Are Interested Parties Required to Attend Probate Court-Ordered Mediation After Breslin?
The first of these two cases to come down was Breslin v. Breslin, which held that Probate Courts have the authority to order interested parties to probate court mediation and bind any non-participating parties to the resulting settlement agreement. The second case, Dunlap v. Mayer, also discusses the broad powers of Probate Courts by delving into one Probate Court’s dismissal of a petition filed in a decedent’s estate. This decision reminds us that the Probate Court’s powers are not without limitation.
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What Does Court-Ordered Mediation Mean?
Mediation entails an impartial third-party mediator working with the interested parties to a legal dispute to resolve the matter. Attendance at a mediation is voluntary, non-binding and confidential. Court-ordered mediation, however, is slightly different. It entails the judge ordering all parties who are involved in the lawsuit and all others who may have an interest in the outcome of the case to mediation. While court-ordered mediation in California is still non-binding and confidential, attendance is mandatory.
Mediation in probate disputes is common since it usually comes with a much cheaper price tag than litigation. The probate mediation process — regardless of whether it is estate mediation or trust mediation — also tends to take substantially less time than litigating the matter in court, allowing beneficiaries to receive their inheritances more quickly.
The Probate Court Orders All Interested Parties to Probate Court Mediation
In Breslin, Decedent Don Kirchner (“Don”) passed away in 2018, leaving an estate valued between $3 million and $4 million. In 2017, Don executed a living trust, which he amended and restated later that year (the “trust”). With no surviving spouse or children, he named his nephew, David Breslin (“David”), as successor trustee.
The trust made three specific gifts of $10,000 each and directed that the remainder of the trust estate be distributed to a number of charitable organizations listed on the trust’s Exhibit A. But David was never able to locate this Exhibit A, as it was not attached to the trust instrument. Rather, he found a document in the Decedent’s estate planning binder containing a list of 24 charities with corresponding percentage interests in the residue of the trust estate.
However, since this document was not attached to the trust nor titled “Exhibit A,” David filed a petition in the Probate Court for an order to confirm the identity of the trust’s residuary beneficiaries. The Probate Court eventually ordered all interested parties (i.e., Don’s intestate heirs and the listed charities) to probate mediation. The parties all received notice of the mediation order (a.k.a., a Breslin notice), which stated the following: “Mediation may result in settlement of the matter that is the subject of the above-referenced cases and of any and all interested persons’ and parties’ interests therein…Non-participating persons or parties who receive notice of the date, time and place of the mediation may be bound by the terms of any agreement reached at the mediation without further action by the Court or further rehearing.”(2)
The Participating Parties at Probate Court Mediation Enter into a Settlement Agreement that Excludes All Non-Participating Parties
Of the 24 listed charities, only five appeared at Probate Court-ordered mediation along with Don’s intestate heirs. At mediation, the participating parties reached a settlement agreement awarding specific amounts to each of the charities that appeared at the mediation and the residue to the intestate heirs. Notably, the non-participating parties were excluded from the agreement. When one of the participating parties subsequently filed a petition to approve the settlement, the non-participating charities (collectively, the “Pacific Parties”) objected. The Probate Court overruled their objections, however, and approved the agreement. By missing court-ordered mediation, the Pacific Parties had effectively waived their right to participate in negotiations.
Pacific Parties Allege Improper Procedure and Breach of David’s Fiduciary Duties
Pacific Parties made various arguments on appeal, hoping to invalidate the court’s approval of the settlement agreement and establish themselves as beneficiaries of Don’s estate. Specifically, the Pacific Parties argued they were denied an evidentiary hearing and that the settlement agreement reached through probate court mediation was invalid because David breached his fiduciary duties as trustee.
The Probate Court Rejects Pacific Parties’ Arguments
Under Probate Code section 17206, a Probate Court has the inherent power to make any orders necessary to dispose of the matters before it, which includes the power to establish certain case procedures. Here, the Probate Court explicitly made a party’s participation in court-ordered mediation a prerequisite to that party’s right to an evidentiary hearing. Thus, by failing to participate in this court-ordered mediation, the court found that the Pacific Parties had forfeited their right to a full evidentiary hearing on the merits.
The court also rejected the Pacific Parties’ claims that by executing this settlement agreement that excluded the Pacific Parties, the trustee breached his fiduciary duties to the Pacific Parties.(3) First, it was unclear whether the Pacific Parties were even trust beneficiaries – as the entire thrust of the probate action was to determine who the trust beneficiaries should be – thus, the trustee did not owe the Pacific Parties the same duties that a trustee typically owes to beneficiaries. Furthermore, even if the Pacific Parties were beneficiaries, the court noted that the Pacific Parties were given ample opportunity to participate in probate mediation or request an evidentiary hearing prior to probate mediation; they did neither. By failing to take either action, instead waiting until after probate court mediation to raise any objections, the court held that regardless of their status, they had no valid claim for a breach of fiduciary duty.
Can a Probate Court Order Parties to Mediation?
In general, mediation is a voluntary process in which parties may “decide the extent of his or her participation in the mediation, including the right to withdraw…at any time.”(4) Seemingly in contravention of this rule, the Probate Court in Breslin ordered the interested parties to probate mediation and then bound any non-participating parties to the resulting settlement agreement.
