Opinion ID: 2609771
Heading Depth: 3
Heading Rank: 3

Heading: Claims to a Community Property Interest

Text: Probate Code section 21303 provides: Except to the extent otherwise provided in this part, a no contest clause is enforceable against a beneficiary who brings a contest within the terms of the no contest clause. Despite this broad language, the Legislature did not intend that the statutes governing no contest clauses do so exclusively. Probate Code section 21301 states: This part is not intended as a complete codification of the law governing enforcement of a no contest clause. The common law governs enforcement of a no contest clause to the extent this part does not apply. As the Law Revision Commission comment to this section makes clear, by the common law the commission meant the contemporary and evolving rules of decision developed by the courts in exercise of their power to adapt the law to new situations and to changing conditions. (Cal. Law Revision Com. com., Deering's Ann. Prob. Code, § 21301, supra, p. 576.) The comment also indicates that, in developing the common law in this area, the courts are to look to, among other things, the terms of the no contest clause and the character of the beneficiary's contest. ( Id. at p. 577.) Here, Marlene's argument that her proposed state court complaint should not be held to violate the no contest clause is based on the character of [her] contest. Specifically, Marlene contends that, even if the no contest clause would be triggered by the filing of the proposed state court complaint, this court should determine that the clause is not enforceable against her because, under common law principles, a no contest clause does not apply against the assertion of a property interest not arising from the claimant's status as an heir  for example, a community property interest. This court has not previously addressed the question. Several Courts of Appeal have considered situations in which a claimant sought to establish an independent property interest in the donated property, with inconsistent results. [2] I would hold that no contest clauses are not enforceable against a beneficiary who claims that the trustor or testator has disposed of a legal interest, such as a community property interest, in identified personal or real property that is lawfully held by the beneficiary. My conclusion is based upon several considerations. First, enforcement of a no contest clause to prevent a beneficiary from challenging the trustor's disposition of property that is not the trustor's property, but is the property of another, would not aid the public policy favoring enforcement of such clauses. As this court stated in an early case, [a] testator has the lawful right to dispose of his property upon whatever condition he desires, as long as the condition is not prohibited by some law or opposed to public policy.... ( Estate of Miller (1909) 156 Cal. 119, 121 [103 P. 842], italics added.) A later case made the point more expansively:  The property of a testatrix is hers to dispose of as she wills, and she is not called on to consult or follow the wishes or views of her heirs or beneficiaries or of courts or juries.... She could give or refrain from giving, and could attach to her gifts any lawful condition which her reason or caprice might dictate. She was disposing of her own property and the beneficiary claiming thereunder must take the gift, if at all, on the terms offered. ( Estate of Fuller (1956) 143 Cal. App.2d 820, 823 [300 P.2d 342], italics added.) The underlying assumption of these cases is that a no contest clause is valid insofar as it assures that a testator or trustor may, without challenge, dispose of property that belongs to him or her. But the converse of that proposition should also be true: under California law, a no contest clause should not be valid insofar as it allows a testator or trustor to dispose of property that does not belong to him or her. This point needs little elaboration. Nothing in the policy favoring no contest clauses was designed to encourage theft. Yet if a testator or trustor lays claim to property that does not belong to him or her, and successfully insulates the disposition of such property from challenge by use of a no contest clause, theft is the result. Several familiar maxims of jurisprudence support my conclusion that a no contest clause cannot be invoked to penalize one who seeks to establish that the property the testator or trustor purported to dispose of was not the testator's or trustor's property. When the reason of a rule ceases, so should the rule itself. (Civ. Code, § 3510.) The reason for the rule allowing no contest clauses is to allow the testator to dispose of his or her property, not the property of another. Moreover, [n]o one can take advantage of his [or her] own wrong. (Civ. Code, § 3517.) For the courts to enforce no contest clauses that are used to deprive individuals of their own property would allow the estates and trusts of testators and trustors who have acted wrongly to take advantage of the wrongs of those testators and trustors. A second, related rationale also supports my conclusion. As this court recognized in Estate of Miller, supra, 156 Cal. at page 121, judicial enforcement of no contest clauses is also limited to situations in which the no contest condition is not prohibited by some law or opposed to public policy.... But in this case, and in similar situations, law and public policy do stand in opposition to the trustor's employment of the no contest clause. Allowing enforcement of a no contest clause to effectively prohibit assertion of statutorily guaranteed community property rights is contrary to the public policy embodied in Family Code sections 1100 and 1101. Those sections provide that a spouse may not convey or dispose of community personal property without the written consent of the other spouse, and grant the nonconsenting spouse a right of action against the other spouse for breach