Estate of Jennings

Filed 10/16/09 Estate of Jennings CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from an order of the Superior Court of San Diego County, Gerald C. Jessop, Judge. Affirmed.

Edward G. King III (Edward) and Brigitte Feucht, co‑executors of the estate of Dorothy Jean Jennings (Jennings) (together, the co‑executors) appeal from the probate court's order granting the application of Miles J. King (Miles) under Probate Code[1] section 21320 for a determination that a petition Miles proposed to file with the court did not constitute a contest of Jennings's will.[2] As we will explain, we conclude that the probate court properly granted the application, and accordingly we affirm.

I

FACTUAL AND PROCEDURAL BACKGROUND

A. The Relevant Provisions of Jennings's Will

Jennings died on February 10, 2006. She executed a last will and testament on April 10, 2003 (the Will) and a codicil to that instrument on June 25, 2004 (the Codicil). Several provisions of the Will, as amended by the Codicil, are pertinent to the issues presented in this appeal.

Articles Second through Fifteenth of the Will dispose of sums of money and various items of personal property, including items of jewelry and art, by gifting them to several different beneficiaries. The disposition of the remaining items of personal property is covered by Article Sixteenth, which states:

"I hereby give, devise and bequeath all other items of personal property to Edward G. King, III to be disposed of at his discretion. . . . It is my express desire that NO ITEM OF PERSONAL PROPERTY under this article is to go to my son, Miles J. King. Personal property under this entire article does not include money, real property, houses." (Italics added.)

Article Seventeenth concerns the disposition of an interest in land located in Texas and referred to as Conley Farm. Jennings, and the other landowners of the Conley Farm, received royalties from mineral extraction on that property. Jennings provided in Article Seventeenth, as amended by the Codicil: "I hereby give, devise and bequeath all of my interest in the Conley Farm, Wise County Texas as follows: 1/2 to Edward G. King III, 1/4 to Miles J. King, 3/16 to Michelle Timberlake and 1/16 to Kathleen King Bimson."

The residue of the estate was disposed of in Article Eighteenth as follows: "I hereby give, devise and bequeath the residue of my estate not covered by the above specific gifts as follows: One half to Edward G. King III, one fourth to Miles J. King, one eighth to Kathleen King Bimson and one eighth to Michelle Timberlake. Miles J. King shall have no input or authority as to the sale of any property, real, personal or otherwise belonging to my estate. . . ."

The Will contained a no contest clause, which provided: "If any beneficiary under this will in any manner, directly or indirectly, contests or attacks this will or any of its provisions, any share or interests in my estate given to that contesting beneficiary under this will is revoked and shall be disposed of in the same manner provided herein as if that contesting beneficiary had predeceased me."

B. Proceedings in the Probate Court

Edward and Feucht, who were named as co‑executors in the Will, commenced this probate proceeding shortly after Jennings's death. They were appointed co‑executors of Jennings's estate, and letters testamentary were issued shortly thereafter.

On August 27, 2007, the co‑executors filed a first and final account and report of status of administration of the estate, and a petition for settlement of the estate (the Petition for Settlement). That document set forth the actions that the co‑executors had taken to administer the estate, including the sale of certain items such as Jennings's real property and securities. It also set forth a proposed distribution of the estate according to the terms of the Will.

As relevant here, pursuant to Article Sixteenth of the Will, which gifted "all other items of personal property" to Edward, the Petition for Settlement proposed that Edward would receive (1) the proceeds from the sale of Jennings's securities, totaling $43,377.82; and (2) Jennings's shares of common stock in Conley Production, Inc., a closely held corporation (the CPI shares). The Petition for Settlement also stated that Jennings's interest in the Conley Farm had already been distributed to the beneficiaries identified in the Will (including a 1/4 interest to Miles) through an ancillary probate proceeding in Wise County, Texas, where Conley Farm is located.[3] According to the Petition for Settlement, the residue of the estate, which consisted of the proceeds from the sale of real property minus certain expenses and cash bequests, would be distributed to the beneficiaries as set forth in the Will, including a one-fourth interest to Miles.

Miles proposed to raise several objections to the Petition for Settlement, and on December 7, 2007, he filed an application for a ruling that the filing of those proposed objections would not be considered a contest under the no contest clause of the Will. The probate court granted the application, and Miles filed his objections to the Petition for Settlement on January 31, 2008.

