Mcle Self-study Article Tips of the Trade: Why Over-notice? Because Due Process Might Demand It.

• Publication year: 2022

MCLE SELF-STUDY ARTICLE TIPS OF THE TRADE: WHY OVER-NOTICE? BECAUSE DUE PROCESS MIGHT DEMAND IT.

Written by David Y. Parnall, Esq.^*

I. INTRODUCTION

As children, many of us naively believed that certainty and consistency exist in life. Gold is at Fort Knox; all police officers are good; the transition of presidential power is unassailable; and the Constitution contains algebraic formulas that can calculate a precise result. But then we grew up. Turns out the gold is not actually at Fort Knox.¹ Police are humans. Election falsehoods can be peddled wholesale. And the concepts embodied by the Constitution, instead of being like math equations, are decidedly mutable, flexible, and uncertain.

For a subset of us, though, the Constitution does provide a glimpse of certainty into something way more exciting than gold heists or SWAT teams: calculating notice. Or as some might say, over-notice. More cautious trusts and estates practitioners use this calibration when faced with the problem of "how many people should be told about what our clients are doing?" Should the step-grandchild of the decedent be on the service list? Should I send the non-beneficiary nephew the trustee's letter outlining the sale of the aunt's home? What about letting the great-uncle's, son's mechanic know about the trust petition just filed? What pushes us to invite potential trouble by saying "yes," if the answer might well be "no?"

Why over-notice? The question of whether to provide notice might seem to be a close call in some situations. Statutes might not explicitly say we must spend a couple of extra postage dollars to keep some people in the know; they might even say we do not need to add persons to our service lists. A probate examiner or a judge might agree service is unnecessary; so might the equities. Due process might beg to differ though, and ultimately its voice is the one that matters most.

When viewed through the lens of the due process clause of the U.S. Constitution's Fourteenth Amendment,² the question of notice, or over-notice, becomes a relatively simple one. Does a person have a property interest in the proceedings? Do the proceedings threaten to deprive that person of their property interest or adversely affect it in some way? Are the person and their whereabouts known? If so, then caution dictates that it is better to splurge on the extra postage.

So, why over-notice? Because the results of a proceeding will not bind someone who was entitled to notice of that proceeding but did not receive it. Clients seek results that bind the whole world, not just some of it. To possibly exceed statutory notice requirements is an easy thing to do, and the outcome can be catastrophic if due process is violated.

II. A FAILURE OF NOTICE IS A FAILURE OF JURISDICTION

To frame the issue in a trusts and estates proceeding, notice might seem like a bothersome procedural hurdle. But notice is not just something to get right for the sake of appeasing the probate examiner and the judge, and avoiding a delay of your hearing and an uncomfortable client conversation. By identifying a notice error, the probate examiner and the judge are actually helping you. After all, you are typically asking the court for an order on which your client can rely

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against the world. If the court were to miss or ignore a notice problem, you might get your order, but it might not be enforceable because a failure of notice deprives the court of jurisdiction.

"Jurisdiction is acquired in one of two modes ... first, as against the person of the defendant, by the service of process; or second, by a procedure against the property of the defendant, within the jurisdiction of the court."³ But it has long been clear that "blind labeling of probate proceedings as 'in rem' does not satisfy constitutional requirements of due process."⁴ Where notice of the proceeding is required, there is no excuse to avoid it. When a lower court erroneously deprives parties of their rights without notice, "the appellate court cannot evade its clear duty to cause parties to be restored to their original positions[.]"⁵

As the appellate court pointed out in Estate of Reed, "[t]he requirement that indispensable parties be before the court is mandatory and may be raised at any time. A failure to join such parties constitutes a jurisdictional defect."⁶ In Reed, a trustee's failure to provide adequate notice to necessary parties "to enable them to defend their interests in the trust resulted in a void order."⁷ Similarly, in Estate of Sigourney, the appellate court ruled that a trial court "lacked fundamental jurisdiction" to modify a trust because the appellants had not been given notice of the underlying proceedings, and "where notice is required to be given and is not given, the resultant order is void and may be collaterally attacked by anyone at any time."⁸

III. A DUE PROCESS REFRESHER

The due process clause of the U.S. Constitution states that no person shall be deprived of "life, liberty, or property, without due process of law." This mandate appears twice. It first appears in the Fifth Amendment, applying the concept to the federal government. Later, it appears in the Fourteenth Amendment, applying the concept to the states.

