Dae v. Traver

Filed 9/27/21; see dissenting opinion
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
IAN C. DAE, B305834
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. 18STPB06832)
ROBERT TRAVER, as Trustee, etc.,
Defendant and Respondent.
APPEAL from an order of the Superior Court of
Los Angeles County. Brenda J. Penny, Judge. Affirmed.
Murtaugh Treglia Stern & Deily, John P. Deily and Devin
Murtaugh for Plaintiff and Appellant.
Jeffer Mangels Butler and Mitchell, Susan Allison and Neil
C. Erickson for Defendant and Respondent.
_________________________________
Ian C. Dae (Dae) appeals from an order denying his motion
to strike a probate court petition under the anti-SLAPP statute.
(Code Civ. Proc., § 425.16.) 1 Respondent Robert Traver (Robert)
filed the petition in his capacity as trustee of a family trust. 2
Robert’s petition alleged that Dae violated a “no contest” clause
in the trust by filing a previous petition challenging Robert’s
actions as trustee.
The parties agree that Robert’s petition (the No Contest
Petition) arose from protected petitioning activity under Code of
Civil Procedure section 425.16, subdivision (e)(1). Thus, under
subdivision (b)(1) of that statute, to defeat Dae’s motion Robert
was required to show a probability that he would prevail on his
No Contest Petition.
The trial court found that Robert made such a showing.
We agree.
Dae’s petition broadly challenged Robert’s conduct in
setting up a financial structure that Robert claimed was designed
to avoid estate taxes. If Robert’s claim is true, Dae’s petition
would implicate the no contest provision by seeking to “impair”
provisions in the trust giving Robert the authority to manage
trust assets.
Dae also challenged his own removal as a beneficiary.
Whether that more specific challenge amounts to a “contest” for
purposes of the trust’s no contest clause depends upon the
1 “ ‘ “SLAPP” is an acronym for “strategic lawsuit against
public participation.” ’ ” (Monster Energy Co. v. Schechter (2019)
7 Cal.5th 781, 785, fn. 1.)
Other than Dae, we use first names because some family
2
members have the same surname. No disrespect is intended.
2
trustors’ intent. Robert provided sufficient evidence of the
trustors’ intent to allow a change of beneficiary to make a prima
facie showing of probability of prevailing on Robert’s contention
that Dae’s claims are a “contest.” Our conclusion is limited to the
context in which it arises—an anti-SLAPP motion. We express
no opinion on how the probate court should ultimately rule on
Robert’s petition.
BACKGROUND 3
1. The Family Trust
Erin and Jean Walsh (the Trustors), a married couple,
established a family trust in 1994 (Family Trust). Jean had three
children from a prior marriage—Joan, William, and Robert. Erin
had no children.
Joan had one child—Dae. William had no children. Robert
has three children.
The Family Trust provided that, when one of the Trustors
died, the assets of the Family Trust would be divided into a
Survivor’s Trust, a Residuary Trust, and a generation skipping
trust for the grandchildren. The Survivor’s Trust was to be
funded with the community property interest of the surviving
trustor and was revocable during the surviving trustor’s lifetime.
Aside from some specific bequests and the funding of the
generation skipping trust (which is not at issue here), the
remainder of the deceased trustor’s community property interest
was to fund the Residuary Trust. The Residuary Trust was
irrevocable.
3We summarize the facts in the light most favorable to
Robert, the party opposing the anti-SLAPP motion. (Murray v.
Tran (2020) 55 Cal.App.5th 10, 16.)
3
The Family Trust designated the surviving trustor and
Robert as the trustees of the Residuary Trust. Those trustees
were given the “same powers and duties” as the original Trustors
of the Family Trust, which included the authority to “grant, sell,
assign, convey, exchange, convert, manage, . . . invest, reinvest,
loan, or reloan” trust property and to “borrow money for any trust
purpose upon such terms and conditions as may be determined
by the trustees, and to obligate the trust property for the
repayment of money so borrowed.” The trustees were also
generally given “all powers that are necessary or convenient to
make fully effective the purposes of the trust.”
During his or her lifetime, the surviving trustor was
entitled to the “entire net income” of the Residuary Trust as well
as those sums from principal that the trustees “may deem
necessary for the reasonable support, care, and maintenance of
the surviving trustor.” Upon the death of the surviving trustor,
the assets of the Residuary Trust were to be divided equally
among Jean’s three children, if then living. If any child was not
then alive, that child’s share was to be distributed to the child’s
issue “by right of representation.” If no issue of that child was
then living, the child’s share was to be divided between the other
children’s shares.
2. The No Contest Clause
The Family Trust included a no contest provision (No
Contest Clause). Among other things, the No Contest Clause
provided that any beneficiary who attacked “any of the provisions
of this declaration of trust” or sought to “impair any of the
provisions of . . . this declaration of trust” would take nothing
“from either of the trustors’ estates or any trust created by this
declaration of trust.”
4
3. Subsequent Estate Planning
Erin died in 1995. Under the terms of the Family Trust,
upon his death the Residuary Trust was funded and became
irrevocable.
William died in 2006 without any issue. William’s share of
the Residuary Trust therefore was to be split between Joan’s and
Robert’s share.
After Erin’s death, Jean and Robert became the trustees of
the Residuary Trust, which was initially funded with about
$16 million in assets. Jean and Robert established a complex
financial structure using the assets of the Residuary Trust that
Robert claims was for the purpose of avoiding estate taxes and
Dae claims was designed to disinherit him. Only the broad
outlines of this structure are necessary to decide the issues on
appeal, and we therefore summarize it only generally.
In 2011, Jean and Robert set up two trusts, reflecting the
two remaining children’s interests in the Residuary Trust—the
2011 Gibb Trust (Gibb was Joan’s last name) and the 2011
Traver Trust (collectively, the 2011 Trusts). Using a loan from
the Royal Bank of Canada secured by the Residuary Trust’s
assets, Robert and Jean purchased life insurance on the lives of
Joan and Robert by paying a premium of $7.5 million for each
policy. The policies initially provided death benefits of $16.2
million for Joan and $15.2 million for Robert. The 2011 Gibb
Trust owned the policy on Joan’s life, and the 2011 Traver Trust
owned the policy on Robert’s life.
In what Robert calls a “split dollar” arrangement, a series
of agreements gave the Residuary Trust an interest in the life
insurance policies in return for the Residuary Trust’s financing of
5
the premiums for those policies. 4 The Residuary Trust’s interest
(the Receivables) was equal to the greater of: (1) the amount of
the premiums, or (2) the cash value of the policies at the time of
the insured’s death.
Jean and Robert later established two other trusts—the
2014 Gibb Trust and the 2014 Traver Trust (collectively, the 2014
Trusts). Those two trusts purchased the Receivables from the
Residuary Trust for the sums of $674,900 (by the 2014 Gibb
Trust) and $626,400 (by the 2014 Traver Trust). With the
approval of a “trust protector” for the 2011 trusts, the 2014 Gibb
Trust and the 2014 Traver Trust also acquired the assets of the
2011 Gibb Trust and the 2011 Traver Trust, respectively. The
net effect of these transactions was to provide the 2014 Trusts
with the bulk of the assets of the Residuary Trust.