On April 25, 2008, Miles filed a second application under section 21320, subdivision (a) for a determination that a pleading he proposed to file with the probate court was not a contest under the no contest clause of the Will (the Application). Specifically, Miles proposed to file a petition for determination of persons entitled to distribution of a share of the estate pursuant to section 11700 (the Proposed Petition).[4] The Proposed Petition raised several issues.

First, the Proposed Petition alleged that the Will was ambiguous as to whether the CPI shares and the proceeds from the sale of Jennings's securities should be treated as personal property to be distributed to Edward, or should be distributed as part of the residue of the estate. Relying on the statement in Article Sixteenth that "[p]ersonal property under this entire article does not include money, real property and houses . . . ," the Proposed Petition alleged that it was possible to classify the shares and securities owned by Jennings as "money" and thus exclude them from the scope of "personal property" gifted to Edward under the Will.

Second, the Proposed Petition took issue with the statement in the schedule attached to the Petition for Settlement that Jennings owned a 10.444 percent interest in Conley Farm. According to the Proposed Petition, a letter written by Edward stated that Jennings's interest in Conley Farm was 11.3 percent.

Third, the Proposed Petition alleged that "the Will is ambiguous as to whether the mineral rights, and the oil, gas, and rock royalties related to the mineral rights on the Conley Farm, are to be considered as severed from the land and distributed as personal property which pass to Edward as part and parcel of the [CPI shares], whether the mineral rights are to be distributed as part of [Jennings's] ownership interest in the Conley Farm, or whether the mineral rights are to be distributed as part of the residue of the estate."

The Proposed Petition alleged that the ambiguities should be resolved in a manner resulting in Miles receiving (1) a one-fourth share of the CPI shares and the proceeds from the sale of the securities owned by Jennings, pursuant to the Will's provision giving one-fourth of the residue of the estate to Miles; and (2) a 11.3 percent ownership interest in the mineral rights and associated royalties from Conley Farm, pursuant to either the provision of the Will, as amended by the Codicil, giving Miles a one-fourth interest in Jennings's interest in Conley Farm or the provision of the Will giving Miles a one-fourth interest in the residue of the estate.

The co‑executors responded to the Application, arguing that the Proposed Petition constituted an indirect contest to the Will.

The probate court granted the Application. It concluded that the Proposed Petition was not a contest as a matter of law because it involved accounting and interpretation issues (see  21305, subd. (b)(8), (9)) and was an action or proceeding concerning the " 'character' " of the property at issue, and the no contest clause did not specifically include such an action as a violation of the clause. (See  21305, subd. (a)(2).)

As permitted by section 1303, subdivision (j), the co‑executors filed a notice of appeal from the probate court's ruling that the Proposed Petition is not a contest under the Will's no contest clause.

II

DISCUSSION

A. Standard of Review

In reviewing the probate court's ruling on an application pursuant to section 21320 to determine whether a proposed filing constitutes a contest, we apply a de novo standard of review, when, as here, the ruling does not turn on the credibility of extrinsic evidence. (Betts v. City National Bank (2007) 156 Cal.App.4th 222, 231 (Betts); Burch v. George (1994) 7 Cal.4th 246, 254 (Burch).)

B. Applicable Legal Framework

The sole issue presented is whether filing the Proposed Petition would constitute a contest under the Will's no contest clause. "A no contest clause 'essentially acts as a disinheritance device, i.e., if a beneficiary contests or seeks to impair or invalidate the trust instrument or its provisions, the beneficiary will be disinherited and thus may not take the gift or devise provided under the instrument.' [Citation.] 'The purpose of no contest clauses "is to discourage will contests by imposing a penalty of forfeiture against beneficiaries who challenge the will." ' " (Betts, supra, 156 Cal.App.4th at p. 231.) Under section 21320, " 'a beneficiary may, without violating a no contest clause, apply to the court for a determination whether a particular act would be a contest provided that no determination of the merits of the petition is required.' " (Betts, at p. 232.) "Because a no contest clause results in a forfeiture, . . . a court is required to strictly construe it and may not extend it beyond what was plainly the testator's intent." (Burch, supra, 7 Cal.4th at p. 254.)

