Salter v. Lerner
2009 Cal. App. LEXIS 1380, 176 Cal. App. 4th 1184, 99 Cal. Rptr. 3d 1 (2009)
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Rule of Law:
A petition by a trust beneficiary to compel a trustee to provide reasonable information regarding the trust's administration, pursuant to the trustee's non-waivable fiduciary duty under Probate Code § 16060, does not constitute a contest that would trigger a trust's no-contest clause.
Facts:
- In April 2005, Glenn and Elsa Lemer created a trust, which provided that upon Elsa's death, Glenn Lemer would become the sole trustee.
- The trust agreement stated that income would be distributed to Lemer, who also had broad discretion to invade the principal of the trust's sub-trusts.
- Elsa Lemer's daughters, Carin Salter and Jennifer Segal, were named as contingent remainder beneficiaries, who would receive most of the assets upon Lemer's death.
- The trust agreement included a no-contest clause and a provision waiving any reports or accounts otherwise required by the California Probate Code.
- Elsa Lemer passed away on February 8, 2006.
- Following Elsa's death, Lemer allegedly used trust assets for expensive projects, including a home remodel estimated at $800,000-$1,000,000, deposits on a Ferrari and a Bentley, and lavish vacations.
- Salter and Segal requested information about the trust's administration, including whether the assets had been properly divided into sub-trusts, but Lemer refused to provide any information, citing the waiver provision.
Procedural Posture:
- Carin Salter and Jennifer Segal filed a petition in the probate court under Probate Code § 21320.
- The petition asked the court for a determination on whether a separate, proposed petition to compel information from the trustee, Glenn Lemer, would violate the trust's no-contest clause.
- The probate court concluded that the proposed petition would not violate the no-contest clause because it did not constitute an attack on the trust.
- Glenn Lemer, the trustee and appellant, filed a timely notice of appeal from the probate court's determination.
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Issue:
Does a beneficiary's proposed petition to compel a trustee to provide information regarding the trust's administration violate the trust's no-contest clause when the trust instrument waives formal reports and accountings?
Opinions:
Majority - Pollak, Acting P. J.
No, a beneficiary's proposed petition to compel a trustee to provide information regarding the trust's administration does not violate the trust's no-contest clause. The court distinguished between the waivable duties to provide a formal report or accounting under Probate Code §§ 16061 and 16062, and the non-waivable, fundamental duty to keep beneficiaries reasonably informed under § 16060. The proposed petition seeks only to enforce this non-waivable duty, which is necessary to enable beneficiaries to protect their rights and prevent a breach of trust. A petition to enforce such a duty is not an attack on the validity of the trust or its terms and therefore does not constitute a 'contest.' Furthermore, public policy, as reflected in § 21305(b), protects a beneficiary's ability to challenge a fiduciary's actions without triggering a no-contest clause.
Analysis:
This decision reinforces a fundamental principle of trust law: a trustee's core duty to keep beneficiaries informed cannot be completely eliminated by a trust's terms. It clarifies that a no-contest clause cannot be used as a shield to prevent beneficiaries from obtaining the basic information needed to monitor the trustee's conduct and protect their interests. The ruling establishes that courts will distinguish between permissible requests for reasonable information under the non-waivable § 16060 and requests for formal accountings that may have been validly waived. This precedent empowers beneficiaries and limits the ability of trustees to operate with total impunity, even when a trust instrument contains broad waiver language.