Under the original terms of the 2014 Gibb Trust, Joan was
the lifetime beneficiary and her issue (i.e., Dae) was the
remainder beneficiary. However, the terms of the trust gave
Joan a power of appointment to designate the remainder
4 A “split-dollar” life insurance arrangement has been
described as “any arrangement between an owner and a
nonowner of a life insurance contract, where either party pays
any portion of the premiums (including payment by means of a
loan secured by the life insurance contract) and at least one of the
parties is entitled to recover, either conditionally or
unconditionally, all or any portion of those premiums (and
recovery is to be made from or secured by proceeds from the life
insurance contract).” (Estate of Cahill v. Comm’r (2018) 115
T.C.M. (CCH) 1463 [T.C. Memo 2018-84 at p. *12, 2018 Tax Ct.
Memo LEXIS 86 at p. **11].) We refer to the financial
arrangement involving the Residuary Trust assets as the “Split
Dollar Trust Arrangement.”
6
beneficiaries. On August 5, 2015, Joan exercised that power,
directing the assets of the 2014 Gibb Trust to various charities
and to Robert and his children rather than to Dae.
Robert testified that the purpose of the Split Dollar Trust
Arrangement was to minimize estate taxes and that it
accomplished that goal. He also testified that he and Jean set up
the arrangement with the advice and counsel of financial and
legal advisors.
Joan died on July 12, 2016. Jean died three months later,
on October 15, 2106.
4. Probate Court Proceedings
In October 2018, Dae filed a verified petition to “settle the
accounts,” to “confirm trust assets and trust debts,” and to
“compel redress of a breach of trust and to compel the trustee to
provide information regarding the trust administration.” Dae
filed a supplemental verified petition in March 2019. (We refer to
both petitions collectively as Dae’s Petition.)
Dae’s Petition (described in more detail below) alleged that
Robert breached his fiduciary duties to the Family Trust by
engaging in the transactions underlying the Split Dollar Trust
Arrangement and by using Residuary Trust assets to benefit
himself and his family while depriving Dae of his interest in the
trust.
Robert filed responses and objections to Dae’s initial
petition and to the supplemental petition. On June 10, 2019,
Robert also filed his own petition “for order and instructions
regarding [Dae’s] violations of no contest clauses” (No Contest
Petition). The No Contest Petition sought a declaration that
Dae’s Petition constituted a “contest” in violation of the Family
7
Trust’s No Contest Clause, and requested a ruling deeming all of
Dae’s interest in the Family Trust to be forfeited.
Dae responded to that petition with his anti-SLAPP
motion, which sought an order striking the entire No Contest
Petition. The motion alleged that the No Contest Petition sought
to impose liability on Dae as a result of Dae’s protected
petitioning activity. The motion also alleged that Robert “cannot
meet his resulting burden of demonstrating a likelihood of
success on the merits of his [No Contest] Petition because . . .
Dae’s Petition only challenges certain acts of borrowing and trust
administration by [Robert], which had the effect of changing the
beneficiaries of the irrevocable Residuary Trust, enriching
[Robert] at the expense of . . . Dae.” Robert filed an opposition,
which included his own declaration.
The probate court denied the motion. The court observed
that, even under the “minimal merit” standard applicable to anti-
SLAPP motions, “the arguments and evidence presented by the
parties calls into question the propriety of the various Residuary
Trust transactions at issue.” The court noted that Joan’s
beneficial interest in the Residuary Trust “was contingent on her
not predeceasing Jean,” and “[o]therwise, Joan’s interest was to
go to [Dae].” The court also noted that “[t]here does not appear to
be any provision in the Family Trust allowing Joan to alter
beneficiaries of the irrevocable Residuary Trust.”
However, the probate court also noted Robert’s testimony
that “all these transactions were done at ‘arms-length’ under the
guidance of financial advisers and independent appraisers.” The
court concluded that, “when this aspect is considered with the
intention of reducing tax liability and expenses . . . , it is possibly
conceivable that Robert and Joan’s actions were within their
8
discretion as trustees as outlined by the Family Trust. In turn,
[Dae’s] petition challenging these actions would contest their
powers under the Family Trust.” The court therefore ruled that
“Robert has shown enough, for purposes of this Motion, to show
the ‘minimal merit’ required to survive an anti-SLAPP motion.”
DISCUSSION
1. The Anti-SLAPP Procedure
Analysis of an anti-SLAPP motion is a two-step process. In
the first step, “the moving defendant bears the burden of
identifying all allegations of protected activity, and the claims for
relief supported by them.” (Baral v. Schnitt (2016) 1 Cal.5th 376,
396 (Baral).) At this stage, the defendant must make a
“threshold showing” that the challenged claims arise from
protected activity, which is defined in Code of Civil Procedure
section 425.16, subdivision (e). (Rusheen v. Cohen (2006) 37
Cal.4th 1048, 1056.)
Second, if the defendant makes such a showing, the
“burden shifts to the plaintiff to demonstrate that each
challenged claim based on protected activity is legally sufficient
and factually substantiated.” (Baral, 1 Cal.5th at p. 396.)
Without resolving evidentiary conflicts, the court determines
“whether the plaintiff’s showing, if accepted by the trier of fact,
would be sufficient to sustain a favorable judgment.” (Ibid.) The
plaintiff’s showing must be based upon admissible evidence.
(HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th
204, 212.) Thus, the second step of the anti-SLAPP analysis is a
“summary-judgment-like procedure at an early stage of the
litigation.” (Varian Medical Systems, Inc. v. Delfino (2005) 35
Cal.4th 180, 192.) In this step, a plaintiff “need only establish
that his or her claim has ‘minimal merit’ [citation] to avoid being
9
stricken as a SLAPP.” (Soukup v. Law Offices of Herbert Hafif
(2006) 39 Cal.4th 260, 291, quoting Navellier v. Sletten (2002) 29
Cal.4th 82, 89.) A plaintiff prevails in the second step by
demonstrating that “ ‘the complaint is both legally sufficient and
supported by a sufficient prima facie showing of facts to sustain a
favorable judgment if the evidence submitted by the plaintiff is
credited.’ ” (Wilson v. Parker, Covert & Chidester (2002) 28
Cal.4th 811, 821, quoting Matson v. Dvorak (1995) 40
Cal.App.4th 539, 548.)
Here, the parties agree that Robert’s No Contest Petition
arose from Dae’s protected litigation conduct under the first step
of the anti-SLAPP analysis. Thus, we need consider only
whether Robert provided sufficient evidence to show a likelihood
of success on his No Contest Petition in the second step of the
anti-SLAPP procedure. In doing so, we employ a de novo
standard of review. (Park v. Board of Trustees of California State
University (2017) 2 Cal.5th 1057, 1067.)
2. The Law Concerning No Contest Provisions
No contest clauses respect the intent of a donor by
“discouraging litigation by persons whose expectations are
frustrated by the donative scheme of the instrument.” (Donkin v.