By statute, the term "contest" covers both direct and indirect contests. ( 21300, subd. (a).) According to section 21300, subdivision (b), a " '[d]irect contest' " is a pleading "alleging the invalidity of an instrument or one or more of its terms" based on any of several specific grounds i.e., revocation, lack of capacity, fraud, misrepresentation, menace, duress, undue influence, mistake, lack of due execution and forgery. The co‑executors concede that the Proposed Petition does not constitute a direct contest. Instead, they argue that the Proposed Petition constitutes an indirect contest. An " '[i]ndirect contest' " is defined as a pleading that "indirectly challenges the validity of an instrument or one or more of its terms based on any other ground not contained in [section 21300, ]subdivision (b), and that does not contain any of those grounds." ( 21300, subd. (c).)

The Legislature has provided that, as a matter of law, certain proceedings do not violate an instrument's no contest clause. ( 21305, subd. (b).) The probate court cited several of these provisions in its ruling. Section 21305, subdivision (a)(2) states that "[a]n action or proceeding to determine the character, title or ownership of property" is not a contest "unless expressly identified in the no contest clause as a violation of the clause."[5] Further, section 21305, subdivision (b) states that a "pleading regarding an accounting or report of a fiduciary" and a "pleading regarding the interpretation of the instrument containing the no contest clause or an instrument or other document expressly identified in the no contest clause" do not violate a no contest clause. ( 21305, subd. (b)(8) & (9).)[6]

Miles contends that the Proposed Petition is not a contest because it falls under one or more of the categories described above in that it either seeks an interpretation of the Will, concerns an accounting or report of a fiduciary, or seeks to determine the character, title or ownership of property.

C. The Proposed Petition Does Not Constitute a Contest

We approach our analysis by separately focusing on each of the three issues raised in the Proposed Petition to determine whether they constitute a violation of the Will's no contest clause.

1. Whether the CPI Shares and the Proceeds from the Sale of Jennings's Securities Constitute Personal Property

The first issue raised in the Proposed Petition is whether the CPI shares and the proceeds from the sale of Jennings's securities are "personal property," as that term is used in the Will, and thus pass to Edward under the terms of the Will. The Proposed Petition explains that because Article Sixteenth states that "[p]ersonal property under this entire article does not include money, real property and houses . . . ," it is unclear whether the Will intends to classify the shares and the proceeds from the securities owned by Jennings as personal property. The Proposed Petition takes the position that the shares and the proceeds from the securities might more properly be categorized as "money" and thus constitute part of the residue of the estate. Miles clarifies his position in his briefing by citing authority which states that the term "personal property" carries an "inherent ambiguity" (Estate of Dodge (1971) 6 Cal.3d 311, 318-319), and that "[t]he word 'money' used in wills is essentially ambiguous." (Estate of Whitney (1958) 162 Cal.App.2d 860, 865.)

According to Miles, this portion of the Proposed Petition concerns an interpretation of the Will, and thus falls under the statutory provision stating that a "pleading regarding the interpretation of the instrument containing the no contest clause" does not constitute a contest. ( 21305, subd. (b)(9).) As we will explain, we agree.

A proposed pleading concerns the interpretation of an instrument when it alleges that any portion of it "is ambiguous and requires judicial interpretation." (Cory v. Toscano (2009) 174 Cal.App.4th 1039, 1044.) The Proposed Petition precisely fits that description. Specifically, the Proposed Petition identifies an ambiguity in the Will and asks the probate court to interpret whether the CPI shares and the proceeds from the sale of Jennings's securities constitute "personal property" or "money" as those terms are used in the Will. Accordingly, the portion of the Proposed Petition alleging ambiguity with respect to the disposition of the CPI shares and the proceeds from the sale of Jennings's securities is not a contest.[7]

2. Whether the Mineral Rights from Conley Farm and the Associated Royalties Are To Be Distributed Along with Jennings's Ownership Interest in Conley Farm

The second issue raised by the Proposed Petition is how the mineral rights from Conley Farm and the associated royalties are to be distributed to the beneficiaries of the estate. The Proposed Petition alleges that it is ambiguous whether those mineral rights and associated royalties pass to the beneficiaries who receive an interest in the Conley Farm pursuant to the Will, whether they are to be considered personal property, which passes to Edward, or whether they are part of the residue of the estate.

