Two Easy Ways To Trigger a No Contest Clause By Accident

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TWO EASY WAYS TO TRIGGER A NO CONTEST CLAUSE BY ACCIDENT

By Noël Margaret Lawrence, Esq.1*

I. INTRODUCTION

There are circumstances under which a client in consultation with his lawyer will make a conscious decision to contest a will or a trust, knowing that an unsuccessful contest will result in loss of a gift under the contested instrument. The client proceeds nonetheless because he hopes that the instrument will be struck down, and he will inherit under a different, more favorable instrument. The implications of this course of action are usually obvious to attorney and client alike.

By contrast, consider the possibility of taking an action that results in an accidental contest, i.e., one that was not intended or anticipated by the attorney or the client. After the enactment of Senate Bill 1264 of 2008, operative January 1, 2010, practitioners might feel a false sense of security that certain types of actions will not result in the enforcement of a no contest clause to penalize the client.2 Obviously, if a practitioner fails to warn a client that the client’s proposed action constitutesā€”or could constituteā€”a contest, and that failure to advise the client results in loss to the client, the attorney has incurred potential liability to the client. It is the kind of liability that will be easy for a jury to understand when the client brings suit against his lawyer. This article will describe some less-than-obvious ways to contest a will or trust for practitioners to be aware of.

II. RELEVANT LAW

With respect to "direct contests", Probate Code section 21311, subdivision (a)(1), provides that a no contest clause shall only be enforced against a direct contest "that is brought without probable cause."3 Defining the types of contests that are "direct contests", Probate Code section 21310, subdivision (b) provides, in relevant part, as follows:

(b) "Direct contest" means a contest that alleges the invalidity of a protected instrument or one or more of its terms, based on one or more of the following grounds:

(1) Forgery.
(2) Lack of due execution.
(3) Lack of capacity.
(4) Menace, duress, fraud, or undue influence.
(5) Revocation of a will pursuant to Section 6120, revocation of a trust pursuant to Section 15401, or revocation of an instrument other than a will or trust pursuant to the procedure for revocation that is provided by statute or by the instrument.
(6) Disqualification of a beneficiary under Section 6112, 21350, or 21380.

Limiting the enforceability of a no contest clause in the case of certain types of contests, Probate Code section 21311, provides, in relevant part, as follows:

(a) A no contest clause shall only be enforced against the following types of contests:

(1) A direct contest that is brought without probable cause.

(b) For the purposes of this section, probable cause exists if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery.

In other words, relating to "direct contests," a no contest clause may only be enforced against contests brought without probable cause.

Probate Code section 21313 provides as follows: "This part is not intended as a complete codification of the law governing enforcement of a no contest clause. The common law governs enforcement of a no contest clause to the extent this [Part 3 of Division 11 of the Probate Code] does not apply."

III. CONTESTING AN INSTRUMENT BY ACCIDENT

A. Losing Probable Cause While Case is Pending.

Under the statutes quoted above, what is important in terms of determining whether probable cause exists for the filing of a direct contest are the facts known at the time of the filing of the contest. But what if, after the filing of the pleading initiating a contest, further investigation and/or discovery reveals that a reasonable person would no longer believe that there is a reasonable likelihood that the requested relief will be granted? In this author’s view, the contest should be dismissed under such circumstances.4 Failure to dismiss the contest prior to the filing of additional pleadings could result in the contestant having to defend against the enforcement of a no contest clause on the ground that the probable cause existing at the time the contest was initiated should insulate further actions taken in the case, even after the loss of probable cause.5

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B. Broader Common Law Rules Regarding Enforcement of No Contest Clauses.

1. Offering a Will in Bad Faith.

As indicated above, the common law governs enforcement of a no contest clause to the extent that Part 3 of Division 11 of the Probate Code does not apply.6 In this author’s view, under California common law, offering a subsequent will in bad faith can be a contest of the earlier will. This analysis depends on the state of mind of the person who offered that later will, and on what that person knew. Similar to the way Probate Code section 21311, subdivision (a)(1)ā€”regarding the enforceability of a no contest clause in the case of a direct contestā€”turns on whether or not the party bringing the contest had probable cause, whether offering a subsequent will results in enforcement of a no contest clause at common law turns in some respects on the good or bad faith of the proponent of that subsequent will.

The case of Estate of Gonzalez is a good example of a later will offered in bad faith constituting a contest of the prior will.7 Jose Gonzalez entered into a will in 1992 that divided his estate equally between four of his children: Enedina, Rosalinda, Roy, and Jorge. Jorge, the youngest, was named executor. Jose died at the age of 81, survived by a total of 12 children. Jose’s 1992 will contained a no contest clause that stated, "If any beneficiary under this Will in any manner, directly or indirectly, contests or attacks this Will or any of its provisions, any share or interest in my estate given to that contesting beneficiary under this Will is revoked, and shall be disposed of in the same manner provided herein as if that contesting beneficiary had predeceased me."