Donkin (2013) 58 Cal.4th 412, 422 (Donkin).) However, that
interest is in tension with the policy of “avoiding forfeitures and
promoting full access of the courts to all relevant information
concerning the validity and effect of a will, trust, or other
instrument.” (Ibid.)
The common law of California traditionally balanced these
interests by enforcing no contest clauses so long as they were
“ ‘not prohibited by some law or opposed to public policy.’ ”
(Donkin, supra, 58 Cal.4th at p. 422, quoting In re Estate of
10
Kitchen (1923) 192 Cal. 384, 388.) No contest clauses were also
strictly construed. (Kitchen, at pp. 389–390.)
The Legislature began codifying the law concerning no
contest clauses in 1989. (Donkin, supra, 58 Cal.4th at p. 422.)
The general rule was that, unless a statute provided otherwise,
“a no contest clause is enforceable against a beneficiary who
brings a contest within the terms of the no contest clause.”
(Former Prob. Code, § 21303, added by Stats. 1989, ch. 544, § 19,
p. 1825, and repealed by Stats. 1990, ch. 79, § 13, p. 463,
operative July 1, 1991.) 5 However, the Legislature also
explained that the statutes governing no contest provisions were
“not intended as a complete codification of the law governing
enforcement of a no contest clause” and that the “common law
governs enforcement of a no contest clause to the extent this part
does not apply.” (Former § 21301.)
The statutory scheme thereafter became increasingly
complex as the Legislature added amendments identifying
particular types of actions “against which a no contest clause was
not enforceable.” (Donkin, supra, 58 Cal.4th at p. 423.) In 2008
the Legislature simplified the statutory scheme (effective in
2010) “by more narrowly defining the types of challenges that
could be subject to a no contest clause.” (Key v. Tyler (2019) 34
Cal.App.5th 505, 516 (Key).) “Under current law, a no contest
clause is enforceable against a ‘direct contest that is brought
5 Subsequent undesignated statutory references are to the
Probate Code. Because this case involves the application of prior
law, we hereafter identify statutory provisions that have since
been repealed or amended by referring to them simply as
“former” statutes without including detailed information about
their effective dates.
11
without probable cause.’ ” (Id. at p. 517, quoting § 21311,
subd. (a)(1).)
The Residuary Trust became irrevocable in 1995 when Erin
died. Thus, the parties agree that the no contest law prior to
2010 applies here. (See § 21315.)
3. Robert Met His Burden to Show that His No
Contest Petition Has “Minimal Merit”
A. Dae’s Petition broadly challenged the
trustees’ conduct
Dae argues that his Petition does not challenge the terms of
the Family Trust. He agrees that Robert, “as trustee, had broad
powers to enter into transactions concerning the [Family] Trust’s
assets.” Dae claims that his Petition “merely challenges the
manner in which [Robert] has used those powers to take [Dae’s]
inheritance for himself.”
Dae’s filings in the probate court suggest otherwise.
Rather than simply targeting the specific act that decreased his
inheritance—i.e., Joan’s exercise of her power of appointment to
exclude Dae as a beneficiary of the 2014 Gibb Trust—Dae’s
Petition took aim at the trustee’s entire Split Dollar Trust
Arrangement.
Dae’s Petition specifically challenged his removal as a
beneficiary of the trusts that Jean established for the life
insurance proceeds (which Dae’s Petition called the “irrevocable
life insurance trust or trusts” or “ ‘ILITS’ ”). Dae alleged that he
“could have easily been made a proportionate beneficiary under
the ILITS but was intentionally not made so by [Robert] and
[Robert’s family] and others designing the ILITS that put
[Robert] in a breach of his fiduciary duties owed under the
Residuary Trust to [Dae] as a beneficiary.”
12
However, Dae’s Petition also went further in alleging that
the trustees’ decision to purchase the insurance policies on the
lives of Joan and Robert in the first place was outside their
authority. Dae’s Petition characterized Jean’s interest in the
Residuary Trust as a “life estate of the income and a limited right
to invade principal,” which was treated for tax purposes as
“Qualified Terminal Interest Property.” Dae’s Petition then
discussed the facts concerning the $15 million loan from the
Royal Bank to pay the premiums on the insurance policies for
Joan and Robert and asked, “Why would the Residuary Trust
spend $15,000,000 in carrying out its purpose as a Qualified
Terminal Interest Property (hereinafter the ‘QTIP’) Trust?”
Dae’s Petition answered this question by alleging that “all the
payments made by the Residuary Trust related to the
$15,000,000 borrowing from Royal Bank were really related to
the personal activity of Jean Walsh and not for carrying out the
purpose of the QTIP.”
Dae’s Petition also challenged the trustee’s authority to
transfer the Receivables from the Residuary Trust to the 2014
Gibb Trust and the 2014 Traver Trust. Dae’s Petition alleged
that the Residuary Trust received inadequate consideration for
that transfer and claimed that the transaction “was just a
shifting of what is really a loss by Jean . . . and her Survivor’s
Trust to the Residuary Trust.” Dae claimed that the “payment of
interest costs and all of the other related costs” associated with
the Royal Bank loan should be “payable to the Residuary Trust”
from the Survivor’s Trust.
It is undisputed that the Split Dollar Trust Arrangement,
including the purchase of insurance on Joan’s life through the
loan from the Royal Bank, resulted in a payment of $16.2 million
13
to the 2014 Gibb Trust after Joan’s death. Thus, in return for a
policy payment of $7.5 million, the 2014 Gibb Trust received
more than twice that amount free of federal estate tax. Had Joan
not excluded Dae as a beneficiary of the 2014 Gibb Trust, Dae
would have received the substantial benefit of this arrangement.
By attacking the trustees’ decision to establish the Split
Dollar Trust Arrangement, Dae’s Petition appears to challenge
their authority to manage the principal of the Residuary Trust
for the benefit of the trust beneficiaries. As mentioned, the
Family Trust gave the trustees the authority to invest, loan,
convey, and hypothecate trust property. Thus, Dae’s Petition
arguably sought to “impair” trust provisions which expressly
granted powers that the trustees exercised in setting up the Split
Dollar Trust Arrangement.
A challenge to investment decisions that a trust expressly
empowers a trustee to make can amount to a contest. In Hearst
v. Ganzi (2006) 145 Cal.App.4th 1195 (Hearst), income
beneficiaries of a trust sought a ruling that their proposed
petition would not violate the trust’s no contest clause. 6 The
petition alleged that the trustees breached their fiduciary duties
by decisions that reduced the dividends the income beneficiaries
received. The probate court concluded that the proposed petition
6 The beneficiaries made their request under a former
statute establishing a “safe harbor” proceeding to obtain a ruling
declaring whether a particular petition would violate an
instrument’s no contest clause before that petition was actually
filed. (Hearst, supra, 145 Cal.App.4th at p. 1202; see former
section 21320; Funsten v. Wells Fargo Bank, N.A. (2016) 2
Cal.App.5th 959, 974 [safe harbor procedure no longer available
after statutory revisions in 2010].)
