Estate of Gray

Filed 2/28/07 Estate of Gray CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Marjorie Laird Carter, Judge. Reversed and remanded.

Charles K. Mills for Petitioner and Appellant.

Marc T. Egan for Objector and Respondent.

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Petitioner and appellant Gloria Jean Evans appeals from an order denying her petition to enforce a contract to divide the estate of Theresa Gray. She contends the court erred when it found there was insufficient consideration for the agreement. We agree and reverse.

FACTS

Evans and objector and respondent, Theresa Ann Zanola, are sisters; they have one living brother, Richard Gray, and one deceased brother, Charles John Gray (John). In 1986 when Theresa Grays husband died, Zanola took her to a lawyer who drafted a will for her. Zanola testified she did not know Gray was having a will drawn. At that time Gray owned two houses, one in Brea and one in Lynwood. She also had about $100,000 in bank accounts and annuities. In the draft of the will Gray left the Brea residence to Zanola and the residue of the estate to the other three children.

When Evans and John learned of the draft of the will, they were surprised and expressed that to Gray. Gray told them, I dont have to sign it. Evans and her brothers also became concerned Zanola was exerting undue influence on Gray because she had gone behind their backs to take Gray to a lawyer. They had a discussion with Gray and decided the four children should enter into an agreement to equally divide Grays estate upon her death. A draft of the agreement was prepared. Gray and the four children then met to sign the agreement. At that meeting, Gray again stated she would not execute a will. After some changes to the draft were made at Zanolas request, all of the children signed the agreement.

The agreement provided the children would share in the estate equally. It also stated Zanola would live with Gray in the Brea house and pay her $300 per month and John would pay Gray $350 per month rent for the Lynwood house. John and Zanola also agreed to pay utilities and maintenance for the respective properties. Upon Grays death Zanola and John would have the first right to purchase the Brea and Lynwood homes, respectively. If they did not, the other two siblings would have the right to purchase them. If none of the children bought the houses, they would be sold and the money divided equally.

Within 10 days after the agreement was signed, Zanola took Gray back to the lawyer where Gray executed a will with terms essentially identical to those in the draft, leaving the Brea property to Zanola and the remainder of the estate to the other children. Evans testified she and her brothers never learned the will had been executed until after Grays death; Zanola testified she had no knowledge of the will until that time either.

When the agreement and the will were signed, the Lynwood house was worth $80,000; the Brea house was worth $112,000 and had a $55,000 deed of trust. Including the cash, Grays estate was worth approximately $237,000.

At Grays death her estate had changed. The Lynwood house had been sold and the proceeds used to pay off what was owed on the Brea house, which was appraised at $480,000. There was approximately $83,000 in cash. Except for one small bank account containing approximately $4,500, of which Evans and Zanola were the beneficiaries, Gray had put all of the cash assets in joint tenancy with Zanola or had designated Zanola the beneficiary. Zanola lived with Gray in the Brea house from 1986 until Grays death in 2004 and during that time took her to the bank to convert the accounts to joint tenancy.

Probate was opened, with Zanola appointed as executor. When she refused to divide the estate according to the terms of the agreement, Evans filed a petition seeking specific performance. After a short trial, the court denied the petition, finding the agreement invalid because of a problem with consideration.

DISCUSSION

In the trial court Zanola argued the agreement could not be enforced because the consideration was unfair and she signed it in the mistaken belief Gray would not execute a will. Those are also the two issues Zanola argued in her respondents brief. At oral argument Zanola stressed her siblings failure to disclose the draft will. It is unclear whether this was to support her mistake claim or whether she now relies on a fraud theory. However, we will not consider a fraud claim because it was not asserted in the trial court nor in the briefs and was raised for the first time at oral argument. (Sunset Drive Corp. v. City of Redlands (1999) 73 Cal.App.4th 215, 226.)

The trial court agreed with Zanola there was inadequate consideration. Evans contends this was error. We agree and conclude there was sufficient consideration, consisting of the mutual promises of the parties to the agreement. (Bleecher v. Conte (1981) 29 Cal.3d 345, 350.)

When a beneficiary of a will has assigned or transferred the right to receive his or her distributive share, Probate Code section 11604 gives the court discretion to refuse to order distribution to the transferee if the consideration for the transfer is grossly unreasonable or the assignment or transfer was obtained by duress, fraud, or undue influence. (Prob. Code,  11604, subd. (c).) Under this section the probate court is empowered to give much stricter scrutiny to the fairness of consideration than would be the case under ordinary contract principles. [Citation.] (Estate of Boyd (1979)

98 Cal.App.3d 125, 131.) The court may set the entire agreement aside, or it can modify it to the extent it finds the consideration grossly unreasonable. [Citation] (Estate of Freeman (1965) 238 Cal.App.2d 486, 489-490.)

Probate Code section 11604 was originally enacted to protect against so-called heir hunter contracts where beneficiaries agree to assign a certain portion of their interest in an estate in exchange for being found, when often they would have been located by the estate without any intervention. (Estate of Boyd, supra, 98 Cal.App.3d 125, 134-135.) However it has also been applied to govern other agreements with heirs (id. at p. 135), including those among rival claimants and heirs. [Citations.] (Estate of Freeman, supra, 238 Cal.App.2d at p. 489.)

It is unclear if the court relied on this section to invalidate the agreement, and the parties dispute whether it is applicable. Evans contends the section governs only agreements with heirs made after the death of the testator, whereas Zanola maintains it controls the agreement here. But whether it was applied or should apply does not change the result.

