court may grant the petition if the conservatee's condition requires the recommended course of treatment; there is a probability that the condition will become a serious threat or life-endangering; and the conservatee is unable to give informed consent. A public defender opposed the petition, arguing that Probate Code section 1950 governed the petition, and petitioner failed to show that the surgery was medically necessary by clear and convincing evidence. Section 1950 addresses only the sterilization of developmentally disabled...