In October 2018, the California Court of Appeal issued its now infamous decision in Barefoot v. Jennings[i]. It was a ruling that mystified the California trust and estate community and left many disinherited beneficiaries in an unenviable state of purgatory while waiting for the California Supreme Court to determine whether their trust contest cases could proceed and how.
Probate Code Section 17200 Contests
As general background, a common fact pattern in trust litigation consists of a prior trust beneficiary – who was recently disinherited by means of a questionable trust amendment – claiming that said amendment should be invalidated (typically because the settlor had lacked capacity and/or had been subject to undue influence when creating or executing it), and the trust should revert to its prior iteration, which named the contestant as a beneficiary.
The normal litigation practice in this situation is for the disinherited beneficiary to bring their trust contest claims to the Probate Court by filing a petition under Probate Code section 17200 (Section 17200 is discussed in greater detail later in this article). By filing such contests in Probate Court, rather than as civil causes of action in Civil Court, contestants were assured their case would be heard (and ultimately decided[ii]) by an experienced probate judge whose docket was exclusively consisted of similar types of matters.
What Is Legal Standing Under Section 17200?
Under Section 17200, legal standing to bring a claim is conferred only to “a trustee or beneficiary of a trust.” Notwithstanding the established and accepted practice of allowing former (but now disinherited) trust beneficiaries to bring such claims, and the myriad of such claims that were already pending in California’s Probate Courts at the time, the California Court of Appeal in Barefoot held that a presently disinherited beneficiary does not have standing to bring a trust contest in Probate Court because they do not qualify as a “beneficiary” under Section 17200.
However, in a fortunate turn of events for current and future disinherited beneficiaries throughout California, in January 2020, the California Supreme Court issued its decision to overturn the Court of Appeal’s Barefoot decision and return to disinherited beneficiaries their standing to bring a Section 17200 trust contest claim before the Probate Court.
Barefoot’s Effect on Section 17200 Standing Requirements
This article analyzes the following aspects of the Barefoot appeals: (1) the Court of Appeal’s reasoning in its Barefoot decision; (2) how Keystone managed to protect its clients’ interests while the Court of Appeal’s decision in Barefoot was under review by the California Supreme Court; and (3) the California Supreme Court’s reasoning in its decision to reverse the Court of Appeal’s ruling, and what this decision means for future litigants. Finally, this article discusses one question that was expressly left unanswered by the Supreme Court – namely, whether a Decedent’s intestate heir,[iii] who was never named as a beneficiary under the Decedent’s prior estate planning documents, would also have standing to file a contest under Section 17200.
Barefoot’s Facts and the Court of Appeal’s Decision
As stated above, the facts in Barefoot closely mirrored a common trust contest fact pattern. In Barefoot, the petitioner was a former trust beneficiary and successor trustee whom the settlor had subsequently disinherited through the execution of trust amendments. The disinherited beneficiary was claiming that these subsequent amendments were invalid because the amendments were executed during a time when the settlor had lacked mental capacity and was subject to undue influence. For these reasons, the disinherited beneficiary was seeking to have the current estate plan invalidated under Section 17200.
Petitioner’s Argument in Favor of Standing
A threshold procedural requirement for a claimant to bring a lawsuit is that the claimant have “standing”[iv] to pursue their claim through the Courts. The Court of Appeal in Barefoot reviewed this threshold issue of “standing” in the context of a Section 17200 trust contest and was tasked with determining whether a former (but now disinherited) beneficiary could establish that they had standing to bring a trust contest as a “beneficiary” under Section 17200(a). The disinherited beneficiary in Barefoot claimed that she qualified as a “beneficiary” within the meaning of Section 17200(a) because 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 (i.e., because the current version should be invalidated) and which she claimed reflected the deceased settlor’s true testamentary intent.
Court of Appeal’s Response
The Court of Appeal disagreed, finding that the disinherited beneficiary lacked standing under Section 17200(a) because she was neither a current trustee nor a current beneficiary. In reaching this conclusion, the Court held that this Probate Code section specifically provides that only a “trustee or beneficiary” can utilize it, and that a disinherited beneficiary was not a current beneficiary. To further support this narrow statutory interpretation, the Court looked to other definitions included within the Probate Code – in particular, Probate Code section 24 (“Section 24”), which states that a “beneficiary” is defined within the Probate Code as “a person to whom a donative transfer of property is made” and “who has any present or future interest, vested or contingent.” The Court of Appeal held that the plain language of Sections 24 and 17200(a) establishes that “only beneficiaries and trustees of the current trust version have standing to petition for review of the internal affairs of that trust.”[v]
As a result of this decision, disinherited beneficiaries were barred from accessing the Probate Courts to bring their otherwise procedurally proper trust contest claims, which thereby created chaos among those disinherited beneficiaries whose Section 17200 claims were already pending in Probate Court.
Barefoot’s Turbulent Reception
The Barefoot decision set a dangerous precedent that left many disinherited beneficiaries in a precarious situation while waiting for the California Supreme Court to decide whether or not they would be able to maintain standing in their existing trust contest cases. The decision in Barefoot caused significant heartburn in litigation departments and Probate Courts across California for the same reason.
