We’ve been your dogged reporter on the ever-growing logjam in the Courts of Appeal on trust modification procedure. We’ve followed the twists and turns that courts have taken as they’ve tackled the question of what happens when a trust amendment complies with statutory amendment requirements, but fails to follow the trust’s own specified amendment procedure. We’ve zigged with Pena v. Dey, zagged with Haggerty v. Thornton, and zigged right back again with Balistreri v. Balistreri.
The California Supreme Court is poised to provide a definitive answer. It granted review in Haggerty v. Thornton and the case was fully briefed as of July 20, 2022. Hence, it seemed that the Courts of Appeal might sit on any new cases dealing with the issue and await the Supreme Court’s decision.
Spoiler alert: they didn’t.
Mateo and His Unmailed Amendment
On May 19, 2023, the Second District of the Court of Appeal issued its decision in Diaz v. Zuniga (2023) ___ Cal.App.5th___. The facts of Diaz differ than those in the other cases mentioned above, but in the end, “it’s a tale as old as time.”
During his life, Mateo Diaz was sole trustee of his revocable trust, which assets included cash and real estate located in Temple City and Montclair, California. The original trust instrument called for the Montclair property to be distributed equally to all of Mateo’s seven siblings, with the Temple City property going wholly to another relative (Marisela).
Following Mateo’s death, however, a sealed, stamped envelope, addressed to Mateo’s attorney, was discovered in Mateo’s closet. Inside the envelope was a purported trust amendment, signed by Mateo. Among other changes, the amendment substantially diminished the gift meant for Marisela – rather than the entire Temple City property, she was to receive only ten percent.
Under other circumstances, this case could have been open and shut. Under Probate Code section 15402, a settlor may modify a revocable trust by the same means provided for revocation in Section 15401 – that is, by a writing, signed by the trustor and delivered to the trustee. Mateo’s purported trust amendment clearly met these criteria.
But herein lies the twist: Mateo’s trust instrument had a specific clause governing amendments to the trust, which specified that the trustor could amend the trust “by an instrument in writing signed by the Trustor and delivered by certified mail to the Trustee.” That obviously didn’t happen.
Setting aside for now the admitted ridiculousness of Mateo mailing an amendment via certified mail to himself, the court was faced with the same quandary that stared down the other courts before it: what to do where a trust amendment is valid per the statute, but inadequate per the terms of the trust itself.
The statute itself is not as helpful as one would like. Section 15402 provides that “Unless the trust instrument provides otherwise . . . the settlor may modify the trust by the [Section 15401] procedure for revocation.” The statute doesnot specify, however, whether the statutory procedure is sufficient even if the trust instrument provides its own modification method.
This strikes a strong contrast with Section 15401’s revocation procedure. In Section 15401(a)(2), the statute clarifies that “[i]f the trust instrument explicitly makes the method of revocation provided in the trust instrument the exclusive method of revocation, the trust may not be revoked pursuant to” the statutory procedure.” That is, a trust may be revoked by the means specified in either the statute or the trust language, unless the trust language specifically states that its method is the exclusive method of revocation.
As has this blog, the Diaz court recognized that the lack of clarity in the statutory language has led to a sharp split in the case law. On one hand, King v. Lynch (2012) 139 Cal.App.4th 1186, and Balistreri v. Balistreri (2022) 75 Cal.App.5th 511, have held that where a trust itself specifies how it may be modified, that method is exclusive, regardless of whether the trust language states that it is exclusive. Under this law, amendment per the statutory method is insufficient to effectively amend the trust.
In Haggerty v. Thornton (2021) 68 Cal.App.5th 1003, however, the Court of Appeal held that unless the trust terms expressly prohibit the settlor from using the statutory method to modify the trust, the trustor may modify the trust using either the means specified in the trust instrument or the means provided for by statute.
The Diaz court ultimately came down on the side of Balistreri and King, finding the reasoning set forth in those cases to be “more persuasive” than that of the Haggerty court. It found the language of Section 15401 to be “clear and unambiguous” – that a trustor was free to modify a trust by the statutory method “unless the trust instrument provides otherwise.” That is, the statutory amendment method was not effective if the trust language provided its own method.
While the Legislature saw fit to include a requirement in Section 15401 that trust instrument’s revocation language was only exclusive where it was explicitly exclusive, the Legislature saw no need to include a similar requirement in Section 15402 – as a Roman legal scholar might say, expressio unius est exclusio alterius.
Resolution . . . For Now
In the end, Mateo’s apparent intent to amend his trust took a back seat to his clear intent that the trust could be amended only by delivery by certified mail: “Mateo’s decision to require amendments to the Trust to be in writing, signed by the trustor and delivered to the trustee by certified mail . . . evidenced an intent to ensure the bona fides of any such amendments.” So Mateo’s trust remained unamended, and Marisela got to keep her Temple City property.
For now, at least. California’s Supreme Court may set oral argument for the Haggerty case any day now, and sometime thereafter will issue a ruling that will presumably mend the rift between the Courts of Appeal and put this particular trust modification issue to rest once and for all. Marisela, her affected co-beneficiaries, and all the readers of this blog eagerly await that day.