The court found there was insufficient consideration because, although the agreement called for Zanola to pay rent on the Brea house, for 18 years [Gray] didnt demand the payments and it was unknown whether John had made his rent payments. Zanola complains consideration is inadequate because she will receive nothing of comparable value in exchange for three-fourths of the Brea property which she would be giving up under the . . . [a]greement. She also relies on the facts she has lived in the house since 1979 and Gray wanted her to have it, as shown by the will which is clear on that point.

However, both analyses of consideration are incorrect. Consideration is measured at the time the agreement is made. (Estate of Boyd, supra, 98 Cal.App.3d 125, 128.) Boyd was decided under Probate Code section 1020.1, the predecessor to section 11604. There, after the death of the decedent, his nephew, Hiram, to whom had been devised a parcel real property, unsuccessfully tried to obtain an advance from the estate to care for his ill mother. Hiram was then introduced to a real estate broker who offered him $16,500 for the property. Hiram agreed on condition he immediately be paid $3,000. In challenging the agreement, Hiram argued the consideration was insufficient because at the time of the hearing the property was worth over $51,000. The trial court found consideration was sufficient.

The court of appeal affirmed, stating: In enacting section 1020.1, the Legislature did not alter the rule that [t]he sufficiency of a purported consideration for a contract must be determined from the facts of the transaction as they existed when the contract was made rather than by subsequent developments. [Citation.] (Estate of Boyd, supra, 98 Cal.App.3d at p. 135.) Probate Code section 1020.1 was enacted to protect heirs from the consequences of unfair agreement. It was not intended to relieve them of the effects of circumstances which changed after the agreement was entered into. (Id. at p. 136.) To effect this intent, the court must scrutinize the agreement for fairness as of the date it was made. (Id. at p. 135.)

Here, at the time the agreement was entered into, Zanola had the right of first refusal to purchase the Brea house, and at minimum the four children were to share equally in an estate worth about $237,000. They each gave up a possibility of receiving more or receiving less should Gray execute a will. And, although not stated, the agreement avoided litigating the terms of the estate. There is nothing grossly unreasonable about this consideration.

Zanolas reliance on Estate of Freeman, supra, 238 Cal.App.2d 486, is ill-founded. There, the residuary legatee predeceased the testator and the gift to him failed. The residue of the estate was worth about $300,000. Katherine Freeman was the decedents only legal heir. In the probate other legatees claimed the residue. Freeman entered into an agreement with one group of claimants to share in the residue with them, they receiving 60 percent and she 40 percent. A few weeks later the court ruled Freeman was entitled to receive the entire residue. She then petitioned under Probate Code section 1020.1 to set aside the agreement on the basis the consideration was grossly unreasonable. The trial court nullified the agreement and the other signatories appealed. The appellate court upheld the ruling, noting Freeman had given up $180,000 for a share of a valueless legacy. (Id. at p. 490-491.)

Zanola likens Freemans situation to her own. But it is not the same. As noted in Estate of Boyd, supra, 98 Cal.App.3d 125, which also refused to rely on Freeman, at the time Freeman relinquished her interest in the estate, it had a value of $300,000, although she did not know it. (Id. at p. 132.) Here, however, when Zanola executed the agreement, the value of the estate was $237,000 and she was to receive 25 percent, the same as her three siblings. The fact that it was less than that at the time Gray died is not controlling. (Id. at p. 136.) As Freeman stated, and as Zanola acknowledges, under Probate Code section 11604, the court is specifically directed to inquire into the reasonableness of the consideration in the compromisethat is to say, valued received, in relation to value given. (Estate of Freeman, supra, 238 Cal.App.2d at p. 490.)

Thus, the courts invalidation of the agreement for lack of consideration was error. To the contrary, we can find nothing in the law to suggest that the probate court can arbitrarily refuse to honor a perfectly proper assignment. (Wilkenson v. Linnecke (1967) 251 Cal.App.2d 291, 295.)

We also note De Mille v. Ramsey (1989) 207 Cal.App.3d 116 and Spangenberg v. Spangenberg (1912) 19 Cal.App. 439. In Spangenberg, siblings executed an agreement to divide equally whatever their father left to them in his will. When the father died, one of the children challenged it. In enforcing the agreement, the court found it did not violate public policy and was supported by good consideration, the siblings love and affection for one another and the desire to avoid litigating the will. (Spangenberg v. Spangenberg, supra, 19 Cal.App. at p. 447.)

In De Mille, two sisters entered into a written agreement to share equally in their mothers estate, even if a will might provide for an unequal disposition. Their agreement was modeled on the one in Spangenberg. After the mothers death, one sister sought to rescind the agreement, claiming that at the time of the agreement, neither sister knew how the decedent would structure her will. The court held the agreement enforceable, even though it changed the outcome of the terms of the will. (De Mille v. Ramsey, supra, 207 Cal.App.3d at p. 123, 125.)

Although Probate Code section 11604 was not discussed in the cases, they support our conclusion there is sufficient consideration for the agreement, making it enforceable.

As an alternate argument, Zanola claims the agreement is unenforceable because her consent was based on the unilateral mistake that Gray would not make a will. The court did not rule on this basis and made no finding as to whether Zanola was mistaken. But under Civil Code section 1577, subdivision 1, a unilateral mistake that can render a contract unenforceable must be a fact past or present. (See Hultin v. Taylor (1970) 6 Cal.App.3d 802, 806.) Zanolas alleged mistake here was as to a future event and thus is insufficient to support her claim.

DISPOSITION

The order is reversed and the trial court is directed to enforce the agreement. Appellant is entitled to costs on appeal.

RYLAARSDAM, ACTING P. J.

WE CONCUR:

ARONSON, J.

IKOLA, J.

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