A recent California appellate decision should make all estate litigators sit up and take notice.
The decision, in Murphy v. Murphy, 164 Cal. App. 4th 376 (Cal. App. 1st Dist., June 26, 2008), held that a posthumous challenge to a will was barred by collateral estoppel insofar as those issues were in fact litigated or could have been litigated in a substituted judgment proceeding while the decedent was still alive.
The common law substituted judgment doctrine as applied to property issues dates back to the English Lord John Scott Eldon’s Court of Chancery in the early 1800s. It was built upon a tradition of the king holding for safekeeping the property of “lunatics” within his realm.
A “lunatic,” as opposed to a mere “idiot,” was once of sound mind, is not any longer, but may be again at some point in the future. In 1816, the seminal case of Ex parte Whitbread presented a near-timeless set of circumstances. A family member wanted money from a still-living “lunatic’s” estate. Lord Eldon asserted, without evidence, that the “lunatic” himself would make the gift to the family member if he were able.
The substituted judgment doctrine, from this humble birth, hopped the pond to New York, grew throughout the United States, and was eventually codified in many state statutes.
The modern doctrine of substituted judgment has come under fire from critics of legal fictions, who disparage the notion that judges might somehow divine the wishes of those with mental incapacities. Posthumous challenges to wills weather this criticism no better. Adducing the desires of those with even severe mental incapacities is still easier than adducing the desires of the dearly departed.
Add this to concerns of judicial economy, and the result is judicial incentive to deal with challenges to wills while the testator is still alive, namely in a substituted judgment proceeding. This is precisely what occurred in the Murphy case.
While California Probate Code Section 2580 et seq. politely abandons “lunatic” as a legal descriptor for the mentally afflicted, it provides for the appointment of a conservator of an estate if the conservatee lacks the legal capacity to make a decision in the matter. It is then the conservator’s responsibility to manage the estate in accordance with the conservatee’s wishes (or what such wishes would be were the conservatee of sound mind).
It is against this statutory backdrop that Murphy arises—a new twist on an old story stemming from a dispute between a brother, William J. Murphy Jr., and his sister, Maureen Murphy, over the estate of their late father, William J. Murphy Sr.
The senior William and his wife, Elaine, were married in 1949 and had two children, William Jr. and Maureen. In 1991, Elaine became ill, and Maureen moved back into the family home in San Francisco to help care for her mother. Elaine died in 1999, and at that time, William the father was 74 years old and a successful practicing attorney. In 2001, he suffered a debilitating stroke.
After William Sr.’s stroke, William Jr. initiated proceedings for appointment of a professional conservator of his father’s estate. Court papers stated the son’s concern that his sister Maureen was “impos[ing] her will” upon their father.
Four days before the court’s appointment of a conservator, William Sr., apparently upset about his son’s allegations and about his son's having chosen to discuss family affairs so publicly, executed a holographic will and living trust effectively disinheriting William Jr. and leaving his entire estate to Maureen.
About a year and a half later, William Sr.’s conservator requested court approval of the estate plan, via a petition for substituted judgment. All interested parties, including William Jr., received notice of the proceeding. There were no objections, and the court entered a substituted judgment order authorizing the conservator to re-execute William Sr.’s will and trust.
William Sr. died a year later, in 2004, after which point the son filed suit against his estate claiming he'd been wrongfully disinherited. William Jr. alleged that his father and mother had entered into an oral testamentary agreement that the survivor between them would leave all of their property to William Jr. and Maureen equally. He also contended that his sister had exercised fraud and undue influence over their father and thereby occasioned his disinheritance.
The trial court found for William Jr., and Maureen appealed.
On appeal, the court found that William Jr. was collaterally estopped from litigating the validity of his father’s estate plan—because he had had the opportunity to do so in the substituted judgment proceeding.
The court first noted that the issues presented by William Jr.’s claim (undue influence, fraud and the existence of the oral testamentary agreement) involved the same underlying “factual allegations” as the issues under consideration at the substituted judgment proceeding, even though they weren’t actually litigated there.
The court, with a rather long chain of reasoning, concluded that any matter that was “within the scope of the action, related to the subject-matter and relevant to the issues” was close enough to be barred, and William Jr.’s claims met such standards.
The court disposed of any lingering due process considerations, finding that William Jr. had the same incentive to litigate in both proceedings and that he had a full and fair opportunity to litigate the substituted judgment proceeding.
Finally, the court found that public policy considerations favored using collateral estoppel to serve the integrity of the judicial system, promote judicial economy and avoid vexatious litigation.
The lesson here is that court approval of an individual’s estate plan when that individual is under a conservatorship will protect the plan against any posthumous contest to it (assuming, of course, that interested parties receive notice of the conservator’s petition to approve the plan).
Those of you with clients in dicey family situations in which you worry about a posthumous contest might want to weigh the risks, costs and public nature of a conservatorship proceeding (or some kind of declaratory judgment action if permitted in your state) to try and bulletproof your client’s plan.
And, attorneys representing clients disgruntled by a now incapacitated relative’s estate plan should certainly come armed and ready for battle upon receiving notice of an action for court approval of that plan.