On October 3, 2019, the Honorable David J. Cowan, Supervising Probate Judge of the Los Angeles Superior Court, issued a ruling that states his position regarding the controversial Barefoot[1] decision, which may shed light on the sentiment of the entire probate division of the Los Angeles Superior Court.
The Barefoot decision is a recent opinion from the Court of Appeal that has created quite a stir in the California probate law community. In Barefoot, the Court of Appeal examined the issue of whether or not a disinherited trust beneficiary has standing[2] to sue under Probate Code section 17200, which allows only “a trustee or beneficiary of a trust”[3] to petition the court under this statute concerning the internal affairs of the trust, or to determine the existence of the trust. Such “trust contest” cases are ubiquitous to the Probate Court, where experienced Probate Judges (not juries) are the triers of fact and address claims of incapacity and undue influence on a daily basis; if the Probate Court lacked jurisdiction to hear such cases, they would need to be tried in Civil Court, which has far less experience with these specific types of cases. Following the Court of Appeal’s recent decision in Barefoot, many disinherited individuals are learning about standing the hard way.
It is not uncommon for a settlor to change the provisions of their trust, including the named beneficiaries, over time. But when a trust document results from undue influence or is executed at a time when the settlor no longer has sufficient mental capacity, problems can arise. The court evaluated this scenario in Barefoot, where a former trust beneficiary was removed as a named beneficiary and successor trustee by subsequent trust amendments, but this named beneficiary alleged that the subsequent amendments were invalid because they were the product of undue influence and were executed when the settlor lacked capacity. This former beneficiary argued that she had standing to bring a claim under Section 17200(a) of the Probate Code because even though she was no longer a current trust beneficiary, she was a named beneficiary and trustee of the most recent prior version of the trust, which she claimed was the operative version of the trust. But the Court of Appeal disagreed, finding that she lacked standing under Section 17200 to contest the trust, as she was neither a current trustee nor a current beneficiary. In reaching its conclusion, the Court of Appeal focused only on the plain language of the statute, which specifically refers to the ability of “a trustee or beneficiary” to petition the court. The term “beneficiary” is itself defined in Probate Code section 24 as “a person to whom a donative transfer of property is made” and “who has any present or future interest, vested or contingent.” The Barefoot court held that the plain language of Section 17200 “demonstrates that only beneficiaries and trustees of the current trust version have standing to petition for review of the internal affairs of that trust.”[4]
The Barefoot decision sets a dangerous precedent because it prevents former (disinherited) beneficiaries from disputing in Probate Court potentially invalid trust documents after a trustor’s death. While a disinherited trust beneficiary could file a trust contest in Civil Court instead, what remedy would be available for a disinherited trust beneficiary who (prior to the Barefoot decision) had filed a trust contest in Probate Court, and whose 120-day deadline for filing such a case[5] had now elapsed? Barefoot is currently under submission before the California Supreme Court, with a decision expected soon; the California Rules of Court dictate that while Supreme Court review is pending, a Court of Appeal’s decision has “no binding or precedential effect, and may be cited for potentially persuasive value only.”[6]
Keystone recently addressed this issue before the Los Angeles Superior Court and successfully opposed a Motion for Judgment on the Pleadings and Motion to Stay Proceedings, both of which were based exclusively on (and as a verbatim repetition of) the Court of Appeal’s Barefoot decision. Here, Keystone’s client was a disinherited former trust beneficiary, who had filed an action in the Probate Court prior to the Barefoot decision that alleged the settlor’s new trust (which disinherited him) should be invalidated on account of undue influence and the settlor’s lack of capacity. In siding with Keystone, Judge Cowan opined that the Barefoot Court had adopted an interpretation of the relevant statutory language that was altogether too narrow, and declined to follow the Barefoot decision as persuasive authority. Instead, Judge Cowan looked to the language of Probate Code section 24(c), which defines a beneficiary to include someone with any future beneficial interest, and found that Keystone’s client had a potential future interest because if he was successful in invalidating the new trust, then the prior version of the trust (which named him as a beneficiary) would stand. In other words, if the disinherited trust beneficiary is ultimately successful, he would have an interest as a named trust beneficiary, even if he does not now.
In a lengthy discussion with the parties, the court also looked to the language of Probate Code section 48, which defines an “interested person” very broadly, and includes: (1) an heir, devisee, child, spouse, creditor, beneficiary, and any other person having a property right in or claim against a trust estate or decedent’s estate; (2) a person having priority for appointment as personal representative; and (3) a fiduciary representing an interested person. And Section 48(b) provides that who is considered an “interested person” may vary by the type of proceeding. Although Section 48 does not specifically reference trusts, Judge Cowan noted that it does not exclude trusts and found that the broad language of that section would include a former beneficiary as an “interested person.” Judge Cowan reasoned that the Barefoot Court’s narrow reading of Section 17200 could preclude a person from seeking relief as a beneficiary under Section 24, and yet allow them to bring a claim as an interested person under Section 48. As the Court suggested in Keystone’s case, this could lead to wildly inconsistent results. For a redacted copy of the transcript of Judge Cowan’s comments on this issue, click here.
Finally, Judge Cowan indicated that he was persuaded in part by the following argument raised by Keystone: Imagine that two beneficiaries of a trust have their beneficial shares reduced by a subsequent trust amendment. One is devised a penny and the other is completely disinherited. The decision in Barefoot suggests that the first person would have standing to challenge the subsequent amendment under Section 17200 in Probate Court, while the second would not, and would therefore need to seek relief in Civil Court. This seems to be an absurd result.
The Supreme Court heard oral argument on Barefoot in early November 2019,[7] so the Supreme Court will file its written opinion within 90 days (by early February 2020), and the decision will become final 30 days after filing. Until then, current and former beneficiaries should keep in mind that Barefoot is not binding precedent. And even if a former beneficiary is found to not have standing under Section 17200, they may have other relief available, including the ability to raise similar claims in the context of a civil action. Keystone anticipates another blog update once the Supreme Court issues its decision. Stay tuned!
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[1] Barefoot v. Jennings (2018) 27 Cal.App.5th 1.
[2] In a legal proceeding, “standing” refers to the ability of a party to bring a particular claim in court; standing is generally limited to parties who meet certain statutory criteria and/or who have suffered damages as a result of the aggrieved conduct. The requirement that a party must have standing ensures that a lawsuit is not initiated by a person who does not have a close connection to the dispute.
[3] Prob. C. § 17200(a).
[4] Barefoot, 27 Cal.App.5th at 6-7 (emphasis added).
[5] See Prob. C. §§ 16061.7, 16061.8.
[6] California Rules of Court, Rule 8.1115(e)(1).
[7] Pleadings, amicus curiae briefs and a video-recording of the oral argument can be found at https://www.courts.ca.gov/43047.htm.