14
would violate the trust’s no contest clause, and the Court of
Appeal affirmed. (Id. at pp. 1199–1200.)
The trust instrument in Hearst provided the trustees with
the authority to hold assets regardless of the income they
produced and to decide what was income and what was the
principal of the trust. (Hearst, supra, 145 Cal.App.4th at pp.
1201–1202.) The trustees were also given explicit authority to
treat income and remainder beneficiaries differently. (Id. at
p. 1214.) The Court of Appeal held that the income beneficiaries’
attempt to increase their dividends would contest the provisions
of the trust by interfering with the trustee’s business decisions
and their discretion to decide what was income and what was
principal. (Id. at pp. 1210–1212.)
Dae’s Petition similarly seeks to limit the discretion of the
Family Trust’s trustees by challenging their use of trust assets to
purchase life insurance and to fund other trusts with the
proceeds. It is undisputed that the Split Dollar Trust
Arrangement avoided estate taxes, which was within the scope of
the trustee’s authority.
Dae cannot avoid the consequences of his broad challenge
to the trustee’s discretion by belatedly narrowing his focus only to
the specific conduct that directly resulted in his loss of a
beneficiary interest. The purpose of no contest clauses is to
discourage litigation that challenges the intent of the donor.
(Donkin, supra, 58 Cal.4th at p. 422.) A pleading that initiates
such litigation can violate a no contest clause even if its
allegations are later withdrawn.
For example, in Schwartz v. Schwartz (2008) 167
Cal.App.4th 733, the court held that a petition seeking a
particular distribution from an inter vivos trust violated a no
15
contest clause even though the petitioner withdrew the petition
several months later. The court reasoned that the petitioner
“used the mechanisms of the court” to challenge the decedent’s
intent, compelling the respondent to respond and the court to
hold hearings. (Id. at p. 745.) The court concluded that
permitting the petitioner to “escape the consequences” of his
petition by withdrawing the contest would defeat the purpose of
the no contest clause. (Ibid.) 7
Here, Dae’s Petition initiated litigation, causing Robert to
file responses and to file his separate No Contest Petition. The
No Contest Petition in turn spawned proceedings on Dae’s anti-
SLAPP motion. Dae may not now escape the consequences of his
original allegations by recasting his Petition as a narrow
challenge only to the particular actions that removed him as a
beneficiary of the 2014 Gibb Trust.
B. Robert provided sufficient evidence
showing that Dae’s challenge to his own
disinheritance was a contest
Based upon the current record, it is also possible that Dae’s
specific challenge to his removal as a beneficiary of the 2014 Gibb
7 Under current law a “ ‘Contest’ ” is triggered by “a
pleading filed with the court by a beneficiary.” (§ 21310, subd.
(a).) In discussing the proposed 2008 changes to the no contest
statutes, the California Law Revision Commission explained that
a contest was defined this way because “[m]any of the harms that
can result from litigation occur early in a contest (e.g.,
reputational harm to the transferor or beneficiaries, acrimony
between beneficiaries, and pressure to settle with a dissatisfied
beneficiary).” (Recommendation: Revision of No Contest Clause
Statute (Jan. 2008) 37 Cal. Law Revision Com. Rep. (2007)
p. 391.)
16
Trust would subvert the Trustors’ intent. One of the two original
Trustors of the Family Trust—Jean—established the 2014 Gibb
Trust, which included the provision giving Jean’s daughter Joan
the power to appoint the persons who would receive the assets of
that trust upon Joan’s death. It is that provision that permitted
Joan to exclude Dae from the remainder beneficiaries who would
inherit those assets. Thus, Jean was a key participant in the
conduct that allegedly led to Dae’s disinheritance.
In his declaration, Robert testified that, following Erin’s
death, “Jean occasionally expressed to me a desire to engage in
additional estate planning activities in order to further the
purposes of the Family Trust to pass as much of her estate to her
children as possible and minimize estate taxes.” Robert also
testified that, “[a]s Erin had no children, the goal of the Family
Trust was to ensure that the Walsh Estate would pass efficiently
to Jean’s children with minimal estate tax impact.”
The provisions of the Family Trust also suggest that the
primary goal of that trust was to leave as much money as
possible to Jean’s children. The Family Trust designated the
surviving trustor (i.e., Jean) as an income beneficiary of the
Residuary Trust, with the Residuary Trust property to be
distributed to Jean’s three children in equal shares upon the
surviving trustor’s death. Only if one or more of those children
predeceased the surviving trustor was the property of the
Residuary Trust to be distributed to the deceased child’s issue “by
right of representation.”
Thus, under the original terms of the Family Trust, if Joan
had outlived Jean (instead of dying three months earlier, as
actually happened), Joan would have inherited her portion of the
Residuary Trust property and would have been free to do with
17
that property what she wanted—including giving it away or
bequeathing it to persons other than Dae. It is highly conceivable
that, in executing the Family Trust, Erin and Jean expected that
Jean’s children would outlive them and therefore would be free to
dispose of their Residuary Trust property as they wished once
they inherited it. The provision for inheritance by right of
representation in the event a child predeceased the surviving
Trustor could simply have reflected an intent to maintain equal
treatment of all of Jean’s children and their families rather than
specifically to provide a benefit to the Trustor’s grandchildren
from the Residuary Trust. 8 If the Trustors had intended to
ensure a benefit to the grandchildren from that trust, they could
have included provisions in the trust instrument guaranteeing
the grandchildren’s inheritance regardless of when the
grandchildren’s parents died. 9
8As mentioned, the grandchildren already were
guaranteed some inheritance through the generation skipping
trust.
9 Of course, as the trial court pointed out, under the
express terms of the trust instrument Dae’s interest became fixed
once his mother Joan died before Jean. The Trustors could have
included a provision permitting Joan (and Jean’s other children)
to designate the beneficiaries of their portion of the Residuary
Trust property in the event that they predeceased the surviving
Trustor, but they did not do so. We do not purport to reach any
ultimate resolution of these issues concerning the Trustors’
intent, which may depend upon extrinsic evidence. On this
appeal from an anti-SLAPP motion, we decide only that Robert
has made the minimal showing necessary to support his claim
that Dae’s Petition amounted to a contest.
18
This evidence supports a reasonable inference that the
Trustors expected, and intended, the property of the Residuary
Trust to pass to Jean’s children to use and distribute as they
chose. If that inference is credited (as we must do in ruling on an
anti-SLAPP motion), Jean’s conduct in establishing a trust giving
Joan the power to appoint beneficiaries, and Jean’s and Robert’s
conduct in permitting the transfer of the Residuary Trust’s assets
into that trust, may have been fully in accord with the Trustors’
original intent. Accordingly, Dae’s Petition challenging that
conduct could amount to a contest.
We emphasize that we do not now decide that Dae’s
Petition amounted to a “contest” for purposes of the No Contest
Clause. Whether there has been a contest within the meaning of
a particular no contest clause depends upon the individual
circumstances of the case and the language of the particular
instrument. (Burch v. George (1994) 7 Cal.4th 246, 254–255.)
