Dae v. Traver

Case Number: B305834

Court: Cal. Ct. App.

Date Filed: 2021-09-27

Case Brief – Dae v. Traver

Court: COURT OF APPEAL OF THE STATE OF CALIFORNIA
Date: 2025-09-03
Case Number: B305834
Disposition: The trial court’s order denying the anti‑SLAPP motion is affirmed; respondent‑trustee Robert Traver is awarded costs on appeal.

Holding

The court held that, under Code of Civil Procedure § 425.16, the trustee‑respondent satisfied the “minimal‑merit” showing required to survive an anti‑SLAPP motion because the plaintiff‑appellant’s petition challenged the trustees’ exercise of powers expressly granted by the Family Trust and therefore constituted a “contest” within the trust’s no‑contest clause. Accordingly, the trial court’s denial of the motion to strike the No‑Contest Petition was affirmed.

Narrative

Lead – In a tightly contested probate dispute that pits a beneficiary’s fiduciary‑duty claims against a trust’s no‑contest provision, the Second Appellate District affirmed a trial‑court order refusing to strike a trustee’s “no‑contest” petition on anti‑SLAPP grounds. The decision underscores that, when a beneficiary’s pleading attacks the very exercise of powers granted by the trust instrument, the pleading can be deemed a contest even if the underlying fiduciary allegations are arguably non‑frivolous.

Procedural History – Ian C. Dae filed a verified petition in the Los Angeles Superior Court seeking to settle the accounts of the Erin J. Walsh and Jean L. Walsh Family Trust (the “Family Trust”), to confirm trust assets, and to compel a breach‑of‑trust accounting. In response, trustee Robert Traver filed a separate “No Contest Petition” asserting that Dae’s petition violated the trust’s no‑contest clause and therefore should trigger forfeiture of Dae’s interest. Dae moved to strike the No Contest Petition under the anti‑SLAPP statute (Cal. Civ. Proc. § 425.16). The trial court denied the motion, finding that Traver had shown “minimal merit” that Dae’s filing constituted a contest. Dae appealed.

Facts – The Family Trust, created in 1994 by spouses Erin and Jean Walsh, established a Residuary Trust that became irrevocable upon Erin’s death in 1995. The trust named the surviving spouse (Jean) and their son Robert as co‑trustees, granting them broad investment, borrowing, and conveyance powers. Upon Jean’s death in 2016, the Residuary Trust assets were to be divided equally among the three children—Joan, William (deceased without issue), and Robert—subject to representation for any predeceased child’s issue.

To minimize estate taxes, the trustees created a “split‑dollar” arrangement: they borrowed $15 million from the Royal Bank of Canada to fund $7.5 million life‑insurance policies on Joan and Robert, then transferred the resulting receivables to a series of “Gibb” and “Traver” trusts (2011 and 2014 iterations). Joan, as lifetime beneficiary of the 2014 Gibb Trust, held a power of appointment that she exercised in 2015 to divert the trust’s assets to charities and to Robert’s children, effectively excluding her son Dae from the remainder interest.

Dae’s petition alleged that the trustees breached fiduciary duties by (1) using trust assets for personal expenses, (2) selling the receivables for inadequate consideration, and (3) structuring the split‑dollar arrangement to disinherit him. Traver’s No Contest Petition sought a declaration that Dae’s filing was a prohibited contest and that Dae’s interest should be forfeited.

Issues – The appellate court addressed two intertwined questions:

1. Whether Dae’s petition, by challenging the trustees’ exercise of powers granted in the trust instrument, amounted to a “contest” that triggers the no‑contest clause.
2. Whether Traver satisfied the anti‑SLAPP “minimal‑merit” burden—i.e., whether he presented evidence that, if believed, would show a probability of prevailing on his No Contest Petition.

Analysis – Anti‑SLAPP Framework – The court reiterated the two‑step anti‑SLAPP test. First, the moving party must identify the protected activity; here, Traver’s petition arose from Dae’s protected petitioning activity under § 425.16(e)(1). Second, the burden shifts to the moving party to demonstrate a probability of success on the merits. The appellate court applied a de novo standard, reviewing the record without deference to the trial court’s credibility determinations.

No‑Contest Clause Law – The court reviewed the evolution of California’s no‑contest statutes. Because the Family Trust became irrevocable in 1995, the pre‑2010 statutory scheme applied (former Probate Code §§ 21303, 21310, 21311). Under that framework, a no‑contest clause is enforceable against a “direct contest” brought without probable cause. The court noted that the modern “safe‑harbor” provisions (post‑2010) were inapplicable.

Whether Dae’s Petition Is a Contest – The majority concluded that Dae’s petition, though framed as a fiduciary‑duty challenge, in substance sought to “impair” the trustees’ authority to manage the Residuary Trust’s principal—a power expressly granted by the trust. The petition attacked the very structure of the split‑dollar arrangement, the loan to fund life‑insurance premiums, and the transfer of receivables, all of which the trustees were authorized to undertake. By seeking to invalidate those transactions, Dae was effectively contesting the trustees’ exercise of the powers that the trustors intended them to have.