of that duty to obtain written consent. As mentioned earlier, Marlene's proposed state court complaint alleged that she had a community interest in the ownership of Pacific Coast Ford, and in the car dealership's pension plan. Although Frank apparently had an ownership interest in Pacific Coast Ford before his marriage to Marlene, he became the sole owner and president of the company during the marriage. The pension plan was created during the marriage. Generally, all [personal] property ... wherever situated, acquired by a married person during the marriage ... is community property. (Fam. Code, § 760.) Accordingly, there is merit in Marlene's argument that the property Frank transferred without her consent during the marriage was community property. To allow a spouse to transfer community property during the marriage without the other spouse's consent and then allow enforcement of a no contest clause to effectively prevent assertion of community property rights is violative of Family Code sections 1100, 1101 and the public policy embodied in these statutes. The majority reaches a contrary conclusion. That conclusion, however, is based on a misunderstanding of the nature of no contest clauses, and a mistaken and apparently unexamined assumption that there is no legal difference between an election under a testamentary instrument and a forfeiture worked by a no contest clause. Moreover, the majority's conclusion is buttressed by a hypothetical example that illuminates its mistaken view of the respective rights and obligations of the parties. The majority approves the use of no contest clauses to obstruct the assertion of community property rights because no contest clauses are, in the majority's view, indistinguishable from election clauses in testamentary instruments, which California courts have long approved. (See, e.g., Estate of Wolfe, supra, 48 Cal.2d 570, 574.) But the majority's reasoning is flawed, and again disregards legislative judgments as to the true nature of no contest clauses. It may be permissible for a trustor to require his or her surviving spouse to elect between an interest as a beneficiary and the spouse's interest in community property. But, as the Legislature indicated in the legislative history accompanying Probate Code section 21304, a no contest clause entails a forfeiture, not an election. Under a testamentary instrument containing a no contest clause, the gift vests immediately upon the testator's death as a vested right and is just as much the beneficiary's property as if acquired by his [or her] own labor; to wrench it away is precisely what is meant by a forfeiture. (Selvin, Comment: Terror in Probate (1964) 16 Stan.L.Rev. 355, 368, fns. omitted.) A no contest clause, when it applies, destroys the surviving spouse's rights under the testamentary instrument simply because the spouse attempts to enforce his or her independent property rights, whether or not the spouse actually succeeds. This harsh result, which is precisely what is contemplated by every trustor or testator who chooses to employ a no contest clause, is simply not possible when a similar, though more benign, election clause is employed instead. An election clause destroys nothing. [3] The majority also utilizes a hypothetical example to show the supposed unfairness of any rule that no contest clauses are not enforceable against a spouse who seeks to assert only his or her own interest in community property. (Maj. opn., ante, at p. 267, fn. 14.) Under the majority's example, a wife who has children by a previous marriage is half-owner of a business in which she works with her children; during her second marriage she becomes sole owner. ( Ibid. ) Wife understands that her business may be at least in part community property, ... but she nonetheless desires to leave the entire business to her two children from her first marriage.... Accordingly, under the majority's example, the wife inserts a no contest clause into her will, but under a rule rendering such forfeiture clauses unenforceable against a spouse who asserts his or her own interest in community property, the no contest clause is ineffective. This, the majority says, is an inequitable result. ( Ibid. ) The majority's hypothetical discloses nothing so much as the majority's dissatisfaction with the community property laws of this state. Under Family Code section 760, all [personal] property ... acquired by a married person during the marriage ... is community property. Thus, under the majority's hypothetical, the husband is a co-owner of the business with the wife, whether the wife, or the majority, care for that fact or not. (See Schnabel v. Superior Court (1993) 5 Cal.4th 704, 715 [21 Cal. Rptr.2d 200, 854 P.2d 1117].) There is nothing inequitable about a rule that precludes one spouse from unilaterally disposing of property belonging in part to the other spouse. To the contrary, equitable considerations mandate that the interests of the nonconsenting spouse be protected. And this simple and fair rule is in no way unworkable; it merely requires that the wife in the majority's hypothetical disclose her plans in advance to her co-owner and partner-in-marriage, and obtain his consent. The majority seems to find a requirement of disclosure and consent unacceptable; the majority comes dangerously close to endorsing marital duplicity in financial matters. [4] Because enforcement of a no contest clause to penalize the assertion of community property rights does not serve the underlying purpose of no contest clauses  to permit the testator or trustor to dispose of his or her own property as desired  and because enforcement of a no contest clause that shields an improper disposition of property belonging to the testator's or trustor's spouse would place the court's seal of approval on a violation of the fiduciary obligations imposed on spouses by the community property laws, I would hold that no contest clauses are not enforceable under these circumstances.