## Facts

- A testamentary trust created under William Randolph Hearst’s will held significant interests in the Hearst media enterprise.
- The will and trust instruments granted trustees unusually broad management discretion, including discretion over income versus principal allocations and authority to retain unproductive assets.
- The instruments expressly authorized long-term investment and management decisions that could benefit remainder beneficiaries at the expense of current income beneficiaries.
- The will included a broad no-contest clause that revoked a beneficiary’s interest for challenging the will’s provisions, including trustee management decisions.
- The will limited trustees’ personal liability to gross neglect or fraudulent misconduct.
- The trustees adopted and maintained a dividend policy that reduced current income distributions and increased accumulation of principal.
- Income beneficiaries claimed the dividend policy breached fiduciary duties by favoring remainder beneficiaries and sought to compel increased income distributions and to impose personal liability on trustees.
- Before filing that substantive petition, the income beneficiaries sought a Probate Code § 21320 safe-harbor ruling that their proposed petition would not be a “contest.”
- The probate court denied safe-harbor relief, finding the proposed petition would be a contest; the income beneficiaries appealed.

## Issues

1. Whether a proposed petition alleging trustees breached fiduciary duties by adopting a dividend policy favoring principal growth over current income would constitute a “contest” under a broad no-contest clause.
2. Whether, for purposes of Probate Code § 21320, a petition labeled as fiduciary-duty enforcement is nonetheless a contest when its practical effect would override discretion and liability limits granted by the trust instrument.

## Decision

- The Court of Appeal affirmed the probate court’s denial of the § 21320 petition.
- The court held de novo review applied to the safe-harbor determination.
- The court concluded the proposed fiduciary-duty petition would constitute a contest because it sought to alter trustee-authorized long-term management choices and to impose liability inconsistent with the will’s exculpatory terms.

## Legal Principles

- A trustee’s default duty of impartiality may be modified by the trust instrument; courts enforce the settlor’s expressed allocation of discretion even if it permits decisions that benefit remainder beneficiaries over income beneficiaries.
- A no-contest clause is triggered when a proposed action would, in substance, attack or negate the operative effect of dispositive or administrative provisions of the governing instrument.
- In a Probate Code § 21320 safe-harbor proceeding, the court evaluates the substance, legal theory, and likely effect of the proposed pleading, not the labels used by the beneficiary.
- A challenge seeking to force a different management outcome (e.g., dividend policy) and to expand trustee liability beyond express limits can be treated as a contest when the instrument authorizes the disputed conduct and restricts liability absent egregious misconduct.

## Conclusion

Because the governing instruments expressly authorized long-term management decisions that could reduce current income and limited trustee liability absent gross neglect or fraud, the beneficiaries’ proposed petition to change dividend policy and impose personal liability would contradict those provisions and therefore constituted a contest, making § 21320 safe-harbor relief unavailable.


Hearst v. Ganzi, 145 Cal. App. 4th 1195 (Cal. Ct. App. 2006)