“ ‘[T]he answer cannot be sought in a vacuum, but must be
gleaned from a consideration of the purposes that the [testator]
sought to attain’ ” by the instrument in question. (Id. at p. 255,
quoting Estate of Kazian (1976) 59 Cal.App.3d 797, 802.)
Extrinsic evidence may exist that bears upon the proper
interpretation of the trusts here, including evidence of the
Trustors’ intent. (See Burch, at p. 254 [the interpretation of trust
language is a question of law “unless interpretation turns on the
credibility of extrinsic evidence or a conflict therein”].) On this
appeal, we decide only that Robert has provided sufficient
evidence that there was a contest to defeat Dae’s anti-SLAPP
motion. We leave for the trial court to consider the merits of
Robert’s no contest claim at a hearing on a fully developed record
following discovery.
19
C. The evidence is sufficient for Robert to
proceed on a claim that Dae’s Petition was
frivolous
Citing Estate of Ferber (1998) 66 Cal.App.4th 244 (Ferber),
Dae argues that to establish that the breach of fiduciary duty
claims in Dae’s Petition triggered the No Contest Clause, Robert
will need to prove that those claims were frivolous. 10 Dae further
argues that this burden must be taken into consideration in
determining whether Robert has demonstrated the minimal
merit necessary to proceed on his No Contest Petition.
In Ferber, the court considered a no contest provision in a
will that purported to disinherit any beneficiary who “objects in
any manner to any action taken or proposed to be taken” by the
executor or “unsuccessfully requests the removal of any person
acting as an executor.” (Ferber, supra, 66 Cal.App.4th at p. 248.)
A beneficiary sought a ruling under the safe harbor provision of
the prior law that objections to an accounting and a petition to
remove the executor would not violate the no contest clause. (Id.
at pp. 248–249.) The court held that those claims would violate
the no contest clause, but that the clause was unenforceable to
the extent it purported to punish the beneficiary’s nonfrivolous
breach of fiduciary claims. (Id. at pp. 250, 255.) The court
concluded that this standard struck an appropriate balance
between the competing public policies of permitting beneficiaries
10 Ferber was decided prior to legislative changes to the no
contest statutes in 2001, and prior to the Legislature’s major
revisions to the no contest law in 2010 discussed above. The
parties agree that Ferber was decided under the law that is
applicable to this case.
20
to challenge fiduciary malfeasance and discouraging litigation
that challenges a testator’s intent. (Id. at pp. 254–255.)
Robert argues that the frivolousness standard the court
adopted in Ferber does not apply to the claims that Dae asserts.
Robert argues that Ferber is distinguishable because the court in
that case considered the enforceability of a no contest clause that
was overbroad in purporting to prohibit any claim challenging
fiduciary conduct. Robert points out that, in this case, Dae has
never claimed that the No Contest Clause is unenforceable.
This ground for distinguishing Ferber is unpersuasive. The
policy considerations that the court considered in Ferber reach
more broadly than Robert suggests. The competing policies of
discouraging litigation challenging a testator’s intent and
permitting beneficiaries to remedy fiduciary misconduct are at
play whenever a no contest provision is interpreted to punish a
particular fiduciary duty claim. Under the court’s reasoning in
Ferber, a no contest clause is overbroad whenever it imposes a
forfeiture for bringing a claim that should be permitted as a
matter of public policy. If the No Contest Clause in this case is
interpreted to penalize a fiduciary duty claim that public policy
would permit Dae to raise, it would be overbroad under the
court’s reasoning in Ferber.
There are other persuasive reasons to follow Ferber here.
First, subsequent cases have adopted Ferber’s reasoning. (See
Fazzi v. Klein (2010) 190 Cal.App.4th 1280, 1289 (Fazzi)
[following Ferber in concluding that a no contest clause could not
apply to a nonfrivolous action to remove a trustee for cause];
Tunstall v. Wells (2006) 144 Cal.App.4th 554, 561 [citing Ferber
for the proposition that “ ‘[b]eneficiaries must be free to raise
public policy issues so the court may address them’ ”], quoting
21
Ferber, supra, 66 Cal.App.4th at p. 252; Hearst, supra, 145
Cal.App.4th at p. 1213 [citing Ferber at p. 253 for the proposition
that “[n]o contest clauses that purport to insulate executors
completely from vigilant beneficiaries violate the public policy
behind court supervision”].)
Second, subsequent legislative actions validated Ferber’s
concern for protecting fiduciary duty claims from the threat of
forfeiture. Following the decision in Ferber, “the Legislature
went one step further and banned the enforcement of a no contest
clause against any action to remove a fiduciary.” (Fazzi, supra,
190 Cal.App.4th at p. 1289, fn. 5.) It did so by adopting former
section 21305. Former section 21305, subdivision (b), among
other changes, declared that a pleading “ ‘(6) . . . challenging the
exercise of fiduciary power’ ” does not violate a no contest clause
“ ‘as a matter of public policy.’ ” (Ibid.; former § 21305, subd. (b).)
That statute applied only to instruments that became irrevocable
on or after January 1, 2001, and therefore does not directly apply
here. (Ibid.; former § 21305, subd. (d); Hermanson v. Hermanson
(2003) 108 Cal.App.4th 441, 445.) However, the legislative
change was based on a public policy to permit claims of fiduciary
misconduct that challenge a trustee’s failure to carry out the
terms of a trust. (See Donkin, supra, 58 Cal.4th at pp. 436–438.)
In making that change, the Legislature concluded that this public
policy was significant enough to establish broad protection for
fiduciary duty claims despite a no contest clause.
Finally, Dae’s Petition is based on the theory that Robert
engaged in self-dealing. It challenges Robert’s alleged conduct in
permitting, or arranging, the transfer of Residuary Trust assets
into the 2014 Gibb Trust for the purpose of allowing Joan to give
Robert’s children a portion of the inheritance that otherwise
22
would have gone to Dae. If true, this conduct could constitute a
violation of Robert’s duty “not to use or deal with trust property
for the trustee’s own profit or for any other purpose unconnected
with the trust, nor to take part in any transaction in which the
trustee has an interest adverse to the beneficiary.” (§ 16004,
subd. (a).) That would be malfeasance of a kind that concerned
the court in Ferber.
Thus, we agree with Dae that, for Robert to prevail on his
No Contest Petition, Robert will ultimately need to prove both
that Dae’s Petition was a contest under the No Contest Clause
and that at least one of the claims in Dae’s Petition was
frivolous. 11
However, Robert need not prove that claim now. Robert’s
burden in responding to Dae’s anti-SLAPP motion was not to
prove all the elements of his claim, but only to show that his No
Contest Petition has “minimal merit.” This means that Robert
need only provide evidence that, if credited, is sufficient to show
that one or more of the challenges in Dae’s Petition is frivolous.