This issue too concerns an interpretation of the Will. In raising this issue, the Proposed Petition identifies an alleged ambiguity concerning the disposition of mineral rights and associated royalties, and it calls for the probate court to resolve it. Accordingly, under section 21305, subdivision (b)(9), the portion of the Proposed Petition seeking to clear up the alleged ambiguity concerning the disposition of the mineral rights associated with Jennings's interest in Conley Farm does not constitute a contest of the Will.

3. Whether Jennings Owned a 10.444 Percent Interest or an 11.3 Percent Interest in Conley Farm

The third and final issue raised in the Proposed Petition is whether Jennings owned a 10.444 percent interest in Conley Farm, as stated in a schedule attached to the Petition for Settlement, or whether Jennings owned an 11.3 percent interest, as stated in a letter written by Edward.

This allegation does not "indirectly challenge[] the validity of an instrument or one or more of its terms" as required for an indirect contest. ( 21300, subd. (c).) Instead, it challenges the accuracy of the Petition for Settlement's description of one of the assets to be distributed to the beneficiaries of the Will. The co‑executors included that description of Jennings's interest in Conley Farm in their schedule of income received by the estate, which was part of their accounting of the estate's assets. Accordingly, the Proposed Petition's challenge to the description of Jennings's interest in Conley Farm is a "pleading regarding an accounting or report of a fiduciary." ( 21305, subd. (b)(8).) The Probate Code provides that such a pleading does not constitute a contest.[8] ( 21305, subd. (b)(8).)

Having concluded that the three issues raised in the Proposed Petition do not constitute a contest under the Will's no contest clause, we determine that the probate court properly granted the Application.

DISPOSITION

The order is affirmed.

IRION, J.

WE CONCUR:

McINTYRE, Acting P. J.

O'ROURKE, J.

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[1] All further statutory references are to the Probate Code.

[2] For the sake of clarity we will refer to Edward and Miles by their first names, and intend no disrespect by doing so.

[3] A schedule attached to the Petition for Settlement stated that Jennings possessed a 10.444 percent ownership interest in Conley Farm.

[4] Section 11700 states that "the personal representative, or any person claiming to be a beneficiary or otherwise entitled to distribution of a share of the estate, may file a petition for a court determination of the persons entitled to distribution of the decedent's estate."

[5] The Will's no contest clause does not identify an action or proceeding to determine the character, title or ownership of property as a violation of the clause.

[6] There are certain limitations on the application of the provisions set forth in section 21305, subdivision (b), but those limitations are not applicable here. Specifically, the provision that a "pleading regarding an accounting or report of a fiduciary" (id., subd. (b)(8)) does not constitute a contest is applicable only "to instruments of decedents dying on or after January 1, 2001, and to documents that become irrevocable on or after January 1, 2001" (id., subd. (d)). Further, the provision that a "pleading regarding the interpretation of the instrument containing the no contest clause or an instrument or other document expressly identified in the no contest clause" (id., subd. (b)(9)) does not constitute a contest is applicable only "to instruments of decedents dying on or after January 1, 2003, and to documents that become irrevocable on or after January 1, 2003" and does not apply if the pleading constitutes a direct contest (id., subds. (d) & (e)). Here, both provisions are operative because Jennings died on February 10, 2006, the Will was executed in 2003, the Codicil was executed in 2004, and there is no argument that the Proposed Petition constitutes a direct contest.

[7] The co‑executors devote much of their briefing to a discussion of whether the terms "personal property" and "money" are in fact ambiguous. The argument is misplaced because our decision does not turn on whether, in fact, there is any merit to Miles's proffered interpretation that the term "personal property" as used in the Will does not encompass the CPI shares and the proceeds from the sale of Jennings's securities, and that those items more properly fall under the term "money" as used in the Will. Indeed, a court is statutorily prohibited from considering the merits in ruling on a petition to determine whether a proposed proceedings constitutes a contest. ( 21320, subd. (c).) Our only inquiry is whether the Proposed Petition raises an issue of interpretation. In making that inquiry we need not, and will not, consider whether Miles's interpretation of the Will is plausible.

[8] The co‑executors concede that this portion of the Proposed Petition does not constitute a contest. They state that "even though Miles is asking the trial court to distribute to him a 1/4 share of [Jennings's] 11.3% ownership interest in the Conley Farm, . . . this part of Miles' [Proposed] Petition . . . cannot be considered a contest of any provision of [Jennings's] Will."