In early March of 1998, three weeks before Jose died, Jorge delivered to Jose for his signature (1) a grant deed that transferred title of Jose’s San Jose home to Jorge, and (2) a will that disinherited Jose’s other children, and left Jose’s estate entirely to Jorge. Jose signed the grant deed and will given to him by Jorge.

Roy filed a petition seeking to void the grant deed to the home in San Jose on the grounds of undue influence or fraud. Enedina and Rosalinda filed a petition to recover funds in bank accounts held jointly by Jose and Jorge, and a motion to consolidate Jorge’s petition to probate the 1998 will with the petition seeking a decree declaring the grant deed void, and the siblings’ petition seeking to impose a constructive trust on the funds in the bank accounts.

The case went to trial in 2000 on a set of facts that were very unfavorable to Jorge. The court found that Jorge was in a confidential relationship with Jose. The court made numerous findings regarding how ill and vulnerable Jose had been at the time the deed and the 1998 will were entered into, that Jose was entirely dependent upon Jorge for management of his affairs, and that Jose was totally dependent on others for assistance. The court further found that Jorge had actively participated in procuring the grant deed, and the will, and that the grant deed and the will were the products of Jorge’s undue influence.8

After the trial, each of Roy and Jorge filed a new petition seeking admission to probate of the 1992 will, and each seeking his appointment as executor. The sisters filed a "petition to determine [Jorge’s] entitlement to estate distribution", alleging that Jorge violated the will’s forfeiture clause by offering for probate a will that he must have known was not valid. Jorge argued that the no contest clause in his father’s 1992 will should not be enforced against him because he had "reasonable cause" to offer the 1998 will to probate. Following the hearing on the petition seeking to determine if Jorge had violated the no contest clause in the 1992 will, the judge issued a Statement of Decision finding that Jorge had indeed violated the 1992 will’s no contest clause, and hence Jorge had forfeited any interest he had under that will.

The Gonzalez case was decided under now-repealed former Probate Code section 21306, subdivision (a), which provided at the time that a no contest clause was not enforceable against a beneficiary to the extent the beneficiary brought a contest that was limited to certain grounds, including revocation, if the contest was brought with "reasonable cause" (then defined to mean that "the party filing the action, proceeding, contest, or objections has possession of facts that would cause a reasonable person to believe that the allegations and other factual contentions in the matter filed with the court may be proven or, if specifically so identified, are likely to be proven after a reasonable opportunity for further investigation or discovery").9 Thus, the question arises as to whether "reasonable cause"ā€”the operative standard when Gonzalez was decidedā€”is the same as the "probable cause" standard found in the current statute. On this question, the 2008 Law Revision Commission comments to Probate Code Section 21311, provide in part:

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Subdivision (b) [defining probable cause] restates the reasonable cause exception provided in former Section 21306, with two exceptions:

(1) The former standard referred only to the contestant’s factual contentions. By contrast, subdivision (b) refers to the granting of relief, which requires not only the proof of factual contentions, but also a legally sufficient ground for the requested relief.
(2) The former standard required only that success be "likely." One court interpreted that standard as requiring only that a contest be "legally tenable." [citation omitted] Subdivision (a) imposes a higher standard. There must be a "reasonable likelihood" the requested relief will be granted. The term "reasonable likelihood" has been interpreted to mean more than merely possible, but less than "more probable than not."

Given that the "probable cause" required under current Probate Code section 21311, subdivision (a), seemingly requires a higher showing than what was required under the prior "reasonable cause" standard, it seems likely that Jorge’s act of offering the later will for probate in Gonzalez would be a direct contest brought without probable cause under the currently operative statutes governing the enforceability of no contest clauses.

2. Contesting an Instrument By Only Defending a Later Instrument.

Suppose an opposing plaintiff alleges that a trust is invalid, contending that that an earlier, separate trust should be given effect. In most cases where a settlor revokes one trust and creates a new trust, the settlor executes a separate document in the nature of a trust revocation revoking the first trust.10 Customarily, the revocation is signed just prior to the new trust being established.

The plaintiff wants to restore the earlier trust, so he alleges that both the later trust and the document that revoked the earlier trust should be declared invalid on grounds of lack of capacity and undue influence. This plaintiff’s contentions are (rather obviously) direct contests of the later trust and the trust revocation document.11 However, a trap lies herein for the defendant preparing to deny the plaintiff’s allegations. Assume that the defendant answers the contest and defends the validity of the revocation and of the second trust. Probate Code section 21310, subdivision (d), provides that a "pleading" (which is required in order for a contest to be present) includes any "answer, response, or claim." So, by responding to the plaintiff’s complaint and defending the second trust (while upholding the revocation of the first trust), the defendant has possibly contestedā€”perhaps accidentallyā€”the first trust.