Nonetheless, the Court of Appeal affirmed the Probate Court’s order, holding that a Probate Court does in fact have the authority to order parties to mediation. As support, the court simply pointed to Probate Code section 17206, which does not mention mediation, but rather states that Probate Courts have broad discretion in adjudicating trust matters.(5)
What Power Does a Probate Court Have Over Non-Participating Parties in Court-Ordered Mediation?
Even if a Probate Court has the power to order parties to mediation, it does not necessarily follow that the court can bind any non-participating parties to the resulting settlement agreement. The court in Breslin, however, held that the courts can do exactly that, so long as the parties receive a proper Breslin notice.
The court does not define exactly what a “proper” Breslin notice is. However, the core of the opinion rests on the fact that the notice of probate court mediation expressly stated that non-participating parties may be bound by a resulting settlement agreement. In other words, the parties were warned that their failure to participate in this court-ordered mediation could result in a potential forfeiture of their right to challenge a later agreement reached at probate mediation.
Here, the Pacific Parties were properly notified of the potential risks they faced by failing to participate in court-ordered mediation. By voluntarily choosing not to participate anyway, the court held that they forfeited their interest in the trust estate and thus the Probate Court could properly bind them to a settlement agreement that they ultimately had no hand in and to which they received no benefit.
Did Josephine’s Estate Have Standing to Petition for an Accounting?
Maria alleged that her mother’s estate did not have standing to request an accounting pursuant to Probate Code section 17200(b) because the estate was not a beneficiary of the trust.(8) Under Probate Code section 24(c), a trust beneficiary is a person with a “present or future interest, vested or contingent.” Since the estate was Josephine’s successor in interest, the court held that the estate was a beneficiary for the purposes of section 24(c) and therefore had standing to request a trust accounting. Furthermore, even though Josephine had since passed away, any cause of action that Josephine had against Maria as trustee survived her death. Therefore, the estate’s petition was proper, even after Josephine’s death.
Did the Probate Court Err in Dismissing the Estate’s Petition Sua Sponte at a Case Management Conference?
Probate Code section 17206 grants Probate Courts with the “general power and duty to supervise the administration of trusts.”(9) In Breslin, this power allows Probate Courts to use their discretion in taking actions sua sponte that (under certain specific circumstances) can bind a party to a result without holding an evidentiary hearing. However, this power only pertains to “incidental issues necessary to carry out [the court’s] express powers”(10) in accordance with all other applicable statutes and laws.
Here, the court’s sua sponte dismissal of the estate’s entire petition at a case management conference was by no means an incidental issue as allowed under section 17206, but rather “a complete resolution of the petition.” (11) As such, the Probate Court was required to hold an evidentiary hearing on the contested facts and provide the estate with notice that its petition may be dismissed at that hearing. (12) By failing to follow these procedural protections, the Probate Court acted outside of its express authority under section 17206 and thus erred in dismissing the petition.
Key Takeaways: The Probate Courts Have Broad Discretion Under Probate Code Section 17206, But It Is Not Unfettered
The court in Breslin and later Dunlap both considered the extent of a Probate Court’s authority under Probate Code section 17206. Breslin showed us that a Probate Court may order parties to mediation, in contravention of the general rule that mediation is voluntary, and even bind non-participating interested parties to the settlement agreement reached at court-ordered mediation that they did not agree to. Although Breslin may make some wonder what limits, if any, are still imposed on the Probate Courts, Dunlap shows us that Breslin did not throw all rules out the window. Indeed, although a Probate Court has broad discretion, Probate Courts must still abide by proper due process procedural requirements in making any final determinations on an action.
- (2021) 62 Cal.App.5th 801, reh’g denied (Apr. 20, 2021), review denied (July 14, 2021).
- Id. at 804-5 (italics added).
- Pacific Parties alleged that David failed in his duties as trustee to act impartially toward all beneficiaries under Probate Code section 16003 and to keep the beneficiaries reasonably informed of the trust and its administration under Probate Code section 16060. The court rejected this argument, however, stating David did not owe Pacific Parties these duties because they were not confirmed beneficiaries of the trust.
- Cal. Rules of Court, rule 3.853(2); See Jeld-Wen, Inc. v. Superior Court (2007) 146 Cal.App.4th 536, 541.
- Prob. C. § 17206 (“The court in its discretion may make any orders and take any other action necessary or proper to dispose of the matters presented by the petition, including appointment of a temporary trustee to administer the trust in whole or in part”).
- (2021) 63 Cal.App.5th 419
- In simple terms, sua sponte is a Latin phrase referring to an action taken by the court that was not requested by any of the interested parties.
- A trustee must furnish an accounting of the trust assets to all beneficiaries at least annually or upon reasonable request.
- Dunlap, supra, 63 Cal.App.5th at p. 426 [quoting Schwartz v. Labow (2008) 164 Cal.App.4th 417, 427, as modified (July 9, 2008)].
- Id. [quoting Schwartz, supra, 164 Cal.App.4th at p. 427].
- Prob. C. § 1046 (“The court shall hear and determine any matter at issue and any response or objection presented, consider evidence presented, and make appropriate orders”).