11 The analysis of whether a petition violates a no contest
clause may differ by claim. (See Fazzi, supra, 190 Cal.App.4th at
pp. 1288–1289 [separately analyzing claims in a petition seeking
to remove a trustee and to disqualify a successor trustee].) As
discussed above, Dae’s Petition contains numerous allegations
and different claims, including at least the claims that (1) the
$15 million obligation of the Residuary Trust incurred to
purchase the life insurance policies was an improper personal
expense and should be repaid by Robert or the Survivor’s Trust;
(2) the 2014 Trusts paid inadequate consideration to acquire the
Receivables from the Residuary Trust; and (3) Robert breached
his fiduciary duties by orchestrating the funding of the 2014 Gibb
Trust to benefit his family at Dae’s expense.
23
(Cf. Key, supra, 34 Cal.App.5th at pp. 531–539 [to prevail in the
second step of an anti-SLAPP motion, proponent of a no contest
petition was required to provide sufficient evidence showing that
the respondent contested a trust without probable cause].)
Robert has made such a showing.
As discussed above, Robert provided evidence that, with
expert advice and counsel, he and Jean established the Split
Dollar Trust Arrangement for the purpose of minimizing estate
taxes to increase the assets available to beneficiaries. If this is
true, Dae’s broad challenge to the Split Dollar Trust
Arrangement would clearly implicate the No Contest Clause by
“impair[ing]” the administration of the Trust. That would be
sufficient for Robert to succeed on his No Contest Petition,
causing forfeiture of Dae’s beneficial interest. Robert has
therefore shown a probability of success on his No Contest
Petition sufficient to meet the “minimal merit” test. 12
12 At this stage of the proceedings, we also cannot foreclose
the possibility that Robert might ultimately prove Dae’s more
specific challenge to his own removal as a beneficiary is frivolous.
As discussed above, that challenge is predicated on Robert’s
conduct in permitting the establishment and funding of the 2014
Gibb Trust that enabled Joan to direct the disposition of her
share of the Residuary Trust before Joan had actually received
that share. Whether that conduct was consistent with the terms
of the Family Trust depends upon the Trustors’ intent with
respect to Jean’s children and grandchildren, which in turn may
depend upon extrinsic evidence. While the current record does
not show that Dae’s challenge to his own disinheritance was
frivolous, evidence might develop that would make the continued
pursuit of that theory unreasonable.
24
DISPOSITION
The trial court’s order is affirmed. Respondent Robert
Traver is entitled to his costs on appeal.
CERTIFIED FOR PUBLICATION.
LUI, P. J.
I concur:
CHAVEZ, J.
25
Dae v. Traver, B305834
ASHMANN-GERST, J., Dissenting.
I conclude that the trial court should have granted the anti-
SLAPP motion 1 filed by Ian C. Dae (Dae) to strike the no contest
petition filed by Robert Traver (Robert) 2 in his capacity as trustee
of the Erin J. Walsh and Jean L. Walsh Family Trust (Family
Trust) because he failed to demonstrate a probability of
prevailing on his claims.
The majority, in contrast, concludes that Robert submitted
sufficient evidence to suggest that Dae filed a contest because:
(1) it is conceivable that he never had an irrevocable remainder
interest in the Residuary Trust; (2) the cotrustees had the power
to purchase the life insurance policies and transfer the
receivables to the 2014 Gibb Trust and the 2014 Traver Trust as
part of their estate planning; and (3) by contesting his de facto
disinheritance from the Residuary Trust and the cotrustees’
estate planning decisions, Dae is contesting the terms of the
1 The anti-SLAPP statute provides that “[a] cause of action
against a person arising from any act of that person in
furtherance of the person’s right of petition . . . shall be subject to
a special motion to strike, unless the court determines that the
plaintiff has established that there is a probability that the
plaintiff will prevail on the claim.” (Code Civ. Proc., § 425.16,
subd. (b).) “SLAPP” is an acronym for “strategic lawsuit against
public participation.” (Monster Energy Co. v. Schechter (2019) 7
Cal.5th 781, 785, fn. 1.)
2 Because multiple people connected to the Family Trust
share various last names, we refer to some by their first names.
No disrespect is intended.
Family Trust and the powers of the cotrustees. Also, the majority
concludes that the evidence suggests that Dae’s claims are
frivolous.
For the reasons discussed below, I disagree.
I. Dae had an Irrevocable Remainder Interest in the
Residuary Trust.
Whether Dae had an irrevocable remainder interest in the
Residuary Trust requires interpretation of its terms.
Interpretation of a trust presents a question of law unless it
turns on the competence or credibility of extrinsic evidence, or on
a conflict in that evidence. (Ike v. Doolittle (1998) 61 Cal.App.4th
51, 73 (Ike).) The intent of the trustor controls. (Ibid.) “[I]t is
proper for the trial court in the first instance and the appellate
court on de novo review to consider the circumstances under
which the document was made so that the court may be placed in
the position of the testator or trustor whose language it is
interpreting, in order to determine whether the terms of the
document are clear and definite, or ambiguous in some respect.”
(Ibid.) “An ambiguity in a written instrument exists when, in
light of the circumstances surrounding the execution of the
instrument, ‘“the written language is fairly susceptible of two or
more constructions.” [Citations.]’ [Citation.]” (Id. at p. 74.)
“Where a trust instrument contains some expression of the
trustor’s intention, but as a result of a drafting error that
expression is made ambiguous, a trial court may admit and
consider extrinsic evidence . . . to resolve the ambiguity and give
effect to the trustor’s intention as expressed in the trust
instrument. [Citation.]” (Ibid.)
The Family Trust specified: “After the death of one of the
trustors, The Grandchildrens’ Trusts[] and The Residuary Trust
2
in each case shall be irrevocable and the surviving trustor shall
not have the right to make additions to said trusts, or the right to
change, alter, modify, or revoke said trusts in any manner
whatsoever.” The Residuary Trust established that “[d]uring the
lifetime of the surviving trustor, the trustees shall pay to, or for
the benefit of, the surviving trustor, the entire net income of The
Residuary Trust.” It also provided that “[u]pon the death of the
surviving trustor, the trust property shall be divided into three
equal shares which shall be distributed as follows: [¶] . . . [¶]
[3] One share shall be distributed to Joan Traver Dae [(Joan)] if
she [is] then [] living. If [Joan] is not then living, said share shall
be distributed to her issue by right of representation.”
The trust terms are unambiguous. As Joan’s son, Dae had
an irrevocable remainder interest in her share of the Residuary
Trust if she predeceased Jean L. Walsh (Jean). It is impossible to
read the trust as allowing Joan to decide that her share should be
distributed to some other person or persons.
The majority suggests that the trust terms are ambiguous
and could be construed as permitting Jean’s children to disinherit
their issue when viewed through the lens of the following
extrinsic evidence: “One of the two original Trustors of the
Family Trust—Jean—established the 2014 Gibb Trust, which
included the provision giving Jean’s daughter Joan the power to
appoint the persons who would receive the assets of that trust
upon Joan’s death.” (Maj. Opn., at p. 17.) Robert declared that
“[a]s Erin [J. Walsh (Erin)] had no children, the goal of the
Family Trust was to ensure that the Walsh Estate would pass
efficiently to Jean’s children[.]” (Ibid.) “The Family Trust
designated the surviving trustor (i.e., Jean) as an income
beneficiary of the Residuary Trust, with the Residuary Trust
3
property to be distributed to Jean’s three children in equal shares
upon the surviving trustor’s death. Only if one or more of those
children predeceased the surviving trustor was the property of
the Residuary Trust to be distributed to the deceased child’s issue
‘by right of representation.’” (Ibid.) “[U]nder the original terms
of the Family Trust, if Joan had outlived Jean (instead of dying
three months earlier, as actually happened), Joan would have
inherited her portion of the Residuary Trust property and would
have been free to do with that property what she wanted—
including giving it away or bequeathing it to persons other than
Dae.” (Maj. Opn., at pp. 17–18.)