IV. POTENTIALLY GOOD NEWS FROM THE COMMON LAW

The applicability of the common law to the extent that Part 3 of Division 11 of the Probate Code does not apply is not entirely fraught with problems for the practitioner. There is at least one circumstance in which the common law might insulate a contest from enforcement of a no contest clause. Old decisional law holds that a no contest clause contained in a will shall not be enforced against an attempt in good faith to probate what purports to be a later will.12 Practitioners facing an allegation that direct contest was not brought with probable cause such that a no contest clause may be enforced against it under Probate Code section 21311, subdivision (a)(1), should consider whether an argument can be made that the good faith of the contestant insulates the contest from enforcement of a the no contest clause.

V. CONCLUSION.

Practitioners should bear in mind certain lessons that will help to prevent them from accidentally triggering a no contest clause on behalf of their clients. In the course of litigating any contest, it is important to be mindful of whether one or more causes of action should be dismissed. If as the evidence is developed, it becomes apparent that a cause of action is not supported by evidence, it should be dismissed promptly. Immediately prior to the commencement of trial, the plaintiff will likely know exactly what evidence supports each cause of action. Each claim should be reassessed at that time; if any claim lacks probable cause, it should be dismissed.13

In this author’s view, contesting an instrument unintentionally can be rather easy to do. Thus, practitioners should be in the habit of analyzing whether each pleading about to be filed might be determined to be a contest. If there is such a risk, practitioners would be well-advised to counsel the client of the risks in writing to ensure that the decision to proceed with a potential client is an informed one made by the client after explanation.

*Oakland, California

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Notes:

1. The author thanks David Baer, Esq., of Orinda, for his generous editorial assistance in finalizing this article (adapted from a presentation made by the author to the Bar Association of San Francisco in November, 2012) for publication.

2. Stats. 2008, ch. 174. This legislation drastically revised California law relating to the enforceability of no contest clauses in California. See Horton, The New No Contest Law: New Challenges for Trusts and Estates Attorneys, which appeared in Volume 14, Issue 3 (Fall 2008), of the Quarterly.

3. Probate Code section 21311, subd. (a)(2) and (a)(3), provides for the enforceability a no contest clause against other types of contests that are typically easier to identify and plan to avoid (and are beyond the scope of this article), e.g., in the case of certain instruments, pleadings to challenge transfers of property on the grounds that it was not the transferor’s property at the time of the transfer and the filing of a creditor’s claim or prosecution of an action based on it.

4. In addition to the risk of unintentionally triggering a no contest clause, a plaintiff who fails to dismiss a contest once it appears that any cause of action alleged in the contest lacks probable cause risks facing a suit for malicious prosecution. (Crowley v. Katleman (1994) 8 Cal.4th 666.) "[A] defendant cannot escape liability for the malicious prosecution of an unjustified charge by joining with it a justified charge." Id., citing Albertson v. Raboff (1956) 46 Cal.2d 375, 385.

5. Note the potential breadth of the types of filings that can result in enforcement of a no contest clause under Probate Code section 21310, defining "contest" as "a pleading filed with the court by a beneficiary that would result in a penalty under a no contest clause, if the no contest clause is enforced," and "pleading" as "a petition, complaint, cross-complaint, objection, answer, response, or claim."

6. Prob. Code, section 21313.

7. Estate of Gonzalez (2002) 102 Cal.App.4th 1296. While the author believes that Gonzalez gives useful insight into what a court would look to in finding a violation of a no contest clause, it is no longer the law since the underlying statute has been repealed and replaced by a new statute.

8. Id. at p. 1301.

9. Gonzalez, supra, at p. 1302.

10. Probate Code section 15401, subdivision (a)(2), provides that "A trust that is revocable by the settlor may be revoked in whole or in part…(2) By a writing (other than a will) signed by the settlor and delivered to the trustee during the lifetime of the settlor…."

11. See Prob. Code, section 21310, subd. (b).

12. Estate of Bergland (1919) 180 Cal. 629, 634 (providing that "[a]n attempt in good faith to probate a later purported will, spurious in fact, but believed to be genuine by the party seeking its probate, does not fall within the forfeiture clause of the genuine will").

13. In the author’s view, any claim that the maker of an instrument lacked testamentary capacity should be carefully scrutinized. Since the enactment of the Due Process in Competence Determinations Act in 1995 (Probate Code section 810 et seq.), it has become more difficult to prove lack of testamentary capacity. This is because many of the criteria to be considered under Probate Code section 811 are the sorts of things that are best evaluated and examined by a healthcare professional while the decedent is still alive (e.g., "ability to attend and concentrate," "ability to understand and appreciate quantities," "uncontrollable repetitive or intrusive thoughts" and "ability to modulate mood and affect").