FAZZI v. KLEIN - 190 Cal.App.4th 1280 (2010)
Dec 14, 2010OUTCOME: The court held in favor of our client, Norma Klein
Norma Jean Klein and her husband, Lloyd, created a joint revocable trust called the Klein Family Trust in 1987, and executed pour over wills. Norma and Lloyd served as co-trustees during their lives. U ... nder the terms of the Trust, on the death of either spouse, the survivor as trustee was to divide the trust assets into three sub-trusts, two of which became irrevocable at the first spouse’s death. Norma and Lloyd's children and stepchildren were named as remainder beneficiaries of the irrevocable sub-trusts. The Trust instrument contained a no-contest clause. The Trust instrument designated Norma’s other son, Michael, as successor trustee in the event that Norma and Lloyd ceased to act as Trustees. Lloyd died and Norma became sole trustee. In November of 2008, Christopher filed an application for safe harbor determination under California Probate Code former section 21320 whether his proposed petition constituted a contest to the trust. Christopher’s petition sought: (1) removal of Norma as trustee for cause; (2) a determination that the provisions designating Michael as successor trustee only applied to the original trust and not to the irrevocable sub-trusts, but that if the designation did apply to those trusts, a determination that Michael was unfit to serve and disqualified from serving as successor trustee; and (3) appointment of a professional fiduciary as successor trustee of the irrevocable sub-trusts. The trial court granted Christopher’s safe harbor petition on the grounds that the sub-trusts did not contain a no-contest clause or incorporate the no-contest clause contained in the original trust by reference. On appeal, the California Court of Appeals reversed the trial court and found that the intent that the no-contest clause apply to the sub-trusts was implicit in the Trust, noting that because the original trust was revocable, a contest was never a possibility during the joint lives of the settlors. The court similarly rejected the argument that the successor trustee provisions did not apply to the sub-trusts, and refused to find that Michael was unfit to serve because of his lack of necessary education or his hostile attitude toward Christopher, noting the importance of the settlors’ choice of a trustee. The court agreed that Christopher’s request to remove Norma for cause did not violate the no-contest clause because the Trust contained no prohibition or provision at all on an action to remove an individual trustee for cause. The court noted that even if the no-contest clause at issue had specifically prohibited any action to remove a trustee, the provision would have been unenforceable because a trustee cannot hide behind a no-contest clause and commit breaches of fiduciary duty. https://www.casemine.com/judgement/us/59146222add7b0493424c5af