Keystone’s Experience in the Wake of Barefoot
Moreover, in the wake of Barefoot, certain litigants sought to take advantage of the Court of Appeal’s decision as a basis to file motions to dismiss currently pending trust contest cases filed by disinherited beneficiaries.
Keystone successfully opposed one such Motion for Judgment on the Pleadings and Motion to Stay Proceedings, both of which were based exclusively on the Court of Appeal’s decision in Barefoot, during the period between the issuance of the Court of Appeal’s decision in 2018 and the California Supreme Court’s final decision in January 2020. The issues raised by these Motions and the subsequent analysis and ruling are discussed in detail in Keystone’s December 23, 2019 blog post entitled: “Beyond Barefoot: The Los Angeles Supervising Probate Judge’s Recent Take on Barefoot v. Jennings.”
Barefoot’s Supreme Court Reversal
In early November 2019, the California Supreme Court heard oral arguments in the Barefoot case, and in late January 2020, the California Supreme Court issued its opinion reversing the Court of Appeal decision. The California Supreme Court held as follows: “We disagree with the Court of Appeal, and hold today that the Probate Code grants standing in Probate Court to individuals who claim that trust amendments eliminating their beneficiary status arose from incompetence, undue influence or fraud.”[vi]
The Supreme Court’s Analysis
The previous use of Section 17200 as the basis for disinherited beneficiaries to litigate their trust contest claims in Probate Court was restored by the Supreme Court through its reversal of the Court of Appeal Barefoot decision. The reasoning behind the California Supreme Court’s ruling closely mirrored the reasoning Judge Cowan had previously provided in Keystone’s case, referenced above. In particular, the Supreme Court held:
Section 17200, subdivision (b)(3) contemplates the court’s determination of “the validity of a trust provision.” Plainly, the term “trust provision” incorporates any amendments to a trust. Section 24, subdivision (c) defines a “beneficiary” for trust purposes, as “a person who has any present or future interest, vested or contingent.” Assuming plaintiff’s allegations are true, she has a present or future interest, making her a beneficiary permitted to petition the probate court under section 17200.[vii] (Emphasis added).
The Supreme Court held that with this interpretation, when a plaintiff claims to be a rightful beneficiary of a trust, if the challenged amendments are deemed invalid, then the plaintiff has standing to petition the Probate Court under Section 17200.[viii] The Court added that this expansive reading of the standing requirement afforded to trust contests under Section 17200 “not only makes sense as a matter of judicial economy, but it also recognizes the probate court’s inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust.”[ix]
An Unresolved Issue
The Court cautioned, however, that its ruling in Barefoot did have certain limitations in its applicability, stating: “Our holding does not allow individuals with no interest in a trust to bring a claim against the trust. Instead, we permit those whose well-pleaded allegations show that they have an interest in a trust — because the amendments purporting to disinherit them are invalid — to petition the probate court.”[x]
Thus, by so holding, the Supreme Court’s ruling could potentially exclude a Decedent’s heirs (who were not named as beneficiaries in any prior version of the Decedent’s estate plan, but who would otherwise have a beneficial interest through intestate succession in the event the Decedent did not have a valid estate plan) from filing a Section 17200 contest in Probate Court. Thus, any such contests currently pending by such heirs in Probate Court may be subject to attack based on the heirs’ lack of standing.
Accordingly, the effect of the California Supreme Court’s decision was not to limitlessly expand the universe of potential litigants who can bring trust contest claims in the future, but rather, to confirm that Section 17200 can be used by disinherited beneficiaries as it had been in the past, while leaving open this unresolved issue concerning a Decedent’s heirs.
Conclusion
The Barefoot Court of Appeal decision put many disinherited beneficiary litigants in an uncomfortable predicament, where a fundamental requirement of their case (i.e., standing) was suddenly subject to direct attack. It also created significant uncertainly both in the legal community and in the courts as to how such trust contests should properly proceed.
Thankfully, the Supreme Court’s reversal has restored the former status quo with respect to previously disinherited beneficiaries, and with it, the certainty that disinherited beneficiaries can once again use the specialized Probate Courts to adjudicate their trust content claims. However, the issue of whether a Decedent’s intestate heirs have similar standing to bring their contests to Probate Court remains unresolved.
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[i] Barefoot v. Jennings (2018) 27 Cal.App.5th 1 (referred to in these citations as “Barefoot I”).
[ii] If trial is necessary, Section 17200 claims, like almost all other probate causes of action, are decided by bench trial rather than by a jury.
[iii] A Decedent’s intestate heir, or “heir-at-law,” is someone who would have been a beneficiary of the Decedent’s estate through intestate succession in the absence of a valid estate plan.
[iv] 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.
[v] Barefoot I, 27 Cal.App.5th at 6-7 (emphasis added).
[vi] Barefoot v. Jennings (2020) 8 Cal. 5th 822, 825 (referred to in these citations as “Barefoot II”).
[vii] Barefoot II, 8 Cal. 5th at 827.
[ix] Barefoot II, 8 Cal. 5th at 828 (citing to the Court of Appeal’s decision in the case of Estate of Heggstad (1993) 16 Cal.App.4th 943, 951).
[x] Barefoot II, 8 Cal. 5th at 828.