The majority concludes that the “provisions of the Family
Trust . . . suggest that the primary goal of that trust was to leave
as much money as possible to Jean’s children.” (Maj. Opn., at
p. 17.) It also concludes that “[t]he provision for inheritance by
right of representation in the event a child predeceased the
surviving Trustor could simply have reflected an intent to
maintain equal treatment of all of Jean’s children and their
families rather than specifically to provide a benefit to the
Trustor’s grandchildren from the Residuary Trust. If the
Trustors had intended to ensure a benefit to the grandchildren
from that trust, they could have included provisions in the trust
instrument guaranteeing the grandchildren’s inheritance
regardless of when the grandchildren’s parents died.” (Maj. Opn.,
at p. 18, fns. omitted.) Per the majority, “This evidence supports
a reasonable inference that the Trustors expected, and intended,
the property of the Residuary Trust to pass to Jean’s children to
use and distribute as they chose. If that inference is credited
. . . , Jean’s conduct in establishing a trust giving Joan the power
to appoint beneficiaries, and Jean’s and Robert’s conduct in
4
permitting the transfer of the Residuary Trust’s assets into that
trust, may have been fully in accord with the Trustors’ original
intent. Accordingly, Dae’s Petition challenging that conduct
could amount to a contest.” (Maj. Opn., at p. 19.)
The problem with this analysis is that none of the evidence
suggests that the phrase “said share shall be distributed to
[Joan’s] issue by right of representation” contains words used by
the trustors in a specialized way. For example, there is no
evidence that the word “shall” was intended to mean may, or that
the word “issue” was intended to mean any person of Joan’s
choosing. (Estate of Dye (2001) 92 Cal.App.4th 966, 977 [evidence
did not create an ambiguity in a will because it failed “to raise a
semantically plausible alternative candidate of meaning”].) I
therefore decline to interpret the language “shall be distributed
to [Joan’s] issue” as meaning “shall be distributed as Joan
specifies.”
The majority suggests that we can interpret the Family
Trust by looking at the primary goal of the trustors and their
presumption about who would outlive who. I cannot concur. The
court in Estate of Canfield (1967) 256 Cal.App.2d 647, 654
explained—in the context of a will—that “[t]he fact that fate, as it
often does, thereafter proved [a] decedent to have been mistaken
in [assuming who would outlive who] does not authorize a trial or
appellate court to rewrite a will under the guise of construing it
to determine what the testator might have intended if he had
survived to a later date and had written it in the light of
subsequent developments.” (Ibid.) This observation applies with
equal force here.
Ultimately, the underpinning of the majority’s holding is
found in its summation. “Robert provided sufficient evidence of
5
the trustor’s intent to allow a change of beneficiary,” this
“conclusion is limited to the context in which it arises—an anti-
SLAPP motion,” and the majority expresses “no opinion on how
the probate court should ultimately rule on Robert’s petition.”
(Maj. Opn., at p. 3.) Once this summation is unpacked, several
significant points are revealed. The majority does not apply the
rules of document interpretation to conclude that the language of
the trust is reasonably susceptible to the interpretation that the
remainder beneficiaries could be changed. Rather, it concludes
that the evidence of the trustors’ intent offered by Robert was
enough, by itself, to prove the potential meaning of the trust in
the anti-SLAPP context. The implications thereby endorsed by
the majority are: The rules of document interpretation as applied
to trusts are suspended and/or relaxed for parties who are
resisting anti-SLAPP motions. Moreover, if a party resisting an
anti-SLAPP motion has an opinion regarding the meaning of a
trust, that opinion must be accepted even if it is directly contrary
to the plain language of the trust.
The language of the anti-SLAPP statute provides no room
for the majority’s interpretation. In Jay v. Mahaffey (2013) 218
Cal.App.4th 1522, 1537 (Jay), the defendants argued that when
the statute states that “the court shall consider the pleadings,
and supporting and opposing affidavits stating the facts upon
which the liability or defense is based” (Code Civ. Proc., § 425.16,
subd. (b)(2)), it means that a court must “consider all evidence
submitted.” (Jay, supra, 218 Cal.App.4th at p. 1537.) In
rejecting this argument, the court recognized that “the statute
neither suggests nor states that normal rules of evidence and
procedure do not apply to anti-SLAPP motions[.]” (Ibid.) I
conclude that the normal rules of evidence and procedure were
6
applicable here, i.e., we must adhere to the rules of document
interpretation related to trusts when deciding if Robert’s petition
had minimal merit. Allowing a defendant to survive an anti-
SLAPP motion if he or she has not shown an ability to prevail on
a later motion or at trial is directly contrary to the stated purpose
of the anti-SLAPP statute: to allow special motions to strike
meritless actions and thereby curb the effect of lawsuits “brought
primarily to chill the valid exercise of the constitutional rights of
freedom of speech and petition for the redress of grievances.”
(Code Civ. Proc., § 425.16, subd. (a).)
To the degree the majority intimates that a court can
modify the Family Trust, I see it differently.
A trial court has the equitable power to modify an
irrevocable trust, but only in exceptional circumstances. (Ike,
supra, 61 Cal.App.4th at pp. 79–82.) The modification must be
necessary to accomplish the purpose of the trustors as expressed
in the trust instrument. (Id. at p. 80; Stewart v. Towse (1988)
203 Cal.App.3d 425, 428.)
In Adams v. Cook (1940) 15 Cal.2d 352 (Adams), investors
placed real property into a trust to be sold by a date certain at a
fixed price. (Id. at pp. 354, 360.) Any lease of the property had to
be subject to its sale. “It was the intent of the trustors that the
unit holders or beneficiaries under the trust should secure the
largest return on their investment.” (Id. at p. 360.) After oil was
discovered on the property, and after the oil was allegedly being
drained by numerous wells drilled on adjacent property, the
beneficiaries asked the probate court to allow the trustee to
execute an oil lease free of the restrictions as to sale. The trial
court granted the relief, finding that if the trustee could not
execute an oil lease, the property would become worthless. Our
7
Supreme Court affirmed. (Id. at p. 363.) It noted that “a court of
equity has the power to change the method of administering a
trust estate[] when it is shown that such a change is necessary to
prevent loss or destruction of the trust property[.]” (Id. at p. 358.)