The court relied on Hearst v. Ganzi (2006) 145 Cal.App.4th 1195, where a challenge to a trustee’s investment decisions was deemed a contest, and on Schwartz v. Schwartz (2008) 167 Cal.App.4th 733, which held that a petition that initiates litigation—even if later withdrawn—constitutes a contest. Accordingly, Dae’s filing satisfied the definition of a contest for purposes of the no‑contest clause.

Minimal‑Merit Showing – The appellate court found that Traver presented sufficient evidence to support a probability of success:

• The trust instrument gave trustees sweeping investment and borrowing authority.
• Testimony indicated that the split‑dollar arrangement was designed to reduce estate taxes—a purpose consistent with the trustors’ intent to preserve wealth for their children.
• The record showed that Joan’s power of appointment was exercised in accordance with the 2014 Gibb Trust’s terms, and that the trustees’ actions were not expressly prohibited.

Even assuming that Dae’s specific claim—that the trustees’ actions were self‑dealing—might ultimately be deemed frivolous, the anti‑SLAPP analysis does not require proof of frivolousness at this stage. The plaintiff need only show that, if the evidence is credited, there is a plausible route to success. The court held that Traver met that threshold.

Dissent – Justice Ashmann‑Gerst, dissenting, argued that Dae possessed an irrevocable remainder interest in the Residuary Trust and that the trustees’ actions—particularly the use of a power of appointment to divert assets away from that interest—constituted a breach of fiduciary duty that could not be insulated by the no‑contest clause. The dissent emphasized that the trust’s language unambiguously granted Dae a remainder share upon Joan’s predeceasing Jean, and that the trustees’ reliance on extrinsic evidence to infer the trustors’ intent was misplaced. Accordingly, the dissent would have granted the anti‑SLAPP motion.

Impact and Unresolved Questions – The majority’s decision clarifies that, in probate contexts, a beneficiary’s challenge to a trustee’s exercise of expressly granted powers can be treated as a contest, even when the challenge is framed as a fiduciary‑duty claim. Practitioners should be alert that anti‑SLAPP motions may be denied where the underlying petition attacks the core administration of the trust rather than a peripheral decision.

The ruling also highlights the lingering tension between no‑contest clauses and public‑policy protections for fiduciary‑duty claims. Although the court distinguished Ferber and noted that the modern statutory scheme now shields beneficiaries from forfeiture when raising non‑frivolous fiduciary claims, the pre‑2010 statutory framework still permits enforcement of no‑contest clauses against such claims if the plaintiff cannot demonstrate probable cause.

Unresolved issues remain:

• Extrinsic Evidence of Trustors’ Intent: The appellate court sidestepped a full construction of the trust, leaving open whether future courts will permit broader extrinsic evidence to demonstrate that the trustors intended to protect grandchildren’s interests irrespective of the children’s survival.
• Scope of “Impair” Language: The decision leaves ambiguous how narrowly “impair” must be read. If a trustee’s discretionary investment choices are deemed “impairment,” beneficiaries may face heightened risk of forfeiture for any accounting challenge.
• Application of Post‑2010 Statutes: Trusts executed after 2001 are governed by the streamlined statutory scheme that limits enforceability of no‑contest clauses. As more modern trusts replace older instruments, the balance struck in Dae may shift.

For California probate attorneys, the case serves as a cautionary tale: when drafting or litigating no‑contest provisions, precise language delineating the scope of permissible challenges is essential, and beneficiaries must be prepared to articulate a clear, non‑frivolous basis for any fiduciary‑duty claim to survive an anti‑SLAPP motion.

Referenced Statutes and Doctrines

• Code of Civil Procedure § 425.16 (anti‑SLAPP statute) – §§ (b)(1) (burden‑shifting framework) and (e)(1) (definition of protected activity).
• Former Probate Code §§ 21303, 21310, 21311 (pre‑2010 no‑contest clause regime).
• Former Probate Code § 21305 (public‑policy exemption for fiduciary‑duty challenges – noted for historical context).
• California Trust Law – §§ 16004(a) (fiduciary duty not to self‑deal), §§ 16200‑16204 (trustee powers).
• Key Cases – Baral v. Schnitt (2016) 1 Cal.5th 376 (anti‑SLAPP burden analysis); Hearst v. Ganzi (2006) 145 Cal.App.4th 1195 (contest definition); Schwartz v. Schwartz (2008) 167 Cal.App.4th 733 (contest despite withdrawal); Ferber (1998) 66 Cal.App.4th 244 (frivolous‑claim limitation); Key v. Tyler (2019) 34 Cal.App.5th 505 (modern no‑contest statute interpretation); Fazzi v. Klein (2010) 190 Cal.App.4th 1280 (post‑Ferber application).