California Appeals Court: Charities Who Ignored Notices Forfeited Rights As Potential Beneficiaries of Trust

In Breslin v. Breslin, a California appeals court considered whether potential beneficiaries of a trust who received notice that the trust litigation was going to mediation, but did not participate in the mediation, were bound by the result.

The Facts Of Breslin v. Breslin

Don Kirchner died in 2018.  His estate was valued between $3 and $4 million.  Kirchner had no surviving spouse or children, but was survived by several nieces and nephews.

Kirchner’s estate was held in a living trust dated July 20, 2017, which was amended and restated on November 1, 2017.  David Breslin was named the successor trustee in the restated trust.

The restated trust makes four $10,000 specific gifts and directs that the remainder be distributed to the persons and charitable organizations listed on exhibit A in the percentages set forth. The restated trust did not have an exhibit A attached to it.  However, in a pocket of the estate planning binder containing the restated trust, Breslin found a document titled “Estates Charities (6/30/2017).” The document listed 24 charities with handwritten notations that appeared to be percentages.

Breslin filed a petition in the California probate court to determine the beneficiaries of the trust.  Breslin served each of the charities on the document with notice of the trust petition.  Only three of the 24 charities filed a response to the petition to determine beneficiaries of the trust.

The California probate court ordered mediation among the interested parties, including Kirchner’s intestate heirs and the charities.  One of the listed charities sent notices of the trust mediation to all of the charities listed on the document.  The mediation notice included the following:

Mediation may result in a settlement of the matter that is the subject of the above-referenced cases and of any and all interested persons’ and parties’ interests therein. Settlement of the matter may result in an agreement for the distribution of assets of the above-referenced Trust and of the estate of Don F. Kirchner, Deceased, however those assets may be held. Settlement of the matter may also result in an award of attorneys’ fees to one or more parties under Smith v. Szeyller (2019) 31 Cal.App.5th 450. Interested persons or parties who do not have counsel may attend the mediation and participate.

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 mediation without further action by the Court or further hearing. Smith v. Szeyller (2019) 31 Cal.App.5th 450. Rights of trust beneficiaries or prospective beneficiaries may be lost by the failure to participate in mediation.

All represented parties (or his, her or their counsel) and all unrepresented parties that intend to participate in the mediation are requested to advise the undersigned of his, her or their intention to be present and participate by making contact via either email . . . or U.S. Mail. Notice to participate in mediation will not be accepted via telephone.

Five of the 24 charities appeared at mediation.  All of the intestate beneficiaries appeared.  The parties that appeared at mediation reached a settlement.  The settlement agreement  awarded specific amounts to various parties, including the appearing charities, and attorney fees, with the residue to the intestate heirs. The agreement excluded the parties that did not appear, including several of the 24 charities collectively referred to as the “Pacific parties.”

Breslin filed a petition to confirm the trust settlement agreement.  Breslin sent notice to all of the charities.  The Pacific parties filed objections.  Just prior to the hearing on the objection, Breslin found the original trust document (not the restated trust) with an exhibit A attached listing the same charities that were on the document in the binder with the copy of the restated trust.

The probate court granted Breslin’s petition to approve the settlement of the petition to determine trust beneficiaries.  The California probate court denied the Pacific parties’ objections because they did not file a response to the petition to determine trust beneficiaries nor did they appear at mediation.

How Can an Interested Party Forfeit Their Rights In California Trust Litigation? By Ignoring Notice From the Court

An interested party in a California probate or trust litigation can forfeit their rights by choosing not to participate in trial and ignoring notice from the court.

In Smith v. Szeyller, 31 Cal.App.5th 450, 458, the California appeals court held that a party who chooses not to participate in the trial of a probate matter cannot thereafter complain about a settlement reached by the participating parties.

Here, the Pacific parties received notice of the petition to determine trust beneficiaries of the California trust, and notice of the mediation, and chose not to participate.  The Court stated:

The Pacific parties may not ignore the probate court’s order to participate in the proceedings and then challenge the result. The probate court’s mediation order would be useless if a party could skip mediation and challenge the resulting settlement agreement.

The California probate court also held the power to establish the procedure for the trust litigation, and the power to order the parties to mediation.  See California Probate Code § 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”).  Here, the California probate court ordered mediation as a prerequisite for an evidentiary hearing to determine the beneficiaries of the trust.  Therefore, the argument by the Pacific parties that they were denied an evidentiary hearing was without merit.  A party cannot ignore notices from the court and then demand their day in court when they chose not to participate in the process.

The California Trustee Did Not Breach Any Of His Fiduciary Duties

The Pacific parties also urge that Breslin violated his duties as trustee under the California probate code, specifically the duties of impartiality, conflict of interest, and notice.

A California trustee has a duty of impartiality.  California Probate Code § 16003.  Here, all interested parties in the trust received notice of the mediation and had an opportunity to participate.  It was not the trustee’s fault that the Pacific parties failed to participate.

The Pacific parties also argued that the trustee breached fiduciary duties by approving large gifts to the Kirchner family members, including himself.  However, the court noted that all parties who participated in the mediation approved the settlement, not just the trustee.

Finally, the Pacific parties boldly claimed that the trustee failed to keep them reasonably informed about the mediation and his intent to execute the settlement agreement.  The California appeals court noted that had they participated in mediation, they would have been fully informed of all of the developments, and stated:

The Pacific parties apparently believe the trustee and participating parties should have gone through mediation, reached a settlement, and, before the settlement was signed, notified the Pacific parties so that they could come in and object. That would have made the mediation a waste of time, money, and effort.

The lesson here:  do not ignore notices from the probate court.  If you are served with a petition, a notice of mediation, or any notice that demands a response or sets a proceeding, contact a California probate lawyer – do not simply ignore the notice.  If you do ignore notice, you could permanently forfeit any rights that you may have had in the California trust or estate at issue.

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