"Many controversies have raged about the cryptic and abstract words of the Due Process Clause[.]"⁹ But the underlying purpose of due process is to guarantee that people's rights are not hindered "save upon due notice, with fair and reasonable opportunity for a hearing, and in accordance with procedure which has been ordained for the preservation of personal and property rights."¹⁰ "The history of American freedom is, in no small measure, the history of procedure."¹¹ "[W]here 'important interests' of the citizen are implicated they are not to be denied or taken away without due process."¹² Its "very essence" is to ensure the "protection of the individual against arbitrary action[.]"¹³ If an action affects a party, due process requires notice to be given in a manner that is reasonably calculated to inform that party of the action. In other words, before a court order or other legal proceeding may lawfully deprive a person of their life, liberty, or property, that person must be notified of the potential deprivation. A person's life and liberty are not frequently at issue in a probate proceeding. Property interests, on the other hand, are virtually synonymous with probate proceedings.

IV. THE DUE PROCESS ANALYSIS

A. Is a Property Interest Involved?

A legal proceeding will implicate a person's right to due process if it threatens to deprive the person of a property interest. Thus, for a person's due process rights to vest, that person must first possess a property interest. But what exactly is a property interest?

The Constitution does not create property rights. Instead "they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law—rules or understandings that secure certain benefits and that support claims of entitlement to those benefits."¹⁴ Consequently state law will decide the limits of what constitutes a property interest.¹⁵

In California, the concept of property is extremely broad.¹⁶ It is "sufficiently comprehensive to include every species of estate, real and personal, and everything which one person can own and transfer to another. It extends to every species of right and interest capable of being enjoyed as such upon which it is practicable to place a money value."¹⁷

The analysis of whether a property interest exists is usually an easy one. If someone has a present right to money, or land, or some other thing or benefit, they have a property interest. If a proceeding will affect that interest, then notice is required.

The analysis in other cases can be more oblique. Is a person's "good name, reputation, honor, or integrity" a property interest? It appears so, because the U.S. Supreme Court has held that if a proceeding threatens to harm one of those things, then due process requires that the person be given notice and an opportunity to be heard.¹⁸ The same holds for government benefits. If a person has "a legitimate claim of entitlement" to a benefit—as opposed to a mere "abstract need or desire for it" or a "unilateral expectation of it"—then they hold a property interest in it.¹⁹ The person's need for a thing must be more than abstract. But the thing itself may be very abstract.

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Take the position of trusteeship—is it a property right? Case law confirms that a trusteeship, a successor trusteeship, and the right and power to appoint a trustee are property rights.²⁰ The Probate Code provides that a successor trustee is entitled to notice of a Probate Code section 17200 petition because "[a]ll trustees" must receive notice and the term "trustee" includes "original, additional, or successor trustee[s]."²¹

Outside the Probate Code, a due process analysis yields the same result. A trustee's interest in a trust, i.e. the rights and powers of the office of trustee, is a present interest. A successor trustee's interest in a trust is a future interest that might never vest. But an attenuated interest is still an interest.

A future interest in property is an interest that is not, but may become, a present interest. In other words, a property interest need not 'be free from conditions precedent or subsequent which may preclude it from ever becoming a present interest.' Thus, the contingent nature of [a property interest] is of no moment.²²

The recent Roth v. Jelley case reinforced the point that an interest does not forfeit its status as "property" just because of its "contingent nature."²³ The crux of Roth was that notice was not provided (or at least was not demonstrable)²⁴ to a contingent remainder beneficiary. Numerous failures of notice arose during that lengthy case. The two key failures were regarding a petition to approve a settlement agreement and a separate petition to approve an account and...