Does laches bar beneficiary’s action filed after settlor’s death contesting capacity to amend trust when issue known long before death?

Posted in: Estate Planning/Probate, Summary Judgment by Steven Vartabedian on

In Drake v. Pinkham (published 6/21/13) 2013 DJDAR 8028, appellant and respondent were the surviving daughters of mother, the settlor of a revocable trust. Their father and mother had a living trust that provided upon one’s death there would be a split into a survivor’s trust to support the survivor, and a family trust that would give equal shares to the two daughters upon death of the surviving spouse. Father died first. When settlor-mother died in 2009, appellant petitioned the probate court to invalidate two amendments mother had made to the survivor’s trust–one executed in 2001, the other in 2004–primarily claiming the mother lacked mental capacity and was unduly influenced by respondent-sister. These amendments eliminated appellant as a beneficiary of the survivor’s trust, and named respondent acting co-trustee with the mother and sole successor trustee.

In an earlier action in 2005, appellant had petitioned the court to appoint her as an acting co-trustee of the survivor’s trust, replacing the mother, based on the mother’s alleged inability to act as trustee and the alleged undue influence of respondent over mother. This petition met with mother’s objection: she denied she was incapable to act as trustee and that, while respondent did assist her, respondent did not control her. She additionally pointed to the 2001 and 2004 amendments which excluded appellant as beneficiary and made no provision for her to serve in any trustee position. Rather than challenge the amendments, appellant reached a settlement agreement in which mother as sole acting trustee of the family trust agreed not to dispose of any family trust property without the consent of both daughters.

Back to the present action, respondent moved for summary judgment on the grounds that applicable statutes of limitation, principles of res judicata and the doctrine of laches barred the petition. The trial court granted summary judgment finding that some of appellant’s causes of action were barred by res judicata and the remaining were barred by the statute of limitations. It did not reach the issue of laches. The Court of Appeal, Third Appellate District, affirmed, finding the petition barred by laches.

Appellant’s principal argument on appeal was that she did not delay raising the present issue because she could not have raised objections to the trust amendments earlier as she lacked standing. At the time of those amendments, asserted appellant, the survivor’s trust was revocable and there had been no determination that mother was incompetent–the only persons with standing to petition regarding the validity of the amendments were mother herself and respondent in her capacity of acting co-trustee.

The appellate court disagreed. While it is true that Probate Code sections 17200 and 15800 limit the petition rights of beneficiaries, a beneficiary lacks standing to challenge a trust only so long as the person holding the power to revoke the trust is competent. The court determined it was not necessary that incompetence be established before a beneficiary challenges a trust; the mere allegation of incompetency takes the matter outside of the terms of section 15800. The allegation by appellant of incompetency back in 2005 gave appellant standing at that time to challenge the amendments of which she was fully aware. That she had the burden of proving incompetency to maintain standing to pursue the present claims did not, in the eyes of the court, excuse her delay. And the fact appellant waited until mother died was necessarily prejudicial where the issues focused on proof of mother’s mental capacity and respondent’s influence over her. Thus laches barred her present petition.

From a practice standpoint, I see a couple of general points worth mentioning. First, upon discovery of an actionable claim upon which a claimant may have questionable standing, a claimant should set out to prove standing as part of an immediately filed claim, rather than wait until standing is indisputably evident, when laches may bar the claim. Second, when trying to get a summary judgment affirmed on appeal, don’t forget that a case is affirmable when, although the trial court may have stated the wrong reason(s), the result is nevertheless correct for a different reason.

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