Who are "Interested Persons" Authorized in California Probate Actions?

In the recent appeal of Colvis v. Binswanger, Garaventa Enterprises, Inc. (Company) appealed from the probate court’s order finding the Company lacked standing to participate in proceedings on a trust petition filed by respondents Linda Garaventa Colvis and Joseph Garaventa (Petitioners), because the Company was not a beneficiary or a trustee.

The appellate court disagreed, and found, as a matter of statutory interpretation, that the California Probate Code authorizes “interested persons” to respond or object at or before a hearing in a trust proceeding.

During their lifetimes, Silvio Garaventa, Sr., and Mary Garaventa established the Garaventa Family Marital Trust (Trust).

Silvio, Sr., died in 1998 and Mary died in 2015. One of their five children, Louisa, is the trustee under the terms of the Trust. The other children are Silvio, Jr., Marie, Joseph, and Linda.

The Trust is a 70 percent shareholder of the Company. Each of the siblings own an equal share of the remaining 30 percent of the Company.

A Company shareholder agreement provides that any shareholder owning more than 50 percent of the company can take various actions in their “sole discretion,” including borrowing money, lending money, and transferring assets.

The Trust provides that the balance of its estate, after expenses and specific distributions, shall be distributed equally to five subtrusts benefiting, respectively, each of the five siblings and their families.

Among the Trust’s liabilities are outstanding loans made to the Trust by the Company. Since Mary’s death, disputes have arisen among the siblings over management of the Company and administration of the Trust.

In 2022, Linda and Joseph filed a petition (Petition) to instruct Louisa, as trustee, to take specified actions, including directing the Company to borrow substantial sums of money to pay estate taxes owed by the Trust.

In advance of a status hearing, the Company filed a status report responding to the Petition.

Petitioners objected to the Company’s filing on the ground the Company lacked standing. The court subsequently issued an order finding that because the Company was neither a trustee nor a beneficiary of the Trust, it lacked standing to participate in proceedings on the Petition.

The parties disputed whether, under the statutory scheme, “interested persons” can respond to petitions in trust proceedings, or whether only trustees and beneficiaries can do so. 

The Company points to section 1043(a), which provides, “An interested person may appear and make a response or objection in writing at or before the hearing.”

“Interested person” is defined to include persons “having a property right in or claim against a trust estate . . . which may be affected by the proceeding.”

“Person’ means an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, limited liability company, association, or other entity.

Petitioners point to section 17200(a), which provides, with exceptions not relevant here, “a trustee or beneficiary of a trust may petition the court under this chapter concerning the internal affairs of the trust or to determine the existence of the trust.”

While this provision governs who may file a petition, it does not prescribe a procedure different from section 1043 as to who may respond or object to such a petition.

The Legislature may reasonably have discerned a distinction between the ability to initiate judicial proceedings and the ability to respond to pending proceedings. Indeed, the statutory scheme demonstrates the Legislature expressly contemplated persons other than trustees and beneficiaries could be impacted by trust proceedings, even though such proceedings can only be initiated by trustees or beneficiaries.

Section 17203(b), provides notice of a hearing on a trust petition shall be served “on any person, other than a trustee or beneficiary, whose right, title, or interest would be affected by the petition.”

It was not necessary to decide whether, as the Company argued, such persons are always “interested persons” within the meaning of section 48, or whether the right to receive notice necessarily includes the right to object or respond.

Notice of the proceeding would be of little value if all the recipient could do is passively observe. The purpose of notice is to provide an interested person an opportunity to protect its interest by participating.

It is sufficient that the Legislature acknowledged persons other than trustees and beneficiaries could have rights or interests impacted by a trust petition and were thus entitled to notice, even though they cannot bring such petitions in the first instance.

Petitions may be filed by “any interested person” where trust property “is claimed to belong to another.

The appellate court concluded that sections 48 and 1043 apply to hearings on petitions in trust proceedings, and allow interested persons to respond or object to such petitions.

The parties also disputed whether the Company is an “interested person” for purposes of proceedings on the Petition.

The probate court has flexibility in determining whether to permit a party to participate as an interested party. Section 48 permits the court to designate as an interested person anyone having an interest in an estate which may be affected by a probate proceeding, and may determine the sufficiency of that party’s interest for qualify as an interested person entitled to participate for purposes of one proceeding but not for another.

Standing for purposes of the Probate Code is a fluid concept dependent on the nature of the proceeding before the trial court and the parties’ relationship to the proceeding, as well as to the trust (or estate).

A probate court’s ruling on whether a person has standing under section 48 is reviewed for abuse of discretion.

LESSONS:

1.         The value of a trust is the California Probate Code provides a statutory process to resolve disputes regarding the trust.

2.         The Probate Code authorizes “interested persons” to respond or object at or before a         hearing in a trust proceeding.

3.         “Interested person” is defined to include persons having a property right in or claim          against a trust estate which may be affected by the proceeding.

4.         “Person" means an individual, corporation, government or governmental subdivision or    agency, business trust, estate, trust, partnership, limited liability company, association, or      other entity.

5.         Section 17203(b), provides notice of a hearing on a trust petition shall be served “on any person, other than a trustee or beneficiary, whose right, title, or interest would be affected        by the petition.”