It explained that “the rule against courts modifying the terms of
a contract . . . does not apply to declarations of trust, where the
primary purpose of the trust would not be accomplished by a
strict adherence to the terms of the declaration of trust[,] and
that when it is made to appear in a court of equity . . . that the
benefits and advantages which the trustors desired to confer
upon the beneficiaries would not accrue to them by ‘a slavish
adherence to the terms of the trust,’ the courts may modify the
terms of the trust to accomplish the real intent and purpose of
the trustors.” (Id. at p. 361.)
“It is only under peculiar circumstances, such as those
exemplified in [Adams], that a court has the power to modify an
active trust. [Citations.]” (Moxley v. Title Ins. & Trust Co. (1946)
27 Cal.2d 457, 468.) One such circumstance is when a drafting
error defeats the trustor’s intentions. (Bilafer v. Bilafer (2008)
161 Cal.App.4th 363, 369.)
The case at bar does not present an exceptional or peculiar
circumstance in which a court is empowered to modify the
Residuary Trust. There is no expression in the Family Trust that
Joan could decide to change whether her issue take her share
under the Residuary Trust if she predeceased the survivor of Erin
or Jean. There was no drafting error in the Family Trust. A
modification is not necessary to preserve the value of the trust
property, as in Adams. In any event, the point is moot because
Robert did not file a petition asking the probate court to modify
the Family Trust.
8
II. Dae did not File a Contest.
Whether there has been a contest within the meaning of a
no contest clause depends upon the circumstances and the
language used. A court must consider the purposes that the
trustor sought to obtain by the provisions of his or her trust.
(Estate of Strader (2003) 107 Cal.App.4th 996, 1002–1003.)
Consequently, a contest has been construed to mean an attempt
to thwart a testator’s intent. (Burch v. George (1994) 7 Cal.4th
246, 262–263.)
The intent of trustors—Erin and Jean—can be gleaned
from the unambiguous terms of the Family Trust. They intended
for Jean’s issue to receive her share of the Residuary Trust if she
predeceased the surviving trustor. Dae’s petition is designed to
enforce that intent, an intent that was thwarted when Jean and
Robert breached their fiduciary duty to Dae by removing a large
percentage of the assets from the Residuary Trust and placing
the right to receive life insurance proceeds upon the death of
Joan into a trust that failed to preserve Dae’s irrevocable
remainder interest. 3 The Family Trust never authorized the
3 “Among the duties of the trustee is the duty to administer
the trust and to manage trust property ‘with the care, skill,
prudence, and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of like
character and with like aims to accomplish the purposes of the
trust as determined from the trust instrument.’ [Citation.]”
(Estate of Gump (1991) 1 Cal.App.4th 582, 596 [citing Prob. Code,
§ 16040, subd. (a)].) “The trustee has a duty to administer the
trust solely in the interest of the beneficiaries.” (Prob. Code,
§ 16002, subd. (a).) With respect to Dae, the cotrustees breached
these duties. As a result, he was improperly cheated out of
millions of dollars.
9
cotrustees to alter, revoke or modify Dae’s interest. For these
reasons, I conclude that any challenge to the revocation of his
interest (and the steps leading up to it) cannot be construed as a
contest.
The majority suggests that if Dae wanted to avoid a
contest, he should have focused his petition solely on his
exclusion from the 2014 Gibb Trust. I part ways with the
majority on this point. While the majority suggests that each
decision made by the cotrustees must be viewed in a vacuum
when courts are deciding if there is a contest, I conclude that the
decisions must be viewed together and judged by the result that
they achieved.
Schwartz v. Schwartz (2008) 167 Cal.App.4th 733 does not
compel a contrary conclusion. It merely held that withdrawing a
petition that amounts to a contest does not save a party from the
penalty of a no contest clause. (Id. at pp. 744–746.) It does not
hold that a no contest clause is triggered when a wronged
beneficiary alleges a deprivation that took multiple steps and an
interim step was legitimate.
My analysis is bolstered by Robert’s declaration. He
declared that Jean and he entered the split-dollar arrangements
to minimize estate taxes based on the advice of financial advisors
and legal counsel. He did not, however, specify how those
arrangements minimized taxes, nor did he state whether all or
only some of the steps leading up to the transfer of the insurance
receivables into the 2014 Traver Trust and 2014 Gibb Trust were
10
necessary for the stated goal. 4 I can only assume that all the
steps were necessary, including the creation of the 2014 Traver
Trust and the 2014 Gibb Trust. In other words, they all had a
common goal. Those trusts did not preserve Dae’s irrevocable
remainder interest in Joan’s share of the Residuary Trust
following Jean’s death. If that is true, then every step the
cotrustees took must be viewed as interrelated steps in a scheme
designed to achieve a goal that thwarted the terms of the
Residuary Trust. While the cotrustees were granted the power to
“borrow money for any trust purpose,” their decision to borrow
money to pay for the life insurance policies was not for a trust
purpose because it ended up serving the interests of Robert’s
family at the expense of Dae.
My point is reinforced by the power of appointment in the
2014 Gibb Trust. Joan was not able to give her share away to
anyone she chose. Her power could be exercised only in favor of
“[Jean’s] issue, and qualified charitable organizations[.]” In other
words, the cotrustees created a trust with a power of
appointment that, if exercised, was highly likely to benefit
Robert, his children, or both because—other than Dae—they were
Jean’s only remaining issue.
The trial court thought it was relevant that Jean and he
received financial and legal advice before entering the split-dollar
arrangements. But there is no “professional advice defense” to
4 Robert declared that following Joan’s death, the 2014 Gibb
Trust received $16.2 million free of federal estate tax. I presume
this is accurate. The point of noting that Robert did not explain
whether all or some of the steps taken were necessary for tax
planning purposes is this: he has rendered the courts unable to
properly judge the purpose of each of those steps.
11
breach of fiduciary duty. In other words, a fiduciary does not
have license to breach his or her duty just because a professional
advised the course of action.
Robert suggests that all the blame for Dae being
disinherited falls on the shoulders of Joan. This is an attempt at
misdirection, and it fails. Robert and Jean gave Joan the power
to disinherit Dae. That was a violation of their fiduciary duties
that should not be excused.
III. Even if Dae Filed a Contest, it was Not Frivolous.
As announced by the majority, the reasoning of Estate of
Ferber (1998) 66 Cal.App.4th 244 indicates that a no contest
clause is overbroad when it imposes a forfeiture for bringing a
nonfrivolous claim of fiduciary misconduct. In this case, it is
undeniable that Jean and Robert breached their fiduciary duty to
Dae by engaging in estate planning that operated to exclude him
rather than include him. Dae’s petition is not totally and
completely without merit (Code Civ. Proc., § 128.5, subd. (b)(2))
and cannot be labeled as frivolous. After all, millions of dollars
that should have gone to Dae pursuant to the unambiguous
terms of the Residuary Trust ended up going to Robert and his
family.
IV. Conclusion.
Robert failed to provide sufficient evidence demonstrating
that his no contest petition had minimal merit. I would reverse
and remand with directions to the trial court to grant Dae’s anti-
SLAPP motion. He should not have to incur the expense of
defending against unmeritorious allegations that are seeking to
12
punish him for exercising his right of petition under our state and
federal Constitutions.
__________________________, J.
ASHMANN